Pay entire purchase amount in cash vs. getting a loan

By
Real Estate Broker/Owner with Texas Five Star Realty, Plano Texas

                        

       Pay the entire purchase amount in cash vs. getting a loan
When Purchasing a Property
at Auction 

EXECUTIVE SUMMARY:Summary of Paying cash vs getting loan in buying a  property at auction

Pay the entire purchase amount in cash, vs. getting a loan:

In most parts, purchasing a property at auction will be different than regular (non-auctioned, non-foreclosed) sales. One of the major differences is that at auction, the winner must pay the entire amount with cash, money order, cashier check immediately after winning the bid at auction. Where as, in regular sale, if they are qualified, they can leverage and get majority of the purchase price (e.g., 90%, 95%, 96.5%, etc) loan with a today’s low interest of 3.5%-4.5%. This is a major cost to the cash purchasers at auction. Loss of leveraging and loss other investment opportunities should be accounted for. This value varies greatly from a purchaser to another purchaser.

The question is that, in view of the purchaser, how much his entire purchase money worth more compare to low down payment and getting the loan.

For Foreclosed REO buying Process from Banks please visit http://www.TexasFiveStarRealty.com/Foreclosure_Things_You_Should_Know.asp

For the most up-to-date list of REOs foreclosure in North Texas please visit http://www.texasfivestarrealty.com/List_of_foreclosures.asp

DETAILS OF THE DIFFERENCES WHEN PURCHASING A PROPERTY AT AUCTION AND PURCHASING A REGULAR (NON-AUCTIONED) PROPERTY:Details of things a buyer should know when buying a property at auction
 Disclaimer:
Disclaimer of things a buyer should know in buying a property at auctionNot all points specified here should negatively impact your decision to purchase a property at auction nor applicable for all banks. Each auction foreclosure sale is different and requires a lot of details to be handled when buying a property at auction. Consult with your real estate agent and/or your real estate attorney for questions regarding purchasing a property at auction.

As we stated earlier, the real question is that, in view of the purchaser, how much his entire purchase money worth more compare to low down payment and getting the loan. The answer is different for each case and each type of purchaser, e.g., individual looking to live in the property or investor that wants to flip and profit.

Example:
If the purchaser of a home is an individual "home owner to be": he intends to live in his property a his primary resident, hi is locking his entire purchase money for a long time before he sells his property.

If the purchaser of a home is an "investor": typically he fixes/repairs (flipping) and put the property for sale in the market and after few months he sells and get his money plus some profit back. Also, investors cannot get loan, even if they are qualified and have the greatest FICO score, because of number of limits that an entity could have open loans at the same time. This makes it less even less disadvantage for investors compare to an individual purchasing a property at auction to live in it.

E.g., some they may put value of about 3% of the purchase price for this difference.

If the purchaser of a home is "owner to be",  he/(she) should account for much more loss than an investor for locking all purchase money for a long time (e.g. 30 years or when he sells his property)  vs. a few months for investors.

 

CONCLUSIONS:Coclusion of differences when buying a property cash at auction            

came up with some numbers as follow, but I need your inputs based on your thoughts and experiences to verify mine.
For an individual "home owner to be"
, paying the entire purchase amount in cash, I put 10% of the purchase price.
 
For an Investors "Flipping Over", paying the entire purchase amount in cash, I put 3% of the purchase price.

QUESTION: I need your Answer:

Based on your experiences and expertise, how much do you put as negative for paying the entire purchase price in cash vs. getting a loan (assuming qualified and rate of 4%) for individuals "home owner to be" and for investors?

 

For more information on Foreclosure Process and purchasing foreclosed (REO) property, please visit http://www.TexasFiveStarRealty.com/Foreclosure_Process.asp

For a current list of foreclosed (REO) properties in North Texas, please visit http://www.TexasFiveStarRealty.com/List_of_Foreclosures.asp

 

      

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Rainmaker
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Bahman Davani, CM at Texas Five Star Realty, Plano, TX (214) 457-7055

Homes for Sale in Plano, Frisco, Prosper, Allen TX
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