How to get a free house without using cash?

How to get a free house without using cash?

You've accumulated a bunch of cash and are finally ready to use it to buy a home. Or maybe you've built up a lot of equity in your current home and are considering selling it so you can downsize to a property you can buy for cash.

You may be wondering: does it make sense to buy a house with cash in 2024, and what is the process like? It would be nice if someone could create a step-by-step breakdown for you...

We talked to several experts about the process of buying a home with cash to find out what buyers need to know when it comes to ditching their mortgage.

The government now has some vacant houses that you can apply for and own for free. If you are interested, click on the link below to learn more.

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Why home sellers (still) love cash

Buying in cash has plenty of benefits — for one thing, you’ll be mortgage-free (sounds pretty nice!). You’ll also avoid the additional expense of mortgage insurance and save thousands on mortgage loan interest since you won’t be paying any.

But the biggest reason buyers are turning to cash? Gaining an edge over other bids.

“We love working with a cash buyer,” says Sherry Ludecker, a top-rated real estate agent in Johnson City, Tennessee. “A buyer purchasing a home with a mortgage loan could still lose their financing, even with a solid preapproval letter. So, a cash buyer gives sellers peace of mind. It’s one less way a deal could die.”

The process of buying a house with cash

Having cash to make a more competitive offer is great and all — but what about the actual process of buying in cash? It may be simpler than using a mortgage, but buying a home is almost never easy (unless maybe you’re doing it at a courthouse auction!). Let’s go through the whole process, step by step.

1. Get the cash together

The first step to purchasing a house with cash is to make sure you have the cash together in one place.

Maybe you’ve already got enough money sitting in a savings account, waiting to spend on the perfect home. But if your cash is socked away in various places, like stocks or money market accounts, you’ll want to cash out those accounts and gather your money together.

You’ll probably want to talk to a financial advisor and a tax professional before cashing everything out, just to make sure you understand the full picture and all of the tax implications of liquidating these types of accounts.

Once you’ve figured out where the money is coming from, it will be easier to take the next step: getting proof that you have the cash.

2. Obtain proof of funds from the bank

If you make a cash offer and want to be competitive, it’s a good thing to have a letter from the bank to prove you have the cash available, advises Ludecker.

“Talk to the institution that holds your money and ask them to provide a letter stating you’re able to purchase in cash up to a certain amount and attach it with your offer.”

Providing a proof-of-funds letter is more secure than forking over a bank statement, which contains sensitive information.

3. Find your house

Now begins the fun part — shopping for your house!

A good real estate agent can not only help you narrow your choices but can also help you determine whether the price that the seller is asking for the house is fair or not. Just because you’ve got a certain amount of cash to burn doesn’t mean you should overspend on the home.

As you shop, keep a few important details in mind.

First, think about what your life might be like five years from now. While the home you’re interested in might be a great fit for your life today, will that still hold true five years down the line?

Remember that cosmetic details, like the color of paint on the walls or the landscaping out front, are easy and inexpensive to change. Don’t get hung up on the small things you don’t love about the house. Instead, focus on the home’s systems. Are the roof, windows, and HVAC system in good working order? Are the appliances up-to-date? Take a look at the big picture, as a home with good working systems will give you the best bang for your buck.

Finally, you know what they say about real estate: location, location, location. Once you buy a home, you can change almost anything you want about it — except for where it’s located. If you love a house but have reservations about its location, think long and hard before you decide to commit.

4. Set a winning offer strategy with your agent

In today’s real estate market, crafting the perfect offer has never been more important.

“I think now people understand that every term of a contract is one that could be the make-it-or-break-it point for them in terms of getting the house,” explains Marchesiello.

Due to the current market’s low inventory levels, competition among home buyers is high. Today, every single detail of your offer has to be on point, or you could lose out to the competition.

Yet that doesn’t mean you should put yourself at risk. You should carefully consider whether to include contract contingencies to protect yourself in the deal.

A contingency means the home purchase is dependent on certain requirements being met, such as a satisfactory home inspection or the buyer being able to sell their current home. If you’ve got cash on hand, you won’t need to include a financing contingency, which makes your offer more attractive to sellers.

And remember: Just because you can remove a contingency, doesn’t mean you should. The appraisal might seem like unnecessary lender red tape — but in actuality, it can protect you from overpaying. There’s also been a recent rise in buyers waiving the home inspection contingency, a risk that could lead to unexpected and potentially expensive problems down the road.

The National Association of Realtors® reports that 25% of buyers in February 2024 waived the inspection contingency, compared to 22% in the same month last year.

How do you balance being competitive with protecting yourself? Work closely with your agent to create an offer that speaks to the seller’s specific needs. Sometimes that can mean offering a higher price, a more flexible closing timeline, or a rent-back agreement (where you rent the home back to the seller for a period of time after closing). And sometimes, that means strategically dropping contingencies.

5. Make your bid

You’ve finished your seller research, created the perfect winning bid, and you’re ready to make that sweet little home your own. It’s time to submit your offer and cross your fingers. When your bid is chosen, you’ll be ready to move quickly with cash in hand!

6. Choose a settlement agent

Even though you won’t need to deal with a lender, there’s no escaping the closing and title process to make sure there are no problems with the title of the home and that the transaction closes smoothly.

Depending on where the property is located, your settlement agent will do a couple of things for you. They’ll act as an independent third party to hold, account for, and transfer money, and they’ll also facilitate the title search and title transfer.

In most states, your settlement agent will be a title or escrow company, but in others, the closing may be handled by special closing attorneys. Talk to your real estate agent and choose a settlement agent who can see the deal through to completion and ensure the title research is thorough.

7. Secure your earnest money check

If you offered earnest money as part of the deal, get a cashier’s check for the earnest money amount. You’ll want to bring a cashier’s check instead of a wad of cash because “cash is a word, not a thing,” says Ludecker.

“Cash doesn’t have a place in real estate — no one wants a pile of cash to count.”

The settlement agent will hold onto the earnest money until the sale is finalized.

8. Get an inspection

It’s time to make sure there aren’t any hidden problems with your soon-to-be new home by scheduling an inspection.

Ludecker says that cash buyers will often include an inspection contingency “for informational purposes only” in their offer. “It indicates that if something is disclosed, you can walk away, but you won’t ask for repairs,” says Ludecker.

In other words, when you include an inspection contingency for informational purposes only, you’re telling the seller that, no matter what the inspection reveals, you won’t ask them to make repairs — though you reserve the right to walk away should the inspection reveal a huge issue. Otherwise, you’re willing to purchase the home as-is.

9. Take part in title research

Title research is an important part of the home-buying process because you want to make sure there are no unknown liens or claims on the house before you take ownership. This should be handled by your settlement agent.

You should also consider purchasing title insurance, which ensures your ownership rights to the property, should title research miss something.

10. Consider getting a land survey

If you are purchasing a large plot of land or a piece of property without a clearly defined lot, think about getting a land survey. The survey will show exactly where the property boundaries are, determine whether the house is on a floodplain, and outline any easements.

11. Get homeowner’s insurance

Even though you’re buying your house outright and are not required to insure it, purchasing homeowner’s insurance is still a wise decision. You’re investing your hard-earned cash into an asset worth hundreds of thousands of dollars, so you want to make sure it’s insured in case something unexpected happens.

If you’re unsure what level of homeowner’s insurance you should obtain, ask your insurance agent (your car insurance agent is a good place to start if you don’t have a homeowner’s policy on your current place).

12. Consider an appraisal

Though you don’t really need an appraisal because you’re paying cash, you may want to confirm that the house you’re purchasing is worth what you are paying for your own peace of mind.

The pros and cons of buying in cash

So far, buying in cash sounds like a win-win, right? It’s quicker and more certain than getting a mortgage. But there may be considerable drawbacks to keep in mind. Let’s get into it!

Pros

  • Make more competitive offers
  • Choose your contingencies (wisely)
  • Skip worrying about interest rate fluctuations
  • Save money on mortgage insurance and interest
  • Pay fewer closing costs and loan fees
  • Avoid years of mortgage payments
  • Close quicker with less stress
  • Own your home outright immediately
  • Bonus: You can always refinance later if needed

Cons

  • All of your cash is tied up in one investment and isn’t liquid if you need it
  • That cash might work harder for you with other investments
  • You won’t get mortgage interest tax breaks
  • Forgoing inspection and appraisal can put you at financial risk
  • Paying in cash isn’t as quick as it used to be, and there could be delays
  • You may not get much of a cash discount on the price