Buying a house with cash: The process

Apr 25, 2023

Having cash to make a more competitive offer is the way to go ahead and buy at deeper discounts and make larger paydays consistently by flipping deals. 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 ensure you have the money together in one place.

This is achieved by securing the financing in the private arena or lining up "private" institutional money.

Once you've figured out where the money is coming from, it will be easier to get proof that you have the cash.

  1. 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.

  1. Find a deal

When seeking a deal, leverage the 70% rule. This formula is where the maximum offer you can make is the ARV (after-repair value) divided by .70 and then deduct the renovation costs. That sum is a safe number you can offer to the property owner. 

  1. Make your offer

You've finished your seller research, created the winning offer, and are ready to take down the project. It's time to submit your offer and open the negotiations. Remember, everything is a negotiation, don't take it personally; it's just business. Remember that the 70% rule is a very conservative number; you may have to push past it to get the deals, but it's an excellent barometer for yourself. 

  1. 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 ensure there are no problems with the home's title and that the transaction closes smoothly.

Depending on the property's location, 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 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 particular closing attorneys. 

  1. Secure your earnest money check or wire transfer.

If you offered earnest money as part of the deal, get certified funds for the earnest money amount. 

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

  1. Get an inspection

It's time to ensure no hidden problems with your soon-to-be new home by scheduling an inspection.

This part of the process is always a tough one. Inspections can lose you deals but save you loads of money. If you have a clean 4-point inspection, you will typically be safe, but having no inspection takes some experience; you need to know what you're looking for before you should be comfortable buying without an inspection. 

  1. Take part in title research.

Title research is an important part of the home-buying process because you want to ensure there are no unknown liens or claims on the house before you take ownership. Your settlement agent should handle this.

It would be best if you also considered purchasing title insurance, which ensures your ownership rights to the property, should title research miss something.

  1. Consider getting a land survey.

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

  1. Get insurance.

We recommend securing insurance through a National COmpany like NERIG. They work with investors and will make sure your project is adequately covered.

  1. Secure a check for the balance or wire the balance.

Now that you've inspected the house and everything is prepped for closing, it's time to prepare to pay for the project. Secure a check for the balance owed after subtracting the earnest money you've already paid. Pull the funds together in a cashier's check or plan for a wire transfer.

  1. Figure out what other funds you might need

Will you have to pay homeowners' association fees? Are you responsible for closing costs — or will the seller do that? These terms should be laid out in your purchase contract.

Talk to your agent about what you owe outside of the purchase price so you can have everything ready.

  1. Conduct a final walkthrough.

Just before the house closes, you'll walk through it again to ensure it's in the expected condition.

  1. Come to the closing.

It's time to kickstart the project. Sign your paperwork get copies, get keys and coordinate possession. Then dive into your project. Have your contracting crew ready to start work immediately because time is money in this business. 


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