What Are the Benefits of Paying Cash for a Home in Colorado
Sellers in Colorado prefer cash offers—and they’re good for buyers, too
Table of Contents
What Is an All-Cash Offer in Colorado?
Why Sellers in Colorado Like All-Cash Offers
Incentives for Buyers in Colorado to Pay All Cash
Downsides of Paying All Cash in Colorado
The Bottom Line
The home-buying process in Colorado can be slow and cumbersome, especially if you’re trying to buy in a hot market like Denver and competing with other buyers and real estate investors. An all-cash offer in Colorado is one way to stand out and speed up the process.
While it’s true that all transactions lead to cash in the end, the realities of financing in Colorado place obstacles between buyers. Sellers naturally want to deal with buyers who face the fewest hurdles. All-cash offers are a great way to remove those obstacles, but they’re not always the best choice.
Making a cash offer on a home in Colorado puts you in the driver’s seat when it comes to negotiating a deal with the seller.
Your credit isn’t a factor if you don’t seek loan approval, and you’ll know how much you can spend on a home, based on the cash you have available.
You’ll avoid paying for mortgage insurance if you make an all-cash offer in Colorado, which is sometimes a requirement for mortgage loans.
The major downside is that you’re tying up your cash in an asset and losing liquidity you could need in case of a financial emergency.
What Is an All-Cash Offer?
In most real estate transactions, buyers in Colorado rely on the help of a lender to finance their purchase. They may come to the table pre-approved and ready to make an offer, but their ability to close the deal will ultimately depend on the lender’s assessment of their ability to pay back the loan, an appraisal of the home’s value, and other factors.
An all-cash in Colorado offer takes the lender out of the picture completely. It means that the buyer has enough liquid assets available to write a check for the full purchase price of the home. If you’re a buyer in this situation, you’re essentially saying that you can close the deal as quickly as possible
Depending on the temperature of a marketplace (Denver is super hot right now), paying cash for a home has benefits from a seller’s point of view, strengthening your negotiating position if you can afford to pay with cash.
Why Sellers Like All-Cash Offers
Some sellers in Colorado choose all-cash purchase offers over higher-priced offers with conventional or FHA loan financing, because they know that a cash offer with proof of funds faces fewer stumbling blocks and is more likely to close.
Lenders require homes in Colorado to be appraised before closing if the real estate transaction is over $400,000; an appraised value less than the amount of a mortgage can spell contract cancellation if a seller doesn’t come down on price or a buyer doesn’t increase the down payment.1 The most common method for appraisals involves looking at comparable sales. That involves choosing three to six properties and comparing those values to the that of property in question and adjusting upward or downward for updates or missing features.2 The process can add a week or more to the sales process. Cash takes the lender—and the need for an appraisal—out of the equation.
Even if you don’t have to get an appraisal in Colorado, it still may be worth the time and cost to ensure that you’re not overpaying for the home. A typical home appraisal will cost between $300 and $400.3
Even buyers in Colorado who are fully qualified for a home loan can be tripped up by any of multiple contingencies. Buyers’ qualifications can change upon further scrutiny. Perhaps a buyer wasn’t fully employed in the same occupation for the past two years, or financial situations changed prior to closing because the buyer bought a new car or was a victim of identity theft. If buyers have cash, no such potential problems can derail a sale.
Cash sales in Colorado also take less time. Buyers do not need 30 or 60 days to close if they are not obtaining a loan.4 Once a home inspection and other contingencies have been satisfied or released, the closing can take place in as little as seven days, provided that the buyer is willing to sign a lead paint waiver.5
This is why I pay cash for houses in Colorado!
Ever wonder why sooenoe would pay cash for your Colorado home? We founda great webpage that was published by a real investor who buys for cash in Colorado and she explains why investors pay cash for houses in the article.
“I pay cash because it saves me time, money and all the other stress. Its that simple. I pay cash for house because I can. I pay cash for houses because it eliminates al the unnecessary paperwork and 3rd party people like realtors, agents, inspectors, mortgage officers and more. It just really simplifies it when I buy a house for cash in Colorado.”
If you are looking to sell for cash and want someone to pay you cash for your house you must read that article to get a really good insight into why they do it and the benefits to you too.
The bottom line is this: An all-cash offer in Colorado usually means a faster closing, which puts money into a seller’s pocket sooner.
Incentives for Buyers to Pay All Cash
Because of the reasons for sellers to prefer cash deals, it makes sense for buyers to want to pay with cash if they have the means—especially in a seller’s market, like Denver and Colorado. Buyers in Colorado willing to pay with cash have an inherent advantage over those who need to borrow, and they may even be able to win over the seller at a lower price.
Lenders in Colorado with multiple foreclosures in their portfolios sometimes discount the list prices in the hopes that properties will attract multiple offers. Again, buyers who pay cash for these real estate owned (REO) homes tend to win multiple-offer situations.
There are benefits for buyers in Colorado other than just negotiating strength. Paying for a home with cash means that you will have no mortgage payment to make each month, and the equity in the home provides a sense of security if financial emergencies arise. While market fluctuations can change the value of a home, owners without a mortgage still have 100% equity in whatever that market value is.
Buyers who pay cash in Colorado also avoid many of the costs associated with closing a loan, not to mention years of paying mortgage interest.
Downsides of Paying All Cash
That’s not to say there are no disadvantages to paying all cash in Colorado, even if you can afford it comfortably. To start with, shelling out that much cash will significantly reduce your liquid assets, leaving you with less available for other needs or even for home repairs.
A home in Denver is also an investment, and it’s possible that your investment dollars could perform better elsewhere. If mortgage interest rates remain low, then you may be able to make up the interest expense plus more with some aggressive investing in stocks or other securities.
Finally, if you pay cash, you’re sacrificing the potential of a significant tax deduction for home mortgage interest. However, the 2017 Tax Cuts and Job Acts, which nearly doubled the standard deduction, has nullified this benefit for many homeowners. Unless your loan is fairly large, you may not even need to itemize your deductions.6
The Bottom Line of Buying for Cash
Buying houses for cash is the best way.
If you have the means to make an all-cash offer in Colorado, it’s definitely something worth considering. With real estate markets favoring sellers for much of the past decade, anything buyers can do to stand out is a smart move. However, your decision ultimately depends on your broader financial plans and comfort with risk.