Home buyers, Realtors see perks in cash purchases

That’s because Johnson is among the 6 percent of Midwesterners able to pay for their homes entirely in cash, according to the National Association of Realtors.

“I guess I’m just used to paying cash for things – I don’t like to finance,” said Johnson, 66, who also paid cash in 1996 for his previous home in Chestnutridge, south of Ozark in Christian County. “Going to a bank to apply for a loan, to me, is a lot of bother.”

While Johnson had the $178,000 in cash to pay for his home from the sale of a motel in Rochester, Minn., other homeowners may be able to avoid borrowing when they sell homes in other regions such as the coasts, where real estate is much more expensive, and find comparable properties in the Ozarks for much less.

Home prices in other regions of the country, particularly California, can run more than six times as expensive as the Springfield area, allowing people to sell their out-of-state homes and find comparable property in southwest Missouri with plenty of cash to spare. According to NAR’s Survey of Median Sale Prices of Existing Single-Family Homes, released Aug. 15, some markets in California, for example, have average home prices that are roughly seven times the prices in Springfield. The median existing home sale price in the San Jose, Sunnyvale and Santa Clara, Calif. area is $865,000, compared to $123,700 in Springfield, the survey said.

Safety net

That type of windfall is good news for sellers-turned-buyers – and it can simplify the selling process for Realtors.

“From a Realtor standpoint, we love it,” said Charlie Gerken of Branson real estate agency Gerken & Associates. He said that a potential home purchase can easily fall through even after both sides have agreed on a price, due in many cases to lack of bank financing.

“When someone says they’re not going through a bank and it’s strictly cash, all we have to worry about is inspections,” Gerken said, noting that he recently lost more than half a million in sales in one month due to financing issues with two different purchases.

Ethel Curbow, a Realtor with Coldwell Banker Vanguard Realtors in Springfield, said although most buyers are pre-approved for loans before engaging a real estate agent, a cash sale does help prevent unexpected surprises.

“Sometimes when you have these out-of-state lenders, those are the (deals) where we get last-minute requests,” said Curbow, who worked with Johnson on his latest home purchase. “There’s less red tape with a cash purchase, and once the inspection is passed, it’s usually a done deal.”

Still, Curbow sees value in the mortgage process, namely in the fact that the red tape helps weed out people who aren’t really serious about buying. She estimates she’s had as many cash deals as those involving mortgages fall through unexpectedly. So when she does have a client like Johnson who plans to pay cash, Curbow likes to get proof that the funds are in place.

Education process

Peggy Barton, president of Great American Title Co., which handles paperwork associated with real estate transactions, said cash deals are “often the most difficult” ones she handles.

“Often you’re dealing with people who are not really well versed in closing transactions every day, every week, every month,” Barton said. “When you have Realtors and lenders who actually know what it takes to get a transaction closed, it becomes a little easier. Sometimes it’s a bit of an education process as you go along with (cash sales).”

Curbow said buyers using cash also need to understand that even though they’re not using a bank loan, it doesn’t automatically mean they’ll get a better deal – the seller is getting money either way.

Even so, Johnson said he won’t consider bank loans for any future home purchases. He plans to stick with his method of working with a Realtor and paying up-front.

“ … I got homeowners insurance, I brought my money to the bank, signed the paperwork and we were done,” Johnson said. “I think I was the easiest transaction Ethel will have all year.”