We covered what to expect when closing on a property using financing in our last post. Now, we will review what to expect when buying for cash. And what we can expect is it to be way less paperwork!

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If you missed any of the previous posts and the possible scenarios you may need to sort out – you can find them here:

Time to Close on Your Property The Final Walk Through The Estoppel Letter The Title Search The Appraisal

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Closing on a Cash Deal

The beauty of buying a property cash is the mere fraction of paperwork you will have to do as opposed to buying with a loan. Of course not having to pay a loan is always nice too!

Items Not Required To Close

When it comes to buying cash we need to be very diligent in our research of a property. There is a reason our lender requires title searches, etc. as they want to be sure the property the borrower is buying is legit and clear of any big headaches because if not they borrow may decide to walk away and not pay the loan.

Here are three biggies that are not forced on you when buying cash:

• Lien Search
• Homeowner’s Insurance
• Title Insurance

Technically you can buy a property without running a lien search – and if you were to do so then you clearly did not read about how to buy right because that’s just asking for a disaster. Inheriting the liens of a property is not a recipe for profitability.

Also, if you own a property outright then technically you do not need insurance. However, if you want to receive funds to rebuild your property god forbid it burns down or a hurricane takes it out then probably a good idea.

Additionally, since we are generally looking to buy property for rental use then you damn sure better have insurance on it otherwise you are one slip and fall away from your tenant owning that property.

Title insurance is more debatable I suppose. Some investors believe if they have a title search come back clean on the property that they do not need to spend money on insuring the title.

Though I can’t completely disagree with that, in the end you truly don’t know if a title is 100% clear until you sell and are free of it. For the one-time cost I’d rather have the peace of mind that I’m covered if something came up that challenged the title. Owner’s title insurance can cost from $800-$1300 in my experience.

The good news is you save money on having to get lender’s title insurance which can run roughly $400-$600. Note: Lender’s title insurance covers the banks interest in the property and Owner’s covers your interest.

Forms Used For Cash Deal

When doing a cash purchase the closing is still done with the HUD-1 (as of this writing) as opposed to financed purchases that now must use the newer Loan Estimate and the Loan Commitment Forms described in my last post.

The HUD-1 is a bit more straightforward in my opinion and since you do not need all the additional pages that are pertinent to the loan it will be a much smaller package.

In fact here is a sample of the HUD’s first page of a cash deal I did. The entire statement was just four pages in order to close on the property, sweet!

That’s the key points for closing a cash deal

Future posts will get into tenant screening, managing your rentals and/or hiring a company as well as delving deeper into some of the forms when it comes to buying and leasing properties!

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Regards,
Mitchell J
Download the property calculator for free at ScaredyCatGuide

Disclaimer: All info in this post is educational in nature and my opinion.