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How much more typically is it to buy a home, but not going for a mortgage?

Amol S.

Golden Member
Mar 14, 2015
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How much percent more typically is it to buy a home, but not to go for a mortgage on it (basically full price)?
 

vi edit

Elite Member
Super Moderator
Oct 28, 1999
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I don't understand the question. Do you mean buy in cash?
 

vi edit

Elite Member
Super Moderator
Oct 28, 1999
61,399
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You save the realtor/bank fees so less.
Buying cash doesn't necessarily negate realtor fees. If there's a selling agent you'd still pay that. If you used a buyers agent you'd still pay that. There's still likely some title and attorney costs as well that may end up being close to what a bank would charge for their closing/processing fees. (Several hundred to a grand or two)

In this market, buying cash just basically moves you to the front of the line since you aren't dealing with any contingencies or waiting for approvals. The only way you'd really save is if you approached the seller ahead of listing it and had an agreement outside of realtors.
 

GodisanAtheist

Diamond Member
Nov 16, 2006
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Weird question.

Buying in cash is always cheaper. No bank fees, no interest accumulating on your mortgage, and sellers will sometimes sell for less if the offer is in cash especially if they've had some prior offers fall through on account of the other party failing to secure lending.

My house more than doubled in value from the time I bought it, and I make it a point to make a rather large Principal only payment with a portion of my yearly saved funds at the end of every year, so by the time my loan is paid off and assuming I can sell the house for its current value, my mortgage will have effectively been free regardless. I would not have been able to buy my house in cash.
 

Sick Willie

Member
Apr 8, 2010
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How much percent more typically is it to buy a home, but not to go for a mortgage on it (basically full price)?
If you want to see how much you save by paying cash vs. financing, get any amortization calculator and plug in the numbers. You will still have to pay some fees, which the title company will be happy to share with you. But at least here, the seller pays both his agent and the buyer's agent out of the sale price. Again, here in Texas, that is normally 3% of the sale price to each agent, from the seller, not the buyer.
 
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highland145

Lifer
Oct 12, 2009
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Buying cash doesn't necessarily negate realtor fees. If there's a selling agent you'd still pay that. If you used a buyers agent you'd still pay that. There's still likely some title and attorney costs as well that may end up being close to what a bank would charge for their closing/processing fees. (Several hundred to a grand or two)
Yeah, I edited the realtor part. Seller should pay that. Would save the 1% origination fee at the bank. Definitely have attorney costs, title search/insurance, maybe survey/inspection. YMMV

Cash is king.

Friend lives in San Fran, just paid $180K over the original asking. Crazy bidding wars.
 
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vi edit

Elite Member
Super Moderator
Oct 28, 1999
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When you say the "seller pays the realtor cost". Sure.

But if a house is listed with a realtor that price is baked in already. While true, as a buyer you aren't technically paying the realtor out of pocket. But it's kind of like saying you aren't paying the kid flipping your burger at McDonalds directly either. It's baked into the price of the burger.
 
Feb 4, 2009
31,492
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When you say the "seller pays the realtor cost". Sure.

But if a house is listed with a realtor that price is baked in already. While true, as a buyer you aren't technically paying the realtor out of pocket. But it's kind of like saying you aren't paying the kid flipping your burger at McDonalds directly either. It's baked into the price of the burger.
Yes and no. Regardless the home is going to sell for market price there are zero scenarios where someone says “let’s avoid realtors and I’ll sell you the house for $16k less”
People like to read about that stuff but it never happens outside of family transaction or family estate sales.
 

highland145

Lifer
Oct 12, 2009
42,209
4,709
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Yes and no. Regardless the home is going to sell for market price there are zero scenarios where someone says “let’s avoid realtors and I’ll sell you the house for $16k less”
People like to read about that stuff but it never happens outside of family transaction or family estate sales.
Friend put his townhouse on fb marketplace to avoid the realtor 6%. The boss says let's go look. She said we'd take it, he saved the 6% and I got a fair price. Happy all around.
 
Feb 4, 2009
31,492
11,883
136
Friend put his townhouse on fb marketplace to avoid the realtor 6%. The boss says let's go look. She said we'd take it, he saved the 6% and I got a fair price. Happy all around.
But did the buying friend save any money? What risk did the buying friend take purchasing that property without representation?
 

highland145

Lifer
Oct 12, 2009
42,209
4,709
136
But did the buying friend save any money? What risk did the buying friend take purchasing that property without representation?
I was the buyer. I didn't save any $ but the price was fair. A realtor isn't going to look out for me. The lawyer took care of the title search/insurance so I was covered. If I had a crystal ball, I would have bought one more that came up soon after.
 

nakedfrog

No Lifer
Apr 3, 2001
52,338
4,726
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Yes and no. Regardless the home is going to sell for market price there are zero scenarios where someone says “let’s avoid realtors and I’ll sell you the house for $16k less”
People like to read about that stuff but it never happens outside of family transaction or family estate sales.
I know someone that did that with a house being sold by a co-worker. Seller didn't like realtors/dealing with realtors (but is married to a realtor :D)
 

Muse

Lifer
Jul 11, 2001
31,763
4,161
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Buying cash doesn't necessarily negate realtor fees. If there's a selling agent you'd still pay that. If you used a buyers agent you'd still pay that. There's still likely some title and attorney costs as well that may end up being close to what a bank would charge for their closing/processing fees. (Several hundred to a grand or two)

In this market, buying cash just basically moves you to the front of the line since you aren't dealing with any contingencies or waiting for approvals. The only way you'd really save is if you approached the seller ahead of listing it and had an agreement outside of realtors.
It's been 21 years but I paid cash because my banker backed out at the last moment for the "for sure" mortgage I'd lined up. There wasn't a realtor involved. Well, there was, sort of, because the owner of the house (which I was living in, paying rent, like the other people in the house) had the property managed by a married couple, both of whom were realtors. They lined up someone to come look at the place when the owner went to sell. That person didn't show up (AFAIK), but I stepped up and asked what the owner wanted, a price was quoted and I eventually came up with the cash and that was it. I had to pay title fee, inspection fee (because I needed inspection for the mortgage), maybe some other stuff I'm forgetting. The house was in escrow. I suppose the realtor/manager got something but it was from the owner, not me.
 
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dasherHampton

Platinum Member
Jan 19, 2018
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You save a shit ton in interest, right?

I'm not super knowledgeable about the specifics of home loans but my first mortgage payment was like $1000 (property taxes/insurance have since raised it to over $1200). Its a 30 year loan.

The $1000 was split approx. (iirc):

$400 interest
$250 principle
$300 taxes
$50 insurance (my homeowners insurance has doubled btw)

As you get further into the loan the interest goes down and the principle goes up. So if the interest averages out to $200 a month over 30 years that's 72 fracking grand.

Again - I could be wrong about how the numbers work exactly.
 
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Muse

Lifer
Jul 11, 2001
31,763
4,161
126
You save a shit ton in interest, right?

I'm not super knowledgeable about the specifics of home loans but my first mortgage payment was like $1000 (property taxes/insurance have since raised it to over $1200). Its a 30 year loan.

The $1000 was split approx. (iirc):

$400 interest
$250 principle
$300 taxes
$50 insurance (my homeowners insurance has doubled btw)

As you get further into the loan the items get down and the principle goes up. So if the interest averages out to $200 a month over 30 years that's 72 fracking grand.

Again - I could be wrong about how the numbers work exactly.
That's just it. The advantage of buying outright is NO INTEREST! You own outright. You have your expenses, property taxes, insurance, upkeep, repairs, responsibilities, all that stuff, but no payments and no interest.
 

dasherHampton

Platinum Member
Jan 19, 2018
2,543
489
96
There are a lot of factors to consider.

Let's keep the numbers simple and say a person has $100,000 to spend and that is a large percentage of their net worth. They will either

1) put down $20,000 and finance $80000
or
2) pay for the house in cash

If they pay in cash they'll save a ton in interest right off the bat and not have a mortgage payment. But $80,000 put in an index fund with an average return of 8% over thirty years is over $800,000 with no additional contributions.

This person can also invest the amount they would have paid towards a mortgage every month. But so few people end up actually doing that.
 
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nakedfrog

No Lifer
Apr 3, 2001
52,338
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Yeah, I edited the realtor part. Seller should pay that. Would save the 1% origination fee at the bank. Definitely have attorney costs, title search/insurance, maybe survey/inspection. YMMV
Oh yeah, I should also mention for people that can get a VA loan, NBKC doesn't charge an origination fee for VA loans, and has very competitive rates. I couldn't get anyone else to match that :D
 
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Sunburn74

Diamond Member
Oct 5, 2009
4,585
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If I pay my house off through the mortgage vs just paying straight up cash, I'll have paid around 600K usd in interest over the 30 years. So yeah if you can pay without a loan go for it. In the long run you win.
 
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guidryp

Golden Member
Apr 3, 2006
1,523
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There are a lot of factors to consider.

Let's keep the numbers simple and say a person has $100,000 to spend and that is a large percentage of their net worth. They will either

1) put down $20,000 and finance $80000
or
2) pay for the house in cash

If they pay in cash they'll save a ton in interest right off the bat and not have a mortgage payment. But $80,000 put in an index fund with an average return of 8% over thirty years is over $800,000 with no additional contributions.

This person can also invest the amount they would have paid towards a mortgage every month. But so few people end up actually doing that.
This.

The only real difference is between:

A: Mortgage interest, offset by your investment income from the money you could have used to buy the house outright.

vs

B: No Mortgage interest, but no investment income either.

Which (A or B) makes the most economic sense, depends on which is higher, investment income or mortgage interest.


Looking at index returns vs current mortgage rates, it looks like you would do better with a mortgage and safe diverse investments.
 

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