Closing on a new house when paying cash

[NJblue]

It's been MANY years since I was last involved in a real estate transaction and when I last did it, there were real estate agents and lawyers involved for both parties (as is the custom in this state). Hence, I just wrote checks and signed documents as dictated by my attorney.

Now, we are preparing to close on our new house in TV. (Yeah!) We plan to pay cash, hence there will be no mortgage company involved. From what I understand, most people who buy new from TV do not have their own lawyer. That leaves two questions:

1) should we have a lawyer anyway? Has anyone experienced legal troubles by not having a lawyer when buying directly from TV?

2) if we don't have a lawyer, how do all of the various fees like Archive and Recording fees and most importantly, State and County Tax Stamps get paid. Since these fees are not paid to TV, who collects this money from us and disburses it to the proper places? In NJ, that would be the function of the attorney. Who does this when paying cash for a house in TV when no attorney is involved? Does TV do this for us?

Any experience or helpful hints on closing will be appreciated.

[downeaster]

NJ,

Answer #1: Your choice. If you feel more comfortable with a lawyer, hire one. We paid cash with no lawyer.

Question 2: The closing company usually takes care of the total transaction. You pay the closing company, they make disbursements.

When we closed they used Citizens First Bank and it was a piece of cake.

BTW, I am a license real eastate broker and attended many closings. Non any smoother than this one.

DC

[Floridagal]

We did not use a lawyer and everything went smoothly. The title company took care of it all.

[JohnN]

We closed in June paying cash, it was a breeze. Closing company handles the recording fees, etc and it's nominal. They'll give you an estimated closing summary in advance.
good luck and welcome

[njgranny]

Just curious. When you pay "cash," do you give a check? Certified? Or how does it work?

[HoneyBunny & Mouse]

Can anyone tell me what the average closing cost would be on a new home costing between $180 to $190 if you pay cash. ??? Any info would be appreciated.

HB&M

[graciegirl]

We closed in June paying cash, it was a breeze. Closing company handles the recording fees, etc and it's nominal. They'll give you an estimated closing summary in advance.
good luck and welcome


Ditto for us in May. Smoothest closing. By mail.

[graciegirl]

Just curious. When you pay "cash," do you give a check? Certified? Or how does it work?


Bank draft, Certified check........or we did a wire transfer.

[Donna]

We did a wire transfer too..Worked out well! They are very helpful and the directions are very easy!

[barb1191]

Same here; paid cash, no attorney, no problems.

[downeaster]

Can anyone tell me what the average closing cost would be on a new home costing between $180 to $190 if you pay cash. ??? Any info would be appreciated.

HB&M


There are too many variables. If you have chosen a house and established a sales price then the agent should be able to give you a reasonable estimate. If you are considering buying a house from the developer then they probably give you an exact figure.
If you are buying a resale then you have to negotiate who pays for what. If there is no broker involved it is best to find a title company to handle the details. Once a contract has been signed they will be able to tell you your share of the closing cost.

DC

[Sidney Lanier]

We bought a resale for cash. A paralegal at McLin & Burnsed in LSL handled all the details, and while we were present, we could see how easy a closing is when the buyers are not there. "Cash" meant our going to our bank, a branch of which is in TV, and getting a bank check; we were told that we would have had to pay for a wire transfer, while a bank check was free and acceptable. Insofar as closing costs are concerned, actually it's not a matter of negotiation; it's all spelled out what the buyers pay and what the sellers pay. As the buyers, our closing costs were nominal; as best as I recall, it was $25 which was half the fee for recording the deed, while the sellers were responsible for tax stamps, title search, title insurance, and so forth. Of course we buyers had to pay adjustments (for example, any portion of property taxes that the sellers had paid that would cover whatever portion of time we owned the house), but that would be the case with any real estate transaction, and again the paralegal handled all the details. We (buyers) and the sellers were given copies of the closing statement that spelled everything out, as well as all other legal paperwork. The fee to McLin & Burnsed was also relatively reasonable, best as I recall; the sellers were responsible for that fee so I don't remember the exact amount. Easiest closing imaginable!

[MMC24]

Just curious. When you pay "cash," do you give a check? Certified? Or how does it work?


I used a Bank Check drawn from my account in Connecticut. A Bank Check is almost as good as a certified check in that the bank will not issue a check if the funds were not available in your account. I am not an expert in this but I do not think you can close on a property with a personal check. You can however pay the misc. fees with a personal check least that was my experience.

[rshoffer]

Now i'm all worked up and worried... When we decided to move to TV our mountainside home in Pa. sold immediately. We have always made financial decisions of any large magnitude with our accountant, our financial advisor (2 different professionals with no connections) and ourselves. We met together, all of us, and one of my main questions was; "should we pay cash for our new Villages house"? We were advised by both, quite emphatically, "NO!" We were advised to finance AS MUCH as we can and invest the cash... especially since the Market is down. Well, I'm an old Pennsylvania Dutchman and debt (even as they call it 'good debt') troubles me. But I followed the advice of the experts I pay to give me advic and financed the entire home. Wonder if I did the right thing?

[NJblue]

Thanks to all for the comforting feedback. I guess the missing information that I was not aware of was that there would be a closing agent involved with the transaction. I imagined sitting at a table with someone from TV who would take our money that they were owed, but then when it came to the various fees owed to others that I would be left with figuring out how to get these things payed.

A related question that I have is the tax stamps that apparently are required. I believe that, unlike the case when buying a resale, when buying new this is the responsibility of the buyer, not the seller. When we received an estimate for what these charges would be when we had a consultation with Citizens First, these totaled (state plus county) approx. .45% of the sale price of the house (approx. .3% state and .15% county). Yet, when I research Florida law, it looks like just the state tax stamp should be .7%. Does anyone have any answer as to why the good faith estimate from the bank was considerably different than what I am reading that the state gets?

[NJblue]

rshoffer,

It is somewhat of a personal thing (cash versus mortgage). I'm sure your advisers were assuming that your post-tax investment returns on the amount of your mortgage would be greater than the post-tax cost of the mortgage. Historically, they are probably correct. However, you also need to include into the equation the costs of getting the mortgage; looking at just the mortgage interest rate is insufficient. In our case, they total about $4,000 (from Citizens First). This includes things like loan discount fees, application fees, appraiser fees, title insurance (for the bank's policy). Of course, your advisers would probably say that over a number of years these upfront costs become insignificant.

As long as your investments are in things other than CDs and bonds, from a purely economic perspective your advisers are probably correct (in fact, I currently owe more on my house up north than I did 28 years ago when I bought it). However, I have never owned a home outright, and I want the emotional satisfaction of doing so.

[barb1191]

WOW That sure sounds "iffy" to me. I've always invested in real estate and found it to be the biggest return on investment. No way would I want the large expense of a mortgage, even though the interest may be deductible, and to play the market would be a risk I'd rather pass on.

My advice would be to pay cash for the home where you know the money is safe and will appreciate. Regardless of the housing situation now, real estate is a far better risk, in my opinion. Why would you want the expense of a mortgage plus interest payments? If you ever need fluidity, one can always find various methods of getting your cash invested in your home via creative financing, i.e., reverse mortgage or equity loan, etc.

[Peachie]

rshoffer, I'm not a financial expert nor do I claim to be but I wouldn't secure a mortgage to buy a home for which I could pay cash. Sounds like a lose, lose situation to me. You may make tons in the market or you may be helping to shore up your advisor's money in the market until it recovers, which could be tomorrow, in 6 months or 10 years. Have you ever read Dave Ramsey's book, "The Total Money Makeover". A paid up mortgage is the new BMW in America, according to his teachings. I suggest you do more research and don't take my thoughts as gospel, then you will feel more comfortable about your decision.

[JohnN]

No lawyer, it's not that complex, unless you feel you need one.

Closing costs were a couple hundred bucks plus the partial payment for amenity fees til the end of the month. Very nominal.

[NJblue]

JohnN,

Didn't you have to pay the state and county tax stamps? These are well over a thousand bucks in our case.

[JohnN]

NJBlue,
I don't recall the line items, I'll look 'em up when I get time.

I was nickeled and dimed for courier fees and recording stamps,
but the bottom line is that it was far less than $500 and I just accepted it.

I'll look it up and note to you.

[NJblue]

My advice would be to pay cash for the home where you know the money is safe and will appreciate. Regardless of the housing situation now, real estate is a far better risk, in my opinion. Why would you want the expense of a mortgage plus interest payments?


While my plans are to pay cash, I think this logic is wrong. Your house will apreciate the same amount whether it is mortgaged or not. The real issue is whether you want to have the money work for you in some outside investment that will pay a return greater than the cost of the loan. This is basic Investment 101. Yes, there is a risk that over the lifetime of the loan the post-tax market return will be less than the post-tax interest paid on the loan. However, from a long-term historical perspective, this has not been the case. Returns in the stock market have exceeded the current loan interest rates.

As far as real estate paying better returns, if you really think so then the wise thing to do is to buy an investment property with the cash that you have on hand. That way you would have two properties that are appreciating.

[Sidney Lanier]

I'm in agreement with most of the posts that say to buy outright for cash if one is able to do so. I agree too that the advice from the financial advisers is accurate from a strictly dollar point of view. But there's also that 'emotional element' of (1) owning outright; (2) not being responsible for paying mortgage interest, tax deductible as it would be; and (3) the peace of mind of putting my head on the pillow at night not wondering what was happening with the money that I would otherwise invest in the financial markets if I had bought with a mortgage. As also noted, this is a personal consideration.

In my earlier post on this thread, I pointed out that closing costs are nominal for the buyer with a resale. I didn't mention that it was our understanding that had we been buying new construction from TV, we would have been responsible for all closing costs, that is, those otherwise required of the seller plus those appropriately paid by the buyer. Another plus to buying a resale, along with (discussed at length in other threads), the possibility that the previous owners had paid off the bond (as was true in our case), or at least had paid a portion of the bond during the time they owned the house.

[JohnN]

To clarify, when we bought, The Villages paid all actual closing costs.

We paid a couple hundred bucks for prorated amenity, bond and fire assessment plus a credit for unpaid county taxes year-to-date. All prorated stuff.

[Boomer]

Hi rshoffer and anybody else caught in the great debate over mortgages, (I think there may be two discussions going on in this thread.)

Well, I just wrote a whole big thing on the topic of mortgages, about which I had no business writing.

And then I somehow hit the wrong button and managed to delete the whole thing.

It was all about how, at our age, we should try not to borrow money that we do not have.

But about how sometimes it is just fine to have a mortgage over your aged head, even if your head is aged.

And about how having a mortgage at this age should happen only if you are sure your ROI is going to generate that payment as long as you want it to. Or at least the principal is hanging tight so you can dip in if you need to dip in. (But try not to.)

And about how if you decide to have a mortgage, you should make sure that there is no prepayment penalty, in case you change your mind.

And about how not to let anybody tell you to have a mortgage just for the tax write off because that is a bit of a crock and those numbers will not wash.

Got cash? If so, then to mortgage or not to mortgage would depend upon where that cash is living right now. And about how bad you want that cash to keep on living where it is living.

And don't get me started on title insurance. That's in another thread. And sometimes I write about prenups and sometimes I write about Long Term Care insurance. And sometimes I write about real estate. And I really should just write about how nobody should pay any attention to me whatsoever because I have no qualifications to advise in any of this stuff. Just life.

And all it ever is anyway in all this stuff is your own personal cost of sleep. Just make sure that you completely understand your own personal sleep number(s).

And the first one I wrote was way better than this. There was a bunch of other stuff in it. But that one is gone forever.

And I really need to shut up and get back to my own personal paperwork anyway.

Boomer

[coach]

I'm a Dave Ramsey fan like an earlier poster. Here is a question he would ask." In today's market, if your house was completely paid for, would you take a mortgage out on the property to invest in the market?"

My answer is no. The point many advisers don't factor in is the risk. The potential return of 10 % in the stock market needs to be balanced against the certain return of not paying 6-6 1/2% for your mortgage. When you consider risk, taxes and the joy of no debt, I would go with a home in TV and no mortgage.

[MMC24]

In other similar threads several respondents advised not to payoff the bond upfront but contrary to their wisdom, at closing time we did pay cash for the home and paid off the bond as well. There is a certain sense of security knowing our only cash outlay is for insurance, taxes, amenity fees and regular monthly expenses. First time in our lives we haven't had a mortgage and it feels great!!!! Now the only things I worry about are:
1. the Red Sox making the post season
2. improving my golf score
3. finding my way home after happy hour. :beer3:

[rshoffer]

rshoffer,

It is somewhat of a personal thing (cash versus mortgage). I'm sure your advisers were assuming that your post-tax investment returns on the amount of your mortgage would be greater than the post-tax cost of the mortgage. Historically, they are probably correct. However, you also need to include into the equation the costs of getting the mortgage; looking at just the mortgage interest rate is insufficient. In our case, they total about $4,000 (from Citizens First). This includes things like loan discount fees, application fees, appraiser fees, title insurance (for the bank's policy). Of course, your advisers would probably say that over a number of years these upfront costs become insignificant.

As long as your investments are in things other than CDs and bonds, from a purely economic perspective your advisers are probably correct (in fact, I currently owe more on my house up north than I did 28 years ago when I bought it). However, I have never owned a home outright, and I want the emotional satisfaction of doing so.
We got a much better deal from Wells Fargo than Citizens First.

[JohnN]

to carry a mortgage or not?
I sleep better being debt free and not trying to beat the interest rate.
I realize lots of investment bankers say otherwise (and that's their business to do so!)

[rshoffer]

rshoffer, I'm not a financial expert nor do I claim to be but I wouldn't secure a mortgage to buy a home for which I could pay cash. Sounds like a lose, lose situation to me. You may make tons in the market or you may be helping to shore up your advisor's money in the market until it recovers, which could be tomorrow, in 6 months or 10 years. Have you ever read Dave Ramsey's book, "The Total Money Makeover". A paid up mortgage is the new BMW in America, according to his teachings. I suggest you do more research and don't take my thoughts as gospel, then you will feel more comfortable about your decision.
I just ordered the book from Amazon! I have the cash equity from my home sale in liquid (money market) assets... trying to wait for the market bottem. I will read the book. Maybe I'll pay off the house (which my wifey wants to do). Thanks for the tip.

[barb1191]

I just ordered the book from Amazon! I have the cash equity from my home sale in liquid (money market) assets... trying to wait for the market bottem. I will read the book. Maybe I'll pay off the house (which my wifey wants to do). Thanks for the tip.


Smart "wifey".....go for it !! :bigthumbsup:

[Boomer]

I know that I go on and on about the cost of sleep where anything financial is concerned.

And the other thing I always say is do not borrow money that you do not have.

That second one of my tired little sayings may seem to make no sense at all.

So I think maybe I should just cut to the chase here.

What I am saying is that if you have any question at all, in your mind, that the lump sum that you are clutching in your hand could possibly get away from you, by all means, pay off the house.

I tend to forget that I am perhaps more comfortable with making financial decisions than some others may be. And I really am a financial conservative. I do fear that some day I may invest in PEZ dispensers and Beanie Babies, but for now I sure am careful. Bubble danced a little in the 90's. But other than that, just plain boring.

It can be pretty tough to plan a retirement or a house payment around a projected market return. I have seen people try to do that. Lately, some of them are sweating a lot.

Retirement planning is not only about cash, it is about cash flow. Don't ever bet the house on cash flow from investments.

Your house? That's here. That's now. An investment you can see and touch. Not likely to evaporate on you.

Picture yourself sleeping under a paid for roof. Do you like it? A lot? Better than the thrill of the investment chase? How are you sleeping? Therein lies your answer.

Warning: I got nuthin', no piece of paper of any kind that says I know what I am talking about here. It's just an opinion.

Boomer

[barb1191]

Boomer.....Your wisdom and wit are an unbeatable combination. As I mentioned elsewhere, you really should give serious thought to sitting on that ball-seat in front of your 'puter in the kitchen and assemble it all into a script that will, without a doubt, become a best seller. :#1:

Hugs, barb

PS: There's a great writers' group in TV with some published authors as members. My neighbor is a member and just had an article published. She loves the class as well as the constructive critique involved in one's writing.

[rshoffer]

I'm a Dave Ramsey fan like an earlier poster. Here is a question he would ask." In today's market, if your house was completely paid for, would you take a mortgage out on the property to invest in the market?"

My answer is no. The point many advisers don't factor in is the risk. The potential return of 10 % in the stock market needs to be balanced against the certain return of not paying 6-6 1/2% for your mortgage. When you consider risk, taxes and the joy of no debt, I would go with a home in TV and no mortgage.


Although I'm no expert on investing, the comment on "todays market" implies that 'todays market' is not a time to invest in equities. The richest stock investors became that way on one major principle : when everyone is panicking and selling BUY! Stocks are cheap now. If I was 30 years old and had available cash, I'd be pouring the money into the market.

[rshoffer]

I know that I go on and on about the cost of sleep where anything financial is concerned.

And the other thing I always say is do not borrow money that you do not have.

That second one of my tired little sayings may seem to make no sense at all.

So I think maybe I should just cut to the chase here.

What I am saying is that if you have any question at all, in your mind, that the lump sum that you are clutching in your hand could possibly get away from you, by all means, pay off the house.

I tend to forget that I am perhaps more comfortable with making financial decisions than some others may be. And I really am a financial conservative. I do fear that some day I may invest in PEZ dispensers and Beanie Babies, but for now I sure am careful. Bubble danced a little in the 90's. But other than that, just plain boring.

It can be pretty tough to plan a retirement or a house payment around a projected market return. I have seen people try to do that. Lately, some of them are sweating a lot.

Retirement planning is not only about cash, it is about cash flow. Don't ever bet the house on cash flow from investments.

Your house? That's here. That's now. An investment you can see and touch. Not likely to evaporate on you.

Picture yourself sleeping under a paid for roof. Do you like it? A lot? Better than the thrill of the investment chase? How are you sleeping? Therein lies your answer.

Warning: I got nuthin', no piece of paper of any kind that says I know what I am talking about here. It's just an opinion.

Boomer
ambien

[Peachie]

"Although I'm no expert on investing, the comment on "todays market" implies that 'todays market' is not a time to invest in equities. The richest stock investors became that way on one major principle : when everyone is panicking and selling BUY! Stocks are cheap now. If I was 30 years old and had available cash, I'd be pouring the money into the market. " (Per rshoffer).

Ah, but hubby and I are not 30 years old and to take the money that puts a roof over our head and going to the blackjack table doesn't work for us. We currently know a gentleman in Florida who invested in a second home to flip and the housing market in FL, (he is not in The Villages), flopped and it has made a serious mess of their retirement funds and life. He only wishes he had that to do over again. You may have a very high risk tolerance and gambling on the market could possibly make you very rich but the FDIC is not involved here, no guarantees to protect your home or principle. If you have lots of money to play with, stocks would be the place to be. I think you're final decision will depend on your portfolio balance and how much you can afford to lose. Hopefully, you would win.

http://www.msnbc.msn.com/id/26330135

[Boomer]

ambien


Hey rsh,

No Ambien necessary for me. I have stuffed all of our retirement money into the mattress. So I sleep just fine.

Boomer ;)