What to know about buy­ing a home with cash

Baltimore Sun Sunday - - HOME SALES - By Ilyce Glink and Sa­muel J. Tamkin

Q: My wife and I are con­sid­er­ing pur­chas­ing our first home us­ing our sav­ings. We don’t need to ob­tain a loan, but we do have a cou­ple of ques­tions if we go this route.

If we don’t get a loan, should we still be go­ing to a lender to get a preap­proval let­ter so that our real es­tate agent knows we can buy what we say we can? If we’re pay­ing from our sav­ings, how much in­for­ma­tion should we share with the real es­tate agent on how much we can spend on a home?

We’ve read it’s best to keep your cards close to your chest when it comes to per­sonal fi­nan­cial in­for­ma­tion. What should we say about what we can af­ford if the agent asks? Do we just tell them what we want to spend ver­sus what we have to spend?

A: These are all great ques­tions to ask be­fore you start work­ing with an agent. Hav­ing some in­sight into how the process works will help you un­der­stand where the in­for­ma­tion bound­aries should be with var­i­ous peo­ple in this trans­ac­tion.

First, you need to feel com­fort­able with the real es­tate agent you hire and work with dur­ing the pur­chase of your home. If you don’t trust your agent, you shouldn’t be work­ing with that agent. Hav­ing said that, you also need to un­der­stand whether the agent you work with is a buyer’s agent or a seller’s agent.

A seller’s agent is an agent that has the seller’s in­ter­ests at heart first and fore­most. A buyer’s agent is one that owes a fidu­ciary duty to a buyer. Typ­i­cally, your agent will have you sign an “agent dis­clo­sure” form that will spell out who the agent is work­ing for in a par­tic­u­lar trans­ac­tion. If you are a buyer, you want to work with an agent who will have a fidu­ciary duty to you and will work to make sure you get the best pos­si­ble deal.

Many buy­ers to­day look at homes on­line and then call the list­ing agent to make an ap­point­ment. That buyer is not rep­re­sented by an agent, and the list­ing agent has a fidu­ciary duty to the seller. So, the buyer winds up with­out rep­re­sen­ta­tion in the deal and the buyer should ex­pect that any­thing said to the seller’s agent will get passed along to the seller. With­out an agency agree­ment, the buyer wouldn’t be rep­re­sented.

If the same agent rep­re­sents the buyer and seller in a sin­gle trans­ac­tion, then the agent is con­sid­ered a fa­cil­i­ta­tor in the deal, or a nona­gent, and rep­re­sents nei­ther the buyer nor the seller. In this sit­u­a­tion, we can imag­ine that a buyer’s per­sonal in­for­ma­tion might get shared with the seller, so you’d want to be care­ful about what in­for­ma­tion you re­veal.

If you un­der­stand whose in­ter­ests your real es­tate agent has at heart, you can then de­cide how much in­for­ma­tion to give to your real es­tate agent.

In the past, when we have an­swered ques­tions like this we of­ten get com­ments back from real es­tate agents, many of whom claim they are your ad­vo­cate and would never vi­o­late that trust.

But you can never know. We just heard about buy­ers whose agent re­ceived (and passed on to them) unedited email from the seller (she rep­re­sented the seller too). The buy­ers knew ex­actly what the seller was will­ing to take, and while they got a bet­ter deal be­cause of it, they de­cided to use a dif­fer­ent agent when it came time to sell the prop­erty.

Per­haps the smartest sce­nario is to imag­ine that ev­ery­thing you say to your real es­tate agent will wind up in the seller’s ear.

On the is­sue of get­ting preap­proved with a lender, we don’t think that is nec­es­sary if you’re pay­ing cash for the prop­erty. You’re in a much stronger po­si­tion if you can buy a home with cash.

What you might want to do is have your bank is­sue a “To Whom It May Con­cern” let­ter in­di­cat­ing that you have suf­fi­cient funds in the bank to pur­chase a home up to a cer­tain amount.

In your sit­u­a­tion, if you’re look­ing to buy a home at $175,000, you can have the bank give you a let­ter that says that you have at least $175,000 in the bank avail­able for the pur­chase.

This gives you the abil­ity to use other funds you may have or funds above the $175,000 to buy a home with­out telling any­body the ex­act amount you have in the bank. If your bank doesn’t is­sue let­ters like that, a branch man­ager might be will­ing to ver­ify the amount of cash you have avail­able, upon re­quest.

Ilyce Glink is the CEO of Best Money Moves and Sa­muel J. Tamkin is a real es­tate at­tor­ney. Con­tact them through the web­site ThinkGlink.com.

DREAM­STIME PHOTOS

When you’re buy­ing a house, imag­ine that ev­ery­thing you say to your real es­tate agent will wind up in the seller’s ear.

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