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Pros and Cons of Cash Buying

All-cash home purchases hit a record in the first quarter of 2014, reaching 43 percent, according to RealtyTrac, which has been tracking cash-buying trends since 2011. This latest figure represents a 19 percent rise from last year—a number industry watchers attribute to stricter mortgage qualification standards coupled with high buyer demand and competition. If you're thinking about buying your next home with cash, you might be wondering how this option stacks up against a mortgage—not to mention, how you'll come up with the money.

Why Cash? Pros & Cons

On the pro side, using cash lets you sidestep mortgage loan qualifications and much of the paperwork and administrative fees. This accelerates the buying process and makes you more attractive to sellers who are eager to close. You have better odds of out-competing other buyers and better leverage to negotiate a lower price. Finally, the prospect of not having to pay monthly mortgage obligations and interest is appealing.

On the other hand, the cash you tie up in your house won't be as readily available for emergency spending. This could place you in a position of needing to sell or mortgage your home in the event of an emergency, and convincing lenders to extend a mortgage or equity loan could be difficult if you lack a steady income, a situation many retirees face. One way to address this issue is opening a home-equity line of credit after you buy your home to make sure you have emergency funds available. A reverse mortgage can also help in a pinch.

Another issue is whether the amount you save on mortgage interest might be better invested. Buying a house with cash amounts to investing in a bond with an interest rate equivalent to what you would pay with a mortgage. Compare this interest rate with other investment options to evaluate how buying your home with cash affects your long-term savings.

Finding Funds

If you want to pay for your home with cash but don't have a lump sum handy, how do you find the money? Options include:

• Realtor suggests a few strategies, including investing in a long-term CD, a method that can be combined with CD laddering if you don't want to lock up all your cash.
• For current home owners, another option is refinancing your existing mortgage into a larger one, known as "cash-out refinancing." Zillow recommends weighing this option against others, such as home equity loans and lines of credit.
• If you're receiving regular payments from an annuity or structured settlement, you may be able to sell all or a portion of your future payments to a financial services firm and put the money toward your home purchase.

What About Taxes?

Paying for your home in cash precludes the tax breaks you would get from your mortgage interest payments. Use the calculator at Mortgage101 to estimate the potential tax benefits of a mortgage so you can weigh this against buying with cash.

Are any of you watching what is happening to housing right now? As reported by Forbes.com’s Eric Carlyle Existing Home Sales Fall 5.1% In January 2014, To Lowest Level Since July 2012 and yet, our S&P still gains ground…..hhhmmm…..

As reported by Lucia Mutikani with Reuters, Housing Starts, Permits Tumble; Mortgage Applications Fall and yet, our S&P still gains ground….hhmm….

As reported by Greg Robb of MarketWatch.com, Philly Fed Manufacturing Weakens in February, index dropped sharply….to a negative 6.3 from a positive 9.4 in January and, yet our S&P still gains ground…hhmm…

As reported by Emily Fox at CNN Money, even consumers are holding back as her article headline reads, Wal-Mart Wars of Soft Start to Year and, yet our S&P still gains ground…hhmm…

Some anaylsis say the weather and cold temps are to blame however, sure, the cold weather may not have made things better but, if our country is so weak, it can’t even take a colder than “normal” (Whatever that is) winter…then I am left to ask, just where are we fiscally…really? Better yet, how is it the S&P can make modest gains in this atmosphere of negative reports?

Oh…I almost forgot, let’s not forget about the last two job reports…..can we say ouch! At some point, the market can’t sustain, especially now with the fed pulling back on Quantitative Easing this year. I am sounding the alarm once again and I really do believe I am correct, this is the year of the “double dip” recession. I say “double dip” in quotes because, I never believed we ever came out of a recession in the first place but, let’s go with the popular misconception we did, hence the quotations around the word, “double dip”.

More now than ever before, since 2007, if we stumble, we will take a much larger hit than any of us that didn’t live through the Great Depression will experience. Why do I say that well, it’s simple, our economy isn’t starting off from a place of strength, as I outlined above. Back in 2006, when the real estate bubble burst, our economy was booming so, the hit we took was bad, even worse than the Great Depression but, most Americans in the Middle and Upper class didn’t make many significant changes to their daily lives whereas the lower class was obliterated. This time around, our economy is not in a position to take another hit like that and if it does, you will see middle class America take the brunt and once again, the lower class will receive the equivalent to a economic nuke being dropped on their heads.

Now, let’s add in expected increases in health care cost due to our Presidents fundamental transformation of our country, increased taxes as we don’t have an in power opposition party to the liberal / progressive agenda being pushed in Washington DC and well, 2014 will be a year we won’t forget, that is for sure.

If any of you are wanting to get into REO but don't really know what to expect....well, I have a story for you.

Saturday morning, January 21, 2012 I get a call from my field services agent telling me that they have gone out, secured one of my listings however, put their lock box on the front door because they didn't know who placed a lock box on the front door. Well, after a little investigation, come to find out, the lock box on the front door belonged to no one....it was a rogue lock box. None the less, I call my field agent back, tell her I am heading out to do my personal property evaluation and that I would cut the front lock box off and move her lock box to the front door. For some reason, her team doesn't carry bolt cutters on them...but, I DO!

Well, it's a busy Saturday morning, people are everywhere in this neighborhood, walking dogs, doing some yard work...you get the idea. In fact, the neighbors angry little miniature overweight dachshund was harassing me the moment I drove in the drive of my property. None the less, I get out of my car, open the trunk, grab my bolt cutters, walk up to the front door and cut the lock box off. My partner walks around to the back, opens the back door (with the key), walks to the front door through the house and lets me in. Well, I grab my camera, start walking through the home, taking pictures. As I walk into the master bedroom upstairs, I hear a booming voice yell, "HANDS UP, STEP OUT OF THE HOUSE, KEEP YOUR HANDS UP". I look out the Master Bedroom door and I see my partner with his hands up, walking down the steps. He is telling the officers at the door that he is with me, the Realtor and we are doing a personal property evaluation. Well the officers sees me step out of the bedroom, orders me to put my hands up and to walk out of the house. Now...as many of you know, I have my conceal carry permit and the first thing out of my mouth is, "I am armed"...telling the office I am packing my gun. All of a sudden, I notice that 4....yes, 4 officers have their guns trained on me as I am walking down the stairs, out of the house. I repeat myself because none of them confirmed they heard me so as I am walking down the stairs, I am yelling, "I AM ARMED". Finally, one of the officers says, "We hear you, we see it, keep your hands up".....so, as I am walking down the steps, I am telling the officer that I am the Realtor, that's my name on the sign in the yard, that's my name on the occupancy notification on the door, and my real estate license and my ccp are in my wallet in my back right pocket. So....here I am, 4 loaded guns, trained on my chest, I have a gun on my hip....officers don't know who I am, what I am doing there and all they know is they got a call from a neighbor saying someone was breaking in......ROFLMAO!

So....as exciting as the start of the ordeal was, the end of the ordeal was actually pretty funny. As I step out on to the porch, with 4 guns pointed right at me, the officer in charge reaches for my hip, grabs my gun and ask me who I am. Now, during this whole time, no one has touched me other than to take my gun, yet.....I have now, 5 guns trained on me...so, I guess they were confident that they were in charge...lol. I tell him I am the Realtor, I am here doing my personal property evaluation and I didn't break in. Well, during this whole time, I see a officer at my car, running my plates....which by the way is a National Association of Realtors plate that says, SELL....lol, yes...it says SELL. Well, by this time, the officer at my car motions to the officer holding my gun and before I know it, all the guns are in holsters and I am talking to the officer in charge having a polite conversation about how I obviously listened in my CCP class because he was impressed that I announced I had a weapon on me and that I had my license on me. He thanked me for cooperating, we shared some jokes about how I carry 10+1, which means I carry 10 rounds in my magazine, which is it's limit and then I carry a round chambered. He was impressed and said it was smart to do so.

All in all, I ended up talking to these five officers (one I didn't see, till I stepped out on the porch, he had a gun pointed to my back the whole time. ) having a cool conversation about how I was a good steward of my CCP, I was a good steward of my weapon. They packed up and left....they only stayed with us for about 10 minutes at most.

So....just one of my experiences as a REO agent.....it's always fun!

Connecticut Senator Christopher Dodd, Chairman of the Banking Committee introduced his own Financial Reform Bill recent however, it didn’t have bipartisan support and died on arrival however, the White House bill that is likely to be brought to the floor on Monday has a very similar outline.

What specifically got my attention was the $50 billion fund, that will be raised out of fees charged to banks. This fund is suppose to be used to liquidate failing banks. Now, it doesn’t say anything in particular about using that money to liquidate bank nonperforming assets in the form of short sale however, follow me down the rabbit hole for a while.

This is an election year and, the last thing a politician wants is to be seen as is someone who is pro business and, pro Wall street, however the financial crisis has gotten worse than anyone will admit and therefore, the government realized their folly with the philosophy, “everyone gets to stay in their home.” So, now….here we are, elections in November, the Country is PISSED OFF at incumbent politicians and the banking crisis is worsening due to the enormous debt and weakening dollar so, what can a politician do?

They find an enemy, in this case, big banks and they find a victim, in this case, defaulting homeowners. Now, regardless of how you feel personally about who is really responsible for this calamity, let me assure you, the media is going to spin this as if it’s all the banks fault so, just a bit further down the rabbit hole, come on……you know reading my blog is like watching a naughty movie on your company laptop, you may not ever say you do it but, we know, oh trust me, we know.

Ok, I digress.

What these politicians need to do is get rid of these toxic assets on these bank portfolios now, under a capitalist system, the banks would be left to deal with the problem on their own however, that isn’t the reality of the situation. So, these politicians in control of these banks tell them that they need to do more short sales however, the banks say, we can’t take the loss.

Well, the Government can’t give them a direct bail out because, it’s not popular at the moment so, the Government decides to charge the banks fee which is essentially tax payer money anyways because the bank is Government owned. The Government then “banks” these fees at the Fed and makes the fees available to banks they determine need to liquidate some non performing assets. So, in essence, it’s a Government bailout with taxpayer dollars however, it’s hidden in the guise of bank fees.

So, how did I make the stretch that these fees would be used to create an influx of short sales? Well, I can’t tell you my source but, let’s just say, no politician in their right mind wants to be charged with kicking homeowners out of their home, no matter if the homeowner can afford the home or not. This is especially true with Progressive politicians because, keep in mind, they are following the Franklin Roosevelt 2^nd Bill of Rights that says everyone gets a home.

Ok, now that I took you on a trip to Wonderland, let’s come back to reality.

America’s debt spending is weakening our dollar in foreign markets. This is why we are seeing gold prices rise. This is important to understand because, we don’t want to end up like Greece in the next 24-36 months, if not sooner. A continued weakening dollar, increased fuel prices, lower home prices, lack of real job growth, more defaults, more upside down homeowners, a tightening credit market, lack of industrial production in the country, higher taxes for everyone and we are gearing up for a perfect storm for hyper inflation.

The Government has to do something, right?

I got an idea.......JUST STOP DEBT SPENDING!