In NYC real estate, an all-cash transaction is when you are buying an apartment with cash, as opposed to getting financing (mortgage) from a bank or another lender. Despite what it sounds like, this does not mean the buyer is bringing a briefcase full of cash to the closing. Many sellers prefer all-cash transactions since they make the whole process faster and simpler.
Benefits Of All-Cash Transactions In NYC
All-cash transactions allow you to avoid or bypass several formalities and costs associated with buying a house through financing. They include:
Mortgage Contingency: Mortgage Contingencies, which give the buyer a way out with their deposit in case the mortgage isn’t approved, is not needed in an all-cash transaction. This makes the buyer’s offer more attractive to sellers.
Appraisal And Appraisal Contingency: Even though buyers have the right to get the property appraised by a professional if they want to ensure the asking price is fair, an appraisal is usually required by the bank/mortgage lender. Cash buyers can skip the appraisal and do not need to include the appraisal contingency in the offer, making it more appealing to sellers.
Mortgage Recording Tax: If you are buying a condo or a brownstone with cash, you don’t need to pay the hefty mortgage recording tax.
Lower Closing Costs: Since there is no bank or lender involvement, you don’t need to pay any financing-related costs. However, you may still need to pay for title insurance.
Faster Closing: In an all-cash transaction, you don’t need to wait for the bank to approve and underwrite your loan, and the lack of financing formalities can result in a much faster closing.
Limitations Of All-Cash Transactions
- Even though an all-cash offer might be attractive for a co-op seller, you will still have to go through the co-op board approval process (time-consuming and rigorous), and the board will still review your finances as per their guidelines.
By committing a significant amount of cash to buy a property, you may lose a lot of (or most of) your liquidity and consequently miss some investment opportunities. However, this limitation is offset by the fact that most properties appreciate (at a decent rate) over time.
