As of January 2024, about 1 in 3 real estate sales are cash transactions — the highest number in almost ten years. While this trend is mostly driven by vacation and investment purchases, the percentage of primary residences purchased without financing is rising as well (Source: NAR).

Whether you have cash from selling another property or have the funds available, it’s important to understand the benefits and risks of paying for a property in cash.

The Benefits of Paying Cash for Your Property

There are two major benefits to paying for a real estate property in cash: you are more attractive to sellers and you save money in the long run.

Sellers like to consider cash offers, even if the offer price is lower, because they are traditionally less risky and faster than offers that include financing. Despite having a pre-approval letter, there are many reasons a mortgage may fall through while under contract. On top of that, the mortgage process requires a longer timeline for things like underwriting and appraisals. To a seller, a cash offer may be worth it even if the sales price is lower than other offers.

Presenting an attractive offer to a seller is important, but paying for real estate in cash can also save you money in the long run. Without a mortgage, you don’t have to pay for mortgage interest, private mortgage insurance (PMI), or lender-related closing fees — potentially reducing your overall investment by tens of thousands of dollars.

The Downside of Paying Cash for Your Property

All of this sounds great. So why wouldn’t you pay for a property in cash if you can? 

The biggest risk to paying for real estate in cash is tying up your money in an investment that is less liquid than other asset classes (such as stocks and bonds or a savings account). With a mortgage, you free up your cash for other expenses or investments.

Cash buyers also need to keep in mind that owning a home comes with ongoing expenses. You need to budget for home maintenance expenses, utilities, property taxes, home insurance, and homeowners association fees (if applicable). Speaking of taxes, another downside to forgoing a mortgage is that you will not be able to deduct mortgage interest from your annual taxes.

Know a cash buyer in Florida?

Refer them to SMART Settlements and join our Smart4Life program! Contact us to learn more.