# Buying a House with cash... **URL:** \ **Category:** Factual Questions\ **Created:** [April 26, 2005, 7:50pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228 "2005-04-26T19:50:46Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![bashere](https://avatars.discourse-cdn.com/v4/letter/b/779978/32.png) [@bashere](https://boards.straightdope.com/u/bashere)\ **Post date:** [April 28, 2005, 2:43am UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/21 "2005-04-28T02:43:37Z")
> [@bashere](#): > > I have a quick question about this, because of the language you used. The “KYC” rules were proposed in '99; are you conflating the patriot act with the KYC rule, or did the KYC guidelines actually beome law because of the patriot act? Or C, I’m confused again? > > The Know-Your-Customers guidelines annoyed me when proposed (and I thought they annoyed banks) but I thought they predated the Patriot Act. Again, this is an honest question and not an attempt to start a debate; I am simply confused. Never mind. The '99 guidelines became law in section 326 of the Patriot act. I will refrain from further opinion. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [April 28, 2005, 2:50am UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/22 "2005-04-28T02:50:13Z")
> [@Cartooniverse](#): > > I do find this to be vaguely sinister. Since when is it against the law to have in your posession large amounts of cash? Ever since the feds started taking advantage of the [asset forfeiture laws](http://www.aclu.org/PolicePractices/PolicePractices.cfm?ID=7238&c=113) that allow law enforcement to seize and keep cash, realestate, cars or anything else of value, merely on the suspicion that is the proceeds of criminal enterprise: > [@](#): > > Under current law, as the ACLU ad explains, law enforcement agencies need only meet a low legal standard - known as probable cause - before they can seize everything, from family photos to life savings. In recent years, forfeiture laws have become a major source of funds for law enforcement agencies as the value of property seized has soared into the hundreds of millions of dollars. More details on asset forfeiture laws: [American Forfeiture Law: Property Owners Meet The Prosecutor](http://www.cato.org/pubs/pas/pa-179es.html) > [@](#): > > Forfeiture laws have become increasingly popular with state and federal law enforcement officials during the last 10 years. A subject once relegated to obscure passages in the musty recesses of lawbooks, and rarely invoked in practice, forfeiture has quickly become the darling of law enforcement. Since 1985, for example, the total value of federal asset seizures has increased over 1,500 percent–to over $2.4 billion,(1) including over $643 million for the Department of Justice in FY 1991 alone.(2) This bonanza for law enforcement officials, however, has become a Kafkaesque nightmare for some property owners, who have found themselves caught up in a world of bizarre legal doctrine, sometimes without the assets even to defend themselves. > > A New Jersey couple, for example, found their home and their two cars seized by local police based upon an allegation that they had violated New Jersey law by stealing Express Mail packages containing inexpensive clothing from the neighbors’ property.(3) Similarly, a substantial New Jersey construction company was seized–lock, stock, and bulldozer-- by state officials based upon a contractual dispute in which state officials alleged that the company had won, and performed, three municipal construction contracts upon which it was allegedly ineligible to bid.(4) According to the reasoning of the New Jersey attorney general’s office in that case, if corporate property is used unlawfully, then all corporate property is subject to summary seizure by the government and subsequent forfeiture to the government.(5) In Florida, a sheriff’s department adopted a forfeiture program that authorizes officials who stop and question people on the streets or highways because they look like suspected drug couriers to seize as suspected drug money any cash in amounts over $100 that such people may be carrying, regardless of whether drugs are found ---
**Author:** ![MaryEFoo](https://avatars.discourse-cdn.com/v4/letter/m/ba8739/32.png) [@MaryEFoo](https://boards.straightdope.com/u/MaryEFoo)\ **Post date:** [April 28, 2005, 5:10am UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/23 "2005-04-28T05:10:46Z")
Well, I had something to post until I read the last few and went into shock. Recovering somewhat: For the tax advantages, be sure the loan you get has tax-deductible interest. A first mortgage does, but a second may not, and I’ll have to ask someone else to say whether a home equity loan used for improvements is tax-deductible. Falling back into the hijack, it certainly is nice that evil only comes from AlQuaeda members, and no government employees have any trace of evil, incompetence, conflict of interest, or error. Given those premises, the Patriot Act and so forth is justified. ---
**Author:** ![Billdo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/billdo/32/315_2.png) [@Billdo](https://boards.straightdope.com/u/Billdo)\ **Post date:** [April 28, 2005, 11:55am UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/24 "2005-04-28T11:55:39Z")
> [@Cartooniverse](#): > > I do find this to be vaguely sinister. Since when is it against the law to have in your posession large amounts of cash? \ > > I wanna buy a house on the North Shore of Long Island? Something close to Leonard’s of Great Neck cause I love their chopped liver? I should be allowed to do so. It is not illegal to have large amounts of currency in your possession, nor is it illegal to enter into a large currency transaction. However, currency transactions of over $10,000 have to be reported to the federal government. _If_ you can trace the origin of that currency and demonstrate that all applicable taxes have been paid, there is no problem (but note that this can be difficult to do). If you’d like to buy a house on Long Island with large sums of currency, there is likewise no legal barrier to doing so, except that you have to find a buyer willing to accept your briefcases full of cash. Most won’t because of the difficulty of counting, safeguarding, depositing and reporting the currency transaction, as well as the risk that such a large sum of currency is somehow from an illegal source or possibly counterfeit. ---
**Author:** ![vetbridge](https://avatars.discourse-cdn.com/v4/letter/v/b5e925/32.png) [@vetbridge](https://boards.straightdope.com/u/vetbridge)\ **Post date:** [April 28, 2005, 12:49pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/25 "2005-04-28T12:49:06Z")
> [@Dewey Finn](#): > > Perhaps instead of all cash, you might obtain a mortgage for 50% of the amount? I’d think you’d have an easier time of getting a mortgage if you can show that much in liquid assets. Could you, for instance, get a mortgage for 50,000 using 50,000 cash to secure the loan? ---
**Author:** ![Mr.Goob](https://avatars.discourse-cdn.com/v4/letter/m/c77e96/32.png) [@Mr.Goob](https://boards.straightdope.com/u/Mr.Goob)\ **Post date:** [April 28, 2005, 1:20pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/26 "2005-04-28T13:20:44Z")
I bought my house from my stepmother. Way below market value (lots of details not needed here.) It was her and I in the lawyers office, he drew up the papers and I wrote a personal check to her for $50,000. Lots of details in the story of how and why I don’t normally have more than a few hundred dollars in said checking account. Anyways, nobody anywhere at my bank or hers asked how, why or where the money came from or went. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [April 28, 2005, 1:36pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/27 "2005-04-28T13:36:50Z")
> [@Dewey Finn](#): > > I believe that the real estate columns I’ve read advise against purchasing a house entirely with cash. I think the idea is that if you get into trouble later, you may have a hard time getting a mortgage if you need the money. Perhaps instead of all cash, you might obtain a mortgage for 50% of the amount? I’d think you’d have an easier time of getting a mortgage if you can show that much in liquid assets. Yes - there’s a columnist in the Washington Post (either Benny Kass or Robert Bruss) who constantly says don’t pay all cash. Couple of reasons: First, if something major turns out wrong with the property (like it’s a new property, the developer doesn’t keep up with all promises etc. and the place turns out unsellable) your money is all tied up and you can’t walk away. OK, that implies that in that situation, you’d screw the mortgage company - but he’s not writing for the mortgage company. The second reason, IIRC, is that when you take out a mortgage, the lender requires title searches and title insurance against the property; this can cause them (and you) to find out about any encumbrances that would prevent your title from being transferred cleanly. If you pay all cash and avoid the mortgage, you might not find out about some of that stuff (unless you have the presence of mind to get an owner’s title policy, which protects _your_ interest in the house, and which you should do even if you get a mortgage). And the third reason is that you’d be tying up all your money in a single non-liquid asset - the house - whereas if you don’t pay cash, you’d have the remaining money to use for other investments, emergency money, or whatever. Another issue to consider is the tax deductibility of interest on a home equity loan. IANAA (Accountant) but I believe there are limits to what you can use home equity proceeds for, and still have the interest be deductible. e.g. first 100K you can use for anything, but any amounts beyond that must be for home improvement, education, medical or certain other specifics. You might be more likely to run into the Alternate Minimum Tax (but don’t quote me on that, I am _not_ an expert). But there’s something with “acquisition indebtedness” (how much your mortgage was when you bought the place) and money borrowed in excess of that; since your acquisition indebtedness would be zero… The columnist I mentioned said that a better idea than a cash purchase would be to take out a mortgage, then in a year or two if you still feel it’s appropriate and can spare the cash, you can pay it off then. You might want to check with a couple of mortgage lenders (or a broker) to see what kind of rate and terms you might get in your situation, with a large down payment (presumably if you can pay cash, you could manage a 25% down payment). You can even get pre-approved for a mortgage in many cases - and a seller would generally be happy to take a preapproved offer with 25% down. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [April 28, 2005, 2:23pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/28 "2005-04-28T14:23:58Z")
I think I saw the recommendation against an all-cash purchase in Robert Bruss’ column (although Benny Kass may have advised the same thing). > [@vetbridge](#): > > Could you, for instance, get a mortgage for 50,000 using 50,000 cash to secure the loan? I don’t think it would be necessary to secure the mortgage with cash, since you’re already securing it with a house, but then again, I’m not a bank loan officer. I would think having enough assets for a substantial down payment along with sufficient income to afford the mortgage payments would allow you to get the mortgage. And you mentioned in the OP that you were interested in the tax advantages of home ownership. Well, I think most of those are related to the deductability of mortgage interest, so if you do pay all cash, what tax advantages would there be? I suggest as a first step contacting a mortgage broker to see what kind of mortgage and in what amount you can qualify, and then you’ll be able to shop for a home more easily. ---
**Author:** ![aaslatten](https://avatars.discourse-cdn.com/v4/letter/a/f14d63/32.png) [@aaslatten](https://boards.straightdope.com/u/aaslatten)\ **Post date:** [April 28, 2005, 4:58pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/29 "2005-04-28T16:58:56Z")
I knew a guy who won the lottery and wanted to buy a house with cash. He was a young guy, so he got some strange looks and even rude responses from builders before he found one that said, “Sure, we’ll take your money!” It sounds weird, but a guess a lot of builders (and car salesman) just aren’t used to people wanting to pay all cash. ---
**Author:** ![Mr.Slant](https://avatars.discourse-cdn.com/v4/letter/m/c57346/32.png) [@Mr.Slant](https://boards.straightdope.com/u/Mr.Slant)\ **Post date:** [April 28, 2005, 5:01pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/30 "2005-04-28T17:01:25Z")
> [@Billdo](#): > > It is not illegal to have large amounts of currency in your possession, nor is it illegal to enter into a large currency transaction. However, currency transactions of over $10,000 have to be reported to the federal government. _If_ you can trace the origin of that currency and demonstrate that all applicable taxes have been paid, there is no problem (but note that this can be difficult to do). > > If you’d like to buy a house on Long Island with large sums of currency, there is likewise no legal barrier to doing so, except that you have to find a buyer willing to accept your briefcases full of cash. Most won’t because of the difficulty of counting, safeguarding, depositing and reporting the currency transaction, as well as the risk that such a large sum of currency is somehow from an illegal source or possibly counterfeit. Note also that multiple currency transactions over $3,000 and under $10,000 adding up to $10,000 will get you reported as well. And according to at least one banker, you’re better off with a single $25K cash transaction than with 8 $3K transactions. With one big transaction, there’s likely an explanation. With a bunch of weird transactions, you are ACTING like you have something to hide, which is somewhat frowned upon. There are some other rules as to what your banker has to report to the Feds, and these laws are in fact confidential. Don’t imagine that you know all the rules on this. If you aren’t a Fed or a Banker, you probably can’t keep up. ---
**Author:** ![Annie-Xmas](https://avatars.discourse-cdn.com/v4/letter/a/ecc23a/32.png) [@Annie-Xmas](https://boards.straightdope.com/u/Annie-Xmas)\ **Post date:** [April 28, 2005, 5:36pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/31 "2005-04-28T17:36:46Z")
When asking about a mortgage, make sure you find out what interest rate and how many points (each point is one percentage of the total mortgage) the bank will be charging you. Almost anyone can get a mortgage if they are willing to accept outrageous interest rates and points. You’ll also have closing costs to consider. The seller might be willing to contribute to your closing costs in exchange for a cash deal. This is perfectly legal, and it’s worth asking about. ---
**Author:** ![Cartooniverse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cartooniverse/32/3084_2.png) [@Cartooniverse](https://boards.straightdope.com/u/Cartooniverse)\ **Post date:** [April 28, 2005, 9:33pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/32 "2005-04-28T21:33:18Z")
Oh ! Please don’t misunderstand my last post. I was in no way advocating doing anything illegal. I was simply questioning why one cannot pay cash- assuming the cash can be proven to be yours with all appropriate taxes, etc. paid on it. As for what **Fear Itself** shared, I find that to be incredibly frightening. ( Ironic that that was the poster to share such info :dubious: ). Say I win the PowerBall. I get a lump sum payment of $ 93 Million. ( NOT unheard of, actually ). All the taxes are drawn off before I get my moolah. I move to, say, San Diego to escape those in town who know I’m now loaded. I’m walking down the roadway with $ 6, 244.18 in my pocket. I’m wearing a stained t-shirt because I love mowing my lawn, just ADOOOORE mowing my lawn, and have just mown my lawn. I’m a sweaty mess in my shorts and sweaty t-shirt. However, I do have all the cash in the house on me. ( last time I checked, that in of itself is not illegal ). A SDPD cruiser sees me. I happen to trip and fall crossing the street. I therefore appear intoxicated or under the influence. They stop and search me and find the six grand. I lose my entire $ 93 Million, new home, etc. etc.- because the SDPD decided to check me out and found six grand in my pockets??? I have no recourse to this law at all, and am forced to forfeit every penny I am worth? ---
**Author:** ![Cartooniverse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cartooniverse/32/3084_2.png) [@Cartooniverse](https://boards.straightdope.com/u/Cartooniverse)\ **Post date:** [April 28, 2005, 9:35pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/33 "2005-04-28T21:35:37Z")
> [@Jonathan Woodall](#): > > There are some other rules as to what your banker has to report to the Feds, and these laws are in fact confidential. No offense intended, but it appears that you are stating here that there are Federal laws pertaining to the banking system in this country ( I may be foolishly thinking you are speaking about the United States. Are you? ) that are completely private and not available for public viewing, discussion and analysis. Cite please? Laws are passed all the time, and we the people are permitted to read them. ALL of them. ---
**Author:** ![Bryan\_Ekers](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bryan_ekers/32/183_2.png) [@Bryan\_Ekers](https://boards.straightdope.com/u/Bryan_Ekers)\ **Post date:** [April 28, 2005, 9:42pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/34 "2005-04-28T21:42:31Z")
> [@Cartooniverse](#): > > Say I win the PowerBall… It _is_ pretty creepy what the beaurocracy can theoretically do to you. I suppose the best first step would be to get yourself a damn good lawyer because claims of “I’m innocent!” won’t get you very far. And if you _do_ get completely crushed, a good killing spree will at least ensure media attention. ---
**Author:** ![Annie-Xmas](https://avatars.discourse-cdn.com/v4/letter/a/ecc23a/32.png) [@Annie-Xmas](https://boards.straightdope.com/u/Annie-Xmas)\ **Post date:** [April 29, 2005, 12:07pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/35 "2005-04-29T12:07:51Z")
The cops would ask where the money came from, you would explain you won the Powerball and maybe have to show something to back up that statement, and you’ll be on your merry way in a maximum of 24 hours. It is not illegal to have large amounts of cash. It is possibly illegal to have large amounts of undocumented cash. ---
**Author:** ![Cartooniverse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cartooniverse/32/3084_2.png) [@Cartooniverse](https://boards.straightdope.com/u/Cartooniverse)\ **Post date:** [April 29, 2005, 1:21pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/36 "2005-04-29T13:21:57Z")
Well, according to the link provided, which I just read through, the government can seize everything I own, then it’s incumbent upon me to TRY to get it back in court. That’s not being on your merry way in 24 hours, that is months if not years while you are dispossessed of your home, and assest in full. Quite a different story. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [April 29, 2005, 3:15pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/37 "2005-04-29T15:15:23Z")
> [@vetbridge](#): > > **Duckster** …have I been whooshed, or what? Let’s see … > [@](#): > > The Tavis Smiley Show, June 16, 2004 · Commentator Connie Rice discusses how the USA Patriot Act could throw a monkey wrench in the plans of first-time home buyers. Source: [http://www.npr.org/templates/story/story.php?storyId=1960189](http://www.npr.org/templates/story/story.php?storyId=1960189) > [@](#): > > The ‘Patriot’ Search - Buying a home? Prepare to pay to have your name checked against a government list of suspected terrorists Source: [MSN | Outlook, Office, Skype, Bing, Breaking News, and Latest Videos](http://msnbc.msn.com/id/5131685/site/newsweek/) > [@](#): > > Section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) and its implementing regulations (31 CFR 103.121) require us to: > > - Verify the identity of any person applying for a mortgage loan, to the extent reasonable and practicable. > - Maintain records of the information used to verify the person’s identity, including name, address, and other identifying information. > - Determine whether the person appears on any lists of known or suspected terrorists or terrorist organizations provided to the financial institution by any government agency. Source: [securedfunding.com - This website is for sale! - loan mortgage finance debt refinance refi 2nd mortgage equity lending rent Resources and Information.](http://www.securedfunding.com/patriot_act.asp) The last quote is repeated many times among all the motrgage companies I randomly found. ---
**Author:** ![vetbridge](https://avatars.discourse-cdn.com/v4/letter/v/b5e925/32.png) [@vetbridge](https://boards.straightdope.com/u/vetbridge)\ **Post date:** [April 29, 2005, 4:17pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/38 "2005-04-29T16:17:21Z")
Thanks **Duckster**. Turns out I am not, nor have I ever been a terrorist. From what I’ve read in your links I should have nothing to worry about. Also, my gains have not been ill-gotten. 😉 ---
**Author:** ![vetbridge](https://avatars.discourse-cdn.com/v4/letter/v/b5e925/32.png) [@vetbridge](https://boards.straightdope.com/u/vetbridge)\ **Post date:** [April 29, 2005, 4:20pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/39 "2005-04-29T16:20:16Z")
Thanks everyone for the help. One more question that has come up. Does a mortgage have to be through a conventional source in order for tax benefits to apply? Let’s say I have a friend with 50k he would like to invest. I offer him the same rate of return that my bank has offered to me. Could I pay him…let’s say a 5 yr mortgage, assuming he cannot get the same rate of return with the same degree of safety? Does my question make sense? ---
**Author:** ![Random](https://avatars.discourse-cdn.com/v4/letter/r/57b2e6/32.png) [@Random](https://boards.straightdope.com/u/Random)\ **Post date:** [April 29, 2005, 4:35pm UTC](https://boards.straightdope.com/t/buying-a-house-with-cash/301228/40 "2005-04-29T16:35:33Z")
Your question makes sense. I’m not a tax guy, but believe that you would still get the same tax benefit. Some states require mortgage lenders to be licensed, though. (You’re not my client, I’m not your lawyer. This isn’t reliable legal advice. See someone licensed in your state for that.) [Previous page](https://boards.straightdope.com/t/buying-a-house-with-cash/301228.md?page=1) [Next page](https://boards.straightdope.com/t/buying-a-house-with-cash/301228.md?page=3)