Buying a house for cash eliminates the need to apply for a loan and wait for approval. Even though the sale can move fast, there are other issues to consider. It's still wise to hire an appraiser to ensure you aren't paying more than market value for the property. An inspector should test all the systems on the property to confirm they're working properly. You may even want termite clearance to know the structure isn't compromised by pests. One of the most important steps, however, is a title search to determine if the property is free of encumbrances that can threaten your ownership.
Title searches normally are performed for a fee by companies that specialize in tracing ownership of a property. You may be able to research this yourself at your county recorder's office, but you must be thorough in determining previous rightful owners. Mortgage lenders require a document showing that no one else but the seller has rights to the property during the transaction. Even though you are paying for the home in cash, it's in your best interest to know that another person will not appear later claiming to be the legitimate owner of your property.
Various liens can be placed on your title, so when you sell the property, the lien holder is paid from the proceeds before you are issued any money. A common lien is for the amount of money you borrowed from the mortgage company to pay for the house. Liens can be placed by creditors if they win a judgment against you in court and you are unable to pay your debt. State and federal governments place liens on your property if you do not pay your taxes. If you have a dispute with a contractor about work performed at your house and you don't pay according to your agreement, you can find a mechanic's lien on your title for the amount you owe.
If you pay for a home in cash and do not perform a title search, you may not find any problems until you try to sell the property. If you unknowingly purchase real estate with a lien, paying it off may be your responsibility to clear the title before transferring it to another buyer. If you find you are not the rightful owner, you should consult an attorney, who may have to track the name on title and request a clearance of ownership.
To protect yourself from any unexpected future claims to your house by previous owners or lien holders, purchase an owner's title insurance policy. A professional title search must be performed beforehand, but title insurance covers you if an encumbrance is overlooked or too old to be found in public records. Your policy may extend to the beneficiaries of your home after you die, too. Although it is not necessary when you pay for a home in cash, you can guard your investment by purchasing title insurance.
Carol Deeb has been an editor and writer since 1988. Her work has appeared in magazines, newspapers and online publications, as well as a book on education. Deeb is a real-estate investor and business owner with professional experience in human resources. She holds a Bachelor of Arts in English from San Diego State University.