Everything I've ever read about paying cash for a home says not to do it unless it is so important to you to have your home paid for that it's worth giving up the flexibility of having ready money in an emergency, etc. I'm not a CPA at all; just try to read alot. If you would still have some money for emergencies after paying all cash, then perhaps it would be a good idea...otherwise, I'd try to put together a mortgage to conserve some of your cash. (and of course, that depends on the terms of the mortgage, etc.) Good luck to you...it seems that you are due for some wonderful things to happen to you in 2007! So sorry about your Mom, but kudos to you for caring for her.

I would be concerned that you don't have enough "cushion" here. Are you putting every dollar into this house? What will be the penalty if you do have to back out of the contract or delay the closing?

Every house comes with some surprises that take cash -- something needs fixing or upgrading or the insurance and RE taxes are more than you anticipated.

Sometimes it's wise to apply for a mortgage -- if only to see that the house appraises for what you are paying.

Tomorrow talk to your attorney and ask what you will probably NET (after taxes and fees) from the estate. Ask what you are liable for should you back out of or delay the purchase.

It does sound like you've moved ahead of yourself here, but maybe not!

Watch the taxes yet due. In many cases the State taxes are far worse than Federal. Also there may be additional hidden issues not yet settled. Your attorney may drop a bomb on you when you least expect it.
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"It does sound like you've moved ahead of yourself here, but maybe not!"

I agree!

Unless your mother's estate is worth more than $1.5 million, there is no estate tax at the federal level. You will have to look in your state's laws to see what the tax may be there. Just go to Google or Yahoo and enter the name of your state and "estate tax" and you should find something.

Here is a link that might be useful: IRS link

We did just what you are talking about 1 1/2 years ago. We came into a very large inheritance. We wanted to live mortgage free, pay off all our debts and invest a large portion of our inheritance. We sat down and very carefully planned this all out on paper. We had been considering putting our home up for sale and moving to the country so we decided there was no time like the present. We set a price that we wanted to spend, no more. We found a wonderful home on 5 acres with two barns. It has everything we wanted but needed extensive cosmetic work. Perfect for us as we'll do the work ourselves.

For us it was all about being willing to set a price and stick to it and making sure that enough was set aside to invest.

You've been given very good advice so far. The only thing I can add is that if I were you I'd look at a fixer upper house INSTEAD of the newer mobile. The fixer will have the advantage of going up in value as time goes by and you make the improvements needed (but make sure it has a good roof and foundation, IMHO). Manufactured homes do not appreciate at all in my area, it may be different where you live.
My uncle (who is 9 months older than me) used his inheritance from his parents' deaths to buy a manufactured home. Ten years later, he's living in an apartment with no money to show for it. So please think over your investment wisely!

A few other things to consider:

You might try making a 50% deposit and get a mortgage for the remainder. Having a mortgage is good for your credit, good for taxes, and generally has advantages that paying 100% cash does not. You could also get a 15-year fixed mortgage, for instance, that will have your mortgage over much sooner than normal. And your payments would be very low.

Even if you paid cash and had no mortgage payments to make, you still have to pay real estate taxes, etc. Usually your bank or mortgage company handles these along with the mortgage payment, but you'll have to do it yourself now.

In my state (NY), all creditors (known and unknown) of the estate are given one year to come forward and lay a claim to the money. You don't know until that period has passed, exactly how much your inheritance will be.

Large cash payments must be reported by the receiving institution (bank, mortgage company) to the IRS. This is a post-Sept. 11 security measure. While I'm sure you have nothing to worry about, it's a bit of trivia I just read today. It would be the same if you paid cash for a brand-new car.

Look at the land and location where the mobile home is. If it would sell profitably in a few years with or without the house, it's a good buy. If it's in a community where you lease the lot, you won't see as much (or maybe less) profit when you sell.

I had a similar opportunity a few years ago when my mother died, to sell my current home and buy something bigger and nicer. But it would have left me with no money for anything else, including health issues, travel, taxes, etc. Instead, I paid off some debts, and used a portion to upgrade my house so it will sell better when I'm more ready to move.

If you are now living on the partial disbursement from the court (as I did in my case), remember this is considered income and you have to pay income tax on it. Once the estate is finished being probated, the remaining inheritance distribution is usually not taxed. Be sure to talk to the CPA about your income taxes for next year. I was hit with a big tax bite after receiving a partial distribution before the estate was settled.

"Large cash payments must be reported by the receiving institution (bank, mortgage company) to the IRS. This is a post-Sept. 11 security measure."

Transaction reporting for $10,000 and up has been in effect long before 9/11. It was part of the 'war on drugs' orginally.

"I'm working with an estate attorney and he's hired a CPA to do the estate taxes."

Did the CPA give you any input about this? Are you uncomfortable with the advice either of them have given you so far? Don't blame you for wanting other opinions.

Personally, I feel it is better to own a house outright if one can afford to. Do you plan to go back to work? Will you be able to live off of the rest of your inheritance? Have you decided how this will be invested? If your financial circumstances change will you be able to sell the house quickly?

Here are a few links that might be useful.

6 money mistakes the experts make
www.bankrate.com/brm/news/advice/20050420a1.asp

10 Things Your Estate Planner Won't Tell You
www.smartmoney.com/consumer/index.cfm?story=estateplanner

From 6 money mistakes:

"Almost equally important is to deep-six the dependence on credit. "I never borrow money under any circumstances," says Ramsey. "No car loan, no house loan, no credit cards." His reasoning: You are risking security and stability for instant gratification."
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I'll many people will disagree with the above.

Did someone already say this and I missed it? If not: if you do have the cash to buy the house outright, you may be able to get a mortgage using that cash as collateral. This way, you don't sink all of your money into the house in case something happens, and you also will have a nest egg that earns interest. It will also give you a better idea of the true value of the home you are buying, because the lender will require you to get it appraised and have a home inspection.

Manufactured homes I have heard can be a problem.

I have to add a few things to my first post as someone who has come into a large inheritance and bought a home outright. My husband and I paid for our own appraisal and home inspection so we had some documentation and the knowledge of what the house was truly worth and what problems we were facing. I would advise anyone buying a home outright to definitely do those two things. You can't protect yourself too much.

Also, although a bit off-topic but certainly related......if you do decide to buy a home outright be aware that your credit report may or may not take a hit. I'm glad newjerseybt brought up the point about never borrowing. After my husband and I bought our home we also paid off our car loans and credit cards. Our slate was wiped completely clean. June of last year we decided to get our free credit reports, which is something we do every year. We were shocked! Our credit score dropped dramatically even though we have a 25 year history of squeaky clean credit with several loans paid in full. The reason? Because we have no current revolving credit to show our creditworthiness. So, we took out a HELOC to do some work on our house. We could have paid cash for the home improvements but my husband is concerned that we may one day actually need a loan and will be unable to get one or get a really high rate.

That really stinks. My husband did not realize how going debt-free would negatively affect us. He said the system needs to be changed and take into account a person's asset position. You shouldn't have to be in debt to look good in your credit report. He jokingly pointed out that when we were struggling deeply in debt but still making every payment on time without fail, our credit score was at the very top of the scale. I guess "they" would rather see you in the poor house than financially independent.

Magret

"I guess "they" would rather see you in the poor house than financially independent."

I think you've got that one right! "They" want you paying some interest. That's how you pay for that good credit report.

Sometimes car manufacturers offer deals that will get you an addition couple of thousand off of sticker than if you paid all cash. Years ago, the big 3 American auto makers made such an offer. You can pay off the loan off in 3 or 4 payments with a interest charges of around $130 and improve your credit score plus save a couple of grand.
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"My husband did not realize how going debt-free would negatively affect us. He said the system needs to be changed and take into account a person's asset position."
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As for receiving a large inheritance and buying a house outright...one option could have been to buy a less expensive home.

If you have "x" million in the bank, why care that your credit score is only 700?

OH! If only it were millions. There's a lot of thing I wouldn't give one wit about! However, it was a very modest amount of money by today's standards but a lot of money to people like my husband and I. And we spent less than $160,000 on the home we bought. Hardly makes us rich now does it? But we still managed to pay off all our creditors and save a good chunk for investing. We both still have our full-time jobs, have to pay for health, car and homeowners insurance, still have to eat, pay for heat and electricity, etc, etc. Believe me, we live a very modest life and so must keep in mind our financial picture, including credit rating, at all times despite our "wealth".

Thank you.

So, we took out a HELOC to do some work on our house. We could have paid cash for the home improvements but my husband is concerned that we may one day actually need a loan and will be unable to get one or get a really high rate.

Because of this, and other reasons (penalties for paying off before 3 years; the ability for a sudden storm to smash an unexpected tree through your roof; the decision to buy a new home by leveraging the first home but wanting to have the first home on the market, etc.) I've come to believe that most people w/ substantial equity in their homes should have a HELOC.

If you don't borrow, it doesn't cost you money. But if you find that home you want to put a bid in on, or a tree smashes through the roof, or a family member's illness means you need cash now--you can get it right away.

A HELOC means you have options, should opportunity or disaster strike.

Yes talley sue, those were our thoughts exactly. We took out $50,000 on our HELOC but have used just $15,000 and don't plan to use any more. This way we have some revolving credit to positively reflect on our credit report and we have money to use in an emergency that is at a much lower interest rate than a credit card. And the interest is a write-off to boot. We're going to keep it open after we pay it off just to have it there if we need it.

The possible downside to opening a HELOC just in case you need the money is that it may lower the amount of money you can borrow for other purposes. It also may negatively impact your credit rating because the rating system takes into account your total indebtedness in relation to your income. A 100K HELOC will change that.

also, of course someone who borrows very little would have a low credit score--bcs a credit score basically answers this question: "How likely am I, the lender, to make money off of this person?"

If you don't borrow much, they won't make money off you, LOL!

If you don't have a lot of other debt, a $100k HELOC or a $50k HELOC won't screw up your credit rating that much.

Canema since you don't say what state you live in or the range of money you received, nobody can tell you what taxes might be due. Some states have an inheritance tax, some don't. Also it depends on the date the decedent died--that affects the amount thats tax free on the Federal Estate tax.
Don't worry about the cash payments over $10,000 thats if you hand over a bag stuffed with $10,000 in bills. I am going to assume that your estate attorney is going to give you a check.
Since I do probate & trust law, lots of the heirs to estates I handle do go out and buy houses for cash or put down large down payments. Its really a sensible thing to do, as long as you make a careful purchase. Since you only received a partial distribution--I would guess that there is more money in the estate that you will receive when it closes.
What I have also seen--is that "financial advisors" seem to come out of the woodwork and suggest that instead of buying a house, heirs "invest" the money in something with a huge return. Sometimes that ends very badly.
So if you want a house, and you know the area, at least its a place to put your money.

magret-
"Our credit score dropped dramatically even though we have a 25 year history of squeaky clean credit with several loans paid in full. The reason? Because we have no current revolving credit to show our creditworthiness. My husband pointed out that when we were struggling deeply in debt but still making every payment on time without fail, our credit score was at the very top of the scale."

Your husband is right. I also think it stinks that someone deeply in debt can have a better credit score than one who is responsible and chooses to pay cash. I think it is the banks and credit bureaus way of jerking you if you refuse to borrow money from them. They don't care if your in the poor house. It works to their advantage when you have fewer options.

Plus, look at the bankruptcy laws. They just changed to favor the banks again. I think a change was necessary, as too many people were abusing credit by filing bankruptcy without paying. But look at how many banks extend credit to underage college students? How do they expect them to pay when some of them aren't even working? Guess they are counting on mom and dad to bail them out.

canemah2-
How are things going? Please tell us how things are coming along with your home purchase!

"...better credit score than one who is responsible and chooses to pay cash."

All this shows is that you can pay cash.
It does not demonstrate that you know how to handle credit, and that is what credit scores and ratings are all about.

I think I'm straying from the original poster's question. The credit debate could go on forever, we all have our opinions.

canemah2, please don't neglect the tax implications as margenorman brought up. That can be a real zinger. My husband and I sat down with his parents' estate attorney and went through everything with a fine-tooth comb and figured out what our tax bill would be. We then set that money aside in an interest-bearing account until it came time to pay the tax bill. We did that before we spent a cent of it or went looking at any homes. We wanted every "i" dotted and "t" crossed. I would suggest doing that so you don't get an unexpected surprise come April 15. There were certain aspects of the estate where the attorney paid the tax before distribution and then there were accounts paid directly to us, not through the attorney, and out of those we had to calculate our tax and pay it ourselves. It can get really complicated.

brickeyee-
"All this shows is that you can pay cash.
It does not demonstrate that you know how to handle credit, and that is what credit scores and ratings are all about."

I understand what you are saying, but a good credit score of 25+ years does demonstrate that you know how to handle credit. I wonder why this would change just because you choose to pay cash instead of carry debt.

magret-
"We found a wonderful home on 5 acres with two barns."
I admire you for eliminating your debt and investing in real estate. Sounds like you got it for a good price. Was it hard to find? Does your property have woods?

margenorman
"Since I do probate & trust law, lots of the heirs to estates I handle do go out and buy houses for cash or put down large down payments. Its really a sensible thing to do, as long as you make a careful purchase. What I have also seen--is that "financial advisors" seem to come out of the woodwork and suggest that instead of buying a house, heirs "invest" the money in something with a huge return.

I guess this is common when people come into money. Have you found that these "financial advisors" come from any particular sector?

Hi dreamgarden. We have just 1/3 acre of woods. The rest is rolling fields which we bought so I could cultivate and start a business. I grow berries, apples, herbs, flowers and veggies and sell it at local farmers markets. We bought the place for the land and it is spectacular, I am very fortunate. But it is also very out of the way and my husband's commute is 90 miles round trip a day. That's a large part of the reason we got so much for such a modest amount of money. Had we wanted to live in the city the same size house would have cost us much more. This lifestyle isn't for everyone but if you love the open country and don't mind the long drive to get basic supplies, it's a wonderful way to live.

And I agree with you. 25 years of working hard and making absolutely sure we kept our credit clean should speak volumes. Apparently, it counts for very little.

Magret

Dreamgarden-you asked about whether scammers come from any particular sector. This weekend's Wall Street Journal had a front page story on how the current "fraud du jour" is currency trading. They said some people were solicited thru ads offering jobs working with health insurance, and then encouraged to involve friends and relatives currency trading. That one netted 1.78 million across the country.
Others got people simply by cold calling and promising big rewards. Its tragic to think people lose their life savings just because they are worried their money isn't making enough interest.
So, Canema you can see why I don't have a problem with putting your inheritance in a house, or paying cash for one.It is certainly the best investment most people make.

magret
Your property sounds great. We are looking for rural acreage as well. Did you use a realtor or find the place on your own? 90 miles round trip is one heck of a commute. Hope your business becomes successful enough so that your husband can help you with that instead of having to drive so far each day. Here is a link I saw earlier today about HELOC vs credit card debt.

When Credit-Card Debt Is Better Than Home-Equity Debt- By Aleksandra Todorova
(Personal Finance-Debt Management) By Aleksandra Todorova
www.smartmoney.com/debt/advice/index.cfm?story=goodcredit

margenorman
"Others got people simply by cold calling and promising big rewards. Its tragic to think people lose their life savings just because they are worried their money isn't making enough interest."

I agree. I feel for those who come into money without sound advice or direction from someone they can trust. It's good to see a probate & trust law individual (attorney?) recommend real estate as a good investment.

Here is a link that will make people check their documents a little more closely when buying a house.

Real estate fraud rises in US
A cooling market exposes scams that cost the industry at least $606 million last year.
www.csmonitor.com/2006/1214/p02s01-usec.html

"If the downturn continues past 2007, experts say the implications for the economy could be dire."Real estate fraud is going to make the S&L crash look like two cars in the parking lot that bumped into each other at five miles an hour," predicts Ralph Roberts, the author of "Flipping Houses for Dummies," in Warren, Mich."

I am a real estate attorney in California (land of the midnight frauds) but I wouldn't worry about buying a house from somebody who didn't own it unless I was dumb enough to buy a house without getting title insurance, going into escrow and having plenty of opportunity to inspect the house.
The real estate fraud that is going to be a problem is that the lenders have been so careless in lending money using phoney appraisals that have been inflated. when the buyer walks away--the lender is going to be holding the bag.
That happened in 1989 to 1993 and the Resolution Trust Company was set up to help solve the problem.
That stuff has nothing to do with you--if you are going to live in your house and you didn't pay over market--a house is a wonderful place for an inheritance. Whoever left you the money might be pleased to know thats what you did with it. I own rentals and there are people who have lived there for 20 years --waiting for the market to reach the bottom. (that may be the year I am selected Miss America)