Cash

The real estate market is a strange world right now.  It’s plagued by distress sales, foreclosures, a challenging lending environment, and economic uncertainties, and yet there are certain price points where inventory is so low that sellers are receiving multiple offers within days of listing.  If the home is priced right and it’s under $500,000 – it will sell – fast.

Many investors and fence sitters feel like with the steep declines in values, it’s time to jump back into the Orange County real estate market.  And guess what?  They have cash.  This video done by Tyler Wood - my go-to-guy for all Big Bear real estate needs – illustrates a similar dynamic in their market and raises some important questions for cash buyers to consider.

So what is the value of an all cash offer?

Are YOU one of those cash buyers?

There is no question that coming into a multiple offer situation with cash will give you an advantage if the other offers have to secure financing.  But as Wood points out, you may be finding that you aren’t the only cash buyer.

But even if you are the only cash buyer in a multiple offer situation – what advantage does that give you in your negotiation?  Let’s look at the potential benefits that the seller has when they have an interested, all cash buyer:

  1. The question of the buyer’s ability to secure financing goes away.
  2. A possible quick escrow period.
  3. Less contingencies to contend with.  No loan contingency.  No need  to appraise.

So what is the value of those things to a seller?  What monetary value do you place on that?  Clearly, the answer will vary depending on a seller’s circumstances and how important a sure and quick close is for them.

I know in theory that ‘Cash is King’.  But, I think you’ll find that a seller, if given a choice via multiple offers, will go with a buyer that requires a loan at full price rather than a buyer that is offering 10% off asking just because they have cash.

It’s important to note that at the end of a transaction – whether it’s a cash buyer, or a bank that funds a buyer’s loan, – IT’S ALL CASH.  Either way, the money is the same in the final analysis.

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This post has 1 comment.

  1. Monica Monson
    01 Sep 09 6:39 pm

    I agree. The “Cash is King” notion may come into play in a negotiation, however if the terms are better with a qualified buyer who is getting a loan, then the Seller will definitely take a look at it. Why do cash buyers think that Sellers will leave money on the table for simply that reason alone?

    It really comes down to what’s going to be most successful for Sellers.

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