In real estate there is an old rule that hasn't been used in along time. It is called "Cash is King!" For those that have not weathered storms in real estate...perhaps you should make note of it. The cash buyer is coming back after a long sabbatical. They have liquidated other assets and are in a great position to buy on their own terms. They are not impulsive buyers, but rather they are calculating, and have all the facts at hand. In the coming market buyers that have cash will be in the drivers seat. For sellers that are up against pressing debt, or are behind in their mortgage obligations they are looking for quick relief. Well here is their knight in shining armor to the rescue! A buyer that is ready and able to buy a home and a buyer that does not need to rely on the whims of mortgage companies will be in a position to call all the shots. The cash buyer does not have to worry about rising rates, they also have lower closing costs.
The reason that cash buyers can make a lower offer and get away with it, is that the seller knows there is some light at the end of the tunnel. A buyer with cash is the real investor, not a wannabee investor. These buyers know what they want, but like the buyer at an auction, they know when to walk away if the counter from the seller is too high. A cash buyer tends to be a no-nonsense deal. They may buy a home AS-IS subject to an exploratory inspection to make sure there are no unforeseen structural issues. If something major turns up, they may walk away or ask for an adjustment in price.
Prepare your sellers, let them know that they are not going to offer you full price. These are educated buyers that know the true value of properties. They will make a lower bid to test the market, do not make the fatal mistake of rejecting the offer outright. Counter the cash buyer with a reasonable counter that shows you are willing to negotiate. Do not posture and counter back with a full price offer. It may be your only offer in this market.
Some caveats in dealing with a cash buyer? Yes, of course there are! They tend to be riskier deals if you do not understand the process, and do your homework! They love dealing with new agents, because they can manipulate them because of their lack of knowledge.
- Proof of buyers funds or accounts needs to be verifed ASAP! In Writing, print and phone call.
- Use board standard contracts - never allow them the use their own contracts!
- All items must be in writing. Take no verbals on counters etc.
- Ask your broker to review the offer and terms with you and homeowner if necessary.
- Do not underestimate the cash buyer, they understand the deal better than yourself.
- In negotiations, don't concede too much too quickly. Cash buyers are the ultimate investor and will smell blood in the water and want more concessions.
- Focus on a quick close, but have the seller retain possession until the last possible moment. Never allow a pre-occupancy!
- Do not allow a substitution or assignment of contract. Next buyer will not be as qualified.
- Realize the buyer is not being guided by a real estate professional - most will choose to be unrepresented buyers.
- The secret to a cash deal is a quick close!
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