Is Cash Really King When It Comes to Your Home Purchase?

By
Real Estate Broker/Owner with Cam Realty and Property Management
http://actvra.in/58gB

Is Cash Really King When It Comes to Your Home Purchase?

Accepting an all-cash offer from a buyer who has the means to purchase their home certainly has its advantages for the seller;

-Quick Closing
-No contingencies(in some cases)
-No worries of financing falling apart

For the cash buyer;

-No out of pocket expenses related to obtaining a mortgage
-No interest charges for the months to come

Investor buyers will also look at their return on investment and look for positive flow.

Cash buyers often do not get appraisals, they work with Realtors they can trust who runs comps for them so they know exactly what the house is worth.

If you are a home buyer purchasing a home in all cash, should you low-ball? Think about it, what difference does it make to a seller whether you are a cash buyer or financing other than a quick closing and a sure one. Although many sellers would prefer a cash offer over financing, they still would want to net the same amount. Why wouldn’t they?

Example 1- List price $290,000, three offers come in. One is cash $220,000 to close in two weeks, one is a conventional loan for $295,000 to close in 30 days, the other is an FHA loan to close in 45 days in the amount of $290,000 asking for 3% seller concession for closing costs and prepaids.
If you were the seller, which would you choose? If cash is king, should it be offer number 1? Looking at these three offers, number two would make sense for the sellers.

Example 2-REO/Bank Owned listing offered at $320,000. The offer comes in at $180,000. If you were the bank, would you take this offer seriously? As the listing agent, I would have to present it to the bank but they don’t have to counter back, they don’t have to do anything. You would be lucky if they countered. If you ever find yourself in this situation and doubt whether the listing agent presented your offer, then I suggest asking for their acknowledgment and rejection on page #9 of the contract.
If you really want the house, then, your offer should reflect your desire to purchase.

Often times, cash buyers think they can low ball and the seller would accept their offer because it’s all cash. This is just a myth. Seller will get paid the same amount whether it’s cash or financing. I’ve had REO listings where the bank chose the cash offer over financed one even though it was less because they removed the inspection contingency. They knew the home needed repairs and wouldn’t pass the inspection. This doesn’t happen often though, most banks are making the repairs or accepting only Conventional or Cash offers As-Is.

Working with a knowledgeable, local REALTOR® is essential. You would want to hear the truth not what makes you happy.

If you are looking to buy or sell a home in Clermont, Minneola, Groveland, Winter Garden FL areas, I would love the opportunity to speak with you. Please call or text me at 407-929-1852, email bethatalay@gmail.com or visit www.WhereToLiveInOrlando.com

Is Cash Really King When It Comes to Your Home Purchase?

 

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Florida
Groups:
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Rainmaker
1,054,858
Kat Palmiotti
Grand Lux Realty, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

Yes, these are good points. A low ball cash over is not necessarily "king." In fact, it can be ignored.

Nov 15, 2017 05:14 AM #26
Rainmaker
2,425,574
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of Manchester NH's Leading Agents

About half my sales are cash andi tell my buyers what they offer and what they ask for in the form of contingencies are just as important as it being cash, as they are not the only cash ffer any longer Beth Atalay 

Nov 15, 2017 05:17 AM #27
Rainmaker
1,700,755
Brian England
Arizona Focus Realty - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

Very nice post my friend, cash is usually king, but it also depends on what the competing offers are, if there are competing offers.  I wish my living room looked like the one pictured, haha.

Nov 15, 2017 06:29 AM #28
Rainmaker
253,929
Jeanne Gregory
RE/MAX Southwest - Sugar Land, TX
The most important home I sell is YOURS!

I love it when the buyers agent says "but, it's cash!".  Yup,but not enough cash!

Nov 15, 2017 08:26 AM #29
Rainmaker
405,714
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Specializing in Brookside, Waldo, Prairie Village

It's been my experience that cash buyers do offer a  lower price than a financed offer, and I can see why b/c of the reasons you outlined. However, it's usually not so far off the list price that the seller is insulted!  It should be just below fair market value.

Nov 15, 2017 09:14 AM #30
Rainmaker
1,411,713
Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC
Waters Realty of Brevard, LLC - Rockledge, FL
... a small office, delivering big service!

I just wrote a post on one of my "other" blogs about "if cash is king then the appraisal is the queen."   In a lighthearted approach I made the point that if the "queen is not satisfied" nothing else matters!

Nov 15, 2017 09:35 AM #31
Rainer
213,445
Stephen Turner
Coldwell Banker Residential Brokerage - York, PA
The BIG Guy of NEW HOME SALES

1st off, Love the graphic to accompany the blog post.

2nd, as for the examples, great. I'm always amazed when buyers ask what the price would be if they paid cash. To the seller, it's the same. if you don't pay 300K in cash, then the bank pays the seller the 300K or whatever the price is. Sometimes having a lenders approval gives a sense of comfort that may not exist with a cash buyer. 

Nov 15, 2017 11:34 AM #32
Rainmaker
637,336
Cynthia Larsen
Safe Haven Realty - Cotati, CA
Independent Broker Serving Sonoma County, CA

Cash was King when we had hundreds of REO's on the market. The bank would take the cash, even if it was the lowest offer. Not so much these days.

Nov 15, 2017 11:38 AM #33
Rainmaker
3,200,193
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Beth

Cash is king in purchasing home . . . . and speaks loud to the seller.

Good luck and success.

Lou Ludwig

 

Nov 15, 2017 06:08 PM #34
Rainmaker
3,200,193
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Beth

Congratulations on a well earned feature for your post.

Good luck and success.

Lou Ludwig

Nov 15, 2017 06:09 PM #35
Rainmaker
431,240
Steven Nickens
Elite Pacific Properties Maui - Wailea, HI
R(S)GRI ABR, Maui Real Estate Hawaii

On behalf of cash buyers, they have a loud voice when it comes to offers, just saying.

Nov 16, 2017 01:57 AM #36
Rainmaker
2,073,237
Nina Hollander
RE/MAX Executive | Charlotte, NC - Charlotte, NC
Your Charlotte/Waxhaw/Fort Mill Area Realtor

Hi Beth... cash is nice, but I haven't found that sellers are quick to accept low ball offers just because it's all cash, especially if they have other offers with highly qualified buyers who are financing. And not all sellers want all that quick a closing, either. And I've seen more cash buyers have appraisals than not. Even cash buyers want to know they are buying something worth what they are paying for it.

Nov 16, 2017 06:39 AM #37
Rainmaker
210,852
Christi Farrington
William Raveis Real Estate - Wilton, CT - Westport, CT
~ Your representative in Fairfield County, CT

Cash is great when the offer is reasonable.  People who think that because they have the ability to pay with cash and, therefore, dictate the price will have a wakeup call when the Seller says NO!  Arrogance is never attractive.

Nov 16, 2017 07:01 AM #38
Rainmaker
1,880,598
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

An interesting read for me, because I'm currently looking and will be a cash buyer. Confirms what I already suspected. Thank you!

Just have to add....love the comment by Endre Barath, Jr. about cleaning up. LOL

Nov 16, 2017 12:32 PM #39
Rainmaker
106,015
Corey Martin
Martin Presence Group - Ruston, LA
Real Estate and Management Solutions

These are all great points. Sometimes cash is not king. Sometimes cash can actually bring more problems to the table. It all depends on the situation. Thanks for sharing. 

Nov 18, 2017 07:19 PM #40
Rainmaker
1,726,655
Jay Markanich
Jay Markanich Real Estate Inspections, LLC - Bristow, VA
Home Inspector - servicing all Northern Virginia

I did an inspection and radon on a $7.1M home and when I retrieved the radon the seller told me that the offer was cash and once they saw that they didn't entertain any other offers.  It wasn't for full price, but what's a couple of hundred of thousands?  Says he, with a wink.  It's all relative...

Nov 19, 2017 04:30 AM #41
Rainmaker
433,835
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Cash is just one part of the equation. The seller is more likely to accept a lower cash offer if;

  • Speed and likelihood of closing is more important to the seller than getting full equity
  • The buyer stipulates a fast closing, such as 3 to 14 days
  • The buyer stipulates buying as-is
  • The buyer waives all inspections, or minimal inspections such as structural or termites only
  • The buyer puts a large earnest money deposit, non-refundable if the buyer doesn't close, subject to minimal inspections.
  • The buyer provides proof of funds
Nov 20, 2017 04:32 PM #42
Ambassador
3,324,982
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

Cash can be king if it is clean with no contingencies, but that rarely happens. Congrats on the feature.

Nov 20, 2017 06:18 PM #43
Rainmaker
2,577,851
Tony and Suzanne Marriott, Associate Brokers
Haven Express @ Keller Williams Arizona Realty - Scottsdale, AZ
Serving Scottsdale, Phoenix and Maricopa County AZ

Beth Atalay "Often times, cash buyers think they can low ball and the seller would accept their offer because it’s all cash. This is just a myth. Seller will get paid the same amount whether it’s cash or financing."

Right on targte - and - re-blog!

Nov 21, 2017 03:53 AM #44
Rainmaker
475,348
Nathan Gesner
American West Realty & Management - Cody, WY
Broker / Property Manager

I want to know who their decorator is for that first picture!

Nov 21, 2017 04:40 AM #45
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Rainmaker
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Beth Atalay

Cam Realty of Clermont FL
Sell or Buy Homes in Clermont FL
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