CASH IS NO LONGER KING! WHAT INVESTORS NEED TO KNOW ABOUT CASH OFFERS.....

By
Real Estate Agent with THE CHAVEZGROUP AT COLDWELL BANKER PREVIEWS INTERNATIONAL

WHAT YOU NEED TO KNOW ABOUT CASH

 

1. CASH IS GOOD WHEN GOING UP AGAINST OTHER OFFERS BUT ONLY WHEN IT IS THE BEST OFFER

2. MOST SELLERS DON'T UNDERSTAND THE DIFFERENCE UNLESS THE REALTOR EXPLAINS IT TO THEM

3. IT WILL NOT EXPEDITE A SHORT SALE APPROVAL ONE BIT, THE BANK COULD CARE LESS

4. IF THE CONDITION OF THE HOME IS TURN-KEY AN FHA FULL PRICE OFFER WILL BEAT YOU

5. IF THE LISTING AGENT IS ALREADY DOUBLE ENDING THE DEAL WITH A POCKET BUYER YOU HAVE NO CHANCE

What I must explain is that most sellers want to net as much money as possible from a sale. With that said if

the subject property needs many lender required repairs, CASH will take first position when the difference in net

proceeds is small in comparison to repairing the property. For example if it will cost $20,000 to repair a property 

but only give a seller $5000 more in net proceeds the seller will most often take the cash offer. 

 

In a property that will qualify for Conventional financing the highest amount I feel the sellers are willing to lose

to take a cash offer is 10% off fair market or the highest offer. In most cases I have seen the seller accept

offers that are within 5% off fair market or the highest offer. 

 

In the case of purchasing homes that are being flipped you will need to look at what the property was recently

purchased for and calculate the cost of the repairs made and then finally determine the investors net

proceeds after all expenses. In my market I submitted a full price offer on a listing of $450,000 you would

think that my client would have been a proud homeowner able to move in on the 16th day after

acceptance..........well that's not what happened. Instead the Investor/Seller called me to ask what my clients

final offer was. I calculated the expenses including the investors costs to purchase the property and with my

clients offer at $450k the investor would net $29,000 apparently this was not enough profit for 3 weeks work

for this investor. The home ended up selling to someone with 20% down and an offer at $480,000. In my

opinion I certainly agree with the investor/seller I would mind waiting an extra 20 days to make another

$30,000. 

 

In the end yes CASH is still strong but your offer has to meet the sellers net proceeds expectations! 

GOOD LUCK TO ALL YOU CASH RICH PEOPLE OUT THERE!

CHEERS!

 

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Groups:
California Short Sales, REO's, and Foreclosures
Investors
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Rainmaker
601,542
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Benny - short sale banks may not care about cash offers but REO bank sellers sure do.  Time after time after time after time, I have seen REO bank sellers accept low-ball cash offers over higher than list financed offers.  It's obvious that a fast closing was much more important to these REO bank sellers than net proceeds.

Granted, many of these properties were run-down, dilapidated dumps but many were also really nice, move-in ready homes.  I just don't get it.  One particular property that a client of mine had made a higher than list price offer and really wanted the property but lost out to another offer.  We watched the property and three weeks later it showed up on the MLS (obviously a cash offer) nearly 30k less  than my clients offer.  My client was livid and nearly gave up the home search.

Feb 09, 2010 04:26 PM #1
Rainmaker
254,487
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

I am not sure what your point is.  Of course the seller wants a sure deal and the most money.  If everything is equal, the seller will always take cash because it is a sure thing.  But a low ball offer with cash does not solve the sellers issue, to maximise their take.

Feb 09, 2010 04:32 PM #2
Rainmaker
601,542
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

I can't speak for other markets here in CA but here in Los Angeles and Ventura counties, many times, net proceeds is not the top priority in selling or in reviewing multiple offers.  So often, the fastest closing (all cash offers) is the top priority regardless of how much lower it is from the highest offer (financed offers).

If net proceeds were the top priority, REO bank sellers would be accepting the highest offer, which most often are financed offers.  As I mentioned above, with the run-down dilapidated, dumps that most REO bank sellers are selling, cash offers make sense.  But there are quite a few that are not dumps that actually are worth more and could most certainly warrant more if those offers were accepted. 

By continuing to accept low-ball cash offers, the impatient REO bank sellers are preventing some areas from appreciating and are continuing to drive property values down in areas that have already lost so much.  JMHO

Feb 10, 2010 02:56 AM #3
Rainer
7,866
Benny Chavez
THE CHAVEZGROUP AT COLDWELL BANKER PREVIEWS INTERNATIONAL - Downey, CA

When I was speaking of these cash offers I should have mentioned I was focusing mostly on regular sales and short sales not bank owned sales. Yes time is of the essence in regards to Bank Owned properties due to the liability and expense that these homes produce for banks while being on their books!

Feb 10, 2010 10:44 AM #4
Rainer
28,025
Sheri Rogers
Power Rentals & Investments, LLC - Desoto, TX

I would certainly agree with the investor/seller as well. In the beginning as a new investor, I always took the first offer that was within 5% of my desired net. Now I'm more lax and wait for the best deal. As far as cash goes, it still gets my special consideration.

Feb 10, 2010 02:29 PM #5
Rainmaker
129,000
Craig Snead
Quality Home Investments, LLC / Dearborn Heights, MI - Dearborn Heights, MI
Real Estate Investor

Benny, wouldn't it make sense for the banks to move the property off of the books as quickly as possible regardless of how it is paid for?  And don't both the seller AND the bank have to be accepting of the offer?

Feb 10, 2010 11:30 PM #6
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Rainer
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Benny Chavez

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