Cash Is King!??

By
Real Estate Agent with Client First, Realtors - Canton, MI
https://activerain.com/droplet/4Vc

I can tell within about 60 seconds of speaking to a Buyer, whether they have been listening to Real Estate investing gurus or watching TV news articles about how to buy foreclosed properties cheaply. Usually the "educated" buyer will begin using the phrases, "I have cash and cash is king", "banks want to move these properties", "fifty cents on the dollar" tip me off to what usually ends up being a failed offer.

A few weeks ago I received a call from an interested buyer that wanted to view a foreclosed property that I had just listed. After meeting the buyer at the property, he started dropping some of the aforementioned phrases. The buyer went on to explain to me that he knew banks want to get rid of their inventory and he had cash and wanted to offer $25k less than the $75 asking. After spending considerable time attempting to re-educate the Buyer, I relented and wrote their $50k cash is king offer.

Within a few days of this property being listed we had multiple offers, as is the case on nearly every REO listing. The bank sent all offers back for highest and best. Most of the offers were improved, except for "Cash is king" buyer.  This buyer learned the lesson, that cash may be king but only with offer amounts that have some parity. I can say from multiple experiences that Banks are not going to take a 1/3 haircut for cash.

Here are some observations that I have observed:

  • A cash offer will not trump even a conventional mortgage with a superior offer amount. Cash is only king if the offer amounts are nearly equal.
  • When it is said that banks are selling their properties for fifty cents on the dollar, it means that they are selling the property for .50 on the dollar from their previous values. Banks will not entertain"low ball" offers on a property that has only been on market for 5 days.  
  • Banks, in my market, are competitively pricing their properties at or below market value.
  • Banks are patient and will wait to get the closest offer to market value.

 

 

When you choose Scott Petersen and The Petersen Team to handle your Canton/Plymouth real estate needs, you choose  a Realtors® who is not just an expert, but someone who cares about you and your family. Buying or selling a home can be a very exciting and yet stressful. We will work to achieve your objectives, bringing our years of expertise and hard work. In this difficult market, we are proven producers selling in the multi-million dollar range year after year.

 We are very familiar with todays market and handle Short Sales, REO, Bank Owned, and all types of real estate in  Wayne County , Oakland CountyLivingston County, and Washetenaw County we specialize in Canton,   Plymouth, Northville, Livonia and Novi.

Scott A. Petersen
Remerica Country Place

www.scott-petersen.com
spete05@gmail.com

Posted by

Scott A. Petersen
Client First, Realtors

www.scott-petersen.com

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Topic:
Home Buying
Tags:
foreclosures
home buying
bank owned
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canton michigan

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Rainmaker
1,442,813
Jeffrey DiMuria 321.223.6253 Waves Realty
Waves Realty - Melbourne, FL
Florida Space Coast Homes

Scott, this is very true. I love when a new investor tells me they would like to buy properties...when we talk I find out they want to buy 60 cents on the dollar and with no money out of pocket...lol

Sep 22, 2010 05:03 AM #1
Rainmaker
271,377
Phil Stevenson, CRMP
PS Mortgage Lending 305-791-4874 or 888-845-6630 - Miami, FL
"Mortgage Nerd" in Miami, Florida and Texas

My understanding is that cash buyers are much harder to work with.  Just as you say, they want to put in a low ball offer that you may lose to a mortgage offer.

Sep 22, 2010 05:05 AM #2
Rainer
8,120
Josh Hackett
HomeSmart - Chandler, AZ

Haha, great read Scott. Being out in AZ I deal with these types of buyers all the time. You hit the nail on the head, best thing you can do is educate your buyers and hope they come to their senses. Doesn't take more than 2 rejected offers for them to wise up usually. Look forward to more of your blogs Scott.

Sep 22, 2010 05:06 AM #3
Ambassador
2,011,761
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

Hi Scott, the "cash is king" phrase is beaten to death by want-to-be buyers to support their low ball offers.  All of your four observations are correct for our market as well.  Additionally, bank-owned property typically goes under contract within the first 30 days of being on the market if not even much less.

Sep 22, 2010 05:08 AM #4
Rainer
128,302
Daniel J. Hansmeier
Rochester, MN

Too many advertisements saying you can buy for pennies on the dollar out there. Get real people.

Sep 22, 2010 05:11 AM #5
Rainmaker
601,487
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

Scott - While cash may not be king in MI, in SoCA (Los Angeles & Ventura counties) it certainly is and REO banks take low-ball cash offers over higher financed offers every day.  So, once again, real estate is extremely local and what works in one market may not work in another.  JMHO

Sep 22, 2010 05:18 AM #6
Rainmaker
89,468
Scott Petersen
Client First, Realtors - Canton, MI - Canton, MI

@ Donna: Very true. These observations are for our market in the Metro Detroit market. In every market there may be factors that make my observations different. One factor for the SOCAL market may be Jumbo and Super Jumbo mortgages are just not being underwritten. Last year, during the credit freeze, cash was much more king. Today, qualified buyers in our market are having no problem obtaining financing for loans under $400k, so cash does not seem to have the advatanage as it did just 12 months ago.

Sep 22, 2010 06:34 AM #7
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