When Cash Isn't King

Reblogger Judith Abbott
Real Estate Agent with Coldwell Banker Residential

I have closed a fair number of cash deals in the last 12 months.  In every case, I have had to explain to the Buyer that their being able to write a check at closing is just one factor for the Seller to consider.  Old School Real Estate Think was that Cash Is King.  Cash is useful.  Cash can get the attention of the Seller.  However it doesn't always dominate a deal.....see the blog posting below for good examples of what I am talking about!

Original content by Sharon Alters

When Cash Isn't King

Investors and other buyers regularly tout the phrase that "Cash is King." Just this past week in an email, a prospective buyer commented that, "I guess cash buyers have a better chance at something along these lines." Not always. In fact, let me dis-spell the common myth that Cash is King with a couple of real life examples.

Mythbuster #1

Cash buyers will trump buyers who are financing a home.
 

A bank owned property comes on the market. After a week or so, a cash offer comes in. It is low, so we negotiate it. Result - buyer will not come up enough, bank will not go down enough. Buyer walks.

Another week goes by. Buyer #2 makes an offer with financing. While we are negotiating with Buyer #2, Buyer #1 comes back and ups their offer $5,000, still lower than Buyer #1's offer. Multiple Offer Disclosures are given to both buyers.

Buyer #1 sticks with their offer - remember, Cash is King, right? Buyer #2 raises their offer to near list price. The bank selects Buyer #2, whose financed offer is $6,000 net higher than the cash offer. Busted: Cash is Not King in this transaction.

Mythbuster #2

Cash Buyers can come in with ridiculously low offers and get the house because they are paying with cash and can close quickly.

In a world where Sellers have equal access to internet information along with buyers, ignorance of value is not as common as it once was. Banks have access to Broker Price Opinions and Appraisals, and their investors set limits as to how much they are willing to lose on a property.

Cash buyers coming in with a low ball offer like a gunman swaggering into town are often kicked to the curb when a more sensible buyer, studying the true market value, then offering a fair price wins out over the cocky low ball cash offer.

Mythbuster #3

Banks will take cash because they know it will close.

Surprise - it's all cash at the closing table. Banks often don't really value a cash offer over a financed offer, in our experience. They go for the highest offer from a creditworthy buyer. Trends change and in this economic climate, cash may not be king.

Banks are trying to recover as much as they can from the huge losses they have written off. The result is that Cash is Not necessarily King anymore. If you have any questions about how to negotiate with a bank and bust the myths, please call or text us.

 

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Rainer
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Matthew Johnson
Keller Williams Premier Realty - Woodbury, MN

It's all cash at the closing table for the seller!

Jul 08, 2011 05:11 AM #1
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Judith Abbott

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