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Cash Buyers and Real Estate Deals - Fact and Fiction

By Melissa Zavala

Real Estate Broker/Owner with Broadpoint Properties Cal BRE #01324959

November 27, 2011 01:52 AM

cash buyers Sometimes the truth is not what the buyer of real estate wants to hear. But, real estate agents do not earn money because they lie, cheat, and steal. They earn because they know the market, and they know their jobs.

Just because that cash is burning a hole in your pocket and you want a screamin’ deal on a piece of real estate, doesn’t mean that the seller is gonna accept your offer. Right now the real estate market is ripe with cash buyers, many who are looking for the deal of the century.

Homes listed at current market value (which is admittedly low right now in San Diego and Riverside County) are receiving cash offers for cents on the dollar. Often times, cash buyers feel that because of the very nature that the offer is cash (a.k.a. cash is king), the offer will be more favorably received than higher offers from buyers who are obtaining a loan.

Interestingly, when it comes to short sales and REOs (bank foreclosures), most of the lenders are looking to recoup the most money that they can—even if they have to wait for the deal to close.

Unfortunately, arguments such as “I can close in three days” do not have lots of weight, since it often takes a month to obtain a short sale approval or a few weeks to put together the necessary paperwork in order to close anyhow.

The common bank response to the cash buyer argument is that the bank is going to receive cash at the end of the day no matter what. And, that’s true. Once the buyer obtains the loan, the bank will receive the buyer’s cash. Yes, the bank had to wait. But, if you were going to get a full price offer, you would probably wait, too.

The amazing opportunity for cash buyers comes with properties for which loans cannot be obtained. That is, properties that require a fair amount of repairs and then, after rehab, can be resold for a profit. So, if your cash is burning a hole in your pocket and if you are looking for a smokin’ deal, contact one of the buyer specialists at Broadpoint Properties, and we can turn you onto a bunch of great properties that meet your specifications.

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Eric Kodner

Wayzata Lakes Realty: Eric Kodner Sells Twin Cities Homes - Minnetonka, MN

Wayzata Lakes Realty: Twin Cities, Madeline Island

The only advantage with cash is the fact that they don't have to go begging for financing. When a lender financed sale closes, the seller gets cash anyway.

Nov 28, 2011 02:33 AM

Renée Donohue~Home Photography

Savvy Home Pix - Allegan, MI

Western Michigan Real Estate Photographer

Ditto with our market. I find it difficult to work with investors because of this type of mentality!

Nov 28, 2011 02:40 AM

Janis Borgueta

Newburgh, NY

Retired RE Salesperson

Cash is great with run down homes that investors are looking to get great deals, fix up and rent in our market. We have an area of the city that has lost an enormous amount of equity. When the banks pay attention to them, we actually get them sold. Big bank losses on these, but still risky for the buyers. It certainly works that they are cash deals though. So much damage to these homes makes the mortgage something that would just not happen, and a rehab loan for the buyer is a no go!

Nov 28, 2011 02:47 AM

Jack O'Neal

HomeSmart Elite Group - Gilbert, AZ

Depending on who owns the home cash is not an issue. Bank-owned by Freddie, Fannie, cash is not a big issue, and cash is not a big deal any more everyone has it, OR they say

Nov 28, 2011 02:58 AM

Jill Watts

Realty Pro, Inc. - Vancouver, WA

A Luxury Experience at Every Price Point!

Lol, your blog article totally described my first client. I had such stars in my eyes because he was a CASH buyer! That man dragged me to about fifty homes, each time carrying his clipboard making notes of repairs to be made....which he would mentally take right off the top of his offer. He also said he could close in just a few days....but he never got any of the offers closed because his offer was so low. UGH. Thanks for the great article.

Nov 28, 2011 03:10 AM

Regina P. Brown

MBA Broker Consultants - Carlsbad, CA

M.B.A., Broker, Instructor

Melissa, congrats on your feature here in AR! "The bank is going to receive cash at the end of the day no matter what" is not necessarily true. (1) VA & FHA buyers, even buyers with conventional loans, will ask for concessions which lower the NET proceeds (2) Any time the buyer is getting a loan, there is a RISK that the loan may not be approved, or the new lender's appraisal may come in at a LOWER purchase price, or a other contengncies cannot be met. How many escrows do we see that "fall out" at the end because the buyer couldn't get financing? Then we're back to the drawing board, putting the listing back on the market, and waiting for another buyer (usually at a lower price now) and another short sale approval.... There's something to be said for the "time value" of money, eh?

Nov 28, 2011 03:35 AM

Donald Reich

Madison Specs - New Rochelle, NY

Cost Segregation Specialist

In recent months, I have had buyers getting rejected for mortgages. These days, having a CASH BUYER is a great thing. I removes all that uncertainty.

Nov 28, 2011 04:01 AM

Bill Gillhespy

16 Sunview Blvd - Fort Myers Beach, FL

Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Melissa, Very well written post. Buyers seem to think that cash is inherently better than financing. Probably only true on properties where financing simply isn't available !

Nov 28, 2011 04:17 AM

Melissa Zavala

Broadpoint Properties - Escondido, CA

Broker, Escondido Real Estate, San Diego County

Regina: I do agree with you that the FHA and VA have concessions, but my point may have been ineffectively communicated: at the end of the day (loan or no loan), when and if the deal closes, the bank or the seller will receive cash.

Nov 28, 2011 05:04 AM

Carla Muss-Jacobs, RETIRED

RETIRED / State License is Inactive - Portland, OR

As with any profession, there are some agents who do lie to get a deal. Not many, and I know not the subject of this post. But most agents are honest and earn their keep when the deal closes, true. So the point is . . . when does the buyer realize that cash isn't always king? When they have an honest agent who can tell it like it is! And even more to the point, the buyers who finally realize when they do.

Nov 28, 2011 07:04 AM

Wayne Johnson

Coldwell Banker D'Ann Harper REALTORS® - San Antonio, TX

San Antonio REALTOR, San Antonio Homes For Sale

Melissa-Most of us look for that little something that makes our house on the market or our offer special. Cash used to have a certain magic, but in most cases now, it's just another tool. no better or no worse than financing (for the average house.) As has been mentioned, if you have a house that need extensive work, or previous offers have crashed and burned, cash probably begins to look a bit better. This was a great subject to bring up.

Nov 28, 2011 07:17 AM

Kate Elim

Dockside Realty - Spotsylvania, VA

Realtor 540-226-1964, Selling Homes & Land a

Hi Melissa...there are multiple things that make up a "good" offer and cash is only one of them. Other factors may trump it. Buyers and Sellers have to realize that it alone does not make it an offer to grab.

Kate

Nov 28, 2011 07:47 AM

Melinda (Mel) Peterson

Grants Pass, OR - Bend, OR

The Savvy Broker - ABR, CRS

Great post Melissa and congrats on the feature! I hope my family isn't giving you any trouble ;)

Nov 28, 2011 07:57 AM

Rose King

David Tracy Real Estate - Friendswood, TX

Friendswood / Pearland / Houston Bay Area

Hi Melissa! I encountered one of those cash buyers last month. She wanted to make a lowball offer on one of my listings, and it took a lot of negotiation to get her to realize that my seller didn't care if she had cash or not. She finally came in with a good offer, but it turns out it was contingent on the sale of her current home which was under contract with a buyer who was getting a loan. So, even though she had cash, my seller still had to wait.

Nov 28, 2011 01:47 PM

Melissa Zavala

Broadpoint Properties - Escondido, CA

Broker, Escondido Real Estate, San Diego County

Melinda: Now, why would they bother me ;-) ?

Nov 28, 2011 01:57 PM

Cheryl Ritchie

RE/MAX Leading Edge www.GoldenResults.com - Huntingtown, MD

Southern Maryland 301-980-7566

I like the tip at the end stating where loans cannot be obtained cash is king.

Nov 28, 2011 04:20 PM

Sandy Acevedo

951-290-8588 - Chino Hills, CA

RE/MAX Masters, Inland Empire Homes for Sale

So true about that attitude. I have a listing in escrow that had a cash buyer. And all the other johnny-come-lately are calling now and saying they have cash buyers for this deal .Like I'm going to cancel an existing escrow, just to get their cash buyer.

Nov 28, 2011 04:32 PM

Goran Utvic

Goran Utvic Real Estate Broker/Construction Consultant - Chicago, IL

Chicago 2 Flat Specialist

Melissa...excellent post! Many of the cash buyers I work with are realizing the same...cash is king mostly for the fixer properties.

Nov 29, 2011 09:22 AM

Margaret Rome Baltimore 410-530-2400

HomeRome Realty 410-530-2400 - Pikesville, MD

Sell Your Home With Margaret Rome

This is what I consider a strong buyer a decent offer, a hefty EMD, cash or no finanacing contingency and a quick closing. (Proof of funds is a must.)

Thanks to Debe for the reblog.

Margaret

Nov 29, 2011 10:31 PM

Michelle Francis

Tim Francis Realty LLC - Atlanta, GA

Realtor, Buckhead Atlanta Homes for Sale & Lease

Melissa,

Well done. I like your explanation. Cash is good, but not the end all be all that will discount the price a crazy amount. It depends on the sellers, their motivation and timing.

All the best, Michelle

Dec 05, 2011 12:32 AM