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If There's A Recession On---Why Are There So Many Cash Buyers Right Now?

By
Real Estate Agent with Realty One Group Mountain Desert AZDRE# SA582422000

Driving to the office the other day, bored with the usual morning chatterboxes, I was surfing the old radio dial when I ran across a local guy talking with great vehemence about the "economic idiots" spewing doom & gloom at every opportunity.

He went on to castigate expert after expert, refuting their findings without a whole lot of supporting evidence to back up his alternate opinion...until the callers started chiming in. 

Call after call was a business owner or manager talking about how business wasn't booming, but was steady and strong.  I was beginning to think that he had stacked the phone lines with buddies when I heard something startling come over the airwaves!  There was a real estate agent talking about the shocking amount of cash buyers who were coming out of the woodwork and snapping up property.  I listened even closer, and I realized that it was one of the agents in my brokerage that had started the "Foreclosure Bus" with some other agents in the office.  In the process of pre-qualifying people wanting a seat on the bus, nearly 40% of those wanting in on the tour were bringing certification of funds letters to pay cash for properties.  Given that Tucson averages 16% cash transactions on a regular basis, this is incredible!

I had no idea!  Then I looked at my own business in the new year--I'm running at 75% cash buyers--it just had never dawned on me.

Hmm...how can we be in a recession when people are willing to part with their cash so readily?

By the way, the "Foreclosure Bus Tour" is so popular with investors, we are getting calls from all over the country and may consider adding another 30-passenger bus if need be:  Call me if you want a seat on The Pepper Group's Bus...cash or not!

 

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Comments (50)

Anonymous
Lance Winslow

Everyone I know is out looking to buy and looking for deals. Not everyone was fool hardy to play in the last toppy market, and borrow to the hilt. It seems everyone new the bubble would pop, still some kept playing. Many folks who have been sitting around waiting and waiting and waiting are now out looking, looking and looking and man is there a lot to look at. Lance

Feb 23, 2008 09:48 AM
#31
Paul Francis
Francis Group Real Estate - Las Vegas, NV
Las Vegas Real Estate Agent - Summerlin Homes
Most of our investors also have cash or certification of funds to back up their purchase agreements -- most of them are old time clients that had sold their investment homes in '04 and '05 and are now back. Buy low, sell high as they say!
Feb 23, 2008 09:54 AM
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F
The only investors I am seeing out there are the bottom feeders.  If the property can be bought for 60 cents on the dollar or less, they will buy with cash.  If not, they steer clear. Nobody is paying cash at the retail prices around here.
Feb 23, 2008 09:54 AM
Diane Bell, Hilton Head Real Estate, Bluffton
Charter 1 Real Estate, Hilton Head, Bluffton, SC - Hilton Head Island, SC
I've seen quite a few cash deals lately.  Of course, the Hilton Head Real Estate market usually does have cash buyers.  Thanks goodness!
Feb 23, 2008 12:10 PM
Denise Shockey
RE/MAX Aerospace Realty - Cocoa Beach, FL
Cocoa Beach, Brevard County Florida Real Estate
Great post and awesome comments.  Cash is returning to the Space Coast in Florida also, especially on the beach.  Thanks for sharing.
Feb 23, 2008 02:37 PM
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes
We are seeing a lot of cash buyers as well. They are out there waiting to find bargains.
Feb 23, 2008 03:19 PM
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Kent... I didn't read any of the comments.  Why would you want to think that there was a recession, when you have that many cash buyers... lol  But there is a slight recession, no matter what anyone says. At least this is my opinion. 

So... where are these people getting the cash?  And why cash?  For security?  I personally think that they are hurting themselves by doing this. They aren't maximizing their full net worth then. Limiting their ability to build their net worth also. Again, just my opinion.

jeff belonger
Feb 23, 2008 04:01 PM
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

 Kent,

Contgratulations on the Feature!  You touched a nerve here!

Mike in Tucson

Feb 23, 2008 08:58 PM
Russ Ravary ~ Metro Detroit Realtor call (248) 310-6239
Real Estate One - Commerce, MI
Michigan homes for sale ~ yesmyrealtor@gmail.com
I am seeing cash buyers in Detroit also.  The banks and lenders love those people.  Good luck on the bus
Feb 23, 2008 09:38 PM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate
Kent - It goes back to the adage that all Real Estate is local. The fact that there are quite a few investors who are paying cash is fantastic. We have not seen that up here in MA. I suspect our prices for homes are a lot higher. Love the bus idea!
Feb 23, 2008 10:54 PM
Midori Miller
Talk 2 Midori, LLC - Daytona Beach, FL
Online Marketing For Real Estate Professionals

Kent-Rock on!  WOW..this is truly great to hear!  Our offices are buzzing with calls and more contracts..heck we've had few recently with multiple offers go figure! Nothing is perfect and  I am with you...I ignore the doom and gloom...I say make your own media and get out there and sell more real estate...no self pity...no this market stinks..there will always be buyers and sellers... 

Feb 24, 2008 12:27 AM
Kathy Clulow
Uxbridge, ON
Trusted For Experience - Respected For Results

Kent - The message is starting to get out. in regards to Jeffs comment about leveraging by not buying all cash there are those like my hubby who have always preached there are 2 ways to buy property ALL CASH or NO CASH, as long as you can afford to hang in when the going gets tough, either way you can't loose over the long run.

 

Feb 24, 2008 12:31 AM
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re
I think is is a great sign for the market they need to see the value before the market changes. Thanks for the post.
Feb 24, 2008 12:52 AM
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Ruthmarie - welcome to capitalism kid.  It is nice to see a dissenting opinion though.  Thank you.

Robert, Janet - you're feeling it.

Mike - in a word, yup!

Cameron, Leo, Jim - they're coming out of the woodwork, aren't they?

Josh - we've lost a few, but I wouldn't attribute the increase in business to the ebb and flow of professionals in the field.

Rob - thanks for coming on and commenting.  Congrats on your CCIM!

Dimuria - watch out, you'll make Rob mad...whoops, too late!

Sean, Mitchell, Homefinders, Lance, Paul, Diane, Denise, Midori - Those that are savvy investors reap the benefits.  The big resounding "thump" of the market is the siren song of those who buy at the best prices!

Rob Arnold - patience, my friend...patience.

Jeff - judging from the holes in backyards I'm seeing from satellite photos, the cash is coming from coffee cans.  I hear what you're saying about maximizing their leverage, but some folks have different strategies and mindsets with their cash.

Mike - thank you!

Russ - thank you for commenting.  Rob Curcio, Gary Andros and Todd Greene are the driving forces behind the bus tour...I'll pass along your good wishes!

Bill - that phrase, "All Real Estate Is Local" has never been more true--even to the point of neighborhood by neighborhood.  Thanks for your comment.

Midori, Kathy, Terry - we can use more positive people like you in our office...want to move to Tucson?

 

Feb 25, 2008 11:44 PM
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People
Thank you, Cheryl!  I appreciate the kind words.
Feb 27, 2008 03:07 PM
Anonymous
Rob Curcio

Hi Kent, thanks for getting the word out.  I appreciate the kudos on the CCIM, but I can't take credit for it yet.  I have only just begone my journey.  I still have a long haul ahead of me.  The info in 101 class was well worth the price.  The knowledge that comes with the CCIM designation, is by far in my opinion everything an investor should be looking for in a commercial real estate consultant.  It is absolutely the best knowledge I have ever received as far as real estate is concerned.  I highly recommend it to any realtor wanting to pursue a career in commercial real estate.

 Peace.

Feb 29, 2008 01:34 PM
#46
Mike Wochner
Coldwell Banker, Mountain Gallery Realtors in Big Bear Lake - Big Bear Lake, CA
Big Bear Lake Real Estate Agent

I've experienced all of these scenerios.  I've had bottomfeeders, I've had wealthy investors, I've had high fico score buyers, and I've shown property to people who I thought would never buy....and I think that it's all about the conversations you are having in your head... what you think about you bring about is awfully true.  The agents that think that there are lots of cash buyers end up working with lots of cash buyers..the agents that think that buyers are liars end up working with buyers that don't perform, and the agents that think there are no buyers out there arent' working with any buyers.  So I constantly remind myself to check my attitude. 

Apr 26, 2008 05:48 PM
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

As with anything- there is a bottom.  Your bus indicates that cash buyers have finally concluded there are gains to be made despite what they hear- they are the ones getting back in on the ground floor. By the time the masses get the message-prices will have already been on the upswing for many months. 

Good luck and sell well!

Apr 26, 2008 09:56 PM
Kent Simpson
Realty One Group Mountain Desert - Tucson, AZ
Real Estate Is About People

Mike - You've hit the attitude right on the keister!  Great comment...thank you!

Allison - when the seasoned investors start buying, it is time to jump in--by the time the media gets the hype machine cranked in a different direction than they've been going, the bargains are all gone (kind of like running to the store on Christmas Eve when you hear that the latest toy craze is selling out fast)!

Apr 28, 2008 03:00 PM
Josh Painter
Pacific Lifestyles Realty - Temecula, CA

Um, yes, it is a recession.  And Jim Cramer isn't a genius.

Mar 12, 2009 07:04 PM