Ever since the real estate market took a turn for the worst(or better depending upon who you are), we have seen a huge influx in cash buyers/investors. While cash can be enticing for many reasons, it is not as powerful a negotiating point as some buyers believe.
True, the mortgage market is less guaranteed and there is a chance a loan could fall apart. Adversely, there are no concerns about that with a cash offer. However, if the list agent and/or seller do their due diligence, you can often times be 99% sure that a potential buyer obtaining a loan will make it to closing and obtain the financing. So, if the seller is confident in the financing of a buyer, why would they want to take significantly less just because another buyer has cash?
I speak with a lot of of investors who would like to offer sometimes six figures less than the actual list price and market value just because they are making a cash offer. Low cash offers still must be reasonable because the seller will get the money one way or the other. The only time an extremely low cash offer is even relevant is if the property is in a total state of dis-repair and would not be approved for financing. Still, due to the large number of distressed properties, the "renovation loan" has become very popular again. A renovation loan is when a distressed property has an estimate done by a contractor for repairs needed and the scope of that work is included in the actual loan. Thus, allowing a non-cash buyer to purchase a property that would typically not be approved for a standard loan. This has made the low cash offers even less respectable or considerable.
In conclusion, if you're an investor with cash or a buyer with a loan, you need to understand the actual bottom line for the seller. This is usually when can settlement occur and how much money will they net from the sale? A cash buyer may try to entice the seller with a fast settlement, but most sellers already need or want 30-45 days to settle. Which is the same amount of time a loan will take to close. If a seller and their agent review a buyers financial information and speaks to the loan officer for the buyer than you should be able to determine whether or not the loan application/pre-approval is strong or not. This is especially true if the property is in decent shape and would not have any inspection and/or appraisal issues. If you're considering a cash offer keep all of this in mind and have a Realtor investigate the situation on the property and if there are competing offers. Cash is not as enticing as some see to think.
Ben White Montgomery County Realtor
0 comments:
Post a Comment