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Greed on whose part? Those who came in and paid cash or those who took that cash/those who keep raising their housing prices?
Just because someone comes in and pays cash should have nothing to do with the price the house's are listed at.
The fact that someone paid over the listing price is an excuse. Why can't the one who's taking a loan pay a few thousand more? It's not as if buyers are paying 10's of thousands over the asking price around here. I understand that a cash buyer is considered a stronger buyer, but that's complete BS - because the seller will get their money whether it's in cash or from a loan. Most buyers I know have to be pre-approved before even making a bid.
There is no law that I know of, that demands that the price of houses in a particular area should RISE, just because people in the area are able to pay CASH.
Now THAT seems greedy to me!
Last edited by Constant_Turmoil; 10-28-2017 at 11:40 AM..
Reason: Could the MOD please add the word Boise to my title?
Many sellers will prefer a cash buyer over a pre-approved buyer, because the cash buyer is more likely to follow through on the deal. There are still more logistical challenges with a pre-approved loan. You have to go through an appraisal, which is something that does not have to be done with a cash buyer.
As for rising housing prices, home prices are primarily a local phenomenon. However, with interest rates historically low it is predictable that home values would rise nationally. The Federal Reserve has been trying to maintain asset prices since the financial crisis.
Greed on whose part? Those who came in and paid cash or those who took that cash/those who keep raising their housing prices?
Just because someone comes in and pays cash should have nothing to do with the price the house's are listed at.
The fact that someone paid over the listing price is an excuse. Why can't the one who's taking a loan pay a few thousand more? It's not as if buyers are paying 10's of thousands over the asking price around here. I understand that a cash buyer is considered a stronger buyer, but that's complete BS - because the seller will get their money whether it's in cash or from a loan. Most buyers I know have to be pre-approved before even making a bid.
There is no law that I know of, that demands that the price of houses in a particular area should RISE, just because people in the area are able to pay CASH.
Now THAT seems greedy to me!
It's a simple matter of supply versus demand.
If cash is involved it becomes even simpler because contingencies are eliminated.
When people demand what they perceive as "fairness", that's greedy.
There are many reasons house prices continue to raise in the Boise area currently:
1. Demand continues to outstrip supply for moderately priced homes.
2. Development costs continue to increase as local municipalities require the developer to incorporate open space, water detention ponds, landscaping, etc)
3. As lot prices increase homes tend to get larger to help absorb the cost of the lot easier. $100k lot and a 1,000 sq. ft. home for an additional $100 a sq. ft. = $200k home at $200 a sq. ft. vs same lot and a 2,000 sq. ft. home = $300k so only $150 sq. ft.
5. Increased cost of replacement inventory (new homes) due to labor and materials costs increasing.
6. High cost of rentals mean at current low interest rates you can still buy a home for less than renting it.
7. Investors absorbing inventory due to #6 above.
The main benefits to a seller to accept a cash offer over a buyer getting a mortgage are:
1. Quicker closing (can be in a day instead of 30-45 days for a mortgage).
2. Saves a seller a few hundred dollars since no appraisal, loan fees, inspections, doc prep charges, etc that a buyer might ask the seller to help pay for.
3. No additional approvals required (i.e. underwriters, appraisals, secondary market investor overlays, etc.)
The best way to try to compete with a cash buyer is to have your loan pre-approved as much as possible up front and be willing to put your earnest money at risk (non-refundable) up front to show the seller you are confident your loan will be approved! If you have enough money to cover a low appraisal and are willing to pay over the amount of a potentially lower appraisal, consider waiving the appraisal contingency. (typically you wouldn't want to do this, but if you really want a house, and would be willing to pay a premium for it, this is worth considering).
If you are in a multiple offer situations (bidding war) on a home, consider offering the price at which you would be upset that someone else bought the home for instead of you.
Another strategy is to use an "escalation clause" where you offer $x for the home and state in writing that if that isn't high enough that you would be willing to increase your price by $x over the next bonafide offer up to a maximum of $Y.
Another thing that makes a huge difference in getting your offer accepted is the knowledge, negotiation skills and reputation of your Realtor. I have had many listing agents tell me that my offer was accepted over someone else's (sometimes even if my offer wasn't quite as high a price) since the listing agents were more confident in my ability to see the sale through to a successful closing and that I would be realistic in my request for repairs on a home inspection!
It seems that there are house farms popping up everywhere. Can there really be that much of a demand for houses? Almost every empty field I pass has a sign advertising another few thousand homes to be built. And it does seem the higher priced models are the ones being built. It is getting difficult to find anything under $200K these days. I'm a new resident but even I am shocked at the building boom, along with the strip malls chasing after them and then traffic congestion.
DH
Another reason is it doesn't cost much more per month to carry the debt load. Those harp loans the government is handing out helps create the "everything" bubble we now are in keeping rates to low for too long.
Last edited by Brother1; 11-01-2017 at 03:55 PM..
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