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There are some times when cash buyers lose out. They do typically put in lower offers than conventional loan folks, and most of the time the seller takes it. However if they low ball too low and don't have the emotional commitment of a conventional buyer to stick with the deal through the process the conventional buyer may prevail. In our place we had a situation where a cash deal was accepted over our financed offer. For some reason they backed out and we resubmitted another bid....with others, including another person with a cash offer which I can only assume was low ball since they went with us this time.
Things got a little ugly (due to realtor bickering)but we presented a very fast time line for the deal to go through, a fair price, a nice earnest deposit and so on. I sometimes wonder if the seller decided to go with us because we were serious -and let's be honest, emotionally committed-and would follow the deal through as opposed to the cash buyer which might start playing hard ball and walk like the original buyers offer that was first accepted. In the end the seller surely made more money going with us and the deal probably only took 2 weeks more than a cash offer. If I recall we closed in 30 days after offer was accepted.
Finally it helped that the house is in good condition, and nothing serious was unearthed in the inspection. Sellers with problematic houses are much more likely to go with a cash buyer as they may waive inspections, or of they have one, there is no lender/appraiser to squash the deal if there are problems.
There are some times when cash buyers lose out. They do typically put in lower offers than conventional loan folks, and most of the time the seller takes it. However if they low ball too low and don't have the emotional commitment of a conventional buyer to stick with the deal through the process the conventional buyer may prevail. In our place we had a situation where a cash deal was accepted over our financed offer. For some reason they backed out and we resubmitted another bid....with others, including another person with a cash offer which I can only assume was low ball since they went with us this time.
Things got a little ugly (due to realtor bickering)but we presented a very fast time line for the deal to go through, a fair price, a nice earnest deposit and so on. I sometimes wonder if the seller decided to go with us because we were serious -and let's be honest, emotionally committed-and would follow the deal through as opposed to the cash buyer which might start playing hard ball and walk like the original buyers offer that was first accepted. In the end the seller surely made more money going with us and the deal probably only took 2 weeks more than a cash offer. If I recall we closed in 30 days after offer was accepted.
Finally it helped that the house is in good condition, and nothing serious was unearthed in the inspection. Sellers with problematic houses are much more likely to go with a cash buyer as they may waive inspections, or of they have one, there is no lender/appraiser to squash the deal if there are problems.
Bingo. I think you made some really great points Clevelandgal. In some ways I cant blame some listing agents for not replying back to buyers agents. There are serial buyers out there just putting in offers EVERYWHERE and hoping one offer sticks, then deciding from there. If 3 offers of 10 happen, the 17 day contingency clause allows them to back out. There is no limit on the amount of offers you can put out.
I can imagine someone with cash is doing the same thing, especially if they are not even in town and are relying on a hired gun to do the leg work.
If its a traditional sale (not short, REO or investor owned) and you get to meet the owners, at least IMHO, its a bonus. We made it a point to and it really paid off, especially for our 2nd house in Murietta where there were 10 offers. The owner really liked us and even though there were higher offers and 2 cash offers, she went with us because she saw how much we liked it and told her we would take care of it.
Yes, absolutely true Clevelandgal. The thing with cash offers is you still need to be realistic and in the ballpark. It can't be some insane offer that is totally out of whack compared to other recent comps in the area.
One thing about California (I had never purchased a property in California prior to 2011) is that the laws are VERY pro-buyer. It seems like a buyer can pretty much back out of the deal for almost any reason even after making an offer. I have purchased MANY properties before but in other places. The laws here are great if you're a buyer and have second thoughts or buyer's remorse.
I think if you're going in with a cash offer you make it very clear to the sellers you won't be difficult and in any inspection you won't ask for anything unless it's major problems. The house we bought was an original owner house and they took immaculate care of it so there weren't any problems at all.
Another thing I think is not to fall in love with any one property. My philosophy with real estate is not to fall in love with anything and if something falls through it's not meant to be. The worst mistakes I've seen where people that totally fall in love with a particular property and will "chase" it.
Cabound, I'll let others that have lived here a long time answer your question. There are a LOT of variables of what you might like or not like. Some things that bother one person (like homeless in the area) might not even be a thought to another.
In some ways I cant blame some listing agents for not replying back to buyers agents. There are serial buyers out there just putting in offers EVERYWHERE and hoping one offer sticks, then deciding from there.
So TRUE. I know this is happening. And cash buyers are doing it too from what I understand. I have read on other forums about people actually putting in offers on houses they are not thrilled about because they want a house so badly and the inventory is low. We had got to the point where we were not going to buy because we would not settle for something not right for us. Now that does not mean we did not make some compromises (1 bathroom! well we put up with that because you can hear the waves crashing when you take a bath)
When we rebid on our house, our realtor did something I thought at the time was so corny, I am embarrassed to admit I participated. She submitted a cover letter with a profile of us and then asked for a picture...she ended up using one of me on my scooter at the beach to drive home the point we were serious and our lifestyle meshed with this community. I have never heard of personalizing offers like that-definitely an interesting strategy.
Bingo. I think you made some really great points Clevelandgal. In some ways I cant blame some listing agents for not replying back to buyers agents. There are serial buyers out there just putting in offers EVERYWHERE and hoping one offer sticks, then deciding from there. If 3 offers of 10 happen, the 17 day contingency clause allows them to back out. There is no limit on the amount of offers you can put out.
I can imagine someone with cash is doing the same thing, especially if they are not even in town and are relying on a hired gun to do the leg work.
If its a traditional sale (not short, REO or investor owned) and you get to meet the owners, at least IMHO, its a bonus. We made it a point to and it really paid off, especially for our 2nd house in Murietta where there were 10 offers. The owner really liked us and even though there were higher offers and 2 cash offers, she went with us because she saw how much we liked it and told her we would take care of it.
Shmoov you were posting at the same time so I missed this. Yes, this is a GREAT point. I'm sure that is what is going on with listing agents and the serial buyers you are talking about. Yes, the 17 day "contingency clause" is what I was referring to but it seems like even if you met all the contingencies a buyer could still back out for just about any reason within 17 days. Maybe I'm wrong on this but when I was reading this while I was buying my house it seemed VERY easy to back out for almost any reason here in California.
Cash buyers are doing the same thing. My good friend does this for a living in Sacramento. He buys and flips houses but also will hold on to some great income generating properties. He bought 30 last year. He told me last week that funds are now getting into the picture. He said one firm bought 1,200 properties within 5 months! I'm sure we're seeing the same thing here in San Diego, maybe to a lesser extent.
So TRUE. I know this is happening. And cash buyers are doing it too from what I understand. I have read on other forums about people actually putting in offers on houses they are not thrilled about because they want a house so badly and the inventory is low. We had got to the point where we were not going to buy because we would not settle for something not right for us. Now that does not mean we did not make some compromises (1 bathroom! well we put up with that because you can hear the waves crashing when you take a bath)
When we rebid on our house, our realtor did something I thought at the time was so corny, I am embarrassed to admit I participated. She submitted a cover letter with a profile of us and then asked for a picture...she ended up using one of me on my scooter at the beach to drive home the point we were serious and our lifestyle meshed with this community. I have never heard of personalizing offers like that-definitely an interesting strategy.
SOunds like you had VERY good agent that proactive. I had read several articles (NYTimes one comes to mind) where this was becoming more commonplace for couples or families that really wanted a place to buy.
Cover letter, pictures etc. Yeah, it seems corny, but guess what? You get to hear the ocean from your 1 ba.
One thing about California (I had never purchased a property in California prior to 2011) is that the laws are VERY pro-buyer. It seems like a buyer can pretty much back out of the deal for almost any reason even after making an offer. I have purchased MANY properties before but in other places. The laws here are great if you're a buyer and have second thoughts or buyer's remorse.
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Agree completely. However the one caveat is, in other states disclosures are available BEFORE you make an offer. I was shocked at when we were ready to make our first offer here and could not view them. Our realtor was equally surprised you could see them pre offer elsewhere. She kept telling us "don't worry there's plenty of time to back out". So im sure that happens. Someone can correct me of I am wrong, but disclosures come after money is but into escrow, the inspections done, and the deal is about sealed.
Where are all these people getting cash from?
Makes me think most of these cash buyers were people the helped with the crash!
Nope. MANY people have liquidated and sold off stocks or bonds or other paper as they feel the stock market might be frothy. There is also a huge segment of the US population during the Great Recession that got scared and also cashed out (at entirely the wrong time) and have their cash sitting in savings accounts earning almost no interest.
Since the Federal Reserve has interest rates at almost nothing and probably will be until 2015, it's causing people to 'chase' other investments including real estate and the stock market.
I'm sure there is a segment out there that are the group you're talking about but lots and lots of cash on the sidelines right now.
Where are all these people getting cash from?
Makes me think most of these cash buyers were people the helped with the crash!
SD real estate over the long term will probably see higher gains or ROI than anything on the market right now. For one, the DOW has been cruising since the downturn and many stocks have/are hitting ceilings, even dropping a bit for some. Treasuries are paying close to nothing and Europe is shaky. So whats left for ROI? Real Estate in desirable corners of the globe.
I dont know percentages in SD, but its likely that international cash buyers are much higher than they were a decade ago. China is certainly a different place and has similarities to Japan in the 80s when they had their tech boom.
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well we put up with that because you can hear the waves crashing when you take a bath)
