Cash Offers Only Get You So Far

Cash Offers Only Get You So Far

On May 8, 2014, the real estate news sources, Inman News posted an article on their website an article stating all-cash home sales reached their highest levels in the last 3 years for the first quarter. Most people assume it was institutional investors constituting a large portion of these purchases. In reality, they made up a relatively small portion of these transactions. Across the state of Colorado in places like LittletonAuroraWestminster, and  Denver, the majority was made up of individual investors, second-home purchases and traditional owner occupants. With more cash buyers out there than ever before, transactions without lenders or mortgages are becoming more prevalent. Does this mean ‘Cash is King’? Well yes and no…

It’s all cash at the closing table

The biggest mistake cash buyers make is they think that because they don’t need a loan that they are in the driver’s seat in negotiations. A cash buyer may have a fraction more power than a buyer who needs a loan, but with inventory levels still drastically lower than they should be, a cash offer can only take you so far. All too often in this market, cash buyers think they can throw out lowball offers. In all actuality, a lowball offer in this market hardly gets a look before it gets tossed in the trash. Loan or no loan, its all cash at the closing table.

Don’t let your cash get too picky

Another interesting phenomenon with cash buyers is that they can be some of the most picky buyers when it comes to inspection issues. Of course, this is not a blanket statement of all cash buyers but sometimes these buyers can think their large bank statement gives them the right to demand perfection. In a market where we are seeing many properties receiving multiple offers, sellers are likely to move on to the next offer if a buyer gets too picky with their inspection items.

Know when to hold ‘em…

At the end of the day, the buyers that succeed in this market, cash or otherwise, understand the circumstances of the market, of the specific property and where the power lies between the parties. We are seeing in many instances that cash will sway a seller when looking at too similar properties but when there two offers and the cash offer is significantly less than the non-cash offer, most sellers are more willing to roll the dice, especially if the buyer needing the mortgage is well qualified. Savvy buyers understand having all the information before entering the ring is crucial. This is why working with a Realtor who is an expert in the market is invaluable. Not sure where you stand? Call me today and we can discuss these issues together!

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Matthew Koller is part of the Carr Peck & Associates at Keller Williams. Carr Peck & Associates have been recognized locally and nationally as experts in real estate. Locally, they are Realtor Roundtable Recipients with Denver Metro Association of Realtors. Nationally, they have been recognized by the Wall Street Journal and Real Trends as one of the top selling agents in America.  

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Phone: 720-446-6301
Dated: May 11th 2014
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