BUSTED! Just like the Mythbusters program we'll just consider this busted! This is a great post about the old addage 'Cash is King'. I hate to inform you but I've been doing this for a long time and I can't remember when it truly ever was 'King'!
Here's a great post with some things to think about, citing some real life stories from Frank & Sharon Alters in Florida.
When Cash Isn't King
Investors and other buyers regularly tout the phrase that "Cash is King." Just this past week in an email, a prospective buyer commented that, "I guess cash buyers have a better chance at something along these lines." Not always. In fact, let me dis-spell the common myth that Cash is King with a couple of real life examples.
Mythbuster #1
Cash buyers will trump buyers who are financing a home.
A bank owned property comes on the market. After a week or so, a cash offer comes in. It is low, so we negotiate it. Result - buyer will not come up enough, bank will not go down enough. Buyer walks.
Another week goes by. Buyer #2 makes an offer with financing. While we are negotiating with Buyer #2, Buyer #1 comes back and ups their offer $5,000, still lower than Buyer #1's offer. Multiple Offer Disclosures are given to both buyers.
Buyer #1 sticks with their offer - remember, Cash is King, right? Buyer #2 raises their offer to near list price. The bank selects Buyer #2, whose financed offer is $6,000 net higher than the cash offer. Busted: Cash is Not King in this transaction.
Mythbuster #2
Cash Buyers can come in with ridiculously low offers and get the house because they are paying with cash and can close quickly.
In a world where Sellers have equal access to internet information along with buyers, ignorance of value is not as common as it once was. Banks have access to Broker Price Opinions and Appraisals, and their investors set limits as to how much they are willing to lose on a property.
Cash buyers coming in with a low ball offer like a gunman swaggering into town are often kicked to the curb when a more sensible buyer, studying the true market value, then offering a fair price wins out over the cocky low ball cash offer.
Mythbuster #3
Banks will take cash because they know it will close.Surprise - it's all cash at the closing table. Banks often don't really value a cash offer over a financed offer, in our experience. They go for the highest offer from a creditworthy buyer. Trends change and in this economic climate, cash may not be king.
Banks are trying to recover as much as they can from the huge losses they have written off. The result is that Cash is Not necessarily King anymore. If you have any questions about how to negotiate with a bank and bust the myths, please call or text us.
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Call or text us at 904-673-2308 or e-mail - sharon@teamalters.com
Visit our website for more information about Jacksonville, Fleming Island, Orange Park, St. Johns real estate, homes for sale, school information, & area news/events.
Serving
Jacksonville * Fleming Island * Orange Park * St. Johns * St. Augustine * Ponte Vedra
If Original Photography, All Rights Reserved.
Join us!
When Cash Isn't King
Investors and other buyers regularly tout the phrase that "Cash is King." Just this past week in an email, a prospective buyer commented that, "I guess cash buyers have a better chance at something along these lines." Not always. In fact, let me dis-spell the common myth that Cash is King with a couple of real life examples.
Mythbuster #1
Cash buyers will trump buyers who are financing a home.
A bank owned property comes on the market. After a week or so, a cash offer comes in. It is low, so we negotiate it. Result - buyer will not come up enough, bank will not go down enough. Buyer walks.
Another week goes by. Buyer #2 makes an offer with financing. While we are negotiating with Buyer #2, Buyer #1 comes back and ups their offer $5,000, still lower than Buyer #1's offer. Multiple Offer Disclosures are given to both buyers.
Buyer #1 sticks with their offer - remember, Cash is King, right? Buyer #2 raises their offer to near list price. The bank selects Buyer #2, whose financed offer is $6,000 net higher than the cash offer. Busted: Cash is Not King in this transaction.
Mythbuster #2
Cash Buyers can come in with ridiculously low offers and get the house because they are paying with cash and can close quickly.
In a world where Sellers have equal access to internet information along with buyers, ignorance of value is not as common as it once was. Banks have access to Broker Price Opinions and Appraisals, and their investors set limits as to how much they are willing to lose on a property.
Cash buyers coming in with a low ball offer like a gunman swaggering into town are often kicked to the curb when a more sensible buyer, studying the true market value, then offering a fair price wins out over the cocky low ball cash offer.
Mythbuster #3
Banks will take cash because they know it will close.Surprise - it's all cash at the closing table. Banks often don't really value a cash offer over a financed offer, in our experience. They go for the highest offer from a creditworthy buyer. Trends change and in this economic climate, cash may not be king.
Banks are trying to recover as much as they can from the huge losses they have written off. The result is that Cash is Not necessarily King anymore. If you have any questions about how to negotiate with a bank and bust the myths, please call or text us.
-------------------------------------------------------------------------------
Call or text us at 904-673-2308 or e-mail - sharon@teamalters.com
Visit our website for more information about Jacksonville, Fleming Island, Orange Park, St. Johns real estate, homes for sale, school information, & area news/events.
Serving
Jacksonville * Fleming Island * Orange Park * St. Johns * St. Augustine * Ponte Vedra
If Original Photography, All Rights Reserved.
Join us!
Good points, Lyn. I can see both sides. I've had a lot of REOs in the past 4 years. Banks have taken 100% of the cash offers over financing so far. I definitely see Frank and Sharon's points, but in our market their information would be busted. Have a great weekend!!
Great points about cash and net cash at the closing table. My experience is that cash has the highest leverage on property with significant problems that lenders won't want to finance. Some examples would be red-tagged homes with building code violations or rural property with failed septic systems or bad wells. Once you are dealing with a typical property that lenders will finance, the advantages of cash are relatively minor.
The other place where cash rules is at auctions. It's indispendable on the court house steps.
Hi Lyn,
Great Blog. I would agree with you. The only time cash buyers trump is if the property is in a bad state of repairs and the lenders are likely to place stringent property conditions inorder to give their clear to close.
Dan
Stateland Brown LLC
South Florida Real Estate
Lyn - Thanks for re-posting this informative blog. I agree with many points but also know that the individual situation make a lot of difference. Properties that don't seem to move with lots of price reductions see to be ripe for cash offers at major discounts!
Lisa: Yes, in that case regular buyers have rejected the property giving the owner not many other choices.
Dan: Repairs needed or lender requirements to close are a large factor also.
Dave: At auctions I would say it rules the day, repairs needed that the regular buyer couldn't readily handle because of lender involvement.
Mike: Not in our area, but doing a recent market report on financing types the cash area was higher than I anticipated. Lower priced properties are also just paid cash because it's an all around hassle to find a bank that will accept a loan of 50K or less. Rather than get abused by a lender, I'd pay cash also!
Well said!
Lyn, thanks for the re-blog! Have a wonderful weekend!
Sharon