Rental Property Investor · Galesburg, IL · Member since 2016 · 13 posts · 37 votes
Hey guys and gals,
I am helping my parents find a house and we have found one with a real estate agent from the area. So, I was going over the offer we would like to make with her this morning and she told me "Cash" offer doesn't really matter. The seller doesn't care about that. Now to me that can't be right, don't banks/financing back out of deals all the time? Also tried telling her to put in certain terms to make it more appealing to the seller, like inspection amounts that we will cover if somethings wrong and won't back out but she said she has 40 years of experience and that doesn't matter either. Any advice will help. Thanks.
I always say flip it around as if you were the seller...would you rather have $100,000 financed offer or $85,000 cash offer? Everyone is different. I have had more trouble with cash offers than with financed offers. After 20 years I've had more cash offers go dark and walk away than financed offers. Now if they were for the same amounts and I can verify certain things, then of course I would rather have cash. One thing for me is that I can have some comfort with financed offers is I can follow the progress. Has lender ordered title, have they ordered appraisal, has the appraisal come in, did it make value, have they sent closing docs to title.....with cash, I'm just sitting on the sidelines wondering if buyer is going to show up on closing day?
I think you should listen to your agent, but they should also listen to you too and follow your directions. If you want to make a low offer and make it for cash, they should follow your wishes.
What's the price of the house? What do you want to offer? What's the market like where you are? What is the value of the house? Is it priced to sell or is it over priced? What are the repairs you think are needed? Are homes in your area selling at list, over list, below list? Where are you in that mix? Are most offers cash or financed?
Also when you say cash....is that cash cash, like money in the bank cash...or are you using hard money? Hard money or private money is not the same as cash.
In our market (San Antonio), it is so wild that a cash offer isn't going to let you offer less than asking price at the moment. Sounds like she may have been (a little too brusquely) trying to communicate that?
If you are presenting a cash offer as is with no inspections and a short escrow period at a fair price it can make a difference. A cash low ball offer not so much.
I am helping my parents find a house and we have found one with a real estate agent from the area. So, I was going over the offer we would like to make with her this morning and she told me "Cash" offer doesn't really matter. The seller doesn't care about that. Now to me that can't be right, don't banks/financing back out of deals all the time? Also tried telling her to put in certain terms to make it more appealing to the seller, like inspection amounts that we will cover if somethings wrong and won't back out but she said she has 40 years of experience and that doesn't matter either. Any advice will help. Thanks.
"Cash" doesn't matter as at the end of the sale, the seller gets the same $ either way.
WHAT MATTERS IS EARNEST MONEY. Or more importantly, how much of the earnest money is hard / non refundable / 'option fee', etc.
I'd rather have $5k of non refundable EM from a guy that was financing 100%, than $500 from a guy who was "all cash". Someone that's "all cash" that has little skin in the game in terms of being able to back out of the contract might as well be a financed buyer.
Hey Jacob! The agent knows you’re an investor and should work with you accordingly. That agent should be ready and willing to write your offers as you’d like. They can give advice but agents ultimately work for their clients and should fulfill their wishes. It is not in the agents interest to be concerned with your final offer. Their job is to write it up and send it!
Full price cash offer where buyer shows the bank statement and wants to close in 10 days, but allows seller to rent back for 30 that might work. Most markets have low inventory and the seller wants the maximum money they can get with the smallest amount of trouble
@Jacob Stokes It sounds to me like her "40 years" experience has closed her mind into the mindset of "That's the way it's always been." Be weary of this attitude. Always.
Its been on the market for half a year. The realtor may know what the seller's situation is and the seller may be very set on the price, maybe they have a loan and need the money to pay off the loan? Maybe they just have it in their mind that they need to get that much out of the sell. And asking for a nearly $30k discount for a new roof and deck repairs is asking for a lot! Especially since those items and their condition may have been considered in placing the original price.
Your low offer may insult the seller and then they will not deal with you at all.
The other option is to include an appraisal contingency with your offer. It gives you a way to back out or renegotiate the price. Between that and inspections you might get yourself a good deal.
Otherwise stop spinning your wheels and move on. Not worth the time and headache when there are other homes to go after.
There are scenarios where this is true - in a hot market, the seller want to maximize their profits. So if you're offering all cash at listing price but they are getting into multiples over asking but requiring financing then they are just going to keep accepting the higher offers.
If your all cash offer is close to the highest bid then perhaps the seller would consider it but if you're not close it won't make a difference.
Cash offer works well when seller need to sell ASAP, or has a property that won’t appraised at the selling value, or need too many repairs that bank won’t finance. In normal circumstances, if you are a seller $ not in a rush, would you take a cash offer to get the money in 10 days, or would you wait another month and get $20K more? Money from the bank loan is just as good as money from cash offers.
@Jacob Stokes it all depends on your market. If there are 5 offers on the home, your inspection contingency could knock you out of contention.
In the Boston area, sellers are not making any concessions based off inspections. Their position is strong enough to tell buyers to either take it or leave it.
If you’re lowballing with cash in a sellers market, chances are you’ll be passed over by an over asking financed deal.
Again, in my market, and it may not be relevant to your market, if you’re not going in at 102% or more over asking, you’re not getting the house. If you are offering cash, it has to be at asking.
If I were representing the buyer/investor I would pick up the phone and call the listing agent. I would tell them that I have a cash offer for $xxx. Ask if it would be considered. After more then 4 months on the market you might even get some indication on what would fly. Seems like agents want to text and dotloop, but picking up the phone is taboo.
If I were representing the buyer/investor I would pick up the phone and call the listing agent. I would tell them that I have a cash offer for $xxx. Ask if it would be considered. After more then 3 months on the market you might even get some indication on what would fly. Seems like agents want to text and dotloop, but picking up the phone??
@Gillian Gong when submitting "cash" offers it's important to provide evidence that you can close. Provide proof of funds from a bona fide financial institution. When I was a realtor and worked with sellers, we received loads of "cash" offers without any proof of funds. The buyers were just trying to get under contract and then force a change to a financed purchase mid-way through the deal.
I have been a realtor for over a year now but have 16 transactions. I have bought 3 properties myself in cash in the past 2 years and I work with alot of investors. I think cash is always better, but depending on the area it may just be more common. However, the area I buy for myself is also usually always cash investors but not always and I have gotten great deals because I was cash. You should have her explain why she is saying cash and waiving contingencies are not important. I would argue no matter what area you are in doing all these things will definitely help, and her logic does not really make sense. The offer you put in should be what makes sense for your parents financially so they have no regrets.
I'm a realtor in northern NJ, right now it's a seller's market and discounts are hard to come by. If a buyer is putting down 20% and is pre approve with a reputable lender there's no reason to take the cash offer.
Yes - there is a myth about the "all-cash offer" being worth a substantial discount. In my experience - it's not. A cash offer will typically win if two offers are for the same amount. And you might even win if it's a percent or two lower than a financed offer. But anything more than that - solid financing and pre-approval will be fine.
Some exceptions here. -If a seller is in a hurry and wants a very fast closing -If your cash offer means you are waiving all contingencies that will absolutely help - but can be countered by a financed offer that also waives contingencies
Do think buying with cash is a particularly poor move with today's rates. Why are you buying with cash and not financing? Your ROI with leverage will be much, much higher.
Agreed. It depends on the market. But cash offers go to the top of the pile. Unless it is lowball in a competitive market. The seller will always want the “highest and best” offer. But that said, if your agent isn’t putting in the offers how you want, get a new agent!
@Jacob Stokes I do agree that these days cash doesn’t weigh as much as it used to, in my experience. My sellers just care who offers the most. Most cash buyers can’t close for at least 2 weeks due to inspections and title work. And most loans can close in 30-45 days. So to the seller, they’d rather wait an additional two to three weeks for more money.
As a listing agent, I often see "Cash" as a code for low offer. Cash buyers often have a mindset that cash makes their position much stronger and therefore entitling them to a discount. At the end of the day, it's all cash to a seller. And in a hot market, sellers can wait the extra 2-4 weeks a higher offer and more cash at close.
@Jacob Stokes To speak to the sellers side, you never know their motivation until you start making an offer. I sold an “oversized” property for my area, 8br 8.5ba in November after being on the market about 500 days. It had been a B&B but with covid the desire for such properties has fallen considerably. My first offer came in on day 312 at $100,000 under asking with a list of 10 contingencies that would have cost me an additional $35,000 in repairs, expenses and a no compete clause even though I own the building next door and plan to Airbnb a room out of it.
I turned it down.
I dropped the price. A second family came along and fell in love with it as a vacation home. We agreed upon a price that was $45,000 less than the original price, only $20,000 less than the new list price. The only contingency was I had to remove 2 underground oil tanks which cost me $6,500. For both.
I would have taken the $100,000 less if it hadn’t been for the 10 contingencies one of which included a personal guarantee that the new owners could make their mortgage payments. Now I couldn’t guarantee this any more than I can fly!