The expression “Cash is king” is often heard throughout the real estate community. But, when it comes to short sales, is cash really king? Does the bank actually care whether the offer is a cash one? Isn’t any purchase a cash purchase at the end of the day?
While it has always been true that cash is king, in the distressed property market it is vital for listing agents (and selling agents and buyers and sellers) to consider the fact that the highest offer isn’t always the best one and cash may not be king.
The Highest Offer May Not Be the Best One
In simple terms, when evaluating offers on a short sale, the highest offer may seem great, but there may be terms and conditions that are not in the best interest of the seller. For example, will the buyer with the highest offer agree to all of the necessary terms and conditions that may come from the bank? Will this buyer agree to pay for pest control if the bank refuses to do so? Will this buyer agree to wait three months for a short sale approval letter?
Now, with regard to short sales, the offer that is the best is clearly from a buyer who is serious, who is willing to stick around, and who is willing to accept any changes to the terms and conditions that have been dictated by the bank.
Finding the Buyer to Stick through the Short Sale Process
A buyer that is willing to stick around for the long haul is probably the best buyer of a short sale. Bank employees do not care a lick that the cash buyer can close in two weeks; they still take their sweet time to process the short sale despite the fact that this inefficiency is causing them to bleed money right and left. Keep in mind that buyers that are willing to agree to terms and conditions that may change at the eleventh hour are better, stronger buyers than those who will march when the bank refuses to pay closing costs or termite repairs.
The cash buyer is great for the short sale because he or she does not need to worry about lender approval of the HOA or an appraisal that comes in sub par. But, will this buyer be willing to come up to the purchase price that the bank is looking for on their short sale? Aaah. That’s a good question. Lately it seems that the bank thinks all short sales are mansions made of gold, platinum and diamonds–instead of the diamonds in the rough that short sales really are.
Photo: flickr creative commons by stevendepolo