Realtor at Tommy Allen Real Estate
Dan Craddock

How to Compete with Cash Buyers

In 2012, a staggering 32.4% of the home buyers in the Bay Area paid cash for their homes.  This is up from 30.4% in 2011 which is double the average of 15.6%.  People are realizing that now is the time to buy Real Estate whether they are purchasing it as an investment or as their personal residence.  Interest rates are at an unsustainable low rate and home prices are low which means that you can get a lot more value for your dollar.  Since the housing bust, more people are renting and the inventory of homes for sale is at its lowest level in many, many years.  In addition, the inventory of homes for sale is extremely low which increases competition and spawns multiple offer scenarios.

Where do these cash buyers come from?  What does the average home buyer have that can compete with these cash offers?  These are all great questions that I will cash buyersanswer below.

There is a ton of cash coming in from countries like China, India, Russia and even Canada which makes up a good portion of the cash buyers.  In addition, Real Estate is considered a safe haven for investors fearing instability in the stock market as well as other investment vehicles providing very low returns. In 2012, 28 percent of the cash purchases were to buyers of two or more homes for a total of 41,450 homes according to DataQuick.

In addition, the requirements for obtaining a mortgage have increased and motivated sellers will take a somewhat lower cash offer rather than wait for a buyer to obtain loan approval.  Some sellers would rather take the sure thing than gamble on a buyer being able to obtain loan approval.

The good news is that we are in a rising Real Estate market.  I sold a townhouse for $10,000 more when the first buyer couldn’t go through with the deal.  Yes, it took a little longer and a few more nails may have been bitten off in the waiting process but in the end the seller made more money.  Had the seller taken an “all cash” deal, they would have closed quicker but there would have been less money in the sellers pocket.

It’s a given that home buyers must have a pre-approval letter from a lender.  Buyers must also refrain from large purchases, opening credit accounts or making unaccounted for deposits in your accounts.  Mortgage companies are revisiting the buyers financial position at the end of the process to ensure that the buyer is in at least the same position as when pre-approval had been obtained.  In addition, the more cash for the down payment the better.  It pays to make sacrifices now in order to increase your chances when you’re ready to buy.

In the cases where a cash buyer is going up against a buyer with a mortgage, the deciding factor will be the Realtor.  This is where the Realtor earns his/her money.  In many cases, a good Realtor with a story for the seller can override a cash offer.  Sellers are human and there is an emotional component in any transaction even though logic is the main driver.  I know this works and I’d like to help you with your home buying adventure.

Another area where non-cash buyers have an advantage is with New Construction.  Most builders have their own financing companies and would rather sell to a buyer that they can not only make money on the purchase but also on the financing.  This is much like purchasing a new car where the dealership makes a lot of their profit by offering the financing.

New construction is going up in Brentwood, Antioch and Oakley and sales are brisk.  In one subdivision in Oakley, they only have the models left.  In the Portofino subdivision in Brentwood, there are over 8 homes in some form of construction with more planned and most of them are sold already.  Inventory of new homes as well as used homes are limited but with new construction, you can get in without any competition from a cash buyer.  Prices are just a little more for new construction but when you consider all the advantages of new construction, it makes sense to at least consider this option even though you might not have even though about this before.

I’ve been through the process of purchasing new construction and can advise and guide you along the way.  REMEMBER, with new construction, the builder will want you to sign up when you take a look at the community.  DON’T sign anything unless you have your Realtor with you.  It doesn’t cost you anything to be represented by a Realtor and it will actually save you money.  Don’t be one of the ones that forfeits their deposit or is subject to penalties for delays.

Call me at 925-336-4938 and I can meet you at the new home subdivision and take you around to the different developments.  I look forward to working with you.

Have a prosperous Day!

Dan Craddock
Resolute Real Estate
3440 Hillcrest Ave, Suite 100
Antioch, California 94531
DRE # 01907845

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