OfflineHowdy All,
Looking for some clarification - check this out.
I was told today that a CASH offer didn't help the seller any, it only helps the buyer (I'm the buyer in this exercise) in that it saves the buyer some costs. Am I missing something? Isn't that backwards?
So, is there a scenario (one I am obviously unaware of) in which a cash offer is not in the sellers interest? Cash offers are a much higher percentage of home sales today, yes? And considering the market as a whole, if I were a seller I'd take cash all day long. After all, until proven otherwise, cash is king. Money talks, the way I see it.
If anyone has heard this before or has some supporting evidence/data/anecdotes I welcome your thoughts & comments.
Thanks!
Jake
__________________
Who told you that?
It doesn't help the buyer in the sense of the lost opportunity cost of the money and lost leverage. In other words, would you rather pay $100k cash and rehab 1 property, or would you rather have the ability to put $20k down and rehab 5 properties at the same time. A cash offer is generally not in the interest of the seller as it will be a lower offer than an offer with financing due to the lost opportunity cost of the money. A cash offer generally satisfies 2 criteria....first, the deal will most likely go through, and second, it allows the purchase of properties banks won't loan on. That being said and cash being king, you must always strive to use cash in the most efficient manner possible. Would you rather have your house paid off and all your money locked up in your house or would you rather have a $150,000 mortgage at 4.5% and $150,000 to invest?
@travisderod - the listing agent for a property I looked into told me that.
@TRSD - thanks for the insight. I'll keep that in mind if I proceed on the property.
They may have simply meant the seller gets paid at closing whether you are a cash buyer or a financed buyer. A cash offer can benefit the seller because his buyer does not have to go through inspection, appraisal and financing. A cash buyer can close quicker. This is a benefit to the seller.
A seller may go with a financed offer because it is higher than a cash offer (cash is not king in this instance). It all depends on the sellers situation and desires.
As TSRD stated, we as investors always want to leverage our cash.
Michael Mangham
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
That's what I say! The last property I sold took forever to sell and when I finally had two offers on the table, I took the lower cash offer because it would close quicker and I didn't have to worry about a low appraisal in this crazy foreclosures-are-everywhere market I'm in.
If you're making an offer on a property and you're paying cash, and another offer is really close but being financed, your cash offer will almost always win.