Keep Losing Out To Cash Buyers?
Become One Yourself.
Hello friends,
The process of home buying can be frustrating, and often times culminates in rejection. Anyone whos entered the market during the past twelve months knows this to be especially true, as competition is at an all time high. While historically properties listed for sale receive 2.25 offers prior to a transaction closing, Q1 of this year saw that number more than double. Some are electing to offer over asking price, while others gamble and waive inspection contingencies. What's quickly becoming the most popular way to stand out from the crowd however is offering all cash.
"Cash rules everything around me C.R.E.A.M., get the money
Dollar dollar bill, y'all" - Wu-Tang Clan
Cash is King
Before discussing why sellers give priority to these types of buyers lets first answer what a cash offer is. When most people buy a home they obtain mortgage financing. The buyer contributes a certain percentage of the purchase price while the lender fronts the remainder, and in return is traditionally repaid in monthly installments. This process involves an appraisal to determine value and an underwriter to gauge ability to repay, both of which take time. When a mortgage is involved it typically takes 50 days to close on a transaction.
On the other hand a cash buyer is someone who will not be reliant on a bank for financing, but will instead be using their own funds for the acquisition. Sellers often prefer this route, for not only is it faster (often times less than a month) but also eliminates many of the unknowns that prevent a sale from occurring. Applicants sometimes don't get approved for loans, properties sometimes don't appraise high enough for banks to lend. Cash removes all these roadblocks. Don't think you can compete against those with deep pockets? Well more and more companies want to help you level the playing field.
The Future of Home Buying?
Where there's a need free markets tend to do a great job providing a solution. Enter firms such as HomeLight, Better and Homeward. These platforms (after approving your financials) will buy a property on your behalf as a cash buyer. You then obtain a mortgage and purchase the home back from the company. The result is the original seller gets a quick close and you the buyer avoid missing out on the home you desire. In return for this service the cash buyer charges a fee, somewhere between 1%-3%. An interesting wrinkle is that a few of these companies will waive part/all of the cost if you elect to hire one of their in house real estate agents or lenders.
While none of these platforms are currently live in the state of New York its certainly only a matter of time.
What We're Watching
Wednesday September 29th: Pending Home Sales. July saw activity drop 1.8% from the month previous and 8.5% from the same time last year.
Thursday September 30th: Initial & Continuing Jobless Claims. With additional unemployment benefits having rolled off in half of all states many expect the current 5.2% unemployment rate to continue its downward trajectory, and less new claimants to apply.
Friday October 1st: Debt Ceiling. Well we've done it again, the country has borrowed the maximum allowed by Congress. Should a stopgap not be passed by midnight September 30th a partial government shutdown will commence.
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NYS Fair Housing Notice
Steven Luttman
Broker/Owner SJLincoln Realty
35 Bath Street, Ballston Spa NY 12020
(518) 309-8584