Thursday, May 6, 2010

Cash Buyers

The Seattle Times today reported the emergence of all-cash buyers as a force in today's housing market. There did not appear to be anything new in the article - cash has always been king in the real estate market.

But the reality of today's housing market is that many deserving homebuyers - perhaps as many as 50% according to note-buying guru Eddie Speed - cannot qualify for a mortgage. The glut of inventory on the housing market is as much a reflection of the lending difficulties as it is of the housing situation.

If more sellers could offer seller financing, there would be a larger pool of buyers for their properties. Funny how many sellers with the ability to offer seller financing choose not to - despite the fact that their houses sit on the market.

The Times article went on to state that sellers are willing to accept a lower purchase price when a buyer comes in with cash, and does not require a financing contingency. Sometimes these buyers refinance right away into a mortgage, so they have access to liquid cash again. Many of these buyers are investors who have discovered that cash makes them more competitive in having their offers accepted. Unfortunately, the NW Multiple List Service has no easy way to track cash buyers.

One way to track cash buyers is to use a service like List Source to find buyers who purchased in the last three months or so, and have 99% equity in the property they purchased (for some reason List Source will not allow screening for 100%). Convoluted, but it works.

Cash buyers find funds by pulling lines of credit, like Home Equity, or perhaps cashing in stocks or using self-directed IRAs. Some of them use hard money or private money until they can sell or refinance the property just purchased.

Money talks. Always has, always will. It is a powerful tool for both sellers and buyers to use in speeding up transactions.

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