Home Buying in 55311>Question Details

Rick, Home Buyer in Maple Grove, MN

Is there an "average" discount for cash buyers?

Asked by Rick, Maple Grove, MN Tue Mar 15, 2011

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A lot of good answers here. I've seen my asset managers accept cash offers anywhere from a thousand to twenty thousand dollars less than the next highest finance offer. It really depends on the sellers' situation.....every seller is different and even the same seller will react differently at any given time. I feel like sometimes it just depends on what side of the bed the asset manager wakes up on. Anyone who tells you they know how "the bank" is going to respond probably doesn't have first hand knowledge of the REO and short sale game. Often times "the bank" doesn't even know how they're going to respond. We are in the fastest changing market I've ever seen and it's a blast to be part of. One piece of advice I have for consumers is to google the name of the agent and/or lender you are considering working with to see how much you can find out about them... It's amazing what you can find out about people with an online presence.
0 votes Thank Flag Link Tue Mar 15, 2011

I wouldn't say there is really a "discount" or an "average" for cash buyers to expect off a home. It all depends on the situation, there could be multiple offers on one home and you may have to offer more for the home based on the value. The seller could recently just dropped the price and is not willing to look at anything 5-10% off the current list price and in that situation your offer may have to sit with the seller for 30-45 days until they are willing to negotiate with you and you'll have to hope another buyer doesn't swoop in and offer more. There are VERY many variables that affect this situation and in real estate no two deals are the same.

I would say you have a stronger chance and look much more attractive when offering cash to a seller. But beware if you're in a multiple offer situation and a buyer that is financing the home offers more you'll most likely not be the winning bidder. One of my buyer's offered $67k on a $79k listed home last week, cash offer, 10 day close, no inspection, and the seller went with a higher financing offer and rejected her offer right away. In todays world of financing restrictions getting tighter and two pre-approvals seller's have a little more confidence in taking a financed offer over a cash buyer.

Please let me know if you have additional questions, I am always happy to help!

Thanks - Hillary Slama
Metropolitan Home Team of Re/Max Results
1 vote Thank Flag Link Wed Mar 16, 2011
It all depends on the situation - most traditional sellers would give your offer a high preference vs. a financed offer but not necessarily a huge price discount. Bank owned homes may have more room to negotiate but that varies greatly by bank and asset manager. I hear more and more stories of banks taking the highest offer price regardless of the financing - this may be something they are being pushed to do by the mortgage insurers or higher-ups.

Cash is most valuable on properties that need to close in under 3 weeks or would be very difficult to finance due to condition or the situation (some condo buildings are almost impossible to finance right now) and far less of a leverage tool on everything else.
Web Reference: http://www.MNseller.com
1 vote Thank Flag Link Tue Mar 15, 2011
It changes with the market conditions...
I used to be a rather large discount, but not anymore.
Right now, we have bidding wars going on in FL.
Over asking price too.
One REO agent told me he had 71 offer after 4 days on the market.
The property was facing a gated entrance (no view)...

I noticed that, if the financing offer is better by 15K, the bank might take that over cash...
It's one of those "class war" things - to let a normal person (like the asset manager) buy, not an investor.

Irina Karan, CDPE
Beachfront Realty, Inc.
0 votes Thank Flag Link Thu Apr 5, 2012
Because buyers are hearing all over the media that it is a buyer's market and there are too many homes, many buyers think that they can offer between 30-50% off the asking price. Unless the property has been on the market for over 120 days the bank usually doesn't take low ball offers even it if is cash.
MLS stats show that most listings sell within 90-93% of asking price.
0 votes Thank Flag Link Tue Apr 26, 2011

I have been doing the Bank Owned real estate business for years. I have been in direct contact with Asset Managers at these banks, I have talked with them on phone, and I have shared emails back and forth. And thru all of my work with dealing thru a Bank Owned negotiated offer, CASH is always King. Banks want to unload their inventory, so when an Asset Manger sees a Cash Offer and a Conventional Offer come up on a property for sale, they will take a Slightly Lower offer if it is a Cash Offer over the Conventional Financed offer A) because the cash offer can close fast, which will get it off their books B) financed offers always have the possibility of blowing up and not closing. So to Answer your questions, yes CASH offer for slightly less, and pay attention to the word "Sightly Less" should most of the time come up on top when in the negotiating process. However just remember the Bank Owned process can be a crazy process, and if your looking for representation, you want to make sure your working with someone who has dealt in this process and has plenty of experieice in this process. Just to make sure your offer does come out on top.

I would love to help you out with this process. Feel free to give me a call if you still have not chosen an agent for representation.

Joshua J. Roueche
KW / Jabez Agency, LLC
(612) 465-9181
0 votes Thank Flag Link Wed Mar 30, 2011
Cash is KING it is that simple. Get together with a real estate agent that works with investors and you will find good deals all around you.

So yes, there is an discount for cash buyers and always will be. As the agents below me have stated if you are trying to buy a retail property maybe not, but I don't know too many cash buyers out there that would go this route anyways. Much better to finance some of the deal.

So, just comes down to whether you are approaching it as an investor or just a retail buyer.

0 votes Thank Flag Link Mon Mar 28, 2011
Hey, Rick! In my experience (and that's all we can speak from as agents on this forum) banks and sellers do prefer when a buyer is willing to pay with cash. It eliminates a large layer of risk not having to worry about financing, whether or not it will be approved, will the buyers do something to mess it up, etc. So, from that standpoint, I guess one could say that, routinely, you would have an advantage by having cash to pay for a property. As to whether or not the seller would be willing to accept a significantly lower price BECAUSE it's cash is anyone's guess. Some sellers may some may not. Banks that are selling foreclosures might be more inclined than others. I would say traditional sellers most likely would not take a huge discount only because of cash.

Good luck!
0 votes Thank Flag Link Fri Mar 25, 2011

Viewing a cash transaction from this perspective could cost you losing the perfect home. To the seller there is little difference between a $300,000 cash offer and a $300,000 financed offer. Generally, the major difference is that with a cash transaction is that the seller doesn't have to worry about the buyer's loan being approved.

This may mean the seller may be willing to accept a slightly lesser amount for the property but attaching a "magic" percentage as an expectation could be disasterous.

Our recommendation is to approach this from a purely "negotiations" approach and see what your savings could be. You should be able to save some but don't plan on an set amount.

Best regards,

0 votes Thank Flag Link Tue Mar 15, 2011
Hi Rick:

The answer seems to be a repititive "not really." It's all cash to the seller in the end, whether it comes from a mortgage or your savings account. My colleagues are correct in my opinion that in some cases cash may be a better choice if the property condition is not up to mortgage standards and/or in the case of a seller worried about timing or appraisal contingencies.

Best in your search!
Web Reference: http://www.GinaDumas.com
0 votes Thank Flag Link Tue Mar 15, 2011
Hi Rick - The position where you could get the most leverage is in an estate sale where the sellers just want to get it sold as quickly as possible and with the least contingencies. If you present a cash offer there is no bank involvement with work orders, repairs or low appraisals which is attractive to the right sellers. Additionally there are bigger discount to be had on property's that can't be financed such as REO listings. You will need to plan on doing more work in rehabing these properties but I have many investors that are buying these properties that the average person can't or won't and they are getting nice returns when reselling them. You just need to keep your eyes open or hire a good Realtor to help you find these opportunities.

Daniel D Boman
Counselor Realty Inc
The Boman Group
0 votes Thank Flag Link Tue Mar 15, 2011
The misconseption of many buyers is their "cash" offer makes them a better buyer. It does not in my opinion. If it is a home that flat out will not approve for a loan it does "not" matter because it is a cash sale anyways.
It may help in a quicker close, but the low ball offers I often time see from cash buyers simply doesn't work out to any benifit to anyone because the bank wants what there bottom line is, and they dont care if it comes from a cash sale or financed sale. They way things are going in "today's" market around our local area, there are multiple offers on homes and some are selling for more than list if priced correctly.

Mitch Spargur
SFR Specialist
Counselor Realty Maple Grove Mn
0 votes Thank Flag Link Tue Mar 15, 2011
Agree with my fellows. I do most of my work with foreclosed properties (bank owned). A cash buyer may be able to negotiate a slightly better offer but mainly because they would then expect you to close in 2 weeks. If closing in a more normal 30 days, you would be no different than a buyer with a new mortgage.

Where it can make a difference is with properties that are difficult to finance (lesser condition). But again, there is no average for the amount of discount.

Ultimately every thing is on a case by case basis.

Steele V. Propp
Foreclosure Specialist
Schatz Real Estate Group
0 votes Thank Flag Link Tue Mar 15, 2011

No, there is no average discount for a cash buyer.

The advantage of a cash offer really depends on who the seller is and what their situation is. A bank couldn't care less if you bring cash or a mortgage, either way the property closes under their dictates or not at all. A seller that is desperate for certainty might give a discount because the cash means that there isn't a financing contingency attached to the offer.

In a short sale, cash is unlikely to matter to any of the parties - certainly it would be appreciated but the seller doesn't care what the house sells for since they aren't making any money and most will give you whatever you ask for. The bank won't allow the sale at less than market value so it really doesn't matter to them either since they will dictate the terms under which it closes.

I hope that helps.

Cameron Piper
Coldwell Banker Burnet
Web Reference: http://www.campiper.com
0 votes Thank Flag Link Tue Mar 15, 2011
Rick, there is not an average discount for buying with cash. Your offer may look better to the seller, and your closing can usually be quicker that a mortgaged sale, and that could be a motivating factor. I know in my transactions with cash buyers, bank owned properties are more motivated, but in the end they receive the funds either way, so it may not be considered as a benefit. Good luck.
0 votes Thank Flag Link Tue Mar 15, 2011
The best advantage an all cash Buyer has is in the Strength of their offer you may find yourself at the head of the line. All things being equal any "prequalified" Buyer is likely to have his offer considered equally with and all-cash Buyer. If you are trying to undercut a Seller by coming in "all cash" the likehood of "coming in last" is high.
0 votes Thank Flag Link Tue Mar 15, 2011
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