Home Selling in Lakeview>Question Details

Barbara Luci…, Home Owner in Chicago, IL

When selling for "cash only" should I expect offers to come in 20-25% lower than loan-backed offers?

Asked by Barbara Luciani Haen, Chicago, IL Wed Aug 8, 2012

My building is over 50% renter occupied. I plan on selling my unit soon and I understand I will only be able to take cash offers due to the renter occupancy rate. Should I expect the cash offers to come in 20-25% below loan-backed offers? Or does "cash only" not affect the amount of the offers any more than with a regular negotiation?

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16
Barbara,

If you provide the address we can do a little research with our lender partners to see if you can market your condo with pre-approved financing. If not, and a buyer may only pay cash, then you can expect that this scenario will affect all units in your building and a resulting negative affect in values will occur. That may or may not be as high as 20-25% below loan backed offers.

The availability of financing and the ease at which it may be obtained is always a factor that drives values of real property. Other factors within an association may be how many homeowners are delinquent in their assessments and also how strong the reserve remains in the associations budget.

If my team and I can help answer more questions feel free to contact me directly at 224-805-2616.


Randy Schulenburg
Managing Broker
Mortgage 1st Realty, Inc.
224-805-2616 Direct

http://www.ActiveRain.com/mmortgage
1 vote Thank Flag Link Wed Aug 8, 2012
The best thing to do is look at other comps in your building, and price it accordingly. If your building is highly investor based, then that's who you would want to market too. With that said, I would expect lower offers than the surrounding area.
0 votes Thank Flag Link Thu Sep 11, 2014
A cash offer does not mean the offer would come in 25 percent lower. However in the situation you described it could, since the buyers knows only cash offers would be accepted. Also with the high renter occupancy purchase demand might be low,
0 votes Thank Flag Link Sun Sep 7, 2014
Not necessarily, Barbara. If your condo is priced right from the outset you should not have to negotiate much at all. Although, many cash buyers do expect to see some reasonable margin of negotiation because the offer to purchase is free of the loan contingency. I would suggest carefully reviewing the comps in your building and pricing your place in line with those that have closed in the past three months. Good Luck!
0 votes Thank Flag Link Sun Sep 7, 2014
Barbara,

A market analysis of your particular condo development will help you answer that question. Have your Seller's Agent do a market analysis for you to see what has sold recently. Most of the recent sales will be cash and many by invetors trying to get the lowest price possible. At first blush and with the market as strong as it is, a 20-25% discount seems a little steep. There is legislation being instituted to change super strict condo rules for FHA Certification. If they do the right things it will cause more buyers to be able to get financing. It could open up the stagnant condo market and allow for more appreciation for condos. We could see stabilization of the condo market like we are seeing with the home market. We are all waiting with bated breath to see what they come up with. Best of success with your Chicago sale.


Robert McGuire ASR
Broker/Consultant
Your Castle Real Estate
1776 S. Jackson St. #412
Denver CO 80210
Direct – 303-669-1246
http://theRobertMcGuire.com
0 votes Thank Flag Link Sun Aug 12, 2012
Depends on what you price the condo at!

Cash offers are often above the listed price for those properties that are priced to sell!
July 17 a Tampa 2/2 condo listed at $60,900 sold for $80,000 and of course a cash deal.

Of course there will be predatory buyers and market buyers. Your situation will dictate what you need to do.
0 votes Thank Flag Link Sun Aug 12, 2012
Hi Barbara,

It is best to look at recent sales in your building to compare value. Due to the high rental rate, your building is not lendable. This really limits the pool of buyers that would be interested in your unit. Have you considered renting out your unit until the banks change the lending requirements? The current owner occupancy rate is really hurting your value.

Best of luck,
Ivan Sagel
312-515-7823
0 votes Thank Flag Link Sun Aug 12, 2012
Barbara,

It all depends on the demand for the property. Cash offers can come in at asking price if the home is priced accordingly with the current market where you are selling it.

Sohail A. Salahuddin | Broker Associate | Visionary

Innovative Property Consultants Team | Sales and Leasing

Jameson Sotheby’s International Realty

425 W. North Ave. | Chicago, IL 60610 


O: 312.335.3230 | C: 312.437.7799 | F: 847.805.6030

http://www.innovativepropertyconsultants.com

"Locally Known, Globally Recognized"
0 votes Thank Flag Link Wed Aug 8, 2012
Cash only will come in at a discount but you should not expect it to be 20 - 25% lower. More importantly your agent should analyze what's been going on in the building - cash vs. loan backed prices. It's also possible that certain buyers have been able to get loans and it's important to understand who they got their loan from.
Web Reference: http://LucidRealty.com
0 votes Thank Flag Link Wed Aug 8, 2012
Analyze the comps and price your unit to sell. Since the pool of cash buyers is less than that of financed buyers, the price will likey be less..
0 votes Thank Flag Link Wed Aug 8, 2012
As always, the answer depending on your situation. Cash offers normally come in at a 5-10% discount as compared to financed offers, since better terms can justify a lower price. However, in a rapidly rising market, as in the Bay Area, it's common for cash offers to come in 5-10% higher than financed offers, simply because there would be no fear of appraisal issues as with a financed offer.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Wed Aug 8, 2012
In this market cash does not equal lower offer. Location, amenities and condition dictate your appeal/demand.
0 votes Thank Flag Link Wed Aug 8, 2012
You need to speakw ith a few lenders because it is possible to get loans in buildings with low owner occupancy IF the buyer is to be an owener occupant!!! It is very hard to get loans in such buildings for investors. My web site has some references.
You also need to figure out what the market price range is for your condo. Agents can do this. Once you have the range you 'might' want to accept a discount for a cash offer, but if the property is in Lakeview I think you will be able to find buyers who can get loans.
0 votes Thank Flag Link Wed Aug 8, 2012
Well they can get a portfolio loan, which are a little tougher to get with an ARM. In my opinion it is foolish to get an ARM mortgage because 5-7 years from now the rates could be 9% when you could get a rate around 3.6% now. Its a huge difference. So yes, right now most people will go for cash with you and I would expect lower offers.
0 votes Thank Flag Link Wed Aug 8, 2012
Your agent needs to seriously analyze the other recent sales in the building and immediate area. Cash buyers are often looking for the best deal out there. Buyers who use financing need to have an appraisal done prior to purchase, and banks are being very conservative (low) in their value estimates. Neither buyer will be willing to pay more than what they perceive to be "market value". Know your comparables and you should be ok.
0 votes Thank Flag Link Wed Aug 8, 2012
The main problem is that your property isn't exposed to the entire pool of buyers. 20-25% I would say is a little high, but that obviously depends on a lot of factors. If you would like some advice specific to your situation please contact me to discuss.
0 votes Thank Flag Link Wed Aug 8, 2012
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