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Ty Davis, Home Buyer in Atlanta, GA

Realtors, how many of your clients pay for a home in cash (%)? Are these people generally rental property?

Asked by Ty Davis, Atlanta, GA Thu Sep 18, 2008

foreclosures, cash payments

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Ty -

I've had a few cash buyers - but most have been couples downsizing after raising families. In the last three months I've had three older couples come in from FL that wanted to be closer to family here and get out of the FL market - all bought for cash here.

Before these next comments, let me again reiterate what I say with every client and when I'm asked any question about buying a home: Do not over-extend and become house poor, expect the unexpected financial hiccup, do not expect to get rich from owning a home, diversify your investments and most importantly - research your agent and any other advisors that you use.

Now, outside of the examples above, I've had two recent cash buyers and both were for REO properties - cash expedited the deal and we were able to negotiate a very good price for each. Both became rental homes which also made life easier as mortgages for income properties are tricky right now. My current buyer list doesn't hold any more cash buyers but that can change at any time.

My approach to this is that mortgage money is still "cheap" - again, if a buyer is smart (as noted above) they can secure a good rate on a fixed mortgage and establish a budget without worrying about that expense getting crazy - it becomes a fixed expense (outside variables like utilities, taxes, insurance...). Instead of sinking cash into the primary residence it might be better applied to long term investments, paying off higher interest rate loans or other things Clark Howard would be proud of.

Bottom line is this - there are buyers (like the FL buyers) that want to keep things simple and not have a mortgage. Investors will find mortgage money can be a pain to secure and that cash deals are best received by banks and liquidation firms. For the average buyer though, I'm not seeing many cash deals.

Hank Miller, SRA, ABR
Associate Broker & Certified Appraiser
REMAX Greater Atlanta
2 votes Thank Flag Link Fri Sep 19, 2008
I am an established broker who works mainly on a referal basis, so my percentages of cash buyers is higher than normal: over 50-60%! Too, I am located in a market that is more affordable than other areas of the country. In as much as approximately 50% of our buyers are coming from out of town, transferees from higher priced markets are in a position to pay cash when they sale their current homes in the process of relocating here. Since my position in the marketplace is very high, I do not work with marginal buyers or cash poor buyers. Part of my agreement with my sellers is that I will have all buyers either preapproved or cash on hand letter from their bank prior to setting up showings. I decline to work with 80-90% of prospective buyer inquiries due to my financial requirements for the buyers to be in a postion to actually own a home, not just look at it. My prospects for success in completing a transaction and having a successful closing is also higher due to these requirements.
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0 votes Thank Flag Link Mon Jun 29, 2009
I couldn't put a percentage on it, but a large number of our buyers are cash. This is a second home market.
0 votes Thank Flag Link Sat Sep 20, 2008
I can honestly say that I have had very few cash buyers. Yes, I have had those that have sold a home and have purchased another but nearly all went through a mortgage process. Maybe it's because they "moved up". Even my investor clients have taken out some sort of loan be it 201K or whatever.
Here in NJ, after 09/11/2001 it is incumbant upon the Realtor to report to the State police any and all buyers that are SIGNIFICANT cash buyers. Hence, there are not that many, but not 100% for that reason. Affordability has a lot to do with it in this marketplace. The term "significant" has not been completely defined but hey...that's the marching orders.
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0 votes Thank Flag Link Sat Sep 20, 2008
Approximately 40% of my business is cash buyers, most are investors (land, rental properties) and second homes. Even if they have the cash, buyers purchasing their primary residences are better off taking out some mortgage for tax purposes (unless they are retired).
0 votes Thank Flag Link Sat Sep 20, 2008
In our dealings this year approximately 25% of our buyers are paying cash for their purchase. These people are generally purchasing as a private residence.

Hope this is helpful.
0 votes Thank Flag Link Sat Sep 20, 2008
Ty, part of your question is %age, right? Well, my 18 transactions so far this year - about 11 buyers and 7 listings I think, kinda went down like this:

1. only one 100% downpayment assistance FHA deal in March

2. most buyers have placed 5 to 10% down

3. 2 transactions involved 20% to 40% +/- cash and in both we had appraisal problems. A Dunwoody purchase in the $700's appraised in the $600's - the buyer got the price down, but not all the way down and he paid more than appraised value by about $60,000 cash. The other was a LaVista Park purchase in the $500's - substantially reduced price at time of sale vs. OLP...came in with the "difference" of about $12,000 between appraised value and sales price - Seller would not sell for less, so the buyer the Seller Paid their own CC's and got a reduced price - another 5% from buyer cash and they got a terrific house.

Folks who can make, smart, immediate and affordable decisions with their cash assets are the kind of clients that we want right now. Right?

I expect that we'll have low purchasing demand for a few years, don't you?
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0 votes Thank Flag Link Sat Sep 20, 2008
We have about a third of our Florida customers buy with cash. These people are buying a second home or they have sold (remember that word - sold) their homes to retire in Florida. Investors are another group that have usually purchased with cash. Younger families continue to be inclined to require a mortgage to buy a home suited for their needs.
0 votes Thank Flag Link Fri Sep 19, 2008
Virtually every multy family i have sold in the last year has been cash. The investors are eating up the bank owned multis as soon as they are listed. Most single family homes are ebing sold using fha financing right now. I see that trend to continue into next spring.
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0 votes Thank Flag Link Fri Sep 19, 2008
Hi Ty,

In the past couple of months I've had 2 cash buyers. Both were older women who sold homes in other parts of the country that they lived in for more than 20 years. They had plenty of cash and wanted to make sure that their retirement was not going to a house payment. Very smart. I also have an investor/builder who buys foreclosures to fix up and sell. He only pays CASH.

I don't find too many clients who buy homes cash to rent. Cash is nice as it can help the deal move a lot quicker. Seller's like the fact that they don't need to worry about financing falling through. Buyers like that they can negotiate a better deal.

I hope this helps and good luck to you,

Lisa Allen, REALTOR
Prudential Georgia Realty
0 votes Thank Flag Link Fri Sep 19, 2008

I've had several cash buyers over the years. It's rare, but not unusual. A lot of relocation clients have cash and a few people who've just rented all their life and decide that NOW is the time to buy.

Most cash buyers occupy the homes, at least for me.

On a side note, most of my investors understand leverage. They don't go overboard with 100% financing, but their opinion is that it would be foolish to buy an INVESTMENT home for all cash.
0 votes Thank Flag Link Fri Sep 19, 2008
Joshua Jarvis, Real Estate Pro in Duluth, GA
I have experienced more cash buyers this year. An example I have is the past 2 weeks I have written 2 contracts and both were cash. They are both buying to occupy these properties.
0 votes Thank Flag Link Fri Sep 19, 2008

Due to the large amount of foreclosures many properties are being scooped up by investors especially those properties priced under $100,000. They make the necessary repairs or sprucing up and then put them back on the market to rent. It is definitely a buyers market and the time to take advantage of some of the values out there. My only suggestion would be to work with an experienced Realtor to assist you during this process.

Aleta C. Saunders
Marquis Brokers
0 votes Thank Flag Link Thu Sep 18, 2008
Hi Ty,
Mostly right now it is foreclosures that are being snagged up with cash that are indeed being turned into rental properties.
Some folks pay cash for their home they wish to live in, as it is such a perfect time to buy.
Please advise if I can be of further assistance.

Tori Lawson
Prudential Georgia Realty
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0 votes Thank Flag Link Thu Sep 18, 2008
Somehow I messed my question should have read, "Are these people generally buying rental properties, foreclosures, etc?"

I have no idea how that got cutoff.
0 votes Thank Flag Link Thu Sep 18, 2008
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