How much better a deal can I get if I bought a foreclosure cash vs. going 20% down? Is it it that big a difference?

Asked by Mcscad, Sacramento County, CA Wed Nov 30, 2011

I'm thinking of putting 20% down on a foreclosure, but if it's a huge difference I may seek an investor.

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13
Michele Ambry, Agent, Sacramento, CA
Wed Nov 30, 2011
Going cash with a 15 days closing will give you power against other offers. Especially at this time of the year when the banks want to see the houses they own off their books before the end of the year. A lower cash offer has good chances again a financed one just because of this deadline. But if you really like the house, be sure to offer a reasonable price!
2 votes
Isom Coleman, Agent, Sacramento, CA
Thu Dec 1, 2011
The difference is seen more in the amount of time it takes to close the deal. If times to close are equal, the bank will take the highest Net amount. Cash is king usually because the bank can get the property off its ledger quicker (15 days or earlier.) So closing the deal in a faster time (Cash usually) I have seen that you can get between a 0-18% discount, but it all depends on the areas. Also remember trying to get a deal can lead to you not getting the home you want. Nothing worse than seeing a home you lost out on, sale for $1,000 more than what you offered. Especially knowing you would have gone $5,000 more just to get it.
Web Reference:  http://www.icaresac.com
0 votes
Robert Chome…, , San Diego, CA
Thu Dec 1, 2011
My research is not exhaustive, but I have been doing some buying in this market and have studied the sold comps in the MLS in the areas I'm looking. I don't think you get that much of a better deal buying cash. In some cases you have to buy cash if it's a super fixer and you have no choice. But in the case where a property can be financed, I have not seen a huge price difference in the cash sales. I'm actually amazed at how many cash buyers are just paying straight retail and really not getting great deals.
0 votes
Holly VanCou…, Agent, hunt valley, MD
Thu Dec 1, 2011
It really depends. If you write in the first 30 days, most banks are not going to give any buyer a large discount. Cash is certainly more attractive to the banks, even better is as-is without inspections, but I would only recommend that if you really know what you are getting yourself into. A lot of my cash investors write like that because they own their own construction companies and have bought a large amount already.
0 votes
Erin, , South Lake Tahoe, CA
Thu Dec 1, 2011
Dear McSCAD; This is such a great question. Thanks for asking.

The bank that is selling the real estate looks at the offer that will NET them the most money. They know what the market value is, because they've gotten a professional opinion either from real estate agents through the vehicle of a Broker's Price Opinion or with a formal appraisal. So, if your offer is all cash with a quick close, your's may be the highest and best in the eyes of the bank's asset manager. Believe me, there is absolutely no emotion involved with these lenders. It's just business.

Now the real question for your to ask yourself is--What are your investment financial goals? If you want to leverage your money into more properties, then 20% down may be the best way to go. If you are buying to fix and flip, cash may be the best way to go. So, are you buying and holding for cash flow and possible appreciation? Or are you looking for a quick fix and flip? All investors know the answer to these questions before proceeding. And that strategy may change from property to property.

The bottom line is and the answer to your question is--Cash offers simply make your offer more attractive to the asset manager. Most of the time, you will pay market value or a little below, but let's face it, every home purchased today is a bargain.

Sincerely,
Erin Phillips
Keller Williams Realty
916-580-2227
Web Reference:  http://SoldByErin.net
0 votes
Lauryn Eadie, Agent, Reston, VA
Thu Dec 1, 2011
I work with Cash investors frequently and have not often found that banks will take less because of it. There is a SLIGHT advantage in my local market area for a cash buyer, but the only really advantage comes on properties that need significant repair and improvements where a loan will not be approved.

I have found that home owners that are not distressed but need/want to sell quickly, i.e. estates etc are more likely to take a lower cash offer because it can close quickly and they can get their money out quickly. There is also less risk of a fall thru.
Banks often can not close within 15 days in my experience, it is at least 30 days, which most lenders can meet as well. Which means the bank will take the highest price with the highest closing probability.
0 votes
CJ Brasiel, Agent, San Jose, CA
Thu Dec 1, 2011
Depends on the property.

If it is need of much repair where a buyer using a loan may run into issues, you could have an advantage.
But determining how much will be based on reviewing comps and the asset managers motivation to sell at your offering price. Have your agent pull together comps and then have a contractor go through the house and help you itemize repairs and reason for discount.

Good luck!
CJ
Web Reference:  http://TalkToCJ.com
0 votes
, ,
Thu Dec 1, 2011
All deals are cash, well, unless they are trades. Your method of payment will not move most sellers.
0 votes
Sue Archer R…, Agent, Palm Harbor, FL
Thu Dec 1, 2011
As others have said, seller motivation is key to whether your alternatives are attractive. If you have a loan, the seller is still receiving cash so they're ALL cash offers, if you think about it. The element of risk that the loan will go through, and in a reasonable amount of time, is what the seller will be weighing.

If the home is not in a condition that a financed buyer may close on time and without issue is one question to consider. The second question is whether the seller has a desire to close quickly, like now before year end. Then the last question is how much is that worth to the seller in terms of price. Consider these factors and you should have a good idea of positioning your offer as being the best choice for the seller.
Web Reference:  http://www.suearcher.com
0 votes
Laura Coffey, Agent, Santa Clarita, CA
Thu Dec 1, 2011
Bottom line if it's not your money and you need to get an investor involved you will not get a big enough incentive off the price verses what you will pay the investor unless you start shopping at the auction steps at county.
Web Reference:  http://www.laura4homes.com
0 votes
Jay Emerson, Agent, Fair Oaks, CA
Wed Nov 30, 2011
It's a simple math question. At some price point, the cost of funds hits an equilibrium with the price you would need to get for being the seller's accepted choice. The bank's selling rules are a mirror of yours so don't assume you are going to get a deal by low-balling. You may just be waiting longer until you offer a price that resembles reason.
0 votes
John Dietel, Agent, Hutchinson, MN
Wed Nov 30, 2011
I don't think you will get much of a break on the purchase price, if that is what you are asking. Waving a cash offer in front of an individual seller may be beneficial, however, institutional sellers do not have the same motivations, and they rarely move swiftly. Institutional sellers look primarily at the likelihood that the transaction will close. A buyer with a 700+ score, and financing with a reputable lender has a strong likelihood to close, also.

A great option for the cash buyer is to have a great real estate agent who knows what is happening in the market. A large market like Sacramento will always have several deals that fall through, and have institutional sellers prepared to close quickly. Find these deals, and JUMP on them with your cash.

There are several possible scenarios for you.

How many properties do you own? If you currently have only one home, you may still be able to find FHA financing on a second home as long as you only have FHA financing on one property, and plan to use it as your primary residence. This way you would only have to put down about 3.5%

http://www.fha-home-loans.com/sfr_fha_loans.htm

You mention investor. If you have the cash to buy a home outright, you may want to put 20% down on 5 different homes, and have several income streams. The trick here is to have each property contracted to at least a one year lease, and you may be able to use this as additional income to support the purchase of the next property.

You and your investor, or mortgage agent, should be able to figure out what is best for you.

It is a great time to buy real estate!

Good Luck!
0 votes
kevin farrell, Agent, Rocklin, CA
Wed Nov 30, 2011
0-15% It depends on the condition of the property and the price point. Most banks won't look at offers 10% or more under asking price. Feel free to give me a call if you have any more questions.
Web Reference:  http://www.sacreopro.com
0 votes
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