In Scottsdale's current market, are cash buyers favored, or do sizable down payments have a shot?

Asked by Trulia Scottsdale, Scottsdale, AZ Thu May 16, 2013

What can the average 20%-down-buyer do to win a deal?

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Mead Summer, Agent, Scottsdale, AZ
Sun May 19, 2013
In conventional sales, the seller generally wants the highest possible price -- the most money in their pocket. However, many sellers -- and more importantly the agents who advise them -- will choose the cash offer over a similar offer with a loan because if there is a loan, then the lender requires an appraisal. No appraisal is necessary in a cash transaction. If the home does not appraise for the purchase price, then the lender may not be willing to make the loan and the seller may have to find another buyer or negotiate a lower price with the existing buyer. In an upward-trending market such as the one we are now in, some appraisers are slow to reflect the trend in their appraisals.

I know many Realtors who have been having issues with homes not appraising for the contract value, and thus preferring the cash offer. There are, however, other creative ways to distinguish you and your offer from competing offers. This is where it pays to have a Realtor who knows how to do more than just submit the contract documents. Feel free to contact me and I will explain in greater detail.

Mead Summer
Realtor & Branch Manager
HomeSmart Real Estate
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Trisha Light…, Agent, Scottsdale, AZ
Fri May 17, 2013
Cash is not always King, but it is always welcome. Bottom line-- Sellers are interested in getting the highest possible price for their homes. Appraisals are often a factor as demand is a leading indicator of price. A large down payment as well as shortening inspection and appraisal times often gives that Buyer the edge. If earnest money becomes non-refundable after the inspection period, that is another incentive for the Seller to accept your offer.
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Gene Hastings, Agent, Scottsdale, AZ
Fri May 17, 2013
Our team listed 136 properties lat year and despite what most Realtors say, we don't give as much weight to a cash offer as they think. Less then 18% of our listing sales last year were to "Cash Buyers" As a listing agent I see some of these offers come across my desk that are just not workable because the agent has given their client really bad advise, or none at all.

The fact is that about half of the offers we get are poorly written, are not followed up with a phone call and ask the seller to pay for everything. That is not the way to represent a buyer. A simple 30 minute in office consultation would avoid most of the problems that buyers endure. If a buyer is properly informed of what the market is doing, they can make better decisions.

We also work with buyers and we make sure that our buyers are aware of the current market trends and what to expect. We also let them know where we need to be when writing an offer. Once we get an offer ready we make sure the listing agents have an understanding of our client and our ability to close. We write complete and clean offers and we make sure we have everything completed and sent in one file. We always follow up with a phone call to the list agent and we talk to them at a time that they can review the file with us. last year we had a 93% acceptance rate and many of our buyers were using programs like "Home in 5" and other low or no or down payment or down payment assistance programs.

It doesn't matter if the buyer is using a down payment assistance program, 3.5% down FHA, 20% down conventional, hard money or cash, at the end of the day the seller just wants to net as much as possible. I have agents all the time that submit a cash offer that is $5k, $10k or more under list and state "But its CASH and a Quick Close!" You have to ask yourself, is 20 days worth $5, $10k or more? If the property can be financed and the seller can net more, that is what they are going to do most of the time.

Feel free to contact us to see how a buyer can be successful with any type of financing.
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Terry Colosi…, Agent, Scottsdale, AZ
Fri May 17, 2013
No matter what "market" we are is always favored as it simplifies the transaction and lends greater security to the seller.

Currently in today's market, a buyer with a conventional loan (20% down) CAN compete with cash buyers provided the offered purchase price falls within a safe range of the local comps.

For an edge when faced with multiple offer situations, additional steps could be taken by abbreviating the number of days in the inspection period or by putting down a sizeable earnest money deposit. Flexibility on the closing date and the ability to close as quickly as possible also enhances your position. When financing this can be accomplished by using our local, smaller mortgage banks.

Let me know if I could be of assistance to you in directing you to a reliable lender and helping you find and negotiate a deal for your next home!

Terry Colosimo, Executive Sales Agent

Keyland Fine Properties
7033 E Greenway Pkwy
Scottsdale, AZ 85254
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Shahla Mentha, Agent, Scottsdale, AZ
Thu May 16, 2013
Yes, cash buyers as well as 20%+ down wins most of the time.
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Larry Harman, Agent, Scottsdale, AZ
Thu May 16, 2013
Yes, you can be sure that a cash buyer is favored by a seller if the offer is within reason. The seller doesn't have to worry about an appraisal coming in low. And the seller can see proof that the buyer has the liquid funds to back up the offer. Also the transaction can close much quicker and for less cost to both seller and buyer. So, the seller doesn't have the issues that is common with a financed purchase.

However, frequently cash buyers believe that they can make an offer substantially below the list price and still get acceptance from the seller. This simply isn't the case, especially in this market. In fact, due to the low inventory or quality homes in quality neighborhoods, cash offers have become much more common. In fact, multiple cash offers for a home are not unusual.

Regarding your question about a sizable down payment, buyers making offers with sizable down payments certainly do have a shot. However, the seller wants to see a sizable earnest money deposit, as well. And keep the request for seller concessions like paying the buyer's closing costs, home owner's warranty, appraisal fees, etc. to a minimum. Again, due to the market conditions, a buyer using financing is frequently at a disadvantage. So, a buyer using financing typically has to be more aggressive in an offer to win.

Let me know if you want to discuss other ways you can be successful in purchasing your dream home in this very competitive market.

Larry Harman
REALTOR and Associate Broker
West USA Realty
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Howard Rudin, Agent, Scottsdale, AZ
Thu May 16, 2013
In an increasing market the issue is always the appraisal. I have seen many sellers take the cash offer with no appraisal contingency just to have a sure thing. Then it seems in many instances that cash buyer walks because they are shopping multiple offers around and something better comes their way.

A 20% down buyer should not waive the appraisal contingency because that could be very costly. Instead they should write their offer as strong as possible and change the contract to do the appraisal first. That way if there is an issue they have not spent money on both an inspection and an appraisal.

If you really want the house play to win and make your strongest offer off the bat.

Howard Rudin
TOP 1% West USA Realty
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Gina Marcell…, Agent, Phoenix, AZ
Thu May 16, 2013
Absolutely all solid buyers have a shot.

20% down don't ask for closing costs. Offer to pay all HOA transfer fee. Ask your lender if you can do a quicker than 30 day close. This should put you in the running.
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Gary and Cla…, Agent, Scottsdale, AZ
Thu May 16, 2013
They say 'Cash is King' but there are fewer cash buyers as the prices increase. A conventional buyer with a larger down payment certainly would be in contention for homes here in Scottsdale. We recently have had success with first time conventional buyers that do not have a sizable down payment. The market is changing. If you are considering a home in Scottsdale with a new loan, go for it.
In Maricopa County the percentage of properties recording an Affidavit of Value and purchased without financing was 33.4% in March 2013, down from 39.8% in March 2012.

Feel free to contact us for the latest properties currently available

Claudia Scott
Gary and Claudia Scott
Realty ONE Group
Direct: 602-402-8595
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Wade Kawaha…, Agent, Phoenix, AZ
Thu May 16, 2013
Cash buyers aren't getting all of the houses. Buyers with a conventional loan and 20 % down are still buying homes. It really depends on how you structure your offer. There are ways to make an offer more attractive to the seller without changing much of the terms. That being said, a cash offer with everything else being equal will always win, but if you are willing and know how to make some minor concessions, you will have a chance to get your offer accepted.
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, ,
Thu May 16, 2013
Really depends on the purchase price.

Just had a 20% down buyer who won the house by bidding a percentage over asking price with 3 other offers.

Hope this helps.

Terry S. Smith, Broker Associate
47 Year Arizona Resident
Rain Dance Realty
Direct 602-763-1858
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