What would be the typical cash offer on a house of $153,900, asking price?

Asked by Craig, Monroe, MI Wed Jan 26, 2011

My wife and i had submitted an offer on a house at asking price ($153,900). We were told that the other two offers were cash offers. We are concerned that we may not get the house because it is a foreclosed home and the bank may just want to get money and run. My wife and I are putting 10% down, $2,000 earnest money deposit, a 30Y mortgage. Our bank said that we are in really good shape percentage wise for our gross income to monthly payment (21%). I guess my question is, when the realtor came back to us and asked for our highest and best offer should we have gone higher (we didn't)? Does a cash offer typically, always, come in lower than asking price? Also the other two offers were from investors.

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Jessica Hood…, Agent, Gambrills, MD
Wed Jan 26, 2011
Hi Craig,

The only number that matters is the market value with an adjustment for condition. Cash is not usually a better option. It means no financing contingency for the seller but really if the financing is solid 99% of sellers would rather have a fair price offer with financing than a lowball cash offer. Unfortunately cash buyers perceive that they have a large advantage. I have never had a lowball cash offer beat a financing offer. Aside from that and not knowing what you offered no one can tell you what your chances are or what a typical cash offer is. Make your best offer based on market value and then let the chips fall where they may. If this house doesn't work out there will be another right behind it. It is still a strong buyers market in most areas.
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Don Tepper, Agent, Burke, VA
Wed Jan 26, 2011
You provided a lot of information . . . most of it (with all due respect) meaningless. And you left out the one critical detail.

Asking price of $153,9000: Irrelevant. (The house might be worth more or less than that.)

Two other offers: Irrelevant. (You don't know the interests or motivations of the other bidders.)

Cash offers from investors: Irrelevant. (Now there's a bit of information. But the investors' motivations likely are far different than yours. Also, they're looking at the numbers differently. Even if the house were worth $153,900, it might not make economic sense for an investor to pay that.)

Your financial details: Irrelevant. (OK. YOU have been told that you'll likely qualify for the loan. But the bank will be weighing two cash offers against one with financing.)

Look: The only relevant piece of data is what the house is worth. You pay no more than that. Depending on your strategy, you might offer that amount or you might offer less.

Does a cash offer always come in lower than the asking price? Absolutely not. Suppose a property is worth $170,000. It's priced at $153,900. Someone paying cash might well offer something above $153,900. In fact, sometimes foreclosures are intentially listed low in order to generate buying frenzy.

Should you have gone higher? Depends on what the house is worth and, secondarily, how much you and your wife wanted the house. Suppose it's worth $170,000. If you and your wife loved the house (and were prequalified or preapproved for a higher amount), maybe you could have offered $160,000 or $165,000. On the other hand, suppose it's only worth $140,000. In that case, your maximum bid should have been $140,000 or less.

What would be the typical cash offer on a house with an asking price of $153,900? Depends. If it's worth $153,900, the investor will then look at his/her exit strategy. Rehab and resell? Rent out for cash flow? With rehab and resell, many investors would offer less. Renting out for cash flow, it all depends on what that property would bring in as a rental.

As you can see, the real question is: What is the house worth? And what it's worth to you as a "retail buyer" may be quite different from what it's worth to an investor.

All you can do is approach it as a retail buyer.

You're second-guessing yourself. But if you want to explore the issue further, take a look at what your Realtor said the house was worth.

Hope that helps.
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Joelle Embres, Agent, Coral Springs, FL
Wed Jan 26, 2011
Where I live cash is king! Unfortunately that makes it really difficult for someone getting a loan to compete. Don't assume that cash offers will be less. If the property is priced under market value then they are probably offering full price or above as well. I hav e an investor /client who put a $36,000 offer on a condo listed for $26,000 and he still did not get it. (than again the condos are selling between $30,000- and $45,000) . The amount you offer should really depend on what the house is worth(your realtor can show you the comps so you can make an educated choice). Listen, You know what they saw, If it was meant to be.... Im sure you will find the right home for you. Good luck.
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Joan Braunsc…, , Morris County, NJ
Wed Jan 26, 2011
There are too many variables that differ for each property and for each transaction for anyone on a site such as this to give you a good answer.

Cash is king for REO's because its one less contingency for the banks to have to deal with and if there are 2 other cash offers on the table, odds are you are already at a disadvantage.

People tend to think that REOs are a great deal. Sometimes they are but it is usually already reflected in the list price. In other words, banks hire the people who can give them an accurate idea of fair market value and they tend to list pretty accurately.

Always offer what you think a home is worth (do your homework and know what recent sold comparables sold for), never more. You are already preapproved, seem to have your financial act together and are ready to go. If your offer isn't accepted, that's ok. It just means its time to move onto the next one.

And....you never know. You just may luck out on this one.

Best of luck, either way.
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Karen Paytas, Agent, Clinton Twp, MI
Wed Jan 26, 2011
The person that's going to win this home is most likely the one to put the most money in the hands of the lender in the fastest amount of time with the least contingencies. The best bet is to be aware of comparable homes that have closed within the last 6 months in the area. As a buyer obtaining a mortgage you are restricted by the value placed on the property by an appraiser a person making a cash offer doesn't have this restriction. Investors are looking for a property that they can either repair and flip or repair and rent. They typically make offers which give them a return on value. So again, the current sales of like homes will determine the offer they make.

Good Luck

Karen Paytas, GRI, CMS
Real Living Kee Realty
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Michael Thom…, Agent, Lambertville, MI
Wed Jan 26, 2011

The answer is there's really no answer. It all depends on the house, the property, the bank who owns it and the people you're competing against. I work here in Monroe County as well, and there's just no set percentage or equation. I've seen some houses go $10,000 or more over list when theirs multiple offers, and others still sell for under list price. Its basically a game of poker, and you have to rely on the advice of your agent to guide you properly for the particular house, and the market as a whole (one thing I can tell you is our local inventories are very low, so the competition is going to be a big more fierce if its a good unit--I've had one girl that's been thru 8 of these highest and best situations)
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Dallas Texas, Agent, Dallas, TN
Wed Jan 26, 2011
Where is your buyers agent who is providing guidance on your behalf.

If you don't have a Realtor who can provide an opinion on property never seen OR can comp the value

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
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x, , Wesley Chapel, FL
Wed Jan 26, 2011
Banks may take a cash offer that is less than the Mtg. offer just because they like the fast cash deals...some will work with Owner occupied before investors but it is usually only in the first week or so... the bank holds the key always and no one know what they may do on each deal... just depends on the bank and the terms and the bank person making the call. Bank owned are not that easy to work with for if your getting a Mtg. some of the homes are not worthy of a loan. So only cash buyers need try. Good luck and you will find something.. don't give up just don't fall in love with one...
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