Why are there so many cash sales? Why is FHA number #6 of the buying power? Do you think the FHA and VA could be respected more?

Asked by Mae Bailey, Hercules, CA Thu Dec 6, 2012

Whenever I find house a house, I am an FHA shopper, I am beat out with a cash offer. So ten when can I get in.

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Olivia Chikezie’s answer
Olivia Chike…, Agent, Richmond, CA
Thu Feb 21, 2013
One of the reasons is that cash buyers can close within seven to ten days after their offer is accepted. Also, they usually don't ask have any contingencies in their offer making it more attractive to sellers because they get to pocket more money from the sale. Don't give up hope though, what's yours will come your way!
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Vincent Paige…, Agent, Orlando, FL
Fri Dec 7, 2012
Cash is king, the hedge funds are buying up EVERYTHING.
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The Medford…, Agent, Fremont, CA
Fri Dec 7, 2012
The problem is that currently, and for a limited time, California property is on sale and investors from around the world are snapping up properties with cash while prices are still low. 31% of transactions in our area are cash – it’s unprecedented and, as prices rise, it will soon be unprofitable for investors and they will start to look elsewhere.

In the meantime, buyers with FHA & VA loans are getting beat out in almost every offer situation.

To be honest, there is nothing FHA or VA could do to be more competitive. They’ve already done about as much as they can do. In reality, they both exist to help buyers who have a limited amount of cash to put down. Given the choice, most sellers will accept offers with more down or, as you’ve noticed, cash. FHA cannot do anything to change this. And, because they are government secured loans, they come with property condition requirements as well. This eliminates many properties that have condition issues and makes the situation even worse.

Until about 5 years ago, we never saw FHA loans in the Bay Area – the prices were too high. FHA realized that there was a need to change their ceilings to accommodate more buyers and to help stimulate the economy, so they raised the ceilings. As a result, for a number of years, FHA loans were the predominate loan vehicle here in the Bay Area. As you’ve noticed, this has changed. More cash is moving to the market, more buyers are using conventional loans and … FHA and VA are being left out in the cold like the “kissing cousins” they’ve always been.

It’s not fair, not right, but very, very real. And there is really nothing FHA can do to change it. Just keep at it - all of our FHA buyers have been able to get a home as long as they keep writing offers and don't give up.
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