Why do home sellers prefer cash buyers?

Discussion in 'Economics' started by wilburbear, Apr 20, 2010.

  1. Maybe about to buy a home. Have cash, but have rented til now. Don't know a thing about how the process works - but I do know the economic slump is making prices favorable now.

    Don't sellers think, "He's got cash, I'll hike the price 5%"?
  2. Just a clarification, here. I've heard the price goes lower when you have cash. I meant, wouldn't the seller hold out for more money knowing the buyer has cash?
  3. Cash means won't financing won't fall through a big concern these days.
  4. 1) No. You're able to buy the house without being concerned about being approved for a mortgage. You may also be the only buyer who has been around in months.
    2) 5 percent of what?.......$100,000.......$1,000,000? :confused: :cool:
  5. Sellers prefer cash buyers because the people that get loans sometimes find out they dont qualify for the loan and the deal falls apart. If I had a house for sale and I had one buyer that was going to get a loan and put 3.5% down and he was going to give me 100k for the house, or I had a buyer that was going to give me 97k and he had the cash in the bank, I would choose the guy with cash because the 100k deal might fall apart at the last second.

    When I sold my first house I had it listed at 299k. I got 2 offers. One for 293k and they had to get a loan, and another for 265k. The realtor told me to really think about taking the 265k because it was a sure thing (house had been on market for 6 months) I took the 293k one. But If I knew what I knew today, I still wouldnt have taken the 265k, but I would've gone as low as 285k if it was cash just because the 293k deal almost fell apart so many times. If the people didnt desperately want my house and didnt like me so much, I'm sure the deal would've fallen apart because of problems with lenders & brokers.
  6. lindq


    My wife is a realtor here in Scottsdale, and deals with a number of cash buyers. If you have cash, you're king of this market and it gives you a better negotiating position.

    But you might want to take another approach, which is popular with many buyers who have cash, but might want to arranging financing because of low interest rates.

    Tell the seller (through your agent or the listing agent) that you will do a cash deal, but you are going to arrange financing for your convenience. (And you will likely need to prove that you have the cash with a bank or broker statement.) And explain that if you don't get financing terms that you like, you will close with cash.

    Then, when you fill out the offer/sales agreement, there is typically an area where you specificy financing terms, and the agreement becomes contingent on arranging that financing. (That is what scares sellers these days.) But in your case, do not fill that out, and do not make the deal contingent on financing.

    This still leaves you open to arranging financing if you can, and if you want to. But the seller knows that it is not necessary for you to close, because you've promised that.

    But remember that if you can't raise the financing, you are then obligated to close the deal with cash. Or, lose your earnest money deposit.

    Check this approach with a Realtor in your area, and be certain that the contracts are completed correctly.
  7. Bob111


    exactly. at the end seller receive a check from title company for full amount. regardless to how the buyer paid for house. and if the deal breaks apart somewhere in the middle because buyer can't get mortgage-you keep their deposits. if you are buyer and you don't know,for sure about mortgage approval-you shouldn't be on the market in first place. if you are the buyer-first thing you do-go to the mortgage broker and get your pre approval letter. then -shop.
  8. Completely agree. As long as the buyer has a pre-approval letter from the bank I doubt most sellers would care.
  9. lindq


    In this market, a pre-approval for a mortgage is hardly worth the paper it is printed on. It is NOT a final approval, and any seller who is faced with either a cash deal or a financing deal (even if it appears solid), should take the cash.

    Even lending deals that have been bank approved are falling apart days before closing. Low appraisals, inspections, recent foreclosures, etc., kill many deals. A close friend of mine has had four "sure" deals fall apart from sellers who were "pre-approved" for financing.

    Sellers have every right to be fearful of any type of financing arrangement.
  10. There are people on here who believe that the earth is 6000 years old.
    #10     Apr 20, 2010