Buyers with cash emerge as force in residential real-estate marketplace
Cash buyers trump a financed offer because sellers feel that a cash deal is less likely to fall through around complications with buyer financing.
Special to The Seattle Times
Jacqui Evanchik, a 53-year-old software consultant, knew when she listed her one-bedroom condo at Capitol Hill's Trace Lofts that she'd chosen to do so in a difficult market. Home sales have been anemic for a while.
She knew her $300,000 listing appeared at a slow time of year, around Thanksgiving. And, she'd accepted that she could wait months for an offer and even then might only break even. What she didn't expect was this: a quick, all-cash offer.
"The offer was attractive because there was no financing contingency," Evanchik says.
Of course, it wasn't perfect at $10,000 below asking. But after some negotiating, Evanchik and the buyer compromised at $294,000. She expects to close on the sale later this month. Evanchik's agent, Jeff Prescott of Re/Max Metro Realty in Seattle, says all-cash offers are on the rise in Puget Sound, just as they are elsewhere in the U.S.
"I've got three cash deals going, ... " Prescott says. "That's a significant jump in all-cash."
Nationally, all-cash offers accounted for 22 percent of the market during December, according to data from The National Association of Realtors. For all of last year, all-cash offers represented 8 percent of the market, up from 7 percent in 2008, says Walt Molony, an NAR spokesman.
The trend appears to be led by investors, who have few viable lending options now, says Guy Cecala, publisher of Inside Mortgage Finance in Bethesda, Md. In recent months, 98 percent of investors' purchases of distressed property were completed in all-cash deals, says Cecala.
The Northwest Multiple Listing Service is unable to track data on all-cash offers. But anecdotally, agents say cash is playing a bigger role in the local marketplace.
"This really kicked up in the past 10 months," says Paul Harvey McLaughlin, an associate broker with John L. Scott Real Estate's University Village office.
McLaughlin says the trend comes from two buying groups — primary buyers who believe that cash makes them more competitive bidders, and investors with a similar outlook or an inability to tap loans for investment property. McLaughlin says he recently handled a $429,000 short-sale listing that sold for $380,000 to an all-cash buyer, despite the fact that a buyer with financing had offered $395,000. In a short sale, the seller owes more on his or her mortgage than the home is worth on the market. Lenders weigh in on the sale — and in this case, the lenders chose cash, McLaughlin notes.
McLaughlin estimates that when a buyer pays all cash he or she may be able to pay 5 to 10 percent below asking, in part because sellers — whether individual or institutional — like the assurance of cash.
In early January Ian Bell, owner and broker for First Exclusive Inc., a Seattle-based agency specializing in homebuyer representation, said that one of his buyer clients lost a home priced in the high $200,000s due to the seller's choice of a rival, all-cash bid.
"This trend has been percolating," Bell says. "The seller went with the all-cash offer."
Chris Stiebler, sales director for Escala, the luxury condominium project in downtown Seattle where home prices average $2 million, says that he has sold four units for all cash. Stiebler says that he and his colleagues expect that 40 percent of the building's sales will come in the form of cash deals, and 60 percent will include mortgage financing, typical for the luxury end of the market.
Stiebler says luxury buyers sometimes buy in cash to facilitate a quick closing. They can always seek out a mortgage or home-equity loan after the fact so that their cash isn't completely tied up in the property.
Greg Abbott, an associate broker at Windermere Real Estate-Bellevue Commons, says buyers with cash don't always get a big discount. He represented a house listed for more than $1.2 million this past summer that got a full offer from a buyer using financing for 90 percent of their purchase as well as a cash offer for about $10,000 less. The seller accepted the cash offer, Abbott says, because the buyer's financing looked "a little weak," he says.
"It all becomes cash to the seller at the end," Abbott says. "It's just that an all-cash offer leaves a few variables out along the way, and because of that some sellers like them."