Cash Offer Buyers Hurting First Time Home Buyers

First time home buyers in Florida had experienced what most home buyers have not experienced since the real estate and credit collapse of 2008.  The real estate market is recovering and homes were selling about list prices by cash offer home buyers, especially in Florida.  Most homes stay on the market for 60 to 90 days but homes were selling within hours of being listed.  For example, one of my Florida clients who had a foreclosure in the past waited patiently for their three year waiting period to expire and finally got a pre-approval letter March, 2013.  These clients were so ecstatic that they thought they were going to find their dream home and have a real estate purchased contract.

Bidding War On Home Purchase

Unfortunately, every house they were going to place a purchase offer were outbidded by cash buyers.  Some of these properties sold for over 10 plus percent above the asking price.  Eventually, when the real estate market slowed down in October of 2013, my clients was able to put a purchase offer and closed in December.  A lot of these cash offer home buyers are institutions and investors who are buying up blocks at a time.  Fortunately, home demand by investors has tapered off somewhat but many home buyers are still running into competition from cash offer home buyers which potentially can hurt their chances of buying their dream home.

 Cash Offer Home Buyers

Cash offer home buyers vary on how they place purchase offers on a home.  Some cash offer home buyers will still want appraisals done and home inspections done.  First time home buyers can still compete with these types of cash offer home buyers if they have a strong pre-approval letter and come up with a large earnest money deposit.  However, there are cash offer home buyers who will offer an as-is purchase with no appraisal or home inspection contingency as well as a quick fast closing.  These types of cash offer home buyers are very hard to compete with and the chances are that the home sellers will go with these investors instead of entertaining your offer.

Competing With Cash Offer Home Buyers

If you are competing with cash offer home buyers and get into a bidding war, you need to know and realize the risks involved in buying a home above the list price.  Most sellers are represented by professional real estate agents and the real estate agent is most likely the person who recommended the listing price to the seller.  The listing price was probably derived by the market value of similar and like homes in the area.  The major issue that a home buyer competiting with a cash offer home buyer has is if they purchase the home over the list price will the subject property appraise out?  If the property does not appraise over the list price, the home buyer needs to come up with the cash difference between the sales price and the appraised value price.  Home buyers who really want the property are willing to pay the difference but need to make sure that they will not financially strain themselves.

Inventory Versus Demand

Shopping for a home is like looking to adopt a puppy.  When you adopt a dog, you want to make sure that the dog’s personality will fit yours and your family’s personality.  Your dog will be a member of your family for ten plus years.  You do not want to adopt a dog with bad genes and DNAs where it turns out to be a biter for the rest of his life.  Take time in shopping for a home.  You will get outbidded by cash offer home buyers but homes come up everyday.  It might take some time but getting into a bidding war is strongly not recommended.

By Gustan Cho

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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