Today’s edition of Ask The Phoenix Real Estate Guys comes from a discussion on a house I recently sold. I was the listing agent representing the Seller and using our usual strategy, we received multiple offers the first weekend on the market.
Let’s take a look at how some numbers worked out. I’m going to change the numbers slightly to protect the transaction, but the ratios are accurate.
We received a full price offer of $300,000 where the Buyer was using a conventional loan. As the listing agent, I did my homework, talked to the lender of the Buyer, and asked qualifying questions. The Buyer easily qualified for what they were writing an offer for. They had a solid job, low DTI ratios and the lender did not see any reason we could not close in 30-35 days.
We also received a cash offer for $292,000. When I talked to the agent representing the cash Buyer, he stated they believed that a cash offer should be worth at least that amount of a discount.
I can understand why the Buyer thought that, but there are two parties in the deal. As the Buyer or Seller, you have to consider the other side of the transaction too and what is in their best interest.
It is not like the cash buyer was walking into the closing room with a suitcase of unmarked bills that have some magical buying power. No matter which offer the Seller accepts, they will walk away with a check. But one check will be $8,000 more than the other, if you were the Seller what would you do?
Now there are times a cash deal is better. If you are worried about appraisal. (You can see a great infographic about the appraisal process here).If you need a really quick 10-day close. If they are really close offers and you would rather not have to deal with the possibility of financing falling through. If the Buyer’s pre-qualified letter is not worth the paper it was written on. This is something that the listing agent can help determine.
So yes, there may be a small discount that you can get with a cash offer, but it is probably not as big as you think if you are the cash buyer.