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>I was shopping for a house a few months ago, and was simply unable to buy one; those in my price range wouldn't accept my offer because it wasn't an all-cash o

by slm_HN 12y ago

>I was shopping for a house a few months ago, and was simply unable to buy one; those in my price range wouldn't accept my offer because it wasn't an all-cash offer I don't understand this. If you're pre-qualified for a $500,000 dollar loan how is your offer worse than someone willing to pay $495,000 cash?

yourapostasy 12y ago
Deal velocity. An "all cash" offer at 1% less than asking is more attractive to the seller's agent (not necessarily the seller) than a loan-process-backed offer, because the agent wants to close quickly and move onto the next deal. The loan process adds days and weeks to the deal, while the "cash" offer can literally close tomorrow. I'm scare quoting "cash" because what is really happening most of the time is the cash represents investor pools of already-fronted, already-loaned-out sums; it's only the minority of "all cash" offers that are actually an individual investor writing out unencumbered checks (and even then, that check is still somewhat encumbered by future flip profit expectations). Really what is happening is you are seeing competition between de facto loans already-made and turned into ready cash, and loan promises.
- maratd 12y ago
  > not necessarily the seller Usually the seller too. A quick tip for those in the market. If you're trying to beat out cash offers, there's a sweet spot in every market where after a certain price point, the cash buyers drop off.
  - yourapostasy 12y ago
    My understanding of the Austin market (please correct me if you know otherwise, I was just an interested observer of the market so as to educate myself before pulling the trigger, not an active participant) is there are two such sweet spots: well below the Austin median (like the $150K area), and way into the stratosphere (like the $1.5M+ area). Below the median, the fixed costs and time commitments per transaction eat up too much of the flipping profit. In the stratosphere, and their deal velocity slows down too much (plus there are issues with money management, i.e., left holding the bag when the bottom cycle arrives). Neither of these sweet spots to avoid hordes of cash buyers are likely to appeal to the median HN reader trying to find a residence in Austin. Too low and either the school district is below acceptable performance and/or the commute distance too far (though Austin metro area has it easy commute time-wise compared to places like LA, SF, NYC, ORD, MIA). Too high and unless you are cashing out of an even greater asset-inflated area, you can't afford it.
- sosborn 12y ago
  There is also the fact that "pre-qualified" != "pre-approved". It is quite possible these days for a loan to be rejected at the last minute.
  - tsotha 12y ago
    This. Closing a real estate deal is like running the hurdles. Cash buyers are starting the race at the midpoint.
x0x0 12y ago
Lots less stuff that can go wrong, too. If you're getting a loan, the bank will want at least an appraisal, plus pre-approved doesn't necessarily mean the cash will show up. It can often take a month or more to close a loan. With a cash offer, once a title search is performed (a few days assuming no liens), the owners and buyers can swap keys and a check. If the seller wants cash sooner than later, this can be very attractive; for example, he or she may well be bidding on another house and need to make a deposit or down payment.

by slm_HN 12y ago

yourapostasy 12y ago

Deal velocity. An "all cash" offer at 1% less than asking is more attractive to the seller's agent (not necessarily the seller) than a loan-process-backed offer, because the agent wants to close quickly and move onto the next deal. The loan process adds days and weeks to the deal, while the "cash" offer can literally close tomorrow. I'm scare quoting "cash" because what is really happening most of the time is the cash represents investor pools of already-fronted, already-loaned-out sums; it's only the minority of "all cash" offers that are actually an individual investor writing out unencumbered checks (and even then, that check is still somewhat encumbered by future flip profit expectations). Really what is happening is you are seeing competition between de facto loans already-made and turned into ready cash, and loan promises.

maratd 12y ago
> not necessarily the seller Usually the seller too. A quick tip for those in the market. If you're trying to beat out cash offers, there's a sweet spot in every market where after a certain price point, the cash buyers drop off.
- yourapostasy 12y ago
  My understanding of the Austin market (please correct me if you know otherwise, I was just an interested observer of the market so as to educate myself before pulling the trigger, not an active participant) is there are two such sweet spots: well below the Austin median (like the $150K area), and way into the stratosphere (like the $1.5M+ area). Below the median, the fixed costs and time commitments per transaction eat up too much of the flipping profit. In the stratosphere, and their deal velocity slows down too much (plus there are issues with money management, i.e., left holding the bag when the bottom cycle arrives). Neither of these sweet spots to avoid hordes of cash buyers are likely to appeal to the median HN reader trying to find a residence in Austin. Too low and either the school district is below acceptable performance and/or the commute distance too far (though Austin metro area has it easy commute time-wise compared to places like LA, SF, NYC, ORD, MIA). Too high and unless you are cashing out of an even greater asset-inflated area, you can't afford it.
sosborn 12y ago
There is also the fact that "pre-qualified" != "pre-approved". It is quite possible these days for a loan to be rejected at the last minute.
- tsotha 12y ago
  This. Closing a real estate deal is like running the hurdles. Cash buyers are starting the race at the midpoint.

x0x0 12y ago

Lots less stuff that can go wrong, too. If you're getting a loan, the bank will want at least an appraisal, plus pre-approved doesn't necessarily mean the cash will show up. It can often take a month or more to close a loan. With a cash offer, once a title search is performed (a few days assuming no liens), the owners and buyers can swap keys and a check. If the seller wants cash sooner than later, this can be very attractive; for example, he or she may well be bidding on another house and need to make a deposit or down payment.