More properties were purchased for cash in 2011 than in any previous year. Of the 7,233 MLS-reported sales (all property types) in the Reno and Sparks markets 2,517, or nearly 35% were purchased for cash. If we restrict the analysis to only site/stickbuilt houses that figure drops to 26 percent – however that is still an incredible 1 in 4 homes being purchased for cash. How does that compare with recent years sales?
|units sold||for cash||% cash sales|
As can be seen in the table above, cash purchases are on quite a tear. And there appears no signs of a slow down – looking at year-to-date sales, already more than 31 percent have been cash sales.
With interest rates at historical lows what could account for these increase in cash sales? Well there are many reasons:
Low Prices – with home prices also at historical lows, buyers now have the ability to pay cash where they once they may not have
Tighter lending requirements – as lenders enact stricter guidelines many buyers either can’t qualify for financing, or simply prefer to not even try to qualify
Cash offers are more attractive – in our increasing competitive marketplace (i.e. dwindling inventory; multiple offer scenarios) buyers make every attempt to make their offer most attractive to the seller. And it doesn’t always come down to price. Many sellers view cash offers as more attractive than those of buyers seeking financing, because there it much less uncertainty regarding a cash offer. The seller needn’t worry whether the prospective buyer will successfully complete the underwriting process, or whether the property will appraise for the required amount, or whether the lender will perform on time. And speaking of time, offers from cash buyers equate to shorter escrows. There is no waiting for loan docs to arrive, which can require 30 – 45 days depending on the lender. Cash buyers can close much faster – as the process is typically only a matter of transferring funds. Also streamlining the cash offer process, many cash buyers waive the appraisal contingency. Buyers presenting offers based on acquiring financing do not have the option to waive the appraisal contingency.
Undoubtedly many other reasons exist for buyers paying cash for properties. I would love to hear your thoughts on this trend.