"We LOVE the house," the darling young couple exclaimed. "What will we need to do to get it?" (They've recently relocated from the East Coast and surprise (!) the market operates entirely differently here.)
"Well . . " I began, "you will need to pre-inspect the home, accept it as it is, comfortably waive your contingencies, and offer substantially MORE than the list price to beat out any other interested Buyers who also love the house . . . AND if you can close in mere days instead of weeks, so much the better."
GULP! (I'm so sorry, that's not much of a Valentine, is it?)
"But we can pay cash," they earnestly countered. "That's great," I responded, "but All-Cash purchases only move you to the front of the line; they don't provide a discount." According to the NAR website (The National Association of Realtors) "All Cash" sales surged after the financial downturn in 2008 from 10% to more than 30% of sales nationwide by 2012. Here in the Bay Area, that figure is much higher still, where young tech millionaires compete with everyday folk like you and me AND can easily outperform us both on price and terms ('terms' are contingencies such as insurance, appraisal, inspection and loan approvals).
True, many of these "All-Cash" transactions came about through speculators and investment companies that were lapping up underwater and distressed sales for investment purposes, but even here in the Piedmont, Rockridge and Berkeley, where REO opportunities (Bank Owned Properties) are exceedingly rare, it isn't unusual to see several "All-Cash" offers at the table on any highly coveted home. (Uh, that would be almost ALL of them.)
Whether it's Twitter money, an inheritance from a well-heeled uncle, or a loan from your oh-so-generous parents, prospective Buyers have a much tougher litmus test these days, which can make it very difficult for the 'Average Joe' to compete in this arena. In other words, a move UP, or even a move down, will often require us to sell our current homes first in order to have the net proceeds available to purchase later. (Yes, that requires a leap of faith.) That doesn't mean that offers with attached loans won't prevail (remember, the majority of home sales STILL involve a loan), it simply means that you are going to have to be smarter about it. The truth is, whether it's a loan or your own personal wealth, the transfer of funds from either a bank or your personal accounts is always 'ALL CASH' to the Seller at the close of escrow!
So what gives? Shouldn't that level the playing field?
ALL-CASH Buyers need not bother with either appraisal or loan contingencies, which shortens their time in escrow considerably. They needn't even worry about insurability if they are foolish enough to concede this important component as well. (Warning Will Robinson! I'm not advocating you buy a home with no insurance. DO INSURE YOUR HOME!) My point is, that the heavy influx of cash, coupled with less available inventory (homeowners are now staying longer in their homes), has made purchasing a home much more contentious and competitive than it's ever been before.
So if you are in heavy competition, you really love the house, and you are purchasing it with a loan (as most of us will be) you will need to be pre-approved by a local lender, be ready to jump as soon as the house hits the market, get aggressive with your terms, and offer MORE money than the All- Cash Buyer at the table. If you do that, many Sellers will be willing to wait a few extra weeks for a bigger payoff. (Wouldn't you?) AND BTW - you'll want to work with a REALTOR who is an "area specialist" and knows the players and the market well!
How's that for tough love? (Don't worry, I'll be here to help you every step of the way.)
Julie Gardner, has been writing The Perspective for 15 years and has published more than 600 essays. She is also a frequent contributor to the Sound Off column in the Real Estate section of The San Francisco Chronicle.