I get this question all of the time because buyers think that if they have an all cash offer they can naturally offer less for the home. But is this a wise move?
It all comes down to the house you’re buying, the current market conditions, and the seller. Let’s go over some scenarios where it would be appropriate to offer less in a cash situation and other situations where you shouldn’t even consider offering a penny less than full asking price.
Consider the sellers net. This is the amount the seller is going to walk away from. This is also where your buyer’s agent and the listing agent need to come together to negotiate the best price. If the seller is already at their lowest possible price that they can go and walk away either breaking even or with barely any net profit, you probably will not get accepted on a lower-priced offer regardless of whether it’s cash or not. Sellers don’t want to bring money to the table; they want to walk away with a profit.
You also have to consider the market. In the Tri-Valley area, there are micro markets throughout Pleasanton, San Ramon, and Livermore. Within those cities, there are even smaller micro-markets where the real estate industry is doing very well and other areas where homes take longer to sell. It’s going to depend on the house that you are buying, the net profit, and what the market is doing in that particular community or neighborhood.
If the home is in a popular neighborhood where homes sell within a week or two, you probably can’t offer much less than the asking price if any discount at all. You may also need to increase your price in a hot market. You will have plenty of competition and if there are other cash buyers in your area, coming in with a lower price than your closest competition will get your offer thrown out.
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Alternatively, if you are buying a home in the neighborhood or community where the properties don’t move as quickly, it will depend on how long the house is on the market and if it has been already reduced. You may have a little bit of negotiating power when it comes to cash in these types of markets. Again, talk to your buyer’s agent about the net profit for the seller and if they can even afford to go any lower.
Terms also matter. When presenting a cash offer the terms will also be either attractive or unattractive. If you’re offering a quick closing, no contingencies, a high earnest money deposit and you’re not lowballing the seller too much, your offer may be considered. Plus, if there are no other offers on the table, regardless of whether it’s cash or a finance offer, you might be more likely to get an accepted offer.
What about a short sale or foreclosure?
If you’re offering cash, this is very attractive to banks, which hold power to accept or decline the offer. Even though you offer less with cash doesn’t mean it will naturally be accepted. Banks will typically respond faster, however, if you’re offering cash. The lender or the bank will need to evaluate their net profit as well to see if they can walk away with as much as possible or as little loss as possible.
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It also will come down to the condition of the house. If the seller has chosen to list the house as-is, and it is in great need of repair or upkeep, it seems reasonable to offer a lower price if the market does not support its current asking price. This is where a qualified, knowledgeable and experienced real estate agent comes into play. Only professional real estate broker or agent will be able to tell you if the home is priced appropriately as is or if a low price offer would be an acceptable move.
So, you can see that there are a lot of different factors when it comes to offering a lower than the asking price if you have all-cash. Using a real estate agent to find you the best home and off of the best advice when it comes to negotiations and offer is really the key to getting the price you want on a home you love.