If I pay cash for a home can I get a lower price? At most price levels, especially the bottom 50% of the housing market, the answer is probably “no.” Even when a lender is financing the purchase, the seller is going to get 100% of the agreed upon sales price. Today, qualified buyers can borrow almost 100% of the purchase price at very affordable interest rates. If the seller gets an offer from a genuinely “pre-approved” buyer, the sale is almost certainty. There is no good business reason why a seller would cut the price for an all cash buyer because the seller will get 100% of the price in either instance.
When a Lower Cash Offer Will Win Over a Higher Priced Offer with a Loan
Clearly, there are instances when a seller may agree to price concessions to an all cash buyer when another buyer is less qualified. For example, compare these two offers:
- Offer #1: Price 5% less than listed. All cash, no appraisal contingency and close in less than 30- days.
- Offer #2: Full price. 3% down payment, 97% loan amount and close in 60-days. Buyer cannot verify loan (credit) approval.
Sellers Who Want More Certainty Take Cash
In my experience, given the facts, a seller who wants the certainty that the deal will close should take offer #1. Accepting offer #2 means the seller assumes the risk that the property will not appraise or the lender will not approve the buyer’s creditworthiness; while accepting offer #1 means no appraisal or lender approval is necessary. For the seller, one less potential impediment to closing.
Buyer Strategy: Pay Full Price and Ask for Seller Credits
Often for sellers this matter of taking less than asking involves ego and saving face. Some people feel that giving in is losing face for whatever personal reason; they simply “don’t want to negotiate.” For a buyer, it may be possible the obtain the same “net purchase price” giving the seller the asking price, but asking the seller to pay for other costs – loan points or escrow fees. The seller can still say they got their price.
Multiple Offers? Cash is Still King – As Long as the Offer is Competitive
In multiple offer situations, an all cash offer gives the buyer a competitive advantage over other buyers who are less strong financially. Cash is still king, as long as your offer is competitive. How much a seller might discount the price is to a greater degree a function of motivation. How badly does the seller want to sell the property at this time? How much certainty does the seller need? The question of “what does the seller have to lose by not taking a buyer’s all cash offer” is one that every seller must ask of themselves, since the seller alone must deal with the consequences of the decision.
In a Multiple Offer Situation? Lead with Highest and Best Offer
Remember though, in multiple offer scenarios, highest and best offer is a must. Is missing out on the best home available worth the risk of losing it by aggressive negotiation tactics? It’s not unusual for a buyer to learn after-the-fact that if they would have offered the amount they were willing to offer in the first place, they would have been the successful bidder. That’s a hard lesson to learn.
Looking to Buy a House in the Austin Area?
Our team of Realtors have a combined 55+ years of experience representing buyers. We know the market and we know how to present your offer for the highest chance of acceptance. For more info about our team and our buyer program, check out our Austin Buyer Representation Program. Then, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.