Profile picture for FLMiami

How much to offer for a house when buying cash? Full price? 10-15% less?

Hello, I was wondering whether there is a ballpark-rule when buying a house cash. Let's say, usually try to get them to sell for 10 - 15% less than what they are asking for in this current market?

Getting a mortgage nowadays is such a hassle that having the cash on hand to me makes all the difference. 

Thank you for the advice..
  • January 18 2012 - Miami
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Answers (10)

Profile picture for AlmaKee
Great detailed advice by Realtor Hitz.  I have to say that in Tampa we often have asset managers for banks that will accept an offer within 2 days of listing.  I sometimes think they just want to clear the file off their desk and rely solely on perhaps an incorrect Broker Price Opinion that determined the asking price rather than require at least 10 days exposure on the market to confirm market value.

Miami may be different but I highly doubt it...
  • January 19 2012
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Profile picture for Jay Hitz

As an experienced, full time, successful buyer's agent I am faced with answering this question nearly every day and certainly with every client.  Here are a couple bits of advice I would give to any buyer - first, enlist the services of an experienced, local Realtor who comes highly recommended by someone you trust.  Perhaps even interview several agents just as you would if you were selling a home. The services your agent provides to you as a buyer are extremely valuable and FREE!  Don't do it alone.  Secondly, NEVER hire the listing agent to represent you as a buyer of his/her listing.  They will not aggressively negotiate for you against the seller who is signing their paycheck.  More often than not, their top priority becomes the potential double-ended commission check and not the buyer's best interests.

Onto the offer price question you ask...No, there is not a hard and fast rule-of-thumb as several people have already commented.  Yes, cash offers will always be more desirable to a seller if there are multiple offers, if all other factors are equal (price, escrow period, earnest money amount, contingencies and their timeframes, closing costs the buyer is asking the seller to pay, etc). 

I will always call the listing agent to inquire whether other offers have been made.  If so, I'll ask something along the lines of "is it the offer the seller is looking for" or "where does my cash offer need to be to be competitive?" Sometimes I get the answers, sometimes I don't (and sometimes I don't believe what they say), but it never hurts to ask and there's nothing unethical about asking. Hopefully your agent has the skills to probe the listing agent for useful information.  Because your agent is local, there is a chance that a relationship exists with the listing agent and they can communicate openly.  Use that to your advantage.

Despite what others have said, there is no advantage to putting in an offer on a bank repo as soon as it's listed.  Banks don't just take the first offer and run with it unless it's unbelievably good. Most, if not all, banks and asset mangers want to see the properties listed for at least a few days to get exposure on the market before they even will look at offers.

What will help you the most when offering on a home is knowing as much about the property as you can.  Research the current fair market value by running comps. Regardless of the type of sale (bank repo, short sale, standard sale, investor flip, probate, etc) try to find out what the motivation of the seller is. Who is selling it? Why are they selling it? How long has it been for sale?  Have they had any price reductions?  How much did they buy it for?  How much do they owe on it?  Is it vacant or occupied?  How soon does the seller need to sell?  These are just a few questions to ask.

Another important factor to consider is your own motivation.  How much do you really want THAT house? If it's a 5 on a scale of 1-10, then by all means be aggressive with your offer.  If it's your dream home after searching for a year you may want to offer something closer to, maybe even over the full asking price (after considering all other factors).

Lastly, outside of the price, make your offer as airtight as possible.  Appeal to the seller's motivation.  Provide proof of funds with your offer.  Have your agent write a note explaining your situation for the seller to consider (except with repo's - banks generally don't care). Reduce the timeframes and contingency periods to minimums.  Type, do not handwrite, the offer.  Make everything in your offer clear, concise,professional and reasonable.  Perhaps offer to pay part of the closing costs that normally the seller would pay.  Don't include an appraisal contingency. Let the seller choose title and escrow companies. Very importantly, make sure the listing agent and seller know that this is the only offer you are writing and that you're not submitting offers on multiple properties. These are all things your agent can include in the contract that will be appealing to the seller, outside of the price itself.  After submitting the offer, have your agent follow up with the listing agent and ask for input on how your offer looks/compares. Your agent has to convey to the listing agent how solid and capable of a buyer you are.

Because every property being sold is a unique situation, by knowing these factors and hiring the right agent, you will be completely educated and prepared to make a reasonable, successful offer.

One last thought, "price is what you pay, value is what you get".  Anonymous

I hope my input helps.  GOOD LUCK!

  • January 19 2012
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Profile picture for AlmaKee
Realtor Ofe makes a very good point.

In addition to ALL CASH, you need to offer the shortest possible inspection period to get the very best deal.   No more than 7 days and ideally less than 7.
  • January 19 2012
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Profile picture for Ofe Polack
There is no rule on how much to offer on a cash offer, what makes an offer oftentimes less attractive, is not necessarily the $$$ offered but the contingencies.  Discuss your offer with your buyer agent!
  • January 19 2012
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There is no set rule for a cash offer, However, cash eliminates alot of red tape regarding the sale of the property. Usually buyers and or sellers have a set price in mind that they will offer or accept. Do your research on the property and the conditions behind the property.

Contact your local Realtor for more expert advice.

John Taylor

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  • January 19 2012
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Profile picture for AlmaKee
As you mentioned, you are going after Bank owned.

Ask your Realtor to send you a report of the list price versus sold price on REOs and it will probably reveal that the majority sold "ABOVE" asking price to an ALL CASH buyer.

Most REOs list well below market value to stimulate multiple offers.  To capture the best deal you MUST submit your offer the first day it is on the market.  If this will NOT be your primary residence your offer may not be considered on certain REOs unless no one wants it after a couple of weeks.

You need your own agent to show you the REO the day it comes on the market because if you think you will have an advantage by calling the listing Realtor you may be too late to even submit a bid.

Hope this helps.

All the best,
Alma Kee
Westchase
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  • January 19 2012
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Profile picture for craigfial
In many cases you may have to consider making an offer OVER list price.  As mentioned below, having a good agent that you trust to work with will make that decision much easier when the time comes.  Before making an offer, you need to know what has recently sold that is similar in size and view and use those to come up with a price strategy. 

Don't be surprised if there are multiple offers on good properties.
Again, discuss this with your agent.  They will be your best resource for information.

Good luck!
  • January 18 2012
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Never EVER make an offer based on list price. Make your offer based on its Market Value.  Listed homes can (and often are) over priced.  Investors generally try to pay 70% of market value .. but that is very difficult.  If you can pay 80% that is good.  If you are picky, you may have to pay more to get what you want depending on the sellers motivation.
  • January 18 2012
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Profile picture for FLMiami
True, but let's say, cash might look appealing to a foreclosure/bank owned.

It's the only upper hand..

Regards,
  • January 18 2012
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Profile picture for wetdawgs
There is no set rule.  There isn't really a discount for cash, but if there are competing  competitive offers the one with cash is more likely to get the deal than the one with financing required.   The hassle is not on the part of the seller.
  • January 18 2012
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