Do cash buyers drive down values? Episode #188

Hello! Welcome to Todd Miller TV. Saw an article today on HousingWire, that I wanted to share with you. Read it here in my iPad. It says “Investors buying with cash, pressure home prices.” And one of the things they were talking about in this article is how people paying with cash are almost half of all home purchases. So what’s happening especially in the lower ranges. So what’s happening is, the analogy that they’re making here, what they’re trying to say is when more people buy with cash that pushes home prices less. Or pushes them down. And one of the things they/the reason/the statistical reason that they believe this, ’cause they don’t have any statistics, is because that/they survey Real Estate agents and asked them on cash investors; what do they normally offer as a comparison of listing price. So, rather than find out what actual home sold for, they asked what people offered and instead of getting statistical data, they just asked agents like give me a range. So agents were just throwing 10 to 20% out there which is probably pretty accurate. The average investor who’s a cash purchaser, offers 10 to 20% below the list price, that’s and offer! So if it’s listed for $50,000, they’re offering 40,000 and 45,000. Now, that doesn’t mean that what they’re gonna be paying for, because they get 10 offers. Eventually they’ll all bid it back up to 50,000 or more. So, the sort of thought that’s just because people are buying cash that pushes home prices lower, that’s not really the case. Because you’re paying cash typically, you’re not asking for closing cost. The seller is able to give you a little less. I’ll give you an example. Let’s look at a $100,000 house. This thing financed. And you’re gonna buy it and say, it’s worth a $100,000, you’re gonna buy is a getting a Loan. So you offer $103,000, because you need $3,000 in closing cost ’cause you’re gonna have closing cost for your Loan. So the seller’s “okay, I can sell it for $103,000 and then have to pay $3,000 for it’s closing cost so that the seller meets a hundred” or someone comes in with cash for $100,000. So the average person looks at that and says “well cash versus getting it cheaper” Well not really! The cash person’s gonna get it for the same price. They’re just netting out that closing cost. So the seller nets the same amount. So there’s a little bit if a Myth. I mean yes, if you have a shorter time frame to close and you’re more of a certain of a buyer, then you have cash in the bank you don’t have to worry for a long call. You tend to get more attention but this thought that you’re/people paying cash are getting it 10-20% less is false. And that this is sort of breeding people with cash to vocal everything, not get anything. We’ve seen this over and over. If you really want a smoking deal, go to the trustee sale, buy down the court house steps basically, silencing, not knowing what’s inside the house, you will get a better deal. You just well. Because you’re taking risks, you don’t know what’s inside the house. It can be trashed, it can be mold infested. Okay? So people buying cash are not pushing down home prices, actually the opposite. People buying cash are solidifying the market because there’s just less homes to be foreclosed in the future because cash people can’t get foreclosed on really. So, anyway, I thought that was interesting, their analogy was really weird, plus they were trying to get this national thing and make the story out of it which didn’t make a lot of sense to me. So, anyway, I thought I would share that with you. Like anything, Especially Real estate, it’s local. So when you see this national things, don’t try to analyze that too much and pretend to be an expert in a certain market place. Just go to somebody in the market who’s a professional who gets it, who knows the detail of the market. They’ll be able to guide you with the best information. So, just be careful when you’re reading these things online. So anyway, that’s my update for today and hope to see you on another video. Thanks!