Monday, February 27, 2012

Cash is King in Real Estate

Cash is king in the real estate market.  One-third of all U.S. home sales this past December were cash deals.  Clean offers - one with limited contigencies - especially those with no financing contigency are in high demand.   One would not automatically assumed this is a bad thing, but the issue is these cash deals are putting downward pressure on home values because sellers are accepting lower offers for a sure deal.  No where is this more prevelent than with homes owned by banks.  Banks are motivated to get real estate off their books and are not emotionally attached to the homes they sell so a sure deal is the deal they prefer.  But buyers who need to finance their home purchase do not need to fret.  For example, in foreclosures Fannie Mae and Freddie Mac prefer first time homebuyers and people who are buying the house to live in it.  Also, not all owners are like banks who are willing to take less for a sure sell.  So while cash is king, it is not the ultimate determination in real estate transactions. 

It is an unusual real estate market, inventory is down, sales are up, but at least in part due to these cashe deals there is downward pressure on home prices.  To navigate this unusual real estate market, one should contact a local real estate agent for professional advice.