reports on an interesting dynamic in the housing market — the growing prevalence of investors willing to pay all-cash for foreclosed properties, and the advantages they have over traditional buyers who would get a mortgage.
“Since January, I’ve put in 10 bids (on foreclosed homes); some were up to $80,000 over asking price and were still turned down,” said [Jay] Nielsen, 41, a medical assistant. Each time, the banks selected offers from investors with all-cash offers – even when those offers were lower than his, Nielsen said.
“Cash is king right now,” said Glen Bell of Keller Williams Realty in Berkeley. For foreclosed homes, “a cash offer that hits the target price will many times trump a higher-priced offer with a loan. The ability to close has become just as important to banks as price. The prospect of a property being tied up longer, still on their books and then falling out is costly.
When you have investors like these, coming in with all-cash, no-closing-time purchases, offering to buy lots of 10 houses at a time, it’s not a surprise that existing home sale numbers look pretty good. And it is a good sign that these buyers feel prices are at a bargain-basement. But it’s a worrying display of short-termism on the part of banks, that they’re willing to forego tens of thousands of dollars just to be 100% sure that the sale does go through. They’re so concerned about any kind of hiccup in the sale process, that the money isn’t even worth it.
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