Cash offers … banks slitting their own throats?

[Oxford]

Asset managers look at “highest and best” offers which is typically the second round call-to-action on multiple offers of REO properties.

That does NOT just mean highest offer. They look at the strength of the offer: large down payment, reserves in bank, FICO, prequal letter, etc…

I just beat out an all-cash offer on the house I am buying. Obviously I was the high bidder but I also was a strong offer according to the things I mentioned.

All cash does not always win. Is the decision process always fair? Maybe not. But it worked for me.

ox

[Effective Demand]

[quote=kcal09]I’ve made offers with a preapproval letter from a lender and the amount was higher than the accepted cash offer and still they accepted the lower cash offer. Does anybody know why they would rather accept a lower cash offer than a mortgage if it has already been approved?[/quote]

Think of it as a risk/reward scenario.

On one end of the spectrum is a non-contingent cash offer. You are basically guaranteed to close and close quickly. There is a premium paid by the bank for this lower risk and liquidity.

On the other end of the spectrum would be a FHA type deal (or worse, FHA + some sort of state DPA) you’ll have appraisal issues, qualification issues, long underwriting times, buyers could lose their jobs during that time, etc. But the banks get rewarded for that risk by getting a higher price.

Preapproval doesn’t mean the property will appraise, will pass home inspection or that you’ve gone through full underwriting and cleared all the hurdles.

[Effective Demand]

[quote=kcal09]I’ve made offers with a preapproval letter from a lender and the amount was higher than the accepted cash offer and still they accepted the lower cash offer. Does anybody know why they would rather accept a lower cash offer than a mortgage if it has already been approved?[/quote]

Think of it as a risk/reward scenario.

On one end of the spectrum is a non-contingent cash offer. You are basically guaranteed to close and close quickly. There is a premium paid by the bank for this lower risk and liquidity.

On the other end of the spectrum would be a FHA type deal (or worse, FHA + some sort of state DPA) you’ll have appraisal issues, qualification issues, long underwriting times, buyers could lose their jobs during that time, etc. But the banks get rewarded for that risk by getting a higher price.

Preapproval doesn’t mean the property will appraise, will pass home inspection or that you’ve gone through full underwriting and cleared all the hurdles.

[Effective Demand]

[quote=kcal09]I’ve made offers with a preapproval letter from a lender and the amount was higher than the accepted cash offer and still they accepted the lower cash offer. Does anybody know why they would rather accept a lower cash offer than a mortgage if it has already been approved?[/quote]

Think of it as a risk/reward scenario.

On one end of the spectrum is a non-contingent cash offer. You are basically guaranteed to close and close quickly. There is a premium paid by the bank for this lower risk and liquidity.

On the other end of the spectrum would be a FHA type deal (or worse, FHA + some sort of state DPA) you’ll have appraisal issues, qualification issues, long underwriting times, buyers could lose their jobs during that time, etc. But the banks get rewarded for that risk by getting a higher price.

Preapproval doesn’t mean the property will appraise, will pass home inspection or that you’ve gone through full underwriting and cleared all the hurdles.

[Effective Demand]

[quote=kcal09]I’ve made offers with a preapproval letter from a lender and the amount was higher than the accepted cash offer and still they accepted the lower cash offer. Does anybody know why they would rather accept a lower cash offer than a mortgage if it has already been approved?[/quote]

Think of it as a risk/reward scenario.

On one end of the spectrum is a non-contingent cash offer. You are basically guaranteed to close and close quickly. There is a premium paid by the bank for this lower risk and liquidity.

On the other end of the spectrum would be a FHA type deal (or worse, FHA + some sort of state DPA) you’ll have appraisal issues, qualification issues, long underwriting times, buyers could lose their jobs during that time, etc. But the banks get rewarded for that risk by getting a higher price.

Preapproval doesn’t mean the property will appraise, will pass home inspection or that you’ve gone through full underwriting and cleared all the hurdles.

[Effective Demand]

[quote=kcal09]I’ve made offers with a preapproval letter from a lender and the amount was higher than the accepted cash offer and still they accepted the lower cash offer. Does anybody know why they would rather accept a lower cash offer than a mortgage if it has already been approved?[/quote]

Think of it as a risk/reward scenario.

On one end of the spectrum is a non-contingent cash offer. You are basically guaranteed to close and close quickly. There is a premium paid by the bank for this lower risk and liquidity.

On the other end of the spectrum would be a FHA type deal (or worse, FHA + some sort of state DPA) you’ll have appraisal issues, qualification issues, long underwriting times, buyers could lose their jobs during that time, etc. But the banks get rewarded for that risk by getting a higher price.

Preapproval doesn’t mean the property will appraise, will pass home inspection or that you’ve gone through full underwriting and cleared all the hurdles.

[Anonymous]

[quote=Aecetia]Awesome quote AK. One of my all time favorite movies.
[/quote]

It’s semi-off topic, but wanted to sure you had seen the alternate ending that was cut from the originally distributed version. It’s only semi-off topic because it is eerily appropriate for today’s banking environment…

http://tinyurl.com/5hfoxj

.

[Anonymous]

[quote=Aecetia]Awesome quote AK. One of my all time favorite movies.
[/quote]

It’s semi-off topic, but wanted to sure you had seen the alternate ending that was cut from the originally distributed version. It’s only semi-off topic because it is eerily appropriate for today’s banking environment…

http://tinyurl.com/5hfoxj

.

[Anonymous]

[quote=Aecetia]Awesome quote AK. One of my all time favorite movies.
[/quote]

It’s semi-off topic, but wanted to sure you had seen the alternate ending that was cut from the originally distributed version. It’s only semi-off topic because it is eerily appropriate for today’s banking environment…

http://tinyurl.com/5hfoxj

.

[Anonymous]

[quote=Aecetia]Awesome quote AK. One of my all time favorite movies.
[/quote]

It’s semi-off topic, but wanted to sure you had seen the alternate ending that was cut from the originally distributed version. It’s only semi-off topic because it is eerily appropriate for today’s banking environment…

http://tinyurl.com/5hfoxj

.

[Anonymous]

[quote=Aecetia]Awesome quote AK. One of my all time favorite movies.
[/quote]

It’s semi-off topic, but wanted to sure you had seen the alternate ending that was cut from the originally distributed version. It’s only semi-off topic because it is eerily appropriate for today’s banking environment…

http://tinyurl.com/5hfoxj

.

[bsrsharma]

‘Cash is king’ in market for foreclosed homes

As an aspiring first-time home buyer, Jay Nielsen hoped to find a cheap, bank-held foreclosure in Vallejo that he could finance with a Federal Housing Administration mortgage. What he didn’t expect was having to compete with buyers willing to pay in all cash.

“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 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.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/23/MNTO197NHM.DTL

[bsrsharma]

‘Cash is king’ in market for foreclosed homes

As an aspiring first-time home buyer, Jay Nielsen hoped to find a cheap, bank-held foreclosure in Vallejo that he could finance with a Federal Housing Administration mortgage. What he didn’t expect was having to compete with buyers willing to pay in all cash.

“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 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.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/23/MNTO197NHM.DTL

[bsrsharma]

‘Cash is king’ in market for foreclosed homes

As an aspiring first-time home buyer, Jay Nielsen hoped to find a cheap, bank-held foreclosure in Vallejo that he could finance with a Federal Housing Administration mortgage. What he didn’t expect was having to compete with buyers willing to pay in all cash.

“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 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.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/23/MNTO197NHM.DTL

[bsrsharma]

‘Cash is king’ in market for foreclosed homes

As an aspiring first-time home buyer, Jay Nielsen hoped to find a cheap, bank-held foreclosure in Vallejo that he could finance with a Federal Housing Administration mortgage. What he didn’t expect was having to compete with buyers willing to pay in all cash.

“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 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.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/23/MNTO197NHM.DTL

[Author]

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