The lender holds all the cards… I forgot the posters name that commented on a thread last week who worked in the loss mitigation group for a loan servicing organization. He was really helpful.
My guess is as follows. First off it depends on how far down the seller is in the hole. If the home is already NOD status and a date has been set for the trustee sale, the lender would probably not negotiate much and simply follow through with the foreclosure unless the short sale amount was significantly more then the opening bid.
I think that the psychology of these darn lenders still needs to get battered some more. The fact that we are seeing short sales on the market for months and months indicates these lenders are still out in space. So all things being equal a cash offer will be much more attractive to a lender then a financed offer. However I don’t think I can answer your question which is, “What sort of premium is my cash offer worth?” 5% better then a financed offer? 10% better? Not sure…I gave up trying to figure out these lenders long ago…
If you have a client who wants to buy a resale house (whose owner is NOT in any financial trouble). Your client wants to make an all cash offer. What sort of premium is that all-cash offer worth ?
It cannot hurt to try for at least 5% less then you would offer if you were going for conventional financing. If the seller is not in trouble, and is not that motivated then there is not much you can do about it.
The true reality of the situation would be to put yourself in the sellers shoes. Say you are selling a home for 500k and one offer comes in at 485k (20% down) and another at 460k all cash. What would you do if you were in no rush, but you had already been on the market for 75 days or so? The 20% down guy had a 700 score, and a steady job… You see what I am saying? It would be hard to pass up that 25k for the all cash offer. Basically both buyers have the same contingency period duration. Yes the all cash offer doesn’t have a loan contingency and will most likely waive the appraisal but still… Now the more shaky the financing gets the more likely you are to get the seller to bite… However I am sure you know all of this.
The motivation of the seller really has alot to do with it. So maybe start with an assumption that the all cash offer can be discounted by a few % and try it, (it never hurts to try) and if they don’t take it, raise the offer a bit or walk and hit them up a couple weeks later.
So I guess the main point is that yes having all cash is great and helps you out. However the desperation factor of the seller carries much more weight at least in this market because financing is still notoriously easy to get… Now if interest rates are a few points higher… that is another story. Credit is still way to easy for cash to command a great discount. Let’s see if that holds in a few years.
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