Is Cash Really King?

Is cash really king in the Seattle real estate market?  Yes, cash has been fairly dominate in the Seattle real estate market for at least 12 months now.  We’ve especially seen a strong presence of cash buyers in the entry level first time home buyer market in the surrounding area, representing anywhere from 50-75% of the overall buyer pool depending on demographic.

How are first time home buyers paying all cash?  It’s more likely that this make up is comprised of institutional, small time and foreign investors.  Also, we have seen many situations where a first time home buyer’s parents may give them a loan to buy their first home and charge them a standard market 4% interest rate, as it gives them a much better return than say leaving the money invested in CD’s or the bond market.

How does this affect first time home buyers?  Competition is already stiff in the Seattle real estate market due to an influx of buyers and very few homes for sale on the market.  Cash buyers are generally given preference by sellers because this type of buyer can close very quickly, generally doesn’t require an appraisal or inspection, and doesn’t have to worry about meeting underwriting guidelines to receive a loan.  So it can be very difficult for first time home buyers to compete in this arena.

Is there any way first time home buyers can compete with cash buyers?  Yes, but it can be tricky.  First time home buyers can employ many different strategies including; conducting a pre-inspection, waiving their financing contingency, using an escalator clause, offering more earnest money, and much more.  However, it is important to understand before using any of these strategies, that they each come with pros and cons.

Don’t make the biggest financial decision of your life without getting educated!  If you’d like to find out more about competing with cash buyers or about the home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer/Down Payment Assistance workshops.

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