What Type Of Discount When Buying With Cash?
For example,
I find a house worth 300K...what is a wise bid for it if paying in cash? Cash is king right?
Where would an experienced investor suggest? 220K, 230K...higher? lower?
[addsig]
I would not give any numbers. I'd play "How low can you go?"
Ask: "If I pay cash, what is the lo-o-o-o-west price you would sell it for?"
-- ....(gives number)
Grunt, say : "Can you do any better?"
--- blah-blah (gives the number)
Grunt, say: "I am paying cash. Can you do any better?"
Repeat this "How low can you go?" with variations until the seller loses his/her patience and gives you the "final" number.
Then... just then... take that "final" number and substract from it $10,762 (or whatever looks "magic" to you) and tell the seller that you were hoping to buy for that amount.
In other words - if you mention number first, you lose. The key is to negotiate the best price.
Besides, after you negotiate price for cash purchase, you do not have to pay all cash. Find out what the seller NEEDS. May be you can get terms as well, along with the good price
Hi Olga,
thanks for your response. I agree I would never give the first number...id let them answer my question first, and work from there.
Ok so then there is no "given" discount when paying with cash...just how ever loooow they want to settle on.
Anyone else?
[addsig]
Think about why "cash is king" To the seller it just means no financing contingency and a fast closing. If you are offeringa deal with no contingencies at all ( no other weasil clauses) and will close in less than 30 days AND the home has been unsuccesfully on the market for a while then your offer will be strong. If the house is new to the market your offer will not mean as much to the seller.
When i get an offer of all cash I do know I have a serious buyer - but I want to make sure his other "outs" are not too broad.
When I am making an otherwise weak offer - from a price standpoint or other contigencey or terms - cash is a good motivator.
[addsig]
The fast closing i understand since its available to the seller immediately.
However...it wont work as a good bargaining tool if its a new listing?
Id say cause they want to see what else is out there. But still...if youre approaching a seller on a new listing...and youre the only one with cash...why wouldnt they take your offer...even if its less.
[addsig]
Hi Dare2003,
Depending on the circumstances, they may take your cash offer, even though it is low. If they have already moved out and found their dream home but cant afford 2 payments, they might take it. If it is an estate and the heirs want in and out quickly, they might.
However, here is why they may not;
I recently bought a house that I was going to put on the market for $159,000. A business man came to the property, told me that he liked it at asked me what I would take if he paid me cash. I told him to make me an offer and I will consider it. He offered $136,000 and emphasized that it was CASH. In my situation, I knew that I could get a considerable amount more, and I was in the position to stroke the payments for a few more months if needed. I sold the property to a pre-approved buyer for $155,000. Because I knew the market, I was able to get another $20,000 out of the deal.
It is way too easy for buyers to get loans right now, even up to 100% financing. So that is why Cash is King ONLY in some circumstances!
Best of Success!
BAMZ
[addsig]
From your post, by the way, sounds like the seller might not be a MOTIVATED seller. Then you're just wasting your time (and his/her time as well), because you won't get a good deal.
The other thing is that I just do not understand why would you want to buy a house for cash? Is that what YOU want, or that's what the SELLER wants?
If you give more details on the case, we will be able to give you better advise.
well, i dont want to really state my exact position, but yes it would be wih heirs to an estate, thats why i was asking...and that sounds motivated enough to me.
Thanks for the responses btw. So BAMZ, if im using it strictly in this arena to buy...i would have an advantage. I dont need everyone to say yes. just two or 3 houses bought like this per year.
Anyone else?
[addsig]
BAMZ, one more thing
I noticed in your post you said that the business man buyer offered you the amount 136. As a buyer with cash isnt it wise to let the seller give you an amount first?
[addsig]
Dare2003,
Yes it is . . . however I was the seller. Therefor it was more wise (if that's a word) for me to let him mention the number first. Generally, he who mentions the number first falls short!
BAMZ
[addsig]
Well i planned on doing the counter offers
[addsig]
Good for you!
Dare,
You are right, cash is king. Because this is so; you never know what could happen. Currently I have three homes that I have just put on the market. I know all three will sell in a reasonable amount of time, but if someone offered me cash today I would lower my original combined price by 20 or 25 Thousand. Why, because I'm done with it and I can move on. I'm still making money and I don't have to worry about a call the day before closing informing that my buyers loan package hasn't arrived. I guess my point is, you don't know what the other guy or gal is thinking. Good luck and don't be afraid to low ball 'em.
Dare,
You asked the question
"why wouldnt they take your offer...even if "its less. .... I think that has been answered.
If your intent is to low ball every seller as Flynn suggested, be prepared to make lots of offers. If you know that a deal makes sense and you low ball them, they most likely they will think that you are rediculous, you want to play games, and probably wont be interested in any counters that you bring to try to raise the offer. Low balling will work in certain circumstaces, as I said, Cash is King only sometimes.
As a prudent investor, I would be prepared to stroke payments for 6 months or more before I would entertain taking $20K to $25K less.
That's my 2 cents ... keep the change!
BAMZ
[ Edited by BAMZ on Date 11/11/2003 ]