There’s more to cash home sales story than out-of-state buyers
Published 3:40 pm Monday, October 31, 2022
Cash sales are the gold standard and fertile ground for local real estate urban legends. The most frequently cited antidote involves cash-rich, out-of-state buyers swooping in, overbidding locals, and driving home prices up. There is some truth to that story, but it’s not all the truth. Cash deals accounted for a higher share of home sales during the Great Recession recovery years of 2011, 2012, and 2013 before pandemic refugees were flocking to the area. Back then, cash sales accounted for almost half of all local home sales.
There’s no argument that cash-rich, out-of-staters have and are driving some cash deals. But there’s little to prove they dominate the cash sales market.
Here’s where cash sales tend to be more common:
– An investor (or investment company) is interested in the property
– The buyer has just sold their previous home and has sale proceeds to pull from
– The seller has approached an iBuyer about buying the house
– There’s lots of competition, and a buyer wants to stand out
– The property needs repairs or renovations and attracts flippers. They account for about one-in-every-ten local home sales.
Sellers and listing agents love cash deals. It means no risk of buyer financing falling through and usually a faster closing time. It also tends to cut through some of the negotiations.
So far this year, all-cash deals in the primary counties NETAR monitors have accounted for an average of 229 sales a month — about one out of every three single-family sales. The U.S. norm is a quarter of sales. Cash sales have been declining since April. They dropped to 28% in September.
While the number of deals is waning, cash buyers are wielding bigger negotiations stick. Last month they averaged getting a little more than $7,000 knocked off the asking price.