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Archive for September 2014

We have all heard the phrase “cash is king”.  Various shows imply that cash talks and the inference is a discount is available if you are an all cash buyer.   Is that so?

How much do you think using all cash for a purchase might save you in negotiations with a Seller vs having to get a loan and negotiating with a Seller?

Let’s look at the numbers to find our answer.

We will be using Grand Junction single family home sales for 2013 with data from the Mesa County MLS.
*Areas used were: Redlands, North, GJ City, NE, SE, Orchard Mesa, Fruita, Clifton & Palisade

Using these parameters, here were the number of sales:
Cash- 562 Sales
Conventional: 850 Sales
FHA- 538 Sales

Now we will look at the Average Sales Price to List Price ratio (SP/LP).  This will show us how much the Buyer percentage wise was able to bring the final sales price down from the list price.
Cash- 96.46%  (in essence, an all cash buyer was able to bring the sales price down ~3.5% from the list price)
Conventional- 97.60%
FHA- 98.64%

If you were a Buyer and an all cash buyer, you did save yourself money versus a Buyer whom had to obtain financing to purchase.  Cash beat a conventional loan by ~1.1% or $1100 for every $100K purchase.  Cash beat a FHA loan by ~2.2% or $2200 for every $100K.

How did your guess match up?  Did you think using all cash would create a bigger discount?

 

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