Nearly one in three October home sales were to buyers paying all cashYet another sign showing investors have become more essential to residential property sales than ever before, nearly one in three October home sales were to buyers paying all cash. The fact is, such a great number of investors are getting winning sales bids using cash with shorter closing times allowing them offer even less money, which may possibly be depressing prices further, especially for distressed properties, concurs the latest tracking survey by Campbell/Inside Mortgage Finance.
During October the overall ratio of cash buyers participating in the real estate marketplace swelled to the highest ever 33.2 percent, increased from 29.7 percent the previous year. Around 74 percent of these investors paid all cash in buying properties last month. Investors amounted for 22.7 percent of home sold in October 2011, an increase from 22.3 percent the previous month. By combining all cash with shorter closing times convinced a large number of sellers to take lower bids. The survey additionally shows that cash buyers thus have the ability to bid successfully significantly less on many properties do to the investors offering a shorter closing time with more reliable closings.
This is especially true for bids for distressed houses, because mortgage servicers disposing of foreclosed properties or REOs most often prefer transactions which will close within 30 days. The total distressed housing market share in December, as epitomized by the HousingPulse Distressed Property Index (DPI), persisted at an upper level of 47.1 percent, via a moving three month average. This becomes the 24th consecutive month in which the DPI has hovered over 40 percent. Although investor offers may not be among the first bids accepted, investors often end up with the winning bids subsequent to other homebuyers have been eliminated because of long mortgage approval timeline issues. Appraisals less than the contracted amount are a widespread reason for mortgage turn-downs. Most mortgage financing time frames now exceed 30 days.
Real estate agents involved the survey made comments on low bids coming from investors. "Investors are extremely aggressive and fully expect to see a 15 to 20 percent reduction off the list price, they can close within 30 days or even less while the majority are cash buyers. The first time homebuyer market sometimes sell for more than asking price which at first is difficult for them to grasp," stated a California agent. "In competitive offer circumstances, cash buyers are "king" mostly due to the common awareness of lender closing problems. Cash sales close within 21-30 days. FHA sales take 45 to 65 days," a New Jersey agent reported. The Campbell Mortgage Finance Housing Tracking Survey has around 2,500 nationwide real estate agents involved every month and provides the latest home sale intelligence and mortgage use patterns.
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- December 16, 2012
Buying Real Estate
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