Imagine a family moving from Idaho to Utah. Already in an unfamiliar market, the family discovers they are far from being the only buyers desperate to close on a house. Their first four offers were rejected, but their fifth attempt is finally successful only after one crucial change: They make a full cash offer.
This family’s story is far from the exception and is becoming the new norm in housing markets across the country. Millennials who tried to buy a house in 2021 found that it took multiple offers to finally get accepted. Homeowners looking to take advantage of the market quickly find themselves overcome with buyer fatigue and are dropping out of the process early and often, choosing to stay where they are or continue renting, despite the rise in rent prices.
Market conditions in 2022 are not making the homebuying process any easier; in fact, it’s only going to get worse. As home prices continue to rise to historic levels, buyers will continue to find themselves locked in insurmountable bidding wars against competitors with deeper pockets and greater liquidity who can afford to make cash offers.
Cash Is King
Historically, low supply has tipped the scales and increased demand among homebuyers. Active listings in Utah alone declined 69% between January 2020 and January 2022, and the Beehive State is not an anomaly; the sharp decline in inventory is consistent with the rest of the country. With less inventory, offers are piling up. To get a seller’s attention, it’s not uncommon for desperate buyers to come in hot, offering tens of thousands over the asking price.
How does a seller know which one to choose when so many attractive offers are being thrown at them? They start, first, by looking at cash offers. Cash gives sellers more confidence that a buyer will follow through on their offer. And because not all buyers are using cash, those who do stand out. In a study of sales from 2020 to 2021, it was found that a cash offer quadrupled a homebuyer’s chance of winning a bidding war — even when they offered less money — and they closed faster.
Who Are Homebuyers Competing Against?
Using traditional offers causes buyers to fall behind bigger players in the real estate market, such as investors, flippers and iBuyers — companies that pay cash for homes, allowing sellers to close in as little as two weeks.
In fact, investors on Wall Street are dominating residential real estate. With the help of tech giants with deeper pockets, Wall Street’s plan to “eat up” the market has been wildly successful. In metro Atlanta, four in ten home sales went to investors (subscription required).
First-time home buyers have to face giants, and the biggest …….
Source: https://www.newsweek.com/democratizing-cash-offers-everyday-home-buyer-1690604
