Wednesday, July 25, 2012

Cash is Still King

When we first heard the national statistics, that a third of all sales currently are cash deals, we had trouble believing it.  Then, when it transpired that that figure in Connecticut was 39%, it was even harder to swallow.  However, as the year goes on, and we look at each transaction closing, it's more apparent that those cash sales really have increased a great deal.  And the difference in those deals can be huge, when the mortgage contingency is removed from the equation.  Closings are faster, deals fall through less often, sellers and buyers feel more committed; however, there is the appraisal problem.

Many buyers feel--and they are often correct--that they will get a better price from the sellers if they offer cash, for all the reasons stated above.  The mortgage process, though, does provide the security of an appraisal, ensuring that the seller is not overpaying.  In fact, these days, with the market improving, the appraisal, as I've stated before, is more often low than high.

Without the need for an appraisal, the seller may want to check the appraisal on his or her own, and sometimes does.  The fact that a deal may be called cash does not mean that the buyer won't seek a mortgage.  It simply means that the buyer intends to close, and can close, with or without a mortgage in place.  So, if they do apply for a mortgage on a cash sale, and the appraisal comes in low, they sometimes try to get out.  Without the mortgage contingency, that can get messy.  If they didn't say that a mortgage was required for them to close, or be willing to close, and they got a better price for that risk, can they now assert the same claim as a buyer who had the contingency?  We're sometimes finding that out these days.