I was working with some buyers this past month looking to purchase a home in Dr Phillips, Florida. They were serious cash buyers making offers within the first couple of days but to their surprise we could not get any of the sellers to accept. They were starting to get frustrated so we sat down and talked about the real estate myths they had been declaring early and often the past month.
1. I have cash. Cash is great and makes any offer look attractive but what is the dollar value for a buyer paying cash? When sellers close they get cash, whether it's a buyer with financing or not. What a cash buyer is doing is waving a financing contingency, so what is the value? For a buyer making an offer on a home priced between $200,000 to $300,000 that buyer could expect to save any where from $3000 to $7000 on the home's purchase price, a home priced $400,000 to $600,000 any where from $7,000 to $15,000. Trying to get a seller to take a bigger hit for your cash offer they might as well go with a buyer financing or lower the list price to see what the market will bear.
2. Banks don't want own homes. Banks have a great strategy selling their inventory, finding market value and staying firm on price. Banks get 2 to 3 BPOs (Broker Price Opinions) and list right at that BPO or a little under. Banks love to sit 30 to 40 days to see what kind of activity they get and if nothing, do a gradual 5 to 10% price reduction and let the market come to them. What you don't see are banks accepting low ball offers just to dump homes. Banks don't want to own properties but they are smart selling them.
3. The Dr Phillips community is still a declining market. If this were true then show me those low 300k homes in gated Phillips Landing or the single family properties in Vizcaya in the 200's. What happened? Sellers in these sought after communities like Dr Phillips don't have to list that low because buyers are seeing value. It's no secret people love Dr Phillips real estate, great location, award winning schools and that community feel many buyers look for. Make no mistake home prices have fallen the past 4 years like pretty much every other community but it has bottomed out. Basic economics is gradual decreases in price until value returns, that's four years of declining prices and today, some great homes attractively priced.
4. I don't want to look at short sales they take to long. Sure if you need to purchase asap the bank owned and regular sales may be the way to go but for buyers that are looking for bargain homes the short sale are getting done. The early years of the declining market the short sales were a bear to close but over the past two years banks and real estate agents have learned how to streamline the process. What a buyers has to watch out for are the short sales that are priced unrealistically low. Some agents still think the best strategy is to list low and get that first offer to start the short sale process with the bank. Most times the end result is the bank comes back with a much higher offer and the buyer walks but the agent and seller now have the purchase price the bank would accept. The only thing is the first buyer had to pay the price of waiting around 2 to 3 months.