While relatively new to the real estate market, cash homebuyers are increasingly becoming popular. If you’ve gone around your estate, you’ve probably seen We buy houses Milwaukee posters; these are buyers who purchase properties for cash.
Unlike contemporary homebuyers, they don’t need financing, which shortens and simplifies the home buying and selling process. Cash homebuyers have disrupted the real estate market in the following ways:
1. Have a Competitive Advantage
The ability to complete all-cash deals gives cash homebuyers an upper hand over buyers relying on financing to purchase their homes. This becomes even more evident in marketable properties with multiple offers. Property sellers will most likely favor cash offers because of the certainty and speed of closing the deal.
Homeowners relying on financing often undergo lengthy processes. Mortgage approval takes weeks or months, causing delays and uncertainty in closing the deal. On the other hand, cash homebuyers don’t need mortgage approval. Cash transactions are also negotiable, and buyers can purchase the home as-is.
2. Flexible Negotiations
Cash homebuyers don’t depend on appraisal reports and lender requirements to proceed with the sale. Eliminating these two hurdles allows cash buyers to focus on the property instead of ensuring they meet strict guidelines issued by lenders. This means they can consider various deals, including homes that can’t meet lending criteria.
Most cash homebuyers are willing to purchase distressed properties that require slight or major improvements. Cash buyers can also accommodate special seller requests. For instance, they can allow sellers to temporarily rent the property for a given period after the sale. This makes them an attractive option to homeowners.
3. Investment Firms and Institutional Buyers
The entrance of investment firms and institutional buyers into the residential real estate market has also increased the popularity of cash home buying. These companies invest heavily because of the stability and ROI of real estate projects. Investment firms have specifically capitalized on the never-ending demand for rental properties. With their aggressive buying strategies, institutional buyers have increased competition and phased out traditional home sales.
4. Impact on Housing Inventory
The surge in cash purchases has also affected housing inventory. Cash home buying is simple, straightforward, and offers certainty to homeowners. This has decreased the number of homes available for traditional homebuyers relying on financing.
As cash transactions increasingly become prevalent, property sellers are more drawn to cash offers. Most homeowners currently prefer cash home buyers to financed buyers, significantly reducing the pool of homes available for traditional financed purchases. Properties stay on the market for very short periods, exacerbating inventory shortages.
The entrance of institutional buyers and investment firms also contributes to inventory shortage. These entities can acquire multiple properties for cash, taking off all the listed properties on the market. Inventory shortage often leads to increased competition and a hike in property prices. This makes it difficult for potential buyers, especially financed buyers, to find properties within their budget range.
5. Challenged Traditional Real Estate Agents
Real estate agents are currently troubled by the increasing preference of homebuyers and sellers to work with cash homebuyers. Traditional real estate agents are finding it difficult to adapt to their strategies and the generally evolving real estate landscape. Some dynamics brought by cash home buyers that negatively affect traditional realtors include:
- Speed and efficiency – unlike financed transactions, cash transactions are faster, resulting in shorter closing times.
- Negotiation tactics – traditional real estate agents primarily leveraged mortgage pre-approval and financed contingencies as their negotiating tools. These don’t apply when negotiating with cash home buyers.
- Property evaluation – mortgage-backed purchases require a strict appraisal process, which isn’t the case with cash transactions. Cash buyers don’t necessarily have to assess the property for potential renovations as they buy properties as-is.
- Education and guidance – real estate agents should find ways of learning the intricacies of cash home purchases, especially tax considerations and legal paperwork.
Successful real estate agents should adapt and diversify their skills to remain relevant in the current real estate market. They should embrace these changes and leverage them as opportunities for growth.
Endnote
The popularity of cash homebuyers will disrupt the traditional homebuying experience and other real estate dynamics. With flexible negotiations, competitive advantage, and reduced housing inventory, cash homebuyers are reshaping the real estate landscape. While these trends can’t be contained, stakeholders should find ways of adapting to the new reality.