Lower cash offers accepted over higher financed offers

Q: I'm wondering why lower offers are sometimes accepted on a bank-owned home? I hear a lot of homebuyers complaining about how their offer was $30,000 or so above the list price and the seller accepted a lower offer. It seems like many of these are cash offers. Thanks for shedding some light on this situation. -- Tiffany J., Las Vegas

A: This situation is certainly happening more often here in Southern Nevada.

I think the answer to your question has a lot to do with the fact that cash buyers are having a huge impact on our housing market right now, accounting for about 44 percent of all sales last month, according to the Greater Las Vegas Association of Realtors. This percentage has been climbing every month throughout 2009.

The way we're going, I think it's possible that we'll soon see half of all homes here being purchased with cash.

I've never seen that percentage so high. In fact, I don't know of another major metropolitan area in the country where so many buyers are paying cash for homes.

People often ask me who these buyers are and what is prompting this trend.

Of course, most of these cash buyers are buying a home here as an investment. Many of them are buying homes at our current bargain prices and then renting them. With many area homes currently selling for less than what it would cost to build that same house today, I know many buyers who think that's a sound investment strategy.

Some of these people are foreign buyers, who find it far easier to pay cash than to try to obtain a mortgage loan here. Some are wealthy luxury home buyers. Others are simply families with savings who want a retirement or second home in Las Vegas, with some of them finding it too difficult or time-consuming to seek a mortgage loan in these uncertain economic times.

In any case, many potential homebuyers are not aware of this trend. For the most part, I don't think first-time homebuyers realize that more than price goes into the decision to sell, no matter the seller or the market.

At the same time, buyers should understand that sellers don't have to accept the highest offer. They can simply select the offer they deem tbe the best for them.

This comes up often with bank-owned homes, which still account for about two of every three homes sold in Southern Nevada.

Perhaps more than most sellers, banks seem to put a lot of stock in the old adage that "cash is king."

My experience, and that of my fellow local Realtors, tells me that lenders are more inclined to accept an all-cash offer, even at a lower price, than an offer involving various forms of financing.

When reviewing multiple offers, a seller will often look for the offer that is most likely to have a trouble-free escrow and an on-time closing. Many factors affect any seller's decision to accept one contract over another, such as price, financing contingencies, appraisal contingencies, proposed closing date, inspections, closing costs, repairs and other concessions requested in the buyer's offer, to name a few.

It's also important to note that if a home does not appraise for the proposed purchase price, the transaction could be cancelled and the seller would have to start the process over again. I know that situation is occurring more often these days.

So, if you aren't able to pay cash for a home, you may want to sweeten your offer. Consider increasing your down payment. Most of all, I encourage buyers to make the most attractive offer they are comfortable with, and to make sure they understand the terms of their offer.

If not, be prepared to compete with cash buyers for the home you want. This requires patience, since we're seeing multiple offers on most local homes selling for less than $200,000.

Sue Naumann is the president of the Greater Las Vegas Association of Realtors and has worked in the real estate industry for nearly 30 years. GLVAR has nearly 13,500 members. To ask her a question, e-mail her at ask@glvar.org. For more information, visit lasvegasrealtor.com.