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Robbien Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 03:42 PM
Original message
'Cash is king' in market for foreclosed homes
Source: San Francisco Chronicle

As an aspiring first-time home buyer, Jay Nielsen hoped to find a cheap, bank-held foreclosure in Vallejo that he could finance with a Federal Housing Administration mortgage. What he didn't expect was having to compete with buyers willing to pay in all cash.

"Since January, I've put in 10 bids (on foreclosed homes); some were up to $80,000 over asking price and were still turned down," said Nielsen, 41, a medical assistant. Each time, the banks selected offers from investors with all-cash offers - even when those offers were lower than his, Nielsen said.

"Cash is king right now," said Glen Bell of Keller Williams Realty in Berkeley. For foreclosed homes, "a cash offer that hits the target price will many times trump a higher-priced offer with a loan. The ability to close has become just as important to banks as price. The prospect of a property being tied up longer, still on their books and then falling out is costly."

Cash offers close escrow quickly and easily, while offers with a mortgage now often take 45 days or longer to close and can fall through if the financing hits any snags.

The result is that average consumers say they are being shut out because they can't compete against deep-pocketed investors snapping up homes to rent out or flip. The situation could have long-term repercussions as neighborhoods shift toward more heavily rental, and it has frustrated many who hoped that low interest rates and increased affordability would let them gain a toehold in the market.

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quakerboy Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 03:50 PM
Response to Original message
1. yup
its pretty fuggered out there.
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paulk Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 04:20 PM
Response to Original message
2. it's been going on for awhile
about a year and a half ago (back when we still had jobs and savings) my wife and I were looking into buying a foreclosed property - we lost out on several bids to cash offers, one where there was an obvious inside thing going on between the listing realtor and the bank - the property was listed at least 30-40k below what it should have been even as a foreclosure, 3 day bidding period - cash sale below list even though we bid above the asking price...

the same fuckers who caused this mess are the one's benefiting from it.
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WriteDown Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 04:23 PM
Response to Reply #2
4. So the banks taking a larger loss...
benefits them? :shrug:

Cash offers will always take precedence.
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paulk Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 04:34 PM
Response to Reply #4
5. who has that kind of cash?
defend the banks if you want. they're all scum, AFAIC. Especially when there's something fishy going on, like the incident I posted about. They created this mess, my taxpayer dollars bail them out, and some rich bastard who can come up with 100k benefits.

It's not like I expect life to be fair, but regular folks are just getting fucked all the way around in modern day America.
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WriteDown Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 04:36 PM
Response to Reply #5
6. You'd be surprised...
The people I speak with at the auctions who usually have cash, usually have received 100 or 200K via inheritence from a parent of grandparent. That is the most common story. You hear some wacky stories about other ways too.

What you described wasn't fishy. Banks and everyone else in the world want guaranteed money.
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Igel Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Aug-24-09 10:36 AM
Response to Reply #5
15. My brother inherited a fair amount of dough.
They're buying a house, in Phoenix, and paying cash. Our aunt and uncle had both worked, been childless, and scrimped, saved, and invested from the time they got married. Working class in origin, white collar (clerk and secretary by "trade"), they each had nearly $2 million in their investment and retirement accounts when they died. The aunt got all the money, and then left it to her nephew's wife.

Then again, my parents, when they moved to Arizona, paid cash. They'd made a bid on a house in Arizona in '96, specifying cash, because they were confident their old house in MD would sell quickly. They got the house, their old house sold after 4 days on the market (counting late Friday afternoon, Saturday, and Sunday as days 1, 2, and 3).

We bought a house that was foreclosed on. It was purchased, for cash, by an investment group. No, they weren't banks. They were a group of 5-6 people who took their $100k or $150k speculation capital and pooled it. Voila: $600, enough to buy something like 6 houses last fall, and turn them around within 6-9 months for 10-20% more than they paid for them. Why the profit? Because they bought them at auction, with cash in hand, from banks that just wanted to get rid of houses. The investment group took the time to sit on them, clean them up a little, and get people like us, who didn't have cash but could get financing.

Three different ways for a house to be paid for in cash. I suspect that if I had another brother or sister they'd have found a fourth way.
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WriteDown Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 04:22 PM
Response to Original message
3. What's nuts...
is that if you ever go to the auctions, and I have been to many, you see people walk in with bags FULL of 1000$ money orders. And the people vary widely, I've seen slobs with grease stains on white t-shirts and kids no more than twenty full of gold chains reel off 100 1000$ money orders after puchasing a property at auction. I really wanted to ask that kid where that money came from.
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BadGimp Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 04:38 PM
Response to Original message
7. Anyone NOT see this commin?
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QC Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 05:34 PM
Response to Reply #7
8. This is what asset bubbles are *designed* to do--to funnel wealth
into the hands of the super rich.

All has gone according to plan so far.
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ThomCat Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 06:27 PM
Response to Reply #8
14. Unfortunately, you're absolutely right.
The right aren't about to let poor people take advantage of these deals. Only rich people are supposed to get big discounts. That's the way things work. :(
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louis-t Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 05:57 PM
Response to Original message
9. I deal with foreclosures and HUD all the time.
HUD says they want "owner occupied". They allow 10 days after a home is listed for owner occupied and non-profits to bid on the house. But if owner occupieds don't bid high enough, they open it up to investors. I see very few that are bought by those that will occupy. They are pricing homes to get people excited. They are succeeding. There is plenty of supply, plenty of demand. Speaking for MI, the "bottom" has been found in the lower price ranges and homes that were selling for $15,000 last winter are now going for $25,000. This past March is when the investors started coming out of the woodwork. They are coming from other states, and other countries. Before that it was easy to get your offer accepted. It is very frustrating trying to make a living as a Realtor right now. I have sold 15 houses this year, have written 3 times as many offers, and still can't pay the bills because prices are so low. The statement that "cash offers close quickly" is inaccurate. HUD still takes 45 to 60 days for cash offers to close. Bank-owned take a minimum of 30 days because the banks are overloaded. What I have seen is banks will reject FHA offers or even any financed offers if they get burned on a previous buyer that couldn't close. I have seen a bank slash the price and say "cash only" many times. Hang in there, there are deals to be had for average consumers, but buyers have to get rid of their "how much do you think they'll come down in price?" mentality. Prices are at historic lows and buyers still want to beat sellers up. Go on the HUD site and look at the bid statistics. You'll see investors and average buyers bidding $2,000 on a house that is listed for $30,000 that should be selling for $100,000. Look at the big picture. You may never be able to buy a home at these prices again, even if you overbid. Unless we get 8 years of another dumbass Republican president.
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Schema Thing Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 06:01 PM
Response to Original message
10. I just purchased a motorcycle from an RE investor...
he just purchased, off Craigslist, 18 acres with a house and a pond in Oklahoma for 27,900.

It was going to go into foreclosure, so the owner just let it go for cash.

The guy has listed it for 89,000, and gotten 10 inquiries already.
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diamidue Donating Member (606 posts) Send PM | Profile | Ignore Sun Aug-23-09 06:02 PM
Response to Original message
11. I wouldn't buy now.
Especially in Western states. And I wouldn't be so confident of renting these homes out - except maybe to multiple parties pooling their rent. Housing prices are still dropping. Unemployment (and the sad lack of employment in the near future) make it all a dismal situation.

However, if you need someplace to park your money in times of uncertainty & you fear banks going under, hyperinflation, and stocks crashing - I can see investors wanting to put their money into something tangible like real estate.
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gorfle Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 06:08 PM
Response to Original message
12. I take this as good news.
If investors are finally coming back into real estate it tells me that they believe we have reached the bottom of the decline in home values. That is good news.

I'm not sure how the banks are getting away with accepting bids for lower offers, though. I would think if you have been approved for a loan, then you have been vetted for that loan and your bid should be as good as cash.

Maybe the rules are different for foreclosures?
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madmax Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Aug-23-09 06:20 PM
Response to Original message
13. Cash is always king
My husband and I are firm believers in living below your means and not buying on credit, unless you absolutetly must.

Learned my lesson in my mid 20's. Up to my neck in cc debt. Was so easy to get into it but, was painful and took sooo long to get out of it.
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redqueen Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Aug-24-09 10:37 AM
Response to Original message
16. Who could have guessed that it'd be the wealthy taking advantage of this situation.
The mind boggles.
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