Retail Cash Sales

[Shaun Reilly]

I was reading an article and there were some hypothetical situations and one of the things ended up being a pretty clean cash offer at ~$200K for a rehabbed house.

What I could not get past is that I just can't imagine that this comes up very much. $200K is a LOT of cash to spend on anything. I kind of figure someone with that much money would fall into a couple different categories.

1) Someone that is still in the process of building wealth and would get a mortgage to take advantage of the cheap money and use that cash to get into other investments.

2) Someone that has saved and lived well within their means to accumulate a nice sum of money. They are fugal and aren't going to be allured into paying the top of the market because the kitchen has granite and cute little pendant lights over the island.

3) Someone that maybe just has a great JOB and even though they have accumulated that much cash they are not necessarily all that investment savvy and would be more likely to use that as a big downpayment on a $600-800K+ house.

4) Someone who has so much money that $200K is a drop in the bucket and will buy a much more expensive home either with financing or a lot more cash.

Part of my "bias" is that $200K is actually a lower end price point in MA. In middling communities you can get into a decent starter home. In nicer towns you are lucky to get into a 2/1 700sqft condo. So my experience at that price point are people having a hard time getting an FHA downpayment as opposed to throwing bags of money at ya.

What do other people see in their markets? Just in my mind I feel that owner occupant cash sales are going to cluster a lot on the very low end like under $50-60K since it is hard to finance them or on the very high end like getting into the million dollar and up area, since the people getting those usually are the really rich.

[J Scott]

Originally posted by Shaun Reilly:

BTW don't know if the guy works in other markets too, but he definitely works in the Atlanta area so your comments leads me to believe that point was thrown into the story overly sensationalized things to make his point.

I've seen some unsavvy investors who will pay over market value for distressed properties (and even non-distressed properties), but I can only think of one situation in the past 6 years where I've seen a retail buyer pay well over market value.

That situation was a bit unique in that the house was out of place for the neighborhood (much nicer) and even though the appraisal probably would have come in 10-15% below what the buyer paid, I still think it was a reasonable price given how much nicer the house was than the comps that would have been used. So, it's really not that crazy in that situation.