What is the power of cash?

[Adam Burns]

What is the power of buying with hard cold cash? We all heard the phrase “cash is king”, but to what extent? If you and a seller agreed on a $100k price, 20% down with a 30 year mortgage.. what would be the cash price? My guess is the true power cash has will vary depending on markets, seller motivations, and other variables. In your experience, does having the ability to make cash offers give you a significant edge in the market? Just something I’ve been thinking about and wanted to hear some opinions on.

[Ryan D.]

Bob wants to sell his house. Person A makes an full price offer, contingent upon financing, & Bob agrees. Bob gets excited & begins planning for the future.
2 weeks later person A finds out they have terrible credit & the bank won’t loan him enough money to buy Bob’s house. The deal falls through, & Bob is sad.

Next, Person B & C get into a bidding war, & eventually Bob settles on Person C’s offer, for $15k above asking. Bob gets excited again. Person C gets approved for the loan, but only up to 80% of the appraised value of the house, which comes back at $5k less than Bobs original asking price, which means Person C now has to come up with an additional $20k to close the deal. They ask their parents, friends, and even great uncle Charlie, but can not find the extra money, and once again the deal falls through. Bob is once again, sad.

This all happens twice more, & by this time Bob is now frustrated & a bit angry, because his plans are being postponed by one unsuccessful offer after another.

Eventually, person F walks into Bobs house with a suitcase full of cash. Person F shows Bob the suitcase full of cash, & explains to Bob that she doesn’t have to ask the bank, her parents, her friends, the credit reporting agencies, the appraiser, or even great uncle Charlie, for any kind of permission whatsoever to buy Bobs house. She then offers to buy Bobs house for $25k below his asking price, & tells Bob that if he agrees, he can have the suitcase full of cash right here, right now, & sticks out her hand to shake. Bob is delighted to be done with the whole process, & the deal is done.