Cash buyer discounts?

[Charles Phanumphai]

How much of a discount should cash buyers expect or at least should start a discount offer at; ie 10% off asking price? More? Or less?

What’s been your experience?

What worked?

What didn’t?

Thank you BP community!

[Steve Morris]

Well, I'd try 10%, but it depends on the "hotness" of your market.

In apts, usually, we ask 30 days for books and physical inspection and then 90 days after M/A for financing contingency.

If you said you can close in 30 days (be prepared if they ask for proof of funds, which I would do as a seller) without a financing contingency, that's a big plus since it's one less uncertainty to closing.

[Charles Phanumphai]

@Steve Morris I'm looking at the Fort Collins, CO market.  Pretty hot right now.  Will have to figure out what a good percentage is.  And yes, proof of funds would be ready; thanks for the tip!

[Dave Katz]

What us the asset? SFR? Multi-Family? Commercial?

Is the the property listed or off market?

How long has it been on the market?

What is the price point?

What is the Seller's situation?

For a listed SFR under 400k, I wouldn't expect much of a discount, you may be lucky enough to win the contract.

I'm in Fort Collins.  Feel free to PM me and schedule a call

[James Orr]

[Adam Bartomeo]

The funny thing about real estate negotiations is that they are ALL extremely local. Local down to the individual buyer and seller. My experience in several states tells me that 10% is extremely high but if that individual seller is motivated than it might work. Also, if the property is already underpriced they may be unwilling to budge.

[Patrick Soukup]

Cash is King. If you can figure out the problem and solve it, you may be able to get a discount. Need to move quick? Cash can expedite a sale. Appraisal issue, cash doesn't have those problems. If the seller is looking to make top dollar, is in no rush and the home doesn't have any "unique" characteristics, cash is as good as a 3% FHA financed offer, possibly. Find an owner with a problem where cash helps solve that problem and you could potentially expect a discount.

[Steve Morris]

Yeah, offering less-than-asking is tough. You have to offer enough, they take you seriously (hence make your seriousness known by POF and experience). However, as noted, in a hot market you may be one of many which means property will prob go for asking (if your bonafides look better than others) or more.

[James Orr]

I'll add four more things to this thread based on actual data in Fort Collins for @Charles Phanumphai to complement what I already posted above.

First, we see a larger number of discounts in the higher priced properties than in the lower priced properties that we'd typically buy as rentals and that have higher demand. Here's a chart showing that.

Second, you are more likely to get a discount when a property has been sitting on the market for awhile than when it is just listed for sale. This is shown in the chart below.

Third, I found it helpful to dig into the data and look at "case studies" of what has gotten discounts. For example, might I suggest you pull the 100 MLS sheets of the properties that got the biggest discounts in the last year and look at what was actually happening. Did it start too high? Was it distressed? Was it a cash offer that got it done or with financing? And so on...

And finally, having done this data analysis for a number of years, each year is different... sometimes slightly, sometimes significantly.