Two of 11 recent offers received on 2709 Alida were all-cash offers, but the buyer ultimately accepted a larger conventional offer.
The practice has become more common in the Bay Area but not as prevalent as you might think.
During the past few years, cash-only home sales in the East Bay often seemed like the rule and not the exception. But if you couldn’t pay some serious dollars for a home, you had to get really lucky. With that in mind, all cash offers are not created equally, and some are downright ludicrous.
“We recently sold a home listed in the $900K price range for well over its asking price,” said Richard Morrison of Berkeley’s Marvin Gardens Real Estate. “We got two cash offers out of 11 and ended up selling to a buyer who obtained a loan. The cash offers were just too low. It made better sense for our sellers.”
During the recession, when banks were on credit lockdown, it was difficult to obtain capital. So buyers with access to cash tended to win out, largely because of the disastrous mortgage meltdown.
It’s no surprise that the tech sector was partly behind this trend, a testament to the region’s thriving economic engine. But other investors, including overseas purchasers, were also more likely to pay cash, and lots of it, for homes in the East Bay, according to an analysis of Bay Area all-cash sales in the first half of 2015 by Pacific Union. Two-thirds of those buyers were purchasing their primary residence, while only about one quarter were acquiring a second home, this analysis found.
Evidence suggests that all-cash offers are on the wane, because of the economic weakness in China and the softening of the Bay Area tech sector.
“In my estimate, cash deals only make up about 30 percent of recent sales in the East Bay,” added Morrison. “It’s not as pervasive as people think.”
Throughout the San Francisco/Oakland metro area, analysts at Zillow put the percentage of all-cash sales closer to 20 percent due in part to the region’s massive price tags.
Zillow data from the first quarter of 2016 shows Bay Area real estate, where the median priced home averages $800,000, barely making it into the top 50 metros for cash-only transactions, ranking near the bottom at 46th. Compare that to the top five metros, all in Florida, in which the median home price is closer to $250,000. More than half of all real estate deals in these metro areas were made in all-cash transactions.
According to Zillow, domestic buyers purchasing with cash in the East Bay paid between $1.3 million and $1.7 million, while international buyers averaged $2.7 million. However, techies made up the big cash spenders with their median all-cash home purchases at $2.8 million.
In a highly competitive market, cash offers convenience, expediency, and lots of leverage. But if you do plan to make a cash offer, be sure it’s not of the insulting, lowball variety. Because in this market, anyone paying cash is also paying substantially for their new home.