More than one-third of the houses purchased in California in 2012 were all-cash sales, a record for such transactions. DataQuick recently in a Feb 2013 report said that there were 145,797 condos and houses purchased in the state without benefit of a mortgage, 32.4 percent of all sales. In 2011, which was also a record year, there were 125,812 such sales or 30.4 percent of the total. Cash sales have represented an average of 15.6 percent of sales each year since 1991 when DataQuick began collecting data. DataQuick attributed the sales to high investor interest, a difficult mortgage environment, and perceived higher returns on investments.
Everybody in our profession can guess several reasons causing this.A few that come to my mind are
- Purchase a property to flip and earn returns
- Buy at the lowest cash price now to get the best rental returns
- Improve their chances of getting the property by promising a quick close with cash money
- Investor money coming from outside the country for real estate investments
- Mortgages not being available to all investors
Cash buyers paid a median $205,000 last year, up 17.1 percent from $175,000 in 2011. Buyers who financed with a mortgage paid a median $305,000 in 2012, up 10.5 percent from $276,000 a year earlier, DataQuick reported. The number of cash buyers purchasing homes costing more than $500,000 rose 35 percent year-over-year while cash purchases below $100,000 fell 11.2 percent. DataQuick said some buyers of mid- to high priced homes used cash either because they couldn’t qualify for a loan or wanted to better their chances of prevailing in bidding situations. It’s likely that in the sub-$100,000 market cash-paying investors simply couldn’t find enough homes for sale in that price range as foreclosures have slowed and many people in lower-cost areas still owe more than their homes are worth and can’t sell.
Mortgage buyers spending more than cash buyers clearly indicates the scope of purchasing and flipping the property.
Fifty-five percent of cash purchases were made by investors or vacation-home buyers. Multi-home buyers represented 28 percent of the cash market; 11,700 of those buyers bought 41,500 homes a 19 percent increase in buyers and a 36 percent jump in numbers of homes they purchased compared to 2011. Individuals and partnerships bought as many as 1,300 homes but most brought fewer than five and 65 percent bought two.
Generally,all lenders offer cash out on properties only 6 months after purchase.This limits the ability of the investor to buy more properties since the cash working capital may be fully invested in homes.
We offer two products that can work really well for such investors
The two products combined can get a lot of your clients back into the market.All they need to do is Cash Out on the current investments and add more real estate to their portfolio. Realtors and clients can have strategies to buy in cash ( to ensure they get the deal at the most competitive price ) and then cash out to liquidate investments and get back in the market for more homes.