Expert: Diann Tonnesen - 3/1/2011

Question
QUESTION: Should I advise the agent I choose that I can pay cash for a property up front or after the negotiations have settled on a price?

ANSWER: Hi Mitch!

Hopefully you have interviewed a few agents and have chosen one that will represent your interests to the maximum. Once you have selected your agent, absolutely you should tell him/her up front that you will be paying cash (or at least that the possibility is there in lieu of getting a loan). That will be one of the negotiating tools that your agent uses to try and get you the property you want for the lowest possible price.

The ability to pay cash can do several things for you. If there are no other offers on the table, the seller is more apt to take less than what they wanted from a cash buyer. If there are multiple offers on a property, sellers will look at who can close the quickest and who is the strongest buyer. If the bottom line to the seller is the same, cash buyers trump loan buyers and cash offers can always close sooner. Or if the cash buyer has offered less than the buyer that needs a loan, the seller is also much more apt to give the cash buyer a second chance to match the other buyer's offer.

So you want to give your agent all the ammunition he/she needs to do the best job on your behalf. :)  Good luck with finding just exactly the right property!

---------- FOLLOW-UP ----------

QUESTION: Thanks for your input. Kind of on the same subject. If a house is in foreclosure or short sale, is there a guideline to follow in regards to offering an amount below asking? ie: asking $189,000 and offering $120,000 CASH

Answer
Hi again, Mitch. Unfortunately there are no set guidelines to follow when making an offer on a foreclosure or a short sale. Many times, especially if they are listed below market value, foreclosures or short sales may actually sell for more than list price.

On short sales especially, the bank doesn't even make the decision. It is up to the investor who is owed the money. You could take two identical homes worth exactly the same amount and one investor could decide to settle for $150k while the other won't settle for less than $225k. (That's part of what makes short sales so frustrating. Sometimes what the investor will take has no basis in reality!)

Bank foreclosures are kind of the same way, except the asset manager for the bank is apt to be more consistent on what percentage below market value they will accept. You should ask your local real estate agent if there is an average percentage below market value that is accepted by local asset managers on REOs, but keep in mind that it will still vary from asset manager to asset manager.

Again, hope this helps and happy hunting!