Expert: Sharon Huneycutt, Realtor, Associate Broker, GRI, e-PRO - 1/3/2012

Question
Hi Sharon, I was told that if I were to pay a property in cash in full, the seller would have likely chance of reducing the selling price. Is that true? If so, in your experience, how much would the price be reduced by? I'm thinking about paying no more than $170,000 for a property in cash. Thanks

Answer
Hi Jackie,

In most instances, even if you are not paying cash, the selling price is usually less than the list price.  The amount less is dependent on a number of factors, how long it has been on the market(The longer, the more anxious they are to sell.), what is the sellers mortgage?(If it is high, they may not be able to lower the price much without doing a Short Sale.), Does the owner HAVE to sell(Sometimes the owner does not have to sell), is it an Estate Sale?(The parties selling really have no investment in the property and usually want to get their hands on the money soon), Is it a Foreclosure or Short Sale?(They normally sell for less than market value because banks don't want to hold the assets.) Remember you can counter offers as much as you like.

The first thing to do is get yourself a good REALTOR.  The Seller will pay them.  You should have to put out NO money.  Look for one with a lot of designations.  Those are the letters after their names.  That indicates that they have extra education. GRI, e-Pro, ABR are some that you might look for.  They should be able to tell you what the List to Sales price percentage is for the area you are searching in is. Remember in your situation it is always better to offer low.  Also make sure the Realtor you pick is very familiar with foreclosures and Short Sales as they comprise a large portion of the market in most areas now.  Have your Realtor explain to you how Foreclosures and Short Sales work and explain about bidding wars.  Your Realtor should show you other peoples Listings, not just theirs.

Cash is always King. They already know you have the money to make the purchase so there is no chance of the deal falling through.  It is a good idea to provide the Seller with a "Proof of Funds" letter from your bank along with the contract.  This makes them know you mean business. Never make it for more than the amount of money you are offering them.  You don't want them to know if you can go higher.  Remember to keep enough money aside for unexpected expenses(10% of purchase price) and closing costs(~3% of the sales price). Also offer them a short Closing Date say 15 days from Binding Agreement Date.  If they are still in the house they may want a longer time.

It sounds to me like this is your first house? So I'm going to give you a couple more bits of advice.  
1.Hire a REAL ESTATE Attorney to represent YOU.  Attorneys are the same as doctors, they specialize.  
2. Make sure you get Owners Title Insurance.  
3. Hire a well certified Home Inspector to inspect the house for you.  If possible be there when they do it.  Even inspect foreclosures.  They will not fix anything on the as foreclosures are sold "As-Is", but you'll know what, if any, repair work you are facing and the cost to cure the problem.
4.  If there is no survey on the property, make the sale contingent on the survey being done and being what they say.  Have them pay for the survey and record it, if possible.  If not pay for it yourself and have it recorded.  If it's not recorded, it doesn't exist. Of course this is done Before the sale.
5. On a $170K house, earnest money should be no more than $2000.

Jackie, hope this gets you started in the right direction and good luck to you on your new home.