Cash Is King: Where Loan Is A Four-Letter Word

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So you’ve scrimped and saved and that five percent down payment is burning a hole in your bank account. You better fasten your seatbelt. It’s going to be a bumpy night.

Or season.

Or year.

Seriously, it could take a while to find a place.

The truth is, in some areas in and around our fair city of Los Angeles, it doesn’t matter how much you have socked and stashed away for a down payment. If you’re not a cash buyer, you’re not a buyer—period.

Curbed reported last year that “One in three home buys in SoCal is now made all in cash.

And this trend is only growing. Now, we’re not talking about the elusive, too-good-to-be-true foreclosure, or a shoebox condo that needs a toe-to-sole reno, or new construction in one of Southern California’s few remaining affordable spots (read: in a location that will test the limits of your good humor on your hours-long daily commute).

We’re also not talking ONLY about investors and foreign money, although those two groups make up a chunk of the all-cash craze. In areas from Culver City to Miracle Mile to Sherman Oaks, it’s millennials and families who are walking into open houses primed to plunk down up to a million-plus.

If you’re flush with cash, it’s hard to argue against forgoing a mortgage, but if you want to debate it, you can check out Investopedia, The Truth About Mortgage, or nerdwallet. The obvious advantage is not having a mortgage payment, although this is minimized by interest rates that are still near historic lows (Imagine weighing the benefits of buying with cash versus taking out a loan when rates were up over 18 percent in the early ‘80s!).

All-cash buyers obviously also have a tremendous advantage with sellers. I can’t personally remember too many instances when I presented a cash offer that was rejected, as long as the offer price and conditions were right. So how do buyers compete with that? Here are a few tips:

  • Up your offer—For a house you really want, you might have to consider going over asking price. The seller still may choose to go the cash route, but, in the end, more money is still more money.
  • Drop your contingencies—A seller is not likely to accept an offer from a buyer whose offer is contingent on the sale of their existing home when they have other options.
  • Try for a quick closing—Anything you can do to sweeten the deal for the seller will work in your favor, and hungry lenders might be willing to help streamline the process.
  • Be flexible—“Sometimes a line of credit on another investment property, or a home-equity line of credit, can help make your offer look even better,” said MarketWatch. “It may not be all-cash, but more-cash is better than less-cash.”
  • Write a letter to the sellers—Yes it’s old school, but it also works. Letting someone into your world and allowing them to have a peek at who you are and why you love their house might help you to leap over the coldness of cold hard cash.

Tripp Jones Real Estate for Santa Clarita and San Fernando Valleys, Call 661-733-4555 or 818-527-6292

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