Looking to elbow out your competition in the real estate market? That may prove difficult if you're financing.
In early 2014, all-cash deals made up almost 43% of home sales, according to RealtyTrac. That’s the highest rate since RealtyTrac started keeping tabs on purchases in 2011—and a huge increase from 2013's 19%.
What’s behind this sudden spike? According to CNN Money, it’s a combination of stricter lending standards that make it hard to get a mortgage, plus stiff competition among potential homebuyers.
Putting up an all-cash offer makes a buyer significantly more appealing to sellers, Daren Blomquist, vice president at RealtyTrac, told CNN Money. That’s partly because cash deals are more likely to close on time and dealing with mortgage underwriting standards often delays the process.
“If they have the ability to, homebuyers will put up cash bids just to jump to the front of the line,” Blomquist said.
But homes purchased through all-cash deals aren’t necessarily in tip-top shape. Many of them are actually in the foreclosure process, and some have already been foreclosed on by lenders. That’s why, in the first three months of 2014, cash buyers paid an average of $207,668 for their homes, which is actually 13% less than the homes’ average estimated value, according to RealtyTrac.
All-cash deals were most common in Florida: As many as 74% of sales in Cape Coral-Ft. Myers, Fla. happened sans financing. At the same time, many foreign buyers are making all-cash offers in New York, Boston and cities on the coast of California, Jeff Meyers, founder of Meyers Research told CNN Money.
If an all-cash offer isn’t feasible for you, learn what you need to do to get a mortgage—and move one step closer to buying the home of your dreams.