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Condo cash offer - is there a typical discount percent?

Posted by jamies (My Page) on
Fri, May 24, 13 at 11:29

Long story. I'll just ask the question and if more specifics are required I'll provide them.

Selling a condo in the outskirts of a major metro area. Building built in 2006. Almost identical unit sold for cash last week. No other comps last three years.

What percent "discount" off "regular" price does a cash buyer "typically" get/expect? By regular price I don't mean asking price. I mean the contract price.

I/O/W How much do you go down for a cash offer?

I know there are no straight answers, but I'm looking for a percentage figure that is tossed around in condo real estate circles that is typical or expected or normal or at least that people frequently hear. I have no idea.


Follow-Up Postings:

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RE: Condo cash offer - is there a typical discount percent?

I don't think there is one here. None.


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RE: Condo cash offer - is there a typical discount percent?

In my local market, not much of a percentage. If an offer comes in that is conventional with just a mortgage contingency with no contingency of sale of another property the seller gets the a check for whatever the full amount is at settlement whether it was a cash offer or a mortgage. So sellers around here won't give much of a discount for not having to wait to see if you actually get a mortgage, because that risk is lowish.

Since most people are pre-approved the inability to get a mortgage doesn't seem to happen so much these days.

People in this area will rarely accept an offer with a contingency of sale on the buyer's current property, and didn't even in the slowest market a few years ago. I thought that sales contingencies were pretty standard years ago.

The most common cash offer around here is a lowball offer on a property that has been languishing on the market, which kinda contradicts what I just said, but that's a different circumstance. It's usually an investor or flipper that does this.

This all probably varies by location.


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RE: Condo cash offer - is there a typical discount percent?

In my area, which is smoking hot right now, many condos are already sold all cash, no contingencies.
The problem with mortgage contingencies is that the bank assessment may be lower than the actual purchase price.
And, of course, it depends on how well the condo is priced.


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RE: Condo cash offer - is there a typical discount percent?

No discount. Just an actual sale instead of something dragging out for financing paperwork.


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RE: Condo cash offer - is there a typical discount percent?

No discount--at closing everyone has cash. Some bring it themselves and some bring via their mortgage.


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RE: Condo cash offer - is there a typical discount percent?

No discount here. Sellers might be inclined to accept an all cash offer over another one if the offer prices are comparable, but there's no money off just because you are paying cash. We put in a two all cash offers when house hunting and in both cases lost to buyers who offered more money but had conventional mortgage deals. And in both cases the difference between our offer and closing price was less than 5%.


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RE: Condo cash offer - is there a typical discount percent?

I think it depends. Ask yourself what you would do as seller, and you may have your answer.
A seller may take a cash offer over a higher financed offer if there's a chance that the bank appraisal will come in lower than the purchase price. This may be a concern especially if there are no comparables.
Also, I don't think that a bank will factor in a cash offer when appraising the condo you're selling.


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RE: Condo cash offer - is there a typical discount percent?

Not much of a discount here either--cash trumps financing, unless there is a huge gap between the offers. Appraisals are a huge issue here (sellers' market--appraisals trailing pretty substantially), so cash offers remove that risk.

The main challenge you'll have is that if the other unit is nearly identical and is the only comp in three years, it will be heavily weighted in the appraisal, so your unit will likely not appraise for more than it sold for (unless there is something special/distinct about yours that makes it more valuable). They do note cash vs. loan in the appraisal (or they do here, at least) but don't adjust for it. So basically, that's probably the most that a potential buyer with financing can offer and still have the loan approved.


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RE: Condo cash offer - is there a typical discount percent?

Not that I would recommend it, but a cash offer doesn't require an appraisal in the same way a financed offer does. A bank will require an appraisal. A cash buyer can, at their own risk, can skip the appraisal.


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RE: Condo cash offer - is there a typical discount percent?

If the other unit sold for substantially less than yours, it wasn't a "discount" for cash. And it's now a comp, and yes, you've got to lower YOUR price.


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RE: Condo cash offer - is there a typical discount percent?

Hollysprings, just for the record, I consider your statement tedious and an insult. I am trying to uncover factual information about a comp sale that it not obvious. Lowering the price is obvious and I am not asking about that. I know ALL ABOUT lowering the price.

I do not need advice about lowering the price. I know how to subtract, and I had an offer in the first week, at the second showing. Price intelligence is me.

Dealing with the terms of a contract that I cannot see, an MLS database that I do not have access to, and the minds of realtors that are opaque is not obvious or easy.

Lowering the price is a cure-all, I agree. The question is how much. That's where the art lies. There are many factors at work. Your response is unhelpful, unnecessary, and unnice.

BTW, I knew it was a comp, too. You seem to assume the whole world is overpriced except you. You would be very surprised to hear my situation and my experience.


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RE: Condo cash offer - is there a typical discount percent?

Jamies, respectfully, I think you need to step back and read what you have offered to us for review. You have more information, so you could take holly's statement as an insult, but factually, and by what you have provided for information, it is helpful information (if not to you, to another reader who might find your question in a similar situation as what you have presented to us).

That said, if you are trying to find something out about a particular sale, call the agent who handled it and ASK. Your first post was elusive. On purpose. I recognize that.

But, I had to do this once because an appraiser had used a house on my appraisal as a comp. Presumably, as an appraiser, he had access to the MLS information that I did not. But, I could not figure out why he used this house as a comp. On the face, it was a comp, but it clearly sold for over 150k less than any other reasonable comp to my house in my immediate neighborhood. I fought the appraisal. And, in order to do so, I had to show why the comps he chose were not comps. For that particular one, I called the agent who listed that house and learned that sure, it was a 3/2 of 1500sq ft like my house, but on the inside, every surface of the house had glued on papers to the walls/appliances, etc. The owner was a hoarder to an incredible level who also needed to (permanently) decorate with their things. It had a tree growing through the roof in one place etc. The agent told me over the phone, had the house been in reasonable shape, it would have easily sold for 150k more (which is more in line with what I had expected...)

Had I not spoke with the agent, I would have assumed it was some sort of arm's reach settlement/buyout.

Anyhow, the point is, Holly is right. It is a comp (I think you know that). But, if you think something was "off" about it, just make a phone call and see what you can learn.

--without being accusatory.


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RE: Condo cash offer - is there a typical discount percent?

IMO, a cash offer is only a stronger offer if there is a financing offer that it is going up against. And even then, like others have said, the sellers collect the same net in the end.


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RE: Condo cash offer - is there a typical discount percent?

Selling requires emulating those who have been successful at doing that. Hire a realtor so that you DO have access to the MLS and reduce your price to very close if not below what the other unit sold for. Your realtor can help you with all of this "invisible" information. It's what they do.

Getting testy with those who you won't share the full picture with only makes you look like an unreasonable seller. If you're that testy with strangers offering you input, then how are you dealing with strangers, aka, potential buyers, viewing your home? Your remarks are only reinforcing the market perception of FSBO sellers as being unreasonable to deal with and overly attached to above market price on their homes.


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RE: Condo cash offer - is there a typical discount percent?

never mind.

This post was edited by palimpsest on Sun, May 26, 13 at 10:05


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RE: Condo cash offer - is there a typical discount percent?

My realtor did not help me with this invisible info. I am paying him. I asked him first for that reason. I am not paying knowledgeable people here, only relying on generosity of spirit.

I have bought and sold a lot buildings and I know about lowering prices and that is not what my question to you was. I am also aware that a lot of people do not understand pricing, and that many people need to hear that. I am not one of those people and I do not feel that my real questions were a waste of energy.

Here are his answers.

Question 1. Was there a buyer realtor and did he get full commission? Did seller pay commissions?
Answer 1. This is a hard one I would say yes, the transaction involved 2 realtors at 2 different offices they actually offered out 3% to the buyers realtor so most likely the owner was paying 5.5-6% commission
- to me, that sounds like he does not know for sure

Question 2. Were seller transaction costs (taxes, fees, etc, etc.) somehow reduced? Did buyer pay them, perhaps?
Answer 2. No way of knowing this,

Question 3. Is buyer paying some costs like real estate taxes, assessments, moving the sellers belongings out, etc.?
Answer 3. No way to tell

Question 4. Was buyer a relative or some other type that makes this not an arms length transaction?
Answer 4. No way to tell, and then only when buyers name is recorded if it's the same name.

Initially I was going to call the selling realtor to ask these questions. I thought I 'd ask my own realtor first, to be honorable, then here second, because I thought I'd have a better chance of getting an answer. Actually, I asked my attorney first; I figured I'd have the best shot with him. But it was Saturday of a holiday weekend and I was impatient. If he has anything helpful on Tuesday I'll update you.

Thanks to everyone who tried to help, especially to those who gave me enough credit to pay attention to my true questions.

"Lower the price" is universal advice. I lowered my price before I ever listed. That's why I got a low offer on the second showing, the third day.

Lowering the price can work, but so can other things, like having the answers to the above question to use in negotiating. Like I said, it's an art. Too bad I don't have a more artistic realtor.


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RE: Condo cash offer - is there a typical discount percent?

Our MLS keeps listings for 10 years. I could have found the answers to all of those questions.
But, I wouldn't have needed them for pricing your unit. The cash offer on the comp did not really effect the amount it sold for.


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RE: Condo cash offer - is there a typical discount percent?

NC - this particular sale took place last week. Is the MLS database the same in Illinois as in your area? Should this info be available on the MLS for a cash sale? Why would my realtor be unable to find it? Perhaps, when the weekend is over, my lawyer will be able to access the info? Are some MLS members less privileged than others?

This is the only comp for my condo for the past 3 years. It is a very telling comp; it will control my sale. MY buyer is not a cash buyer and the appraiser does not have any other good comps on which to rely.

The condos were built 7 years ago and are selling for less than 50% of what the original owners bought them for, so nobody is selling -- that's why there's only this one comp. I have to sell. I need to get the best info I can on this comp.


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RE: Condo cash offer - is there a typical discount percent?

Have you checked your county's property appraisar website?

Often, on ours, selling prices are updated within days. Other times it takes a few weeks.

ML


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RE: Condo cash offer - is there a typical discount percent?

Just some FYI to consider:

MLS is only as good as the agents that put in the info. That means the listing agents need to update it, and various MLS have their own rules about the # of days that a listing has to be updated. For example, we are supposed to put at least one picture up on a new listing within 3 days, and change from "active" to "under contract" within 24 hours, etc.

Our MLS does not contain financing/cash details, just final sale amount and date. So while the listing might offer 3% to the buyer's agent, and that is probably what happened, there possibly may have been changes in the contract that nobody except the parties involved would know about. For example, when I purchased a condo, I rolled my 3% as a price reduction on my contract offer. Someone who went back and looked at the MLS listing would see that the sold price was less than the asking price, but not necessarily know why.

It is not really normal, unless you have a friendly relationship with the other agent, for one to call another one to get the specifics on a contract. It's just not really professionally a normal thing to do. It may not hurt to ask, but I've had to do it and it's uncomfortable, and you stand the chance to look bad. Example, I called during contract to find out the sale price on another condo because I knew it would affect my appraisal because it would close prior to mine. (Otherwise I would've had to wait until they closed, and I was in a time crunch) The other agent, whom I didn't know, was reluctant to discuss, but after some schmoozing I learned that the contract was about to fall apart because their appraisal came in $25K low (on an under $300K condo) and did learn the contract price, too.

Unless it is stated in the listing "seller will help with closing costs" then unless you see the HUD-1 or contract, you can't know the financial details, including whether is it financed or cash (NC might be different). Again, while it is possible for one of the agents or seller or buyer to tell you, remember the agents may be dealing with many clients and contracts and listings and won't necessarily take the time to help you or your agent. After the deed is recorded, your agent should have quick access to the public record (here, via MLS) to see the buyers names and amount of financing and who holds the lien, etc.

Around here, we have a problem with estates. It is not normal for an appraiser to study the title status, so when heirs are selling low-ball to get out of a property, it seriously affects our comps. Short sales and foreclosures are adjusted for (or not used as comps), but estate sales don't have a special designation so the rest of us are screwed.

But taking your OP at face value, there is no "discount" for cash around here. It's just that all things being equal, two identical offers, the cash would be accepted over the financed offer. Slide the cash offer lower, and it might still be accepted over having the home off the market while awaiting financing that might fall through on closing day. At some point, that cash offer would be considered too low and the financed offer would be more attractive. Where that transition is, is up to an individual seller.


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RE: Condo cash offer - is there a typical discount percent?

No $$$ discount on FSBO. The only seller which will offer negotiations on a cash transaction is REO or bank because they may be aware of problems and wish to avoid back and forth on financing also quicker close.

Only discount applies if you can avoid using a real estate agent or lower their %.


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