How to win a house-bidding war

Here’s one more thing the housing market crash changed: the frequency of all-cash deals.

Almost 30 percent of home sales this year have been made in all-cash, reports the Wall Street Journal, despite increasing home prices.

Pre-crash the figure of all-cash transactions for homes was at about 20 percent, reaching a high of 40 percent in 2011 and 2012, so it’s nothing new, but the enduring frequency of buyers throwing down all cash is surprising economists. After all, mortgage rates are close to all-time lows, yet sellers are still preferring to take all-cash to lower risk and close the deal quickly.

What’s more is the trend is not isolated to hot markets; real estate in Boise, Idaho and Minneapolis are suddenly having bidding wars, due to the low supply of housing, and the all-cash incentives are winning sellers over.

All-cash deals are being done by big investors, wealthy foreigners or buyers from coastal markets who’ve cashed out and are moving into cheaper markets to downsize (or bankrolling their children’s first homes). But as those offers seem to be winning over and over again, buyers who wouldn’t have otherwise considered making an all-cash offer are looking for new services that will let them be competitive.

Bank of America, for instance, is allowing buyers to access loans worth up to 80 percent of their home value following their purchase if the deal is done in cash, while Better Mortgage Corp. is testing a new offering to underwrite mortgages in a day to allow traditional buyers to have a fighting chance against a cash offer.

[WSJ] — E.K. Hudson