Buyers with cash frustrate traditional home shoppers

Even with record-low interest rates and housing prices just beginning to climb, this can be a discouraging time to shop for a home. Cash buyers are snapping up limited inventory, leaving traditional buyers disappointed.

The other day, after weeks of looking, a young Eastside woman and her fiance found their dream house.

“The location was exactly what we wanted, the size of the house was great, it had a backyard up against a greenbelt, it basically was perfect,” she said.

They were pre-qualified for financing and ready to buy. The next day, she said, they put in a full price offer, but within hours, their dreams were crushed.

“There were 14 offers in total and one was an all-cash offer and they waived the inspection and you can’t really compete with cash,” she concluded.

The couple never had a chance to increase their offer.

Cash is king when it comes to buying a house. Windemere’s Wolf Puls, outgoing president of the Seattle King County Realtors, says cash buyers push traditional buyers aside in a head-to-head competition.

“The reason that an all-cash offer would win out is because it eliminates the uncertainty of that buyer who needs to get financing to be able to close,” he explained.

All-cash sales can close within days, not weeks or months. “You’re probably 98 percent to closing if you get an all-cash offer,” said Puls. For the seller, it’s a no-brainer. Take the cash.

Here’s the problem for buyers. The inventory of homes for sale is out of balance with the number of buyers. Real estate experts figure a 4-to-6 month supply represents equilibrium. Right now, in King County, there’s just a one-and-a-half month supply of homes for sale.

In the latest monthly update and press release from Northwest Multiple Listing Service, O.B. Jacobi, president of Windermere Real Estate observed “there continues to be extremely low inventory levels and high buyer demand which is causing multiple offers in many local areas.” He added that there’s also a “definite uptick” in the number of cash buyers, “many of which are investors.”

Statistics from the National Association of Realtors shows that all-cash sales represented almost 1/3 of all housing transactions nationwide in October. And most all-cash home purchases are made by investors.

“Other investments really haven’t brought back any kind of solid returns, so people are deciding maybe to plant their money in real estate,” suggested Puls.

Many experts don’t expect the number of homes for sale to increase dramatically in the next year, making it tough for more traditional buyers who can’t close the deal.

“It’s a letdown because you start to kind of imagine your furniture in the house and the updates you want to do,” said the disappointed young Eastsider looking to buy.

“We were at Home Depot the next day, not looking for stuff for the house, but we were thinking ‘Wow, that tile would look really cool in the bathroom’ so you can kind of start to visualize it as your own and it’s hard to control that.”

Puls offered some words of advice for young house hunters: “Don’t be discouraged because there will be a property that you will be able to make an offer on and have an accepted offer and be able to get your first house.”

Sales activity is picking up. The Northwest Multiple Listing Service just reported the highest number of pending sales for November in six years.