“They say money talks. All mine ever says is goodbye.” – Red Skelton
My father-in-law is an excellent negotiator. He expects a deal wherever goods and services are exchanged. This includes Best Buy, although I’m told they don’t negotiate prices. From his Ford Expedition to the tux I wore at my wedding he will always ask for, and usually get an excellent deal.
Many of the cash buyers entering the Phoenix real estate market remind me of my father-in-law: skillful, tough and flush with cash from years of careful saving and planning. I actually enjoy negotiating with these buyers. I appreciate their financial prowess. So-called industry experts label these all-cash buyers as speculators. They warn of more bubbles bursting and market implosions. The reality is these are sophisticated investors that recognize two things:
- Real estate is a hedge against inflation, which could be imminent because of the government’s involvement in the banking industry.
- The cash-on-cash return from rental income earned on a median priced single-family residence exceeds the stock market.
But not all cash home buyers are created equal. Just this week I received two cash offers from out-of-state investors. Even though both offer prices were very reasonable and their agents were pros, early on my hunch was that these buyers were not very serious or sophisticated. How? Both asked for a 30-day closing. This could mean that they don’t have the cash on hand or they really aren’t sure about the home and need plenty of time to back out.
So how do you find out if they are for real? Counter, counter, counter. In this case we countered the purchase price ($2,000 more), closing date (from 30 days to 16) and current proof of funds (printed from an online source with today’s date.) If the buyer really wants the home they will pay a little more, close a little early and will have access to online banking. If they don’t they’ll take the time to get it.
However, in this case neither buyer was serious. One agent sent me the counter back rejected and the other called to say “no deal.” At least we didn’t have to wait 30 days to find out.