Cash Offer

In the good years, I got 20% discount for a cash offer with promise "to make every effort to close within 30 days" (coop obviously) I would imagine that cash is very appealing now.

why would it matter to the seller if you buy with a mortgage or cash...also it's up to the co-op board to make the effort to interview you which could take weeks or months.

you are 100% correct. as noted in many threads, while cash is always attractive, a seller who already believes that their price is significantly lowered is not necessarily going to be moved even further down by an all cash offer. no doubt, with two offers at the same price, cash wins every time.

I can see where it would make considerable difference in the case of two offers at the same price. But am wondering if, in the current climate, there would be any incentive to lower the price for someone willing to close in short order, no financing, cash up front.

as i said, depends on context of sale and where seller is financially and pyschologically. try it and see.

tpush - here's a recent thread on the topic. Not much content, unfortunately, but there is a link to an Urbandigs piece that is more substantive
http://www.streeteasy.com/nyc/talk/discussion/10511-how-much-less-to-expect-if-paying-cash

Thanks for the thread. Seems like it's situational and contingent upon the seller's motivations, previous experiences, etc. The only "sure" advantage is if two offers are coming in at the same price. Although it couldn't hurt when making a low offer to mention that it's all-cash, no financing.

The all cash might help with the co-op board, not the seller.

We're sellers and probably would take 5-6% less for a cash buyer. Of course that is provided that they have enough left over to satisfy the coop board thereby taking a lot of the uncertaintly out of the equation.

I never understand the cash offer. Why would it get a dicount at any time unless it's cash in a suitcase and you had tickets to flee the country. You have to register the sale and you must pay all fees and taxes as does the seller. May be you get a discount if the seller is in a rush (plane leaving pronto). I like the Florida approch to a "cash" sale. The Florida method goes like this: Final sale is for example 1.2MM. 950,000 for the RE and the remainder for the furnishings. It's the remainder thing that makes sense to all parties. the sale price clears the mansion tax and the remainder is in cash (suitcase cash) and the seller can do what they want with that suitcase, report it, don't report it, hop on a plane to Costa Rica...who cares. Here you used 'some' cash to lower the price and avoid the very abusive mansion tax, as if your 1000sq/ft purchase would qualify as a mansion to anyone but Umpa-Loompas. This makes some sense

I just had to dicqualify all-cash buyer because she didn't have enough left for the board. A board doesn't care about anything but the carrying charges.

Beholder,
Now that I know that you are selling with a 'fatty' terrace, send me a link so I can take a look. I'm a terrace lover and, it doesen't have to be big to be good but if it's big...it's good.

a cash offer in the current climate makes a big differance. under the new mortgage guidelines many buildings are not approved even though the buyer may be approved. The new quidelines require more insurance, and more ownership by primary tenants. Also mortgages are taking a much longer period of time to clear underwriting. Therefore a seller would be wise to consider a discount for cash.

Just sold my place and here's the advantage a cash buyers has over a mortgage buyer"

1. Faster closing.
2. The cash buyer signs a mortgage contingency which means the only reason the apt won't close is because of the coop board.

Is this a big deal? Depends on the seller, if they are in a hurry to move or if they are worried that your won't get a loan for some reason. I had offers where the buyer was 'cash', but what they really mean is I'm going to refinance my other house or who knows what to pay you in cash. That's not cash, and it will slow you down by 1-2 months because you have to wait for them to get the cash, deposit it, then they will submit a board package.

In this environment, bids don't come in all at the same time. So if you need a mortgage you probably aren't competing with anyone else, there really is no discount, it's what YOU are will to pay. I don't really think you get a discount for paying cash, but it will bump you up on the list of other bidders if there are any.

If you are a cash buyer, I think you are nuts. New York is a non-recourse state. If you default on your loan they can't go after your personal assets. At least give yourself some room for error if real estate crashes 50%

We are an all cash(in a suitcase if you would like) buyer and in our experience it has made no difference whatsoever in obtaining a discounted price.

of course...if you can pass the board (with a mortgage contingency) you can get the loan. as julia pointed out above, the time that the board takes can slow down a deal considerably, cash or no cash.

Thanks for the interesting range of opinions. Is California a non-recourse state, as you point out about New York? There seem to be a variety of takes here, with most on the side of a cash offer being of little advantage. If one has the cash to offer up front, it would seem they also have the personal assets to go after if they default on a loan. Never heard of this non-recourse law..

>>The all cash might help with the co-op board, not the seller.<<

Actually, the opposite is generally true. A board wants to see that a buyer has a certain amount of liquidity after purchase--all-cash can diminish that to an undesirable level. On the other hand, a seller is often eager for a cash offer because it cuts out the need for financing which, especially these days, can often fall through and kill the deal.

If you are a cash buyer, you don't have a loan at all, so you don't need to worry about recourse laws...

California is a recourse state, unlike NY, which means if you decide for whatever the reason that you are going to stop paying back your loan to the bank, they can go after you including garnishing your wages/social security. In NY if you stop paying your mortgage then they can't go after you, it just ruins your credit. I can't confirm this but if you refinance your loan in ANY state your refinanced mortgage then becomes a non-recourse loan. You'll have to speak to a attorney about this.

Here's another think about. If real estate prices do crash (>25%) you as a shareholder in that coop or condo will get slammed with assessments from people that have decided to stop paying their maintenance or just decided to move out and turn in their keys. This was the #1 reason why I sold my apartment. I don't doubt for a moment that I have neighbors that are leveraged up and will soon lose their jobs. It's no different than a landlord that has deadbeat tenants. I know no one is considering this, but I did and I made a decision that I was not going to take this risk and sold my apt. This is happening right now all over America, but not in NYC - yet.

if an owner in a coop has a mortgage the bank is responsible for paying maintenance arrears this is stated in a document called recognition agreement (aka Aztech form) the bank recognizes that they are obligated to pay maintenance to coop. So coop is actually protected with a buyer who has financing. This is NOT true with a condo which is "real property" in a condo all the neighbors get stuck with arrears

oldbroker, banks don't make great neighbors. If you live in a coop where the banks own a few apartments, I like to see how easy it will be to sell you own apartment. Best to take some precaution.