What is Cash Worth?

Are you serious? Absolutely no premium. The other purchaser who isn't qualified simply isn't a purchaser. Either you meet the threshold or you don't.

They're not unqualified - but they need to do things like get a bank appraisal, have risk of financing falling through, may have a different timeline due to their bank. They're qualified, but obviously they bring risk to the equation. Risk of the board not approving. Certainly, I also have that risk (who knows what the board is ever going to say) but if the financials are in top shape, I should represent less risk to the seller.

It should be worth around 1% in theory, but theory doesnt apply for large purchases and imperfect information. Only the other side knows if you the bidder have achieved a 1% gap between yourself and a competing bidder and if that actually happened, they should make you bid higher to match them or lose it.

Is this in Manhattan?
Here in NY, unless you are a billionaire - and then still - your shit still stinks. Your situation isn't special.

Well aware my shit still stinks.

If you were a seller, would you always go to the highest price, or would you prefer a cash buyer. If so, how much would you value that and why?

Most take the highest price of all bids that meet perceived minimum standards to pass co-op. If many meet that standard and are similar in price, they go to the one with the highest chance to pass (the cash buyer) and ask them to match the highest bidder or drop out.

By my experience, zero or nominal premium, especially with the number of qualified buyers of million dollar co-ops in NYC. The only "premium" would not be financial, it would be that all other thing being equal, the seller would go with someone who is paying all cash or is agreeing to buy without a financing contingency. I obviously don't know your financial situation, but why on earth would you go all cash at that level when you can borrow at 3.5% for 30 years?? Going 50% down would still leave you in great shape with the Co-op Board and leave you with ample liquidity and a nice tax deduction at a low fixed rate. Just my 2 cents.

@cashbuyer2015: When I put an offer for the apartment I now own, the seller had 5 cash offers on the table, including mine. The apartment went to the best and highest offer, which thankfully was mine. I paid a $100K premium on a $4M apartment....You are a cash buyer, so what? Do you know how many more cash buyers are actively looking, especially in your price range? You are nothing special...You must be a newbie or you have absolutely no idea how the NY Real Estate works...

Also, some boards prefer applicants who have mortgages because the lender has also vetted the applicant, adding reassurance.

In your price range I think your premium is 0. Most sellers will take a higher offer first.

The other thing is, many sellers don't need to close quickly. We spent a year selling our co-op, longer than we wanted for sure, but it wasn't a hardship for us.

It really depends on the position of the seller. Many parties in Manhattan/Brooklyn real estate have deep pockets, and few have to get out quickly. (The best exception may be a divorce, where the controlling party sometimes doesn't mind selling at the low end of the range just to be done with the situation).

I agree with John that we often see multiple cash buyer situations (in which case your cash is truly just the price of admission) and with Flutistic that some boards prefer financed offers.

That said, if you find the right situation, it's probably worth a couple of percent.

ali r.
{downtown broker}

cash = ill-gotten gains (drug-dealing, banking, pimping/prostitution, high-technology "business" swindles, et cetera) ... you can see how some coop boards would not like that, and might prefer nice stolid financed deals.

does any of this apply? http://streeteasy.com/talk/discussion/35109-co-op-boards-discriminating http://streeteasy.com/talk/discussion/33006-f-coops

Currently cash is getting the deal done for you over a similar contingent deal , non-contingent deal or lower cash deal. That is the premium in today's market. Of course there are other factors involved with a co-op that must be met. Like Ali said, there are exceptions and your cash purchase may be worth something to a particular seller . We've had few agents let us know in advance that only cash offers were welcome and many others that only offers not contingent on financing were being considered. That said we are seeing what appears to be a small softening in the market (on select properties) over the last few months. Is it seasonality? Time will tell, though we'll take what we can get.

Keith Burkhardt
The Burkhardt Group

ask stevehjx

I'm a potential seller in the co-op $1mm-$1.5mm range. What I'm looking for is a clean, easy offer that will get past the board. Financing is one component.

My building has a lot of unwritten rules. We don't have a ban on smoking, but the board will not approve "new" smokers. Same for dogs -- technically allowed, but not looked upon favorably. Ditto for pied-a-terres and second residences. We have too many of those already.

If you're an "easy" buyer -- no smoking, no pets, no musical instruments, have a professional occupation, and intend to be a full-time resident -- then I think your cash adds to that. Otherwise, I don't think it helps that much.

When we bought into this building, with multiple offers on the apartment, we sold ourselves as the "easy sell" to the board for all of the reasons I mentioned. We did finance, but put 33% down and had a mortgage pre-approval for double what we financed. From what I understand, there was a lower cash offer that the seller rejected, but I obviously don't know what the difference was or what that buyer's profile was.

Hi lad.

cashbuyer2015 have you considered a condo purchase instead? I believe your cash offer would carry more weight in that transaction as opposed to a coop one. In my experience, condo owners can, at times, be in a rush to sell perhaps to liquidate their asset and re-invest elsewhere (real estate/business) or due to relocation. The boards are also more lax than those of coops. Condo owners also tend to prefer cash offers when compared to financing contingent ones. With all that said, even though the condo deal is more favorable, you might still not get a premium. The current market is too competitive to offer cash premiums. Like others suggested, it gives you a leg up in staying relevant amongst the other offers but does not afford you a discount. Your cash offer will carry more weight in a down or buyer’s market. The above are my thoughts and opinions based on my experience in the field and obviously open for debate.

Certainly open to a condo - but haven't found any that I really like. I'm happy enough with the coop restrictions, and the lower price point for most coops is very attractive.

cashbuyer, it sounds like you're the right type of buyer for a co-op, and you do get more for your money.

I have no regrets about buying into a co-op. I find that most of the co-op rules (1) don't impact my life at all, and (2) actually make sense for keeping a diverse group of people happy while living together in the same building.

I'm only considering a sale due to a potential permanent work relocation. (If you're interested in a brownstone building co-op in Chelsea, I may have a limited window in which to offer a no-broker discount. ;-)) The restrictive sublease policy is forcing my hand on selling, but in some ways, it's helping me make a logical (cash out and move on!) versus emotional decision (keep it because I love it and rent it out for the allowable one-year, and then do what?). It's also the responsible decision for the building, which needs owner occupants.

If I moved back to NY in the future, I'd buy in a co-op again without hesitation.

lad, boy would I love to take you up on that offer and get a look at Chelsea. Unfortunately, my commute would be far too long to make that a reality. I love the neighborhood and would prefer to live there, but just not in the cards for me.

Interesting, you rejected a neighborhood without telling us which neighborhood actually does suit you.

You just ask your question and let everyone just respond for your pleasure?

Anyone who responds further to cashbuyer2015 is an idiot.

Sorry fieldschester, I wasn't asking for help finding a neighborhood. You've been very helpful on this thread so far. Thanks so much.

Cashbuyer, out of curiosity, what is the source of all that cash?

My job. Chronic saver here.

Cashbuyer:

1. where are you looking
2. and are you looking for a studio or something smaller

If you have a great job and you have a boatload of cash, who cares where is the source of it ?

The co-op cares.

Rb345 - that's pretty cold

Hi front_porch

Sorry but I don't think the all cash offer will help you in your situation. I recently won in a multiple bid situation, beating out an all-cash buyer. I don't know what the other offers were, but I'm assuming I got it because my bid was the highest and I was already pre-qualified for a mortgage. As many others have noted, all-cash buyers are common in this market. btw, I ended up bidding about 5% above asking price.

I'm coming back to this thread with a different, real-life perspective having now sold my apartment in the same price range as the OP is looking to buy. With multiple offers, we went to best and final and ended up with three serious contenders.

Offer 1 - all cash, at ask, closing ASAP
Offer 2 - $20k over ask, 60% financed
Offer 3 - $50k over ask, 80% financed

Although my initial inclination was to take Offer 3, I ended up taking Offer 1.

Upon closer examination, Offer 3 had a "many moving parts" problem. The (young) buyer had just enough for a down payment, with just enough left over in savings to get past the co-op board. Although the buyer waived appraisal, it still could have been a problem. If the apartment didn't appraise and the buyer had to put down more cash to get to 80% LTV, then he wouldn't have had enough left to get past the co-op board. We listed at an aggressive price, above what agents told us we'd get, so I felt the appraisal risk was not entirely hypothetical. And the only solution to an appraisal problem would have been reducing the price or asking the buyer to get a guarantor to pitch to the Board. Nothing in particular felt high-risk about this offer, but up close, it was a minefield for a co-op. For a condo, where the buyer wouldn't have had to deal with post-closing Board requirements, it would have been a non-issue since he was pre-approved for far more than he was borrowing.

If Offer 1 had been $100k over ask, I may have gambled. $50k didn't seem worth it. After everyone takes their cut, it's more like $45k. Figuring two extra months to close versus the cash offer, and we're down to $40k. When your best selling feature is outdoor space, you really don't want to spend four to six weeks off the market and deal with re-listing your apartment in the dead of winter if your buyer can't get financing or gets rejected by the Board.

Offer #2 had a more solid financial situation, but $20k over ask wasn't enough to sway me to deal with the hassle and the risk of financing. This buyer did not waive appraisal, so it was a gamble. After everyone takes their cut and we account for the delay in closing versus the cash offer, it becomes < 1% advantage in price. Just not worth it. Had this buyer given me Offer #3 ($50k over ask with no appraisal contingency), I would have taken it because she had the cash to deal with any appraisal problems. But she didn't, so I moved on.

Given the realities of the "best and final" offers, I probably would have landed on Offer #1 regardless, but the quick close was icing on the cake. It was the only one that could close before my move overseas. In addition to the $5-7k savings in carrying costs, there was also headache avoidance. I didn't have to worry about coming back for closing or dealing with a Power of Attorney. I also wasn't leaving my apartment vacant in December and January, which is when everything that can go wrong tends to go wrong, while I'm thousands of miles away trying to get up to speed in a new job.

In the end, I was skeptical that cash had value, but in my case, it did. Of course, the offers weren't "all else being equal" -- #1 had a soft financial profile, and #2 had contingencies -- but all else is rarely equal. My newly revised feeling is that cash can be worth 0% (problematic buyer, e.g., trust fund baby with no job) to 5% (slam-dunk buyer compared to a very marginal one) depending on the profile of the offers, with 2-3% not unreasonable.

Would be curious to hear thoughts! I'm very comfortable with my decision, quantitatively and qualitatively, so it's fine to disagree.

cashbuyer2015, have you found a place yet?

Oops, sorry, I messed up the offer numbering in two places. Meant to say if "Offer #3" (not 1) was $100k above ask in paragraph 4, and that "offer #3" (not 1) had a soft financial profile. And sorry for the long post :o. It didn't seem as long when I was writing it. Hopefully it's at least somewhat interesting.

It's very interesting :) Brace yourself tho for the possibility that the all cash closing won't be as soon as you think. It happened to us both as "all cash" deal sellers and all cash deal buyers--we saved no time at all, we did not close anywhere near the on or about date. Delays including the managing agent's closer's schedule, last-minute requirements by the board, unexpected travel, other party not ready to move on time after all, so asked for extension which we agreed to.

Extremely interesting, and I think I finally figured out where you live(d). Nice job on the reno ... and GL on the new job. Come back and visit us here from time to time.

Hi Lad, great job selling the place and fantastic insight.

Yes I found a place, and will update this thread once we're all the way through "the process."

If I was selling in manhattan I would not accept any offer that comes with unreasonable contingencies (eg. mortgage contingency, or anything related to the buyer's ability to come up with the money to buy the place, that's their problem not my problem). If they can't get a mortgage then they lose their deposit. A lot of sellers will take an offer that's a little bit lower (like, .5 - 1% or so) that's all cash vs one with a BS contingency that lets the buyer walk.

>Oops, sorry, I messed up the offer numbering in two places.

Well that certainly lends credibility to your thought process and choices

>I think I finally figured out where you live(d).

Stalker

Congrats, cashbuyer2015!

Not surprised a pro like Ali could figure out where I lived. ;)

I had thought of the offers from high to low, but posted about them from low to high, which is why I flipped the numbering in a couple of places. The thought process was the same, though.

In the end, we were able to do a < 30 day close, which is fantastic for a co-op.

>I had thought of the offers from high to low, but posted about them from low to high, which is why I flipped the numbering in a couple of places.

Once again, you seem very credible.

Good stuff , insightful