Week after week, I receive calls from various clients asking how they can obtain a deal in Chicago real estate. While a lot of factors play into it – the fact that it’s a buyer’s market or that sellers are often very motivated – there is one surefire way of getting the best deal out there: cash.
Many prospective clients may not have high FICO scores or have less than 20% to put down on a Chicago real estate purchase. And when it comes to lending, banks are continuing to be very cautious about who they will allow to have a mortgage. As a result, many sellers have become concerned when buyers don’t have funds to put toward a loan and are looking very favorably to offers that avoid that situation all together—i.e., buyers with cash.
Since cash is king when purchasing real estate, a buyer’s realtor is much more able to negotiate a deal at an even better price than if a buyer is going to need a mortgage.
When a seller sees cash as part of an offer, it’s an extra assurance that the deal will close, instead of not knowing what obstacles might get in the way of a buyer trying to obtain financing. A Chicago real estate deal usually closes within a short time period, sometimes within a week or two, but typically in less than 30 days. Cash buyers can usually make that a speedier process, which is what a seller wants to see.
Using Cash to Negotiate in Chicago Real Estate
This is why, for the last six months or so, I’ve really been talking to potential buyers about having cash ready when shopping Chicago homes for sale, particularly people wanting to buy short sales and foreclosures.
For example, I will soon be closing on a 1600 square foot, 3-bedroom newer Chicago condo right off the lake, with spectacular panoramic views, plus two garage parking spots for $460,000. When the original owners bought the property new not too long ago, they paid over $600,000, plus an additional cost for parking.
How were we able to broker such a good deal? Cash. The buyer could bring the cash to the table and we told the bank we could close in 15 days, or whenever the seller wanted to close. That creates a scenario that is far less likely to run into any problems, and the buyers can rest assured that they got a great deal on their new home.
Cash Buyers Help Move Chicago Homes for Sale
The Wall Street Journal reported this month that this very scenario is what is getting more real estate off the market, with more homes being purchased for cash than ever before. In the Chicago real estate market, 23.4% of homes were purchased with cash at the end of 2010—the highest in at least the last six years. One real estate professional in the article said that cash buyers can take 5% to 10% more off of an asking price than a mortgage buyer could. Having cash also avoids having to go through the lengthy process with a bank–I have found that, when purchasing a luxury Chicago home, the banks are being more stringent when it comes to providing buyers with financing. Rates are lower than ever, but the underwriting on those loans can be rigorous.
Knowing that real estate prices are at or near bottom gives cash buyers a great opportunity to get a great deal on a real estate purchase. With the Chicago real estate market being at a low point, and possibly getting better at the end of the year, this may be the best time to buy. Making a real estate purchase is a smart way to invest your cash during a time that bank accounts are earning virtually nil. If you’re not considering flipping a property and will stay in a home for 7 to 10 years, I believe this is the way to go to come out ahead in that time frame. Not to mention the anticipated increase in the inflation rate in coming years, so real estate and other commodities are good investments.
And for those individuals who are anticipating a Chicago real estate purchasing a home for over $1 million and do not have cash, I have found a major bank source that is emphasizing loans for high net worth clients that will provide out-of-the-box loan ideas to provide money for your dream home. Please contact me at 312-264-5853 or by email at [email protected] so we can discuss how you can possibly have the ability to purchase a home in the million dollar and over range plus obtain a mortgage.