Why Are Cash Real Estate Deals on the Rise?

This is an ideal real estate market for cash buyers and according to CNN Money, cash sales accounted for 43% of the national real estate market in 2014.  This is nearly half of all transactions. What has caused an increase in paying for a property in cash?  Several factors contribute, including a tough mortgage lending market.  There are only a limited number of qualified buyers who have not suffered a dent in their credit, a foreclosure or short sale of property in the last five years.  Banks and mortgage brokers are still quite strict with lending requirements.   With Baby Boomers’ retirement looming or imminent, many have the means - and find it easier to pay with cash, rather than relying upon a mortgage lender. 

In some markets, there are inventory shortages, and cash buyers want to go to the head of the line. Often they do – because the real estate purchase is simplified and the closing time may be shortened if the buyer is able to pay in cash.  

Who is the Cash Real Estate Buyer?
There are many different personas capable of paying cash for a home purchase, and there are foreign buyers influencing cash purchase figures.  The reality is that cash buying is on the advance in many states, including Virginia, where the brokerage I represent, Coldwell Banker Traditions says that cash buyers account for 33% of all sales in 2014 as of May 2014. 

Retirees Pay Cash for Homes
The retired sector of the economy now has decades of equity in homes and they are once again on the move. As the real estate market perks up in various U.S. markets, retirees are considering moving out of state to lower expenses and downsizing or embracing retirement community living lifestyles.  Living in the Williamsburg, Virginia real estate market has always been popular with retirees, especially those who love golf, history and plenty of outdoor activities.  

Cash Buyers Looking for Deals
John Starke is a Registered Principal at Financial West Group, based in West Lake Village, California. He said, “I purchased a foreclosure in Virginia that was in excellent condition, so I picked it up.  I saved at least 35% by paying cash for the home in the fall of 2013. The property is in Mechanicsville, Virginia. It’s just 10 miles from Richmond and sits on a half acre.  It’s a 3 bedroom 2 bathroom with an enclosed backyard, to keep my dogs happy,” added Starke. 

Jeff Hurd, Loan Originator at Fidelity Bank Mortgage in Newport News says, “As a lender, I don’t see the cash buy of owner occupied homes. I think the number of people has increased, simply because a lot of people are meeting more resistance to getting a mortgage in the first place.  It’s more of a ‘perceived’ hassle to finance a house.” 


Clearly the trend to pay in cash has benefits for the home buyer.  There are lots of reasons why home buyers prefer this to traditional financing. The most popular cash buyers in today’s market are the second home purchaser, the owner occupied home purchaser and foreigners purchasing real estate in the United States. 

Second Home Purchases Often Paid for With Cash
The second home purchase is becoming increasingly popular for cash buyers in Florida.  In fact, in the Cape Coral area of Florida, cash buys account for 74% of all purchases in 2014.  This is a significant portion of the market, accounting for three out of four real estate transactions.  In the Williamsburg, Virginia market, Coldwell Banker Traditions has measured their cash buys at 33% in 2014 – accounting for one in every three home purchases being paid for in cash. 

Owner Occupied Buyers Pay Cash
The National Association of Realtors (NAR) reports that less real estate investor cash buys are occurring, while property buyers looking for a primary residence who are willing to pay in cash are on the rise. This includes retired couples and individuals who sell their homes and purchase a new one with the equity gained over the past several decades.  It’s also reported that 50% of millennial children will ask their parents to help buy them a home.  Speculatively - many millennial children may be paying cash for homes. For all age groups, nothing compares to the security of home ownership. 

Hurd says that many people are searching for 100% mortgage financing. “It is not available to all home buyers,” Hurd cautions.   To qualify, home buyers must be Veterans, first time homebuyers or homebuyers in rural areas.

Down payments commonly range from 5-50% of home value. “I do have buyers put a big chunk of cash down,” observed Hurd. “It varies. I would say that more than 50% of the people I work with put 5% or less down. Many are Veterans who do not need a down payment or they are in transition and do not have cash at the ready,” commented Hurd. 

Heftier down payments are common, too.  Hurd says, “Occasionally I have a client that puts down 20% or 30% or even 50% on a home purchase. Many people I work with could have bought a house with cash only, but because interest rates hover above 4% it is still enticing to have a mortgage and receive a federal tax break each year.”   

Foreign Buyers Invest Cash in Real Estate
The NAR also reports foreign purchases of U.S. real estate often occur in cash. For example, in Miami, Florida, Latino families and individuals are likely to purchase homes for cash.  In California those of Asian ancestry often pay in cash, too.  Each ethnic group wants their stake in the American dream - and they want it without a mortgage. 

In brisk real estate markets where inventories are low - such as urban areas like San Francisco, Boston and Washington D.C. - some buyers believe if they pay in cash, they will go in front of financed buyers. “From my perspective, a cash buyer may be chosen for the contract in front of a financed buy,” says Hurd. “ It is a generally accepted perception that the home purchase will close much faster if it is not reliant upon financing,” says Hurd. Cash buyers are not receiving the deep discounts (such as the example provided by Starke) in real estate as they did in years past.  Still, in some markets where inventories are low, cash deals may be rather enticing to sellers to speed up the sale.    

Cash home purchases are certainly an optimum way to buy if the resources are available.  Many finance experts usually recommend using only a portion of savings to purchase a home. So, in some cases, a 30-50% down payment may suffice, especially with today’s mortgage rates still low enough to be enticing. 

Learn more about homes for sale in Williamsburg, Virginia. Visit http://www.voncannonrealestate.com.   

Riding the Rollercoaster: Is it a Seller’s Market or a Buyer’s Market?

Is it a seller's market or is it a buyer's market in real estate this year? I say both. This question is posed repeatedly, and answers may vary. In my regional market, Williamsburg and Richmond, Virginia, it is an equal market for buyers and sellers heading into peak sales periods in the spring and summer seasons.

National Association of REALTORS (NAR) Home Sales Statistics

The National Association for Realtors (NAR) reported in April 2014 housing sales and price depends upon the geographic area of the property location. For example, inventories are low and housing is in demand in the Boston and San Francisco real estate markets, driving prices higher quicker. But in Florida, housing prices and home sales are just beginning to recover after years of decline during the recession.

Virginia Association of REALTORS (VAR)

The Virginia Association of Realtors (VAR) statistics report there is an increase of over 17% from March to April 2014 in Virginia real estate market sales, a trend in keeping with previous spring seasons followed by snowy, icy winters. Yet overall Virginia home sales are down by almost 3% compared to April 2013.

The good news for sellers in the Virginia market is that the median sales price for a home is up by almost 3% compared to April 2013, an indicator that market prices are stabilizing. According to the VAR research by the Virginia Center for Housing Research at Virginia Tech, “These numbers indicate that housing prices have recovered in Virginia and have reached a fairly stable level. We expect prices to increase at a moderate rate throughout the spring, as long as inventory increases at an adequate rate to meet demand.”

Inventory is a crucial issue that affects pricing in many markets but it impacts Virginians from all areas of the state quite differently. While Northern Virginia homebuyers may be experiencing bidding wars due to low inventories in some areas, people searching for homes in Southeastern Virginia are experiencing a shortage of inventory in median priced homes ($180,000-350,000). Lack of available choices may put a damper on the decision to buy, but there are not currently bidding wars in the Southeastern Virginia real estate market.

Inventory problems in median priced homes reflect the current Williamsburg real estate market's status quo. So many homeowners are still underwater. Whether they purchased homes at high prices or refinanced, they cannot sell. Sellers that do place their homes on the market need to make sure features are updated – or the price tag has to reflect a lack of updating. In some cases, homeowners that have cosmetic issues (not structural or mechanical) may have to cut listing prices by as much as $10,000-30,000 in order to sell in this market. It's no longer a market where you can just put any home up for sale and expect to sell it in 90 days. Ideally, improvements need to be made prior to placing a home on the MLS.

Request a Custom Market Analysis (CMA) from a Licensed REALTOR

Do not rely on a home's assessment value, or the sale of the home right down the street to accurately price a property. The best way to determine an actual fair market price for any home is to ask a REALTOR experienced in your regional market to perform a custom market analysis. The realtor will examine home sales within a 1-2 mile radius that are comparable to your own home and will let you know the real market value.

What Price to List?

In my opinion, sellers need to get in reality about their home's listing price. Many sellers need to either make improvements or lower the listing price, so they don't miss opportunities to sell a home because it is priced inaccurately or is not adequately updated. I have seen too many homes sit on the market for far too long, for just this type of reason.

There are still vacant homes that are foreclosures and bank owned properties on the market. Many homes have been vacant for some time. When a house is not occupied and nobody is there to see the small repairs, leaks and maintenance nuances going on it will inevitably fall into disrepair. Homebuyers will stop looking at these homes as the stale listing becomes 'shopworn.'

Sellers and Buyers Can Meet at the Table

Sellers must face reality AND buyers must also look more closely at today's real estate market in order to obtain the best price on a home. The days of bidding low on a property purchase by $30,000-50,000 or even more are over. 
Some buyers I have worked with think they can find a home with 100% of the amenities they desire in the price range they want to pay. Because of low inventories in some markets, these homes don't exist. Buyers become frustrated- and this is understandable.

Be Open to Making Cosmetic Changes on the Home

Taking a thorough look at the home market in Williamsburg and Richmond, Virginia areas, I can say that finding a home is easier if buyers are willing to purchase a home and tweak it as they go along, performing upgrades slowly. I recommend sellers accept homes that are not 100% everything they want or cosmetically perfect. However, these homes must be structurally and mechanically sound. If home buyers can make some concessions in covering closing costs or take responsibility for making upgrades after home purchase, many more homes for sale in Virginia would have “sold” in the initial three months on the market.

By all indications, the real estate market nationally, and in my region, is stabilizing and prices are on the rise – albeit slowly – while inventory is flagging in some areas. Buyers and sellers who want to complete home sales have to get together on the transaction to make it work. Compromise and concessions are the keywords of this 2014 real estate market.

Visit:  http://voncannonrealestate.com/articles/riding-the-rollercoaster-is-it-a-sellers-market-or-a-buyers-market.php

Will New Home Building Help Inventory Shortages in Real Estate Markets?

By Elaine VonCannon, ABR, SRES, Associate Broker, Notary, Team Leader, Property Manager, Award Winning Agent

What are homebuyers searching for in today’s real estate market? There are many characteristics of a home – and a neighborhood – that appeal to the current buyer. Many people in the professional job market are experiencing a greater flexibility with personal mobility. They are able to work from home or relocate to a desirable place where employment opportunities are numerous.

Many buyers prefer new homes to existing homes when making a purchase, for a variety of reasons. A new home is not likely to need immediate maintenance. It may even come with a one year home warranty – making the first time homebuyer feel secure in the initial year of purchase.

Housing Market Uptick

With personal mobility on the rise, there are also more female homebuyers (20% of the present real estate market) and the potential for household formation is greater than it was during the recession. Housing priorities that are looked at closely by the buyer have shifted slightly with the times. Homebuyers in today’s market want: shopping, restaurants and entertainment nearby, economic growth, public parks and walking/biking paths, walkability and more.

Low Housing Inventory in Some Markets May be Only Temporary

Since the recession, there are low inventories of saleable properties in many different U.S. markets. Check with the National Association of Realtors (NAR) and state real estate organizations to find the current inventories in your area. The NAR reported on May 22, 2014, "Total housing inventory at the end of April jumped 16.8 percent to 2.29 million existing homes available for sale, which represents a 5.9-month supply at the current sales pace, up from 5.1 months in March." This is a sign that inventories are improving overall.

Renovation Loans and Construction to Perm Loans Available Now

Many banks and mortgage companies now offer renovation loans. These loans are designed to encourage homebuyers and real estate investors to purchase bank owned properties and foreclosures, which generally need maintenance and upgrades upon acquisition. To build new homes to specifications, construction to perm loans are now available. All of this bodes well for low housing inventories in various markets.

New Home Builders, Williamsburg and James City County, Virginia

New home builders in the real estate market today are striving to create communities based on chosen lifestyles. For example, in my region, the Williamsburg, Virginia real estate market, excellent community planning has helped James City County grow in leaps and bounds. There are numerous 55+ communities, golf communities, and gated communities with families and children, and a well-respected education system.

In James City County, new homes for sale include townhouses and condominiums situated near shopping areas and recreation. Many moving to the Williamsburg area are impressed with the plentiful green areas for public recreation and the mild, year round climate. Other enticements for growth include low real estate taxes, compared to taxes in Northeastern states, making a home purchase in Virginia appealing for retired homebuyers.

Major Employers in Williamsburg, VA

Economic opportunities in Williamsburg exceed years past thanks to new growth and strong, key players in the local economy. Employers include: Colonial Williamsburg, The College of William and Mary, Riverside Regional Health System, Sentara Hospital, The National Park Service and many more. In nearby West Point, Virginia, the RockTenn Company paper mill employs many in well-paying jobs.

In Williamsburg, Virginia, strategic community planning combined with economic growth has created desirable surroundings for many. The town is occupied by college students, young professionals, families with children and a significant number of retired people as well as Active Boomers. New home builders have risen to the occasion by adapting their vision to the town’s own future – with great success.

Some of the most well-known communities in the Williamsburg area are Fords Colony, Kingsmill and Stonehouse. These are excellent examples of golf communities that provide quiet, scenic surroundings in luxurious settings as well as numerous other amenities.

New Homes for Sale in Williamsburg, Virginia

Many of the builders currently working in Williamsburg are national production build companies such as Ryan Homes, creating a project in Upper York County named Washington Ridge. Lennar is working on Colonial Heritage in James City County, a 55+ community boasting an active lifestyle for residents. On site there are tennis courts, golf course, pool and a spa as well as other amenities. Then there are numerous communities where the home purchaser can have their dream home built on site, from the ground up.

Buyers Agent Needed for New Home Purchase

Many home buyers find this out the hard way, so be forewarned: do not rely on the builder to provide adequate representation when purchasing or building a new home. By law, a real estate buyer is entitled to a representative, so make sure to secure an agreement with a professional real estate agent. Remember, all of the representatives of the builder work for that particular company – not the buyer. The company representative may be trained to upsell home features and add more cost to the home purchase. A buyer’s agent will negotiate the best deal, at the average cost per square foot in that particular real estate market and is well worth the commission.

As the recession passes into memory and the economy continues to improve, more people will find secure employment and begin new endeavors. Many will want to purchase a home. Any individual, couple or family searching for a home wants to have choices. According to present indicators, low housing inventory will not be a challenge to the home buyer for long as new home building and home financing opportunities become available and popular with buyers. Learn more about new homes for sale in Williamsburg, Virginia. Visit http://www.voncannonrealestate.com.