Noah Rosenblatt, Founder & CEO of UrbanDigs, shares his predictions on why cash is still king as the market changes.
How can cash buyers capitalize on opportunities in this market?
The slowdown is a rates-driven one, which puts stress on any buyer that may have less than perfect credit or other financial/employment situations.
Banks will be tighter and financed bids will be lower. The allure of the all-cash bid gets a bigger premium boost due to the removal of risks associated with financed deals.
As prices fall due to rising rates, all-cash buyers stand to benefit the most leverage and negotiability-wise.
Sellers have been used to selling quickly, for top dollar — but the market is changing now, why should a seller jump on a cash offer even if it’s not leaps and bounds over ask?
In a recent blog post, UrbanDigs’ Co-Founder John Walkup wrote: “Sellers enjoyed the luxury of unseasonably high deal volume for more than five quarters now, and for the first time in a while, will need to adapt to declining bid activity and bid levels. To put it in driving terms: The market was speeding along at 100 miles per hour, but will slow back down 65 — with the possibility of a lane closure ahead causing more of a slowdown.”
Assuming the all-cash deal is not too low, it brings a lot of certainty to the closing table, said Rosenblatt.
Between rising layoffs and a negative wealth effect on risk assets, financed buyers can encounter unexpected situations that can delay or cause other issues to the deal.
All cash removes these stresses for the seller.
Can you elaborate on what leverage buyers will have in the coming months and how to maximize that leverage?
When the spread between the bid and ask widens, as the bid drops to changing macro conditions, deal volume slows. This is happening now in our markets.
As deal volume slows, the market gets more and more illiquid which puts heavier strain on those sellers with a time need to sell. Think of job loss, liquidations, deleveraging, or flat our fear for reasons a seller must convert that property to cash.
When a seller needs to move a property in a rising illiquid marketplace, the chances of them hitting a “gap down” bid to end it, becomes enticing.
All cash buyers should seek out these opportunities, as most sellers will choose to take a listing off of the market versus hitting a bid that is deemed too low.
Platinum Can Help
At Platinum Properties, our agents are experts in crafting the perfect offer or negotiating on a property to help you reach your real estate goals. Whether you’re a seller looking to get a strong offer with a maximum return on your investment, or if you’re a buyer looking to capitalize on current market conditions, we can help.
Contact Platinum Properties today for help navigating the changing market conditions.