InvestingMarkets & Economy

Cash buyers paying premiums in steep markets, RealtyTrac reports

SVP Daren Blomquist says markets where cash buyers pay more, including Manhattan and San Francisco, could be at risk of overheating
  • Cash buyers in some markets are paying premium prices for properties.
  • This is a sign that the markets are overheated.

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Forgoing a mortgage and putting all cash on a property might increase bargaining power -- right? Not necessarily, according to RealtyTrac’s Q1 2016 U.S. Cash & Institutional Investor Housing Market Report, which shows cash buyers in San Francisco, San Jose Manhattan, Los Angeles and Naples paying premiums instead of discounts. Cash buyers are usually willing to take on properties in worse condition that might not qualify for financing, says Daren Blomquist, senior vice president at RealtyTrac. This is why they frequently sell at a lower price point per square foot. Nationwide, all-cash buyers purchased single-family homes and condos for $91 per square foot (median) in the first quarter of this year, which is 23 percent below the median $118 for all home purchases. However, in 9 percent of home markets, the opposite is occurring. Previously, just 5 percent of home markets had cash buyers paying premiums. The biggest premiums were in Honolulu (6.6 percent), Seattle ...