Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast yes I can
confidently say that it is your favorite
real estate podcast here in the upstate
of South Carolina it's the only one you
need to listen to and it's probably the
only one that you will find I am your
host as always Stan McCune realtor right
here in the greater Greenville area of
South Carolina and as always you can
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all right today we are going to be
talking about cash purchases in the
upstate cash purchases purchases in
which there is no Bank financing
involved and I want to to bring this up
because it was on my mind recently I was
talking to someone about cash purchases
someone that that interested in
later on this year in buying a house
they will be doing so in theory with all
cash and we were talking about the
the Dynamics there because I was saying
about how difficult it is for so many of
my clients that are buyers that need
financing how difficult it them it is
for them to compete with the cash buyers
out there on the market and so I was
going back and forth with with with
this person just discussing those
Dynamics and it occurred to me that
there's a lot of misconceptions about
cash and about what type of what that
means for a transaction how that impacts
a transaction you always hear that cash
is King but what does that really mean
and and what has the market looked like
in recent years with regard to cash
purchases so I have done a lot of number
crunching and a lot of spreadsheet
crunching here for you guys and I hope
that U that you will enjoy this
basically I I
analyzed four data sets technically five
from basically four different years
2018 2019 2020 and then I kind of
skipped over 2021 and instead of
focusing on that entire year I I
basically instead took the took the
year
of the past six months and the past 12
months and and this is from I'm
recording this in early March so I I
instead of taking the year 2021 I did
the past 6 months and the past 12 months
again from early March
2022 and and I analyzed several
different things I analyzed the number
of cash sales I analyzed how that
compares to the total number of sales
and what that means and then I looked
at what type of a of a discount are we
seeing cash buyers get because the
conventional wisdom a few years ago was
if you have cash you can expect to get a
little bit of a of a discount at least
on on whatever purchase you're making
you know it it's going to be you're not
going to have to pay full price if
you're making a a cash offer on a house
is the conventional wisdom well I have
worked with plenty of cash buyers and I
have learned the past year that by and
large that is no longer true now here's
where it can be true it can be true in
instances when a a home is just
overpriced and nobody else comes in with
a full price offer or and or because
these are are probably going to go hand
inand if a home has been on the market
for at least a few days and it doesn't
have any great offers on it that could
be the opportunity you know if it's been
on the market for say a week and it
hasn't gone under contract yet that then
can be an opportunity for a cash buyer
to come in and and maybe get a few
thousand bucks off whatever it's listed
for but a house that is
listed right on the market just just
came on the market you are not going to
find yourself in this market getting a
cash discount and that was what I have
personally experienced now obviously not
a huge portion of my buyers on the
retail side now on my investing side
this is this it's different but but
that's also a completely different
Market but I'm talking just generally
speaking for just people buying you
know their own home that they want to
live in obviously not a huge percentage
of my clients are going to be cash
buyers most of them are are wanting to
finance and so I didn't have a huge
sample size so I wanted to analyze all
this data and look at what has happened
the past few years and and as well I
have felt that there is way more cash
coming into the market than in previous
years and this has been reflected in a
lot of National Data that I that I've
looked at this is why a lot of people
don't think that we're in a housing
bubble because there is there are larger
down payments being made than ever
before there's more cash purchases
than ever before I've seen that data on
a meta level but I had never actually
looked at that data in Greenville
specifically and so the good thing is
that in the greater
Greenville MLS system that we use
which is
Paragon they do have the option to
filter results by the type of purch
purchase whether it was Cash whether it
was a conventional loan whether it was
an FHA loan etc etc and so I was able to
to analyze this to great specificity
and here is what I found
out let's just start in in 2018
2018 roughly I come up with about
18.39% of the total sales in that year
so 2018 basically 18% that's easy to
remember we're going to do trivia
after this so so make sure you you
remember that
18.39% of all the transactions that year
were cash sales so there was
13532 transactions in Greenville MLS and
by the way I just filtered by
residential all residential
transactions and no other filters so
this does not include commercial but
it does include things like land
it it does not include residential
would not include multif family so I
don't have multif family in here these
are generally speaking going to be
single family homes Town Homes condos
things like that individual units so
there were
13,5 32 total
sales of homes that fit that what I just
described and out of those
2,489 sold to a cash buyer $18 18.39%
the average
listing you know among those cash
purchases isn't the average among all of
them but of those that sold cash the
average listing was
$235,000 and N let me say that one
more time
$235,900 that was the average list price
for the homes that sold to cash buyers
and the average sale price was
22658 along with an average of the the
seller paid
$281 of the buyer closing cost now
just a reminder when it's a cash
transaction there's the closing costs
are much less because a lot of the
closing costs are related to your
financing and your escro account and
things like that that that you don't
need when there's not a bank involved
so the amount of of closing costs you
know that's a pretty low number
$281 but you don't need to have a lot of
closing costs paid when you're a cash
buyer okay so all in all in 2018 18%
roughly a little bit more about 18 and a
half% of the market made cash
purchases and of those Cash Cash
purchases they got a discount of
4.09% off of what the house was listed
for so a
4.09% discount now I didn't get further
into the weeds than that because I I
will say this you have to kind of grade
on a curve a little bit because you know
the average in
2018 probably would have been around
that the average house would have sold
for about 98% of what it was list Ed for
so the average would have sold at a
2% discount but basically what we're
saying is that roughly speaking if if
I'm putting all of that data together
correctly and I think I am the cash
buyer in 2018 was getting roughly double
the discount on average that that the
Finance buyer was getting when
purchasing a home so 4% off
just for buying cash or you could say if
you want to to be really accurate
probably a little bit closer to 2% off
again if if you want to adjust it for
the purposes of this discussion I'm just
going to go with the gross number with
4.09% because that will help me to to
better track it in comparison to the
other years 2018 we saw the
percentage of cash buyers go down and in
200 sorry 2019 we saw the percentage of
cash buyers go down in 2020 it went down
down even further I'm not sure
exactly why it went down in 2019 it went
from 18.39% in 18 to 17.21% in 2019
and then in 2020 only
15.36%
of the transactions that happened were
cash purchases now I have a theory for
20120 and my theory is that interest
rates mortgage rates went so low
during the pandemic and so I think that
a lot more people were were you know
that maybe would have normally
considered buying with cash were like
well I mean this is like free money I
can get a a 15-year loan you know at you
know less than 2% why not I'll just hang
on to my cash I'll invest my cash I can
get more than a 2% return and so I
think that that's what happened in in
2020 and the number numbers are pretty
comparable from the standpoint of the
percent discount although the other
numbers are starting to go up so the
average listing from 2018 to 2019 to
2020 among these cash purchases went
from
235,000 in 19 to then
33,900 so we saw an increase in between
from
2018 the average and and I did for for
this data set I did go with average
versus median for a variety of reasons
but we saw the average go from 235,000
basically 236,000 to basically
34,000 that was the average list price
what was the average sale price for
these cash purchases again it was 226
and change for
2018 and compared Aron to the 236
list in 2019 the
$258,700 listings on average sold on
average to the cash buyer for
$248,500 the
$34,000 average sold on average to a
cash buyer for
293,000 and then there were some
closing costs as well to factor in
the both 2000 we already discussed 2018
2019 20 20 were both close to 500
bucks of closing cost 456 in 2019 517 in
20120 all right what that comes out to
remember we said that the cash purchase
discount in 2018 was
4.09% that jumped up marginally I
don't think it's statistically relevant
but it jumped up marginally to
4.12% in
2019 and then in 2020 this is a little
bit more interesting it it started we
started to see that come down it came
down to
3.76% now again
reminder that that is a it's it is
3.76% so so it is still pretty close to
4% but also it's a larger portion of the
overall Pi that is Cash purchases now
that being said it was still the most
cash purchases in this you know up
between 2018 through 2020 because 2020
went nuts in
2018 within this data sample that I
selected there were again
13532 homes that were sold in 2020 there
was 16,67%
49 and higher than what we already said
for 2018 which was
2489 it's the highest but it's the
lowest slice of the pie 15.36%
so that's just something to to keep in
mind I don't know exactly why we
started to see that the alleged cash
discount start to go down at that point
other than the market was starting to
heat up and starting to make things more
interesting but here is where things get
really crazy is when you look at the
past 12 months and I'm going to focus on
the past 12 months I ran the past 12
months and the past 6 months and really
it wasn't statistically I I didn't find
it to be there to be that big of a
difference it just seems like the past 6
months have essentially reinforced
what's what's happened the past 12
months so the past 12 months within
this data sample has been fewer sales
than what we saw in 2020 fewer fewer
total sales
1553 again it was
16675 in 2020 so that's a big drop off
that's a
1,500 home 1500 sale drop off and
that's just the inventory issues it's
not like homes are sitting homes are
sitting for less time way less time than
they were in 2020 it's like half the
days than they were in 2020 it's just
that they there there's just not the
inventory out there but but the cash
purchases went up for the past 12 months
versus 2020 went up over 11 over a,
nearly 1,00 it jumped up in 2020 again
it was
2562 cash purchases the past 12 months
it's been
3,643 for an overall slice of the pie
being
24.4% so roughly a quarter of all
transactions that have happened the past
12 months have been C to cash buyers a
quarter of them that means if you have a
house that has 12 offers on it the odds
are three of those offers are going to
be cash offers that is
insane and and that number that
actually is one of the more interesting
ones that number has has gone up a
little bit I I think a sta statistically
important amount the past 6 months it's
gone from 24.0 4 to 26.5 one nearly a
2.5% increase so we're seeing more cash
purchases now than we did 6 months ago
and way more than we did a year and a
half ago two and a half years ago 3
years ago four years ago we are seeing
cash purchases at a rate that we have
never ever seen
before and why is that well we've talked
about this a little bit but just a
reminder people are freaked out let me
tell you I know this for a fact I'm
talking to people all the time they are
freaked out about the idea of
hyperinflation they don't know where to
put their money they're scared you know
now we've got we talked about a few
weeks ago the war between Russia and
Ukraine as I'm recording this that is
still ongoing I hope by the time this
podcast releases that that we are over
and done with that I I don't know what
to think but regardless people are
freaked out about all these different
things they don't want to put their
money in stocks they don't want to put
their money in crypto they don't want to
have their money sitting in a bank
losing however many percent of value
of purchasing power per year they
they don't want to you know most people
don't want to just have a safe full
of gold and silver that you can't easily
spend anywhere so what other options do
they have they have real estate real
estate is something that we know is
usable there there's an argument that
gold and silver have inherent
value I am not a financial planner or
counselor so I I can't argue one way or
the other I can't give you advice one
way or the other but that argument
doesn't make a lot of sense to me in in
our 21st century economy like that made
sense maybe like 500 years ago but to
me I I don't quite see the the the the
full argument obviously there are some
utility that gold and silver have you
know in in in I I guess microchips and
things like that there are some things
that they have Beyond just decorative
value but outside of that like I I
personally it's hard for me to believe
that if everything goes to pot we have a
a you know an apocalyptic economic
scenario that happens that all of a
sudden people are going to be you know
buying stuff with gold and silver I I
don't know I just I that doesn't make a
ton of sense to me but it makes sense to
some people that are smarter than me so
I'll let you defer to them but what does
make sense to me and to a lot of other
people Is that real estate holds value
and will continue to hold value I'm
not going to argue that it's the best
way to hold value because I am not a
financial planner a financial counselor
as I've already said I can't advise you
in that way but real estate has so many
different utilities right and and I'm
not talking about utilities like like
water and power I'm talking about uses
it has so many different uses you know
whether it's housing whether it's
farming whether it's you know commercial
types of uses there are so many
different things that you can do and
and it's a limited asset we know there's
only so much ground that we can buy up
in this world there's there it's we know
exactly how much there is
whereas we don't know you know some
of these other things you know are
constantly being in INF at in in various
different ways other assets are
constantly inflated in various different
ways there's no way to inflate real
estate well probably someone's going to
dispute that with me go ahead go ahead
go go on the show notes and find my
contact information and tell me how real
estate's being inflated I'm I'm waiting
to hear from one of y'all but anyway
to to conclude my rant on on this I
know from the people I've talked to that
people that have cash are finding and
and it's not just people I've talked to
it is i' I've read this in so many
different places they're finding a safe
haven in real estate it is a place where
you know your money is going to be safe
and not only is it going to be safe it
has been the past few years if you've
made the right decision it has been a
great investment for a lot of people as
we've seen you know appreciation real
estate unlike anything else that
we've ever seen particularly here in the
upstate
so I believe that all of that is why we
have seen this insane amount of cash
purchases happening
now here's where it continues to get
interesting the average listing of the
cash sale continued to go up it went
up from
304 roughly th000 in 2020 to the past 12
months
that's not surprising I you know I
guess the only thing that's noteworthy
is
the well that's pretty close to what the
average because again I was looking at
averages versus medians you know our
median price point is right around in
the in the 280s right now but actually
if you look at averages the averages
come out to about that that 330 range
from the numbers that I've seen so
that's basically they're basically
purchasing an average house is what is
what the cash buyers are looking at what
they're
purchasing and so that was 332 621 and
the average sold price for these cash
purchases was
329,000
with the seller paying
$442 of their closing costs that comes
out to less than
1% of a cash
discount 95% and I'm including the
closing cost in there that comes out to
a
95% discount that's a major major
decrease from 2020 it was a
3.76% discount if you were a cash
purchaser now that has gone down to
95% that is that is massive the cash
discount is no more like that's what
that tells me me Point like less than
one percentage Point what that means is
that the vast majority of these
purchases are either at or above what
these homes are listed for and there's
just a handful of them that are
substantially that are are selling you
know that have been on the market for a
while that are that are selling
substantially less to a cash buyer and
and this fits exactly what I thought I
and I I didn't tweak the data I didn't
try to reverse engineer the data in
order to say
what I was thinking I let the data speak
for itself I literally just plugged in
the numbers and was like okay whatever
it says this is what I'm going to
deliver in my podcast and it said
exactly what I had been seeing in the
market and and this is what I was
telling my friend that I was talking
to about you know cash in real estate is
she asked hey is is Cash still King is
that still what's happening I was like
well yeah
cash is definitely stilling
absolutely but I was quick to say but
the cash discount I haven't seen that
happen in a long time and she was a
little bit disappointed because
obviously she said she's planning to be
a cash buyer and I was like however you
will get the house because you're buying
cash and that's the thing and this is
also a point of confusion for for some
of you this will be remedial but but
perhaps I I I've learned that I need to
explain this a little better sellers
prioritize cash buyers because their
offers can be so much cleaner they can
have an earlier closing date I mean a
cash purchase can close in a week not
all of them are doing it that quickly
but they can they don't have to have
appraisal contingencies they don't have
to have financing contingencies Mo
the vast majority of them do not have
home sale contingencies it can it
there's just so many things that when
you're a financed
buyer that aren't a problem with a cash
buyer the cash buyer is basically going
to get to closing unless something
really really ridiculous happens right
the vast majority of cash contracts make
it to closing it's a much higher
percentage and I don't know if
there's a way for me to pull this data
but I know anecdotally it is a much
higher percentage that actually make it
to the closing table versus Finance
offers and so a lot of sellers they're
looking at their offers all else being
equal they're always going to take a
cash offer versus a financed
offer and and so what's happening here
is these cash buyers are entering into
this pool of a lot of other buyers
you know we have almost multiple offers
on on everything that is below 300,000
and on a huge chunk of things that are
below 300
50,000 and and that's right in that data
set that we're looking at here and so
cash buyers are in the 4A with a lot of
other buyers some that are cash again
a quarter of the buyers right now are
cash and so they're competing in
multiple offer situations and at the end
of the day there does reach a point
where a seller will accept a financed
offer versus a cash offer if it is just
that much better right not very many
sellers are going to leave $50,000 on
the table because you know they want to
go with that safe cash
offer versus a relatively safe not quite
a safe but relatively safe financed
offer and so what's happening here is
that cash buyers to even you know in in
the old days I mean again back in
back in summer of
20120 I had a situation with with a
cash buyer where we were able to
you know have them even in a multiple
offer situation there there it just
wasn't as crazy they were able we were
able to get the price down just a little
bit just a little bit off of what it was
listed for you can't do that now the if
you are a cash buyer yeah cash is King
but you have to at least offer what a
house is listed for excuse me I've been
dealing with the some sickness
sickness stuff in my throat
definitely some bug going around right
now not Co God forbid just a just a
little cold I'm I'm almost over
it but if if a home just comes on the
market listen sellers are not even
considering your offer if it's below
what it's listed for they don't even
they don't even think of that as a
serious offer so if you're a cash
buyer the cash discount it is no more it
it is gone and I'm I imagine at some
point it will come back but I don't know
when I I do do not know when if you're a
financed
buyer I'm sorry I don't know how else
to say this those that are trying to to
buy and and that need financing it is a
really really difficult market right now
you're going up against a a quarter of
the of the people that you're going up
against these multiple offer situations
are bringing cash to the table the only
way you even stand a chance at beating
them is if you go well well above what a
new listing is listed for and make your
offer as clean as possible and I know
all the tricks of the trade again this
is what I do this is my living I've I've
had a lot of clients went out in these
situations where I know that we're going
up against cash offers but you have
to be aggressive you have to come in hot
and heavy and if you want the house you
your offer needs to reflect that there's
no there's not going to be a back and
forth right because if if they have a
cash buyer saying here's my offer take
it or leave it I'm withdrawing this you
know tomorrow you're not going to be
able to get into a back and forth with
the seller they're going to want you to
bring your put your best foot forward
bring your your highest and best offer
right from the get-go and so that's what
I'm encouraging all of my buyer clients
it puts us in a weird spot let's just be
honest I don't I I want my buyer clients
to be able to get the best deal that
they can unfortunately right now the
best deal if you're on that you know
that 350 and Below price point the the
best deal is whatever one that you can
get and that is just me just being
honest it is a brutal brutal Market out
there it's not showing any signs of a
Slowdown what happened with Russia
and Ukraine now you know we talked a
couple of weeks ago about interest rates
well as I'm recording this interest
rates have mortgage rates have come down
even further so so yeah we are seeing
now an even bigger Rush people are are
Panic buying even more we're getting
Panic purchasing from all over the
people that have cash the people that
need financing everyone is trying to buy
right now we don't have enough houses on
the market to to satiate the demand
now Supply should be picking up a bit
we've already seen it pick up in early
March hopefully that will continue
normally that continues and we we
continue to see it go up all the way
through the month of June before it
tapers off a little bit in
July but roughly speaking it it's
going to be a a brutal buying season and
listen if you're suffering from buyer
fatigue I feel you I feel you we we just
need to plow through it eventually one
will work out I'm giving a little pep
talk to my buyer clients that are
listening to this we will pull through
I've got a lot of you a lot of buyer
clients right now we will find something
at some point something will work out
it just has to be in the right timing
has to be you have to be in the right
place at the right time I try to keep my
schedule flexible so that I can move
quickly if something comes on the market
that's of interest to one of my clients
and you guys know I go to bat for you
guys I'll be up sometimes negotiating
something until midnight trying to to
get a deal done for my clients that's
the way I operate and that's what you
have to do in this market so yes cash
is
King but that doesn't mean it's a
discount there is there is no more
cash discount you just end up getting
the house more likely if you're buying
with cash versus
financing that's it for today's episode
I appreciate you guys listening if you
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stay safe and have a great rest of the
week
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