WASHINGTON — The average family on the hunt for a home in the Washington metro learns quickly that time is not on your side and the only language that everyone understands is that of dollar bills.
"In today's terms, you need to come correct," said Justin Noble, Realtor with Sotheby's international and husband of WUSA 9 Reporter Evan Koslof.
An increasing number of home buyers are flooding the market with all-cash offers; paying thousands above the asking price and closing contracts much faster than the typical 30 day contract period.
“Last year, cash offers were insane. About one in every four homes sold in the DC metro area was a cash offer,” explained Noble.
In some DC neighborhoods, like Forest Hills located in the upper Northwest, all-cash offers made up 80% of the offers placed on homes. Washington is not alone in this trend. Data from the National Association of Realtors showed cash buyers represented between 15% to 25% of real estate sales last year.
With the economy still recovering from the coronavirus, supply chain issues slowing down distribution and war abroad, where are families getting all of this cash? Some buyers are selling assets, dipping into retirement accounts, and some are even borrowing money from loved ones. The extra cash provides greater flexibility to provide a competitive offer where house sales can close faster and for a higher price.
Investors are also a variable in the equation. Noble noted a few of his contracts where investors offered $200,000.00 to $500,000.00 above the asking price.
“The investors are constantly hunting for property. And generally speaking, the investors are offering all cash which puts the first-time buyers at a significant disadvantage,” said Dr. Lawrence Yun, Chief Economist for the National Association of Realtors.
In this current climate, it's all about the sellers, several agents explained. Whatever the seller wants, the seller gets. In spite of the competitiveness, Dr. Yun is a bit more optimistic. He believes 2022 presents a little more hope for first-time home buyers. Developers are building more houses to try and meet demand. The added inventory means a little less competition.
“With the market somewhat coming down, it will offer better chances for first-time buyers who have to take out a mortgage,” said Dr. Yun.
There are ways for first-time buyers to get around the army of all-cash buyers. There are companies that can provide all the cash needed to secure a house. The fees, however, can be excessive and cost-prohibitive. Also, having an agent that is both willing and can write a competitive offer helps. A faster close and greater assumption of closing costs help you remain competitive.