August 2013 Report
All-cash buyers come in three main categories: the first group consists of investors buying foreclosed-upon properties, often during trust-deed auctions on the “courthouse steps.” The Blackstone Group alone has purchased over 20,000 distressed homes across the country, which they usually fix up and rent out. Other investors buy, fix up and re-sell, or just buy, wait and flip (as the market recovers). The second category of all-cash buyers consists of people who always purchase their homes without financing: These often very affluent buyers have always been around to one extent or another. And the last category of all-cash buyers are those who prefer
to finance their home purchases but have enough cash available to buy without financing: In the hope of winning in a competitive bidding situation, they make all-cash offers in order to appeal to sellers and listing agents (no banks, appraisals or financing contingencies to potentially mess up the deal). This third group plans to refinance their purchases as soon as their all-cash deals close. (Note: If you are considering this, you should definitely speak to a lender well ahead of close of escrow, ideally before making your all-cash offer.)
In most of the country, the first group, investors, dominate all-cash purchases, even though their percentage of sales is now falling with the market recovery and general decline in the number of distressed property sales everywhere. In San Francisco, with its affluent (and sometimes super-affluent) buyer profile and its ferociously competitive market, all-cash purchases are dominated by the second and third categories. Some of these purchases run in the many millions or even tens of millions of dollars. And since San Francisco never suffered from the distressed property crisis as much as other areas, investor purchases of such homes never made up the large percentages of sales seen elsewhere (though we do have a fair number of contractors looking for fixer-upper and tear-down-and-build-new opportunities). Now distressed home sales are on the verge of disappearing altogether in the city: The percentage of distressed home sales in San Francisco peaked at about 20% a couple years back and is now down to a negligible 4% (generally clustered in the least affluent neighborhoods). However, in many other areas of the Bay Area, state and nation, the percentage peaked at over 50% or 60% of sales and has now declined to a much reduced but still considerable 20% - 30% of sales.
All data from sources deemed reliable, but may contain errors and is subject to revision. Statistics are generalities and how they apply to any specific property is unknown. All numbers should be considered approximate.
© 2013 Paragon Real Estate Group