WALNUT CREEK, Calif. After getting the good news on a Friday night that their offer topped all the others on a foreclosure in Vacaville, Calif., they wanted as their retirement home, Jack and Donna Pfister spent the weekend packing.
But the next Tuesday they were told the bank had decided to go with an all-cash buyer, whose offer was $25,000 less than the $475,000 offer from the Pfisters.
My husband was heartbroken, said Donna Pfister of Rodeo, Calif. I was heartbroken because he was heartbroken. Right now, we both feel kind of let down.
The Pfisters are far from alone. While no reliable figures are available, San Francisco Bay Area real estate agents report dozens of people like the Pfisters have lost their dream houses, edged out by a steady increase in homes bought by those who dont plan to live in them.
Investors are gravitating toward low-end properties, the same homes that first-time and move-up buyers want. The median price paid by all-cash buyers in July was $230,000, down from $270,000 a year ago.
Most sellers, including banks that own foreclosed homes, prefer all-cash buyers because the deal can close faster than a transaction involving a loan, say real estate professionals.
In the past few years, many regular buyers have turned to government-insured Federal Housing Administration loans after conventional and jumbo loans became harder to get as a result of the housing meltdown.
Over the past two years, cash has been king, said Dominic Carano, an East Bay Realtor with ZipRealty. Then next comes a conventional loan with 20 percent or better down, and the next is the FHA loan with 3.5 percent down.
Caranos territory is eastern Contra Costa, where low home prices have made it a ground zero for investment buyers. Silicon Valley (buyers) are buying up properties in Antioch and Pittsburg to become landlords.
Most of the investors are buying into the first-time homebuyer price range of $200,000 to $400,000, said Linnette Edwards, an East Bay associate broker with Better Homes and Gardens Real Estate.
All-cash buyers are also purchasing a lot of homes on the east side of San Jose, said Sami Asfour, a broker with Keller Williams Realty. Most of them will buy them, fix them up and flip them, he said.
He said that one of his clients, who is looking for a home in San Jose for under $300,000, has lost out several times to all-cash investors.
We made six or seven offers; in some cases it was above the asking price. (The buyer) that comes in with all cash takes it, Asfour said.
As his client and the Pfisters discovered, sellers will often take all-cash offers that are less than the bid from someone using a loan, say real estate professionals.Loans take time
Loans require time-consuming appraisals before a sale can close. Also, FHA loans have property inspection requirements that can slow down the process even more.
The investor has the cash wherewithal to be able to close on the property without the risk of the seller worrying about whether the buyer can get the loan or not, said Mike Sibilia, another broker with Keller Williams.
But while all-cash buyers are dashing the homebuying dreams of regular buyers, the trend is also helping to move along the glut of foreclosures dragging down home prices, real estate experts say.
You have to see both sides, said Ivonne Valdes, a South Bay Realtor with Coldwell Banker. There are many times when a bank wont make a loan to a regular buyer because the property is in a state of disrepair or sometimes there are safety issues, she said.
(The homes bought by investors) are getting a face-lift and are getting rebuilt, said Jeff Pereyda, a broker with Tri-City Real Estate Brokers in Fremont, Calif.
Usually, the all-cash buyers are out there looking for a flip. Theyre going to use all cash to buy it, fix it up, turn it around, and sell it.