In home sales, cash was king. Now it’s God

They say cleanliness is close to godliness, and in real estate, there’s nothing neater than an all-cash transaction.

Lately the number of cash buyers in the residential market seems to have increased, as rising mortgage rates and market volatility have paralyzed their competition and increased the chances of scoring a discount.

“People who still have the means and liquidity to purchase right now … have a pretty good situation going on for them,” said Corcoran broker Ryan Kaplan. “The shock change in interest rates, I’ve seen it knock out buyers I was working with.”

Cash has always been king. Without the need for a lender’s approval, deals are less likely to fall through. They can also happen much faster than those contingent on mortgages, for which the process — appraisal, underwriting and such — can take several weeks.

But with mortgage rates rising to a 21-year high and winter is approaching, cash has taken on an even greater premium.

Sellers’ incentive to take a lower cash offer is to avoid starting from scratch several weeks later because an offer with financing falls through. Appraisals are increasingly coming in below the offered price, causing lenders to balk and tanking deals several weeks in the making.

“For a seller working with a broker that’s sophisticated, that’s been through these lulls before, they know a cash deal is worth X dollars,” said Eugene Litvak, a Compass broker. “The last thing you want is to go into contract, the deal falls apart, now you’ve got to relaunch the listing in winter when the rates are going up. There could be a huge financial impact.”

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To be sure, mortgages are still being approved, and offering cash doesn’t guarantee a discount. Douglas Elliman’s Doreen Courtright said she hasn’t noticed an uptick in cash buyers.

“I know from experience: You’ll say to a seller, ‘Well, this offer’s all cash,’ and they say, ‘It doesn’t matter, it ends up being cash once you get to the closing table,’” Courtright said.

Brokers who have seen an uptick in cash buyers say stock market volatility has lessened competition: While some buyers are motivated to invest in real estate as a hedge against inflation and uncertainty, others have already seen their down payment wiped out.

“Two executives I had in mind, they’re at some of the more substantial operators in the crypto world and they had to put their plans on ice,” Kaplan said, though he added that some buyers refinance after they’ve paid all cash, opting to reinvest in the stock market.

“A sophisticated and astute investor knows … if you can invest that cash elsewhere it’s more useful than leaving it tied up in a home,” he said.

Litvak said it would be reasonable for a seller to take a cash offer that’s 2 to 5 percent below a contingent offer. Sheila Trichter, a Coldwell Banker Warburg broker, said cash clients of hers recently beat out a contingent offer $35,000 greater. Several brokers said discounts vary by seller, with one key factor being how motivated they are to sell.

Jared Barnett, a Compass broker, said three of the four deals he’s closed since Labor Day have been all cash.

“In some of our listings, we receive multiple bids and it’s generally the all-cash buyers who are the ones making these offers,” he said.