Is an all cash offer enough to buy a Los Altos home?

By
Real Estate Broker/Owner with Catarra Real Estate, Inc CA BRE #01191946

Los Altos has seen a strong return of the all cash offer.  This is especially true of homes priced under $1.5 million.  Many people wonder how there are so many buyers with all cash and why there is a recent surge in demand in Los Altos.  In this market, it all comes down to supply and demand.  The problem in many neighborhoods is that there are very few homes, especially those that area "value priced" below the median and average selling prices.  With so few homes priced under $1.5 million and the renewed interest in buying in Los Altos, competition has been fierce.  It's not unusual to see 5-10 offers on a home with many of them presented as all cash.  However, many all cash buyers are losing out.

The general strategy in making an all cash offer is to come in with a strong price and terms.
  One of the strongest offers you can make is to come in with all cash, full asking price, no contingencies, and a 10-14 day close.  That's a really good offer in most markets, even Los Altos.  However, lately all cash buyers are losing because paying the listing price isn't enough.  Homes put on at $1.2 or $1.3 million are selling for 10-15% over their asking prices as buyers realize that the market is heating up and prices will trend higher in future months.  This is also prime time for buyers wanting to get in so they can register for schools.

So, how does an all cash buyer compete right now?  Increase the price.  It's that simple.  However, the fervor varies from neighborhood to neighborhood so making a higher offer may be necessary on one street but less so 3 blocks away.  Location is still a huge factor and while going over may be necessary, the proximity to noise or traffic will reduce the need to overbid.  Also, size matters.  A smaller home will get less overbidding because it will need expansion.  Homes that are already large but can be remodeled without expansion will get the most attention and overbids.

Knowing these factors will help craft an all cash offer that makes sense and still wins. 
I encourage anyone looking in Los Altos to consider all these factors and others in this market.

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