For the majority of the thirteen years that I have been a real estate agent, ‘cash’ buyers got no better concessions than a typical buyer who was getting a loan. After all, in a normal market a pre-qualified/pre-approved borrower, working with a good lender, was ALMOST as good a risk as a buyer claiming to have cash for the purchase. As far as the Seller was concerned there was little reason to offer a better deal to the cash buyer.
That has changed, at least in some urban condo communities. I have written before about certain urban communities where lenders are not willing/or are unable to loan money for purchases. At the time, I suspected that prices would suffer greater at those communities. Well now, it seems that there is evidence to suggest that is the case.
Edgewater at Hayden Ferry, in Tempe is one of my favorite urban communities. I love the location and the style, the building seems to be extremely well-built, and it seems to be very well-managed. Unfortunately, due to several things beyond the control of management, lenders will not loan money there to condo buyers. Because of this, prices have gotten pummeled. A good example of this is a two bedroom condo with over 1600 square feet on the sixth floor of Edgewater, with fantastic upgrades, that just sold for $220,000. That’s less than $140 per square foot for commercial grade construction in one of the best locations (IMO) in the Valley! The property originally sold for $835,000 less than four years ago. Now, I don’t typically look at previous sales prices to determine whether a deal today is great or not, but in this case I think it is significant. While we have seen many properties sell for 40 or 50% of their original sales prices it is unusual to see a Class A property sell for 26% of the original price. Clearly, the reason for such a significant drop is because buyers must pay cash at Edgewater….fewer Buyers leads to lower prices. I believe that it is just a matter of time, probably very little time, before lenders will loan money to buyers at Edgewater. When that happens, I believe that prices will begin to trend upward. Are we at the ‘bottom’? I don’t know. But for those of you who have cash to spend, buying a fantastic two bedroom condo with fabulous lake views for $220,000 sure makes sense to me.
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