How All Cash Offers Change Everything. For Everyone.

Meet 3928 20th St. in San Francisco. It was recently listed and sold by an excellent San Francisco agent, Bernie Katzman of Herth. The property was on the market for about 10 days, received an incredible number of offers, and closed several days after the offer date (!) in an all-cash offer that was $551,000 over the asking price. The buyer was represented by an excellent Zephyr agent, but it wasn’t Britton or me. You might not be in the market for a single family home (maybe you are thinking condo), and you might not want to live on Liberty Hill/Dolores Heights (but if you could, it is a phenomenal location!), but this is an excellent tale about why all cash offers change the dynamics for all buyers in San Francisco.

3928 20th St. - Image Source: Google Maps

3928 20th St. is in an incredible location. If I recall correctly, it was a trust sale. Go track down the MLS photos and you’ll discover that while the home just wreaked of potential, it also was in a condition very typical for trust or probate homes. Optimists would call it vintage, while pessimists would call it out-of-date. It really doesn’t matter for our tale.

The home is also in an incredible location. It’s probably close to a tech shuttle bus stop, it is close to one of San Francisco’s most popular parks (Dolores Park), has great muni access, is on a block of 20th that dead ends, so it isn’t heavily trafficked and (call me harsh) isn’t attractive to the homeless or otherwise mentally unstable drifters that usually wander down hills, not up them. All of which to say there is a lot to like about this house!


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But I will bet  you my real estate license that if the purchaser of this home was financing the property, an appraisal would have dramatically scaled back the purchase price acceptable to the bank, easily by several hundred thousand dollars. And yes, even with a loan and a large down payment the property could have appraised for well over the asking price, but buyers getting loans tend to place some value on their appraisal, and usually tread pretty cautiously when paying for more than the bank’s opinion of value. As I’ve written about before, in a market where most buyers finance their homes, appraisals act as a buffer from rapid market changes, because the comps are always backwards looking by about 6 months.

In markets where there is plenty of cash – and believe me, San Francisco is one of those markets at the moment – appraisals don’t matter. The buyer of this home, regardless of who they are and what they plan to do with it, saw value at their purchase price. Maybe the value was bragging rights. Maybe the value is in a planned expansion or remodel. Maybe the value was sentimental or historical. Maybe the value was location. But for this particular buyer, the value was there, and they went for it.

What does this mean for the rest of the market is? Anyone in the market for a home – even with financing – now have a comp that is substantially higher than it might otherwise be that appraisers can use in justifying value for other homes. Appraisers now have a comp for a 3 bedroom, 1 bathroom home under 1,500 square feet (per tax, not verified) that was in need of updating but sold for $1,400,000. Which gives buyers that are financing their home a lot more room to offer similar prices on similar homes. Did nearby single family homes just get more expensive for everybody, financing or not?

Yes they certainly did, and that is how all cash offers affect everyone in the San Francisco market.

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