How strong is an all-cash offer?

A Santa Barbara home buyer asked me today how strong a "cash offer" is compared to an offer that had a financing component. This buyer had $1.1 million in cash and did not want to get a loan. Here is my response:

The relative "strength" of cash in today's market is a bit of a mixed bag. Some sellers are very concerned about today's financial markets and will give significant extra weigh to an extra cash offer. Sellers that have gone through one or more frustrating escrows with buyers who haven't been able to get loans would also be in this category. That said, there is still such high demand in SB from home buyers, that the vast majority of sellers, while they would obviously prefer a cash buyer, they are not willing to take a significantly lower offer in exchange for the greater surety of a smooth close. In the end, the seller gets paid cash regardless of whether the buyer gets a loan. For the first time, I recently heard of a multiple offer situation on an REO (Roughly 60% have multiple offers these days) where the bank accepted the 2nd or 3rd highest offer because it was all cash. This is by far the exception to the rule.

Most homes in our current SB market are selling on average of 7-10% less than their original asking price. If you have $1.1m and definitely do not want any kind of loan (You may want to discuss with your accountant/tax professional the pros/cons), I would look up to $1.2m, maybe $1.25 or $1.3m if you are content to wait for sellers to go through price reductions. If you are hoping to come to buy an already competitively priced property for more than 5-10% under the asking price, you may need to adjust your expectations as we simply are not seeing that in our market, even with our recent financial bumps.