According to the U.S. Institutional Investors & Cash Sales Report for Q3 2014 released recently by RealtyTrac, all cash buyers and institutional investors enjoyed huge discount rates when they bought residential homes from the average market value at the time of purchase compared to the average rate for all U.S. homebuyers in the third quarter.
RealtyTrac’s report show that institutional investors, which are described as entities that bought at least 10 properties within 12 months, paid an average price of $159,389 in third quarter, which is a 15 percent discount from the average market value at purchase of $187,637. As for cash buyers, they got about 10 percent discount in the same quarter with an average purchase price of $227,905 compared to the average market value at $252,640.
The discounts enjoyed by both parties were certainly below the average rate for all homebuyers, according to RealtyTrac. All homebuyers who bought a home in the third quarter paid an average price of $278,040, a 4.3 discount from the the average market value at purchase price of $290,531.
Furthermore, these all-cash home sales represent a huge share of distressed sales (54.6 percent), which involves homes currently bank-owned or those within the foreclosure process.
All-cash sales represent 33.9 percent of single-family and condo sales in the third quarter, which is a slight drop from 36.9 percent in the second quarter and unchanged from the same period in 2013. In addition to that, RealtyTrac’s report showed that the cash sales were greatest at the highest and lowest extremes of the housing market with 64 percent of home sales done under $100,000 and 41 percent above $2 million.
As for the share of single-family and condo homes bought by institutional investors, it dropped from 5.3 percent in Q3 2013, 5.0 percent in Q2 of this year to a four-year low of 4.3 percent in Q3.