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All-Cash Financing Increases; Buyers Avoid Red Tape

A survey of real estate agents released Monday finds a growing number of homeowners have turned to all-cash financing in order to avoid the red tape that comes with mortgage lending.

According to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, an estimated 26.2 percent of home purchases by current homeowners in March relied solely on cash, up from a 12-month low of 22.8 percent recorded last August. Figures are based on a three-month moving average.

While cash sales are usually associated with investors looking to profit from their purchases, Campbell Surveys says they’ve become more popular with average American homebuyers hoping to avoid closing delays and gain an advantage over their competition.

According to the company’s report, 30 percent of March home purchases financed with a loan going to either Fannie Mae or Freddie Mac and with a down payment of at least 20 percent were delayed, predominantly due to issues related to underwriting, documentation, or appraisals.

Even for all-cash purchases, a fair amount—24 percent—of transactions experienced delays last month. At the same time, however, the closing time on cash transactions remains at least 10 days shorter on average, even compared to a mortgage that isn’t delayed.

Even with the recent trend, Tom Popik, research director at Campbell Surveys, expects home purchase mortgages to bounce back this spring, noting that the declining share of mortgage financing “is part of a seasonal trend that has reversed in April in each of the past three years.”

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