All-cash buyers and institutional investors were able to purchase residential homes at a larger discount rate from the average market value at the time of purchase than the average rate for all U.S. homebuyers in the third quarter, according to RealtyTrac's U.S. Institutional Investors & Cash Sales Report for Q3 2014.
RealtyTrac reported that the average price paid for homes by institutional investors, which are defined as entities that purchase at least 10 properties in a year, was at $159,389 in Q3 – a discount of 15 percent from the average market value at purchase of $187,637. Cash buyers enjoyed nearly a 10 percent discount in Q3, with an average purchase price of $227,905 paid for a home, according to RealtyTrac. The average market value at the time of purchase for cash buyers was $252,640 in Q3.
Both discounts for institutional investors and all-cash buyers were well below the average rate for all buyers, according to RealtyTrac. All buyers paid an average price of $278,040 for a home in Q3, a discount of only 4.3 percent from the average market value at purchase price of $290,531.
All-cash home sales in the third quarter represented a large share of distressed sales, making up 54.6 percent of transactions involving homes currently bank-owned or in the process of foreclosure.
Overall, all-cash sales accounted for 33.9 percent of single-family and condo sales in Q3, a decline from 36.9 percent in Q2 and unchanged from the same period a year ago. RealtyTrac reported that cash sales were concentrated at the lowest and highest extremes of the housing market, accounting for 64 percent of home purchases made under $100,000 and 41 percent of purchases made above $2 million.
The share of single-family and condo sales made to institutional investors dropped to a four-year low of 4.3 percent in Q3, down from 5.0 percent in Q2 and 5.3 percent in Q3 2013, according to RealtyTrac.