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Is Cash the King?
July 20, 2009

Ron RutherfordAccording to a recent study by Ron Rutherford, professor of finance and the Elmo J. Burke Jr. Endowed Chair in Building Development, cash is "king" when purchasing residential properties.

The study was done in collaboration with Jessie Huang, a UTSA finance doctoral student, and Texas Christian University Professor Larry Lockwood. According to their research findings, cash buyers obtained discount purchase prices in comparison with individuals who used conventional mortgage purchases.

The results were obtained by sampling 500,000 properties selling through the MLS. The results for the foreclosure subsample show that foreclosures purchased with cash sell at a discount of approximately 10% in comparison to properties financed with a conventional mortgage. Interestingly, this finding only held true with properties in the lower-priced housing segments, not the higher-end markets.

For more information, view this link to a story on this research in the Express-News.

Wendy Frost—

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