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How to be Competitive against All-Cash Offers

One of the more frustrating things to encounter when getting ready to make an offer on a home is coming up against someone that is paying all-cash. You may think you’re instantly out of luck, but that is not the case!

If you’re a home buyer obtaining a mortgage, you can still compete and win against cash buyers, and here’s how:

Get a head start on the mortgage: Reach out to your mortgage lender and see if they can move the process along quicker. Ask your lender what information they need and provide it to them ASAP.  Some mortgage companies are now offering Pre-Commitment documentation, which is more advanced in the underwriting process and speeds up the closing as it’s more iron clad than a pre-approval.  If timing is an issue for the sellers, this is a great option for buyers.

Don’t hide your finances: Provide confidence that the home seller needs in order to accept your offer. In addition to your pre-approval letter, be open with your agent by providing additional financial information with your offer. This may include how much money you make, credit reports, how much money you have in the bank, and more.  This is to ensure that the mortgage and down payment are secure and that the deal is as ironclad as cash.

Pre-order Appraisal: While not an easy task with larger banks, smaller banks, direct lenders, or mortgage brokers can get an appraisal set up for you in advance. When sending your written offer, tell the seller your appraisal has already been ordered.

Quickly inspect: Get your inspector in and out of the house within a few days of having your offer accepted shows that you mean business. This can be a hurdle for some homeowners but tackling it quickly is important.  Some buyers can consider waiving the inspection, as explained further in this bidding war post, but it’s up to buyers to make sure they’re willing to take the risk.

Offer more: Cash buyers almost always get a discount because they are a sure thing by offering cash straight up. To increase your chances, paying a little more than the house is actually worth will certainly help you out. If the difference in money is 5% higher compared to the cash buyer, the seller will be intrigued.

Get known to the seller: Some buyers will write letters to the homeowner, hoping to personally get in touch with the seller. Ask your agent about writing a nice cover letter so your seller can get to know more about you. Their home is very personal to them and showing them that you’re going to care for the home and love it like they do can be a very big help!

Give the sellers what they want:  In this market, it is extremely possible that the sellers still need to find a new home to purchase.  If they need a longer closing in order to find suitable housing or need to rent the home from you for an extra month or so, give them what they need!  If it means you end up getting the home you want, what’s a little extra time?

It may seem like an uphill battle to compete against an all-cash buyer but that doesn’t mean you should give up! Hiring an expert Realtor to help you navigate this highly competitive market is the first and most important step in the home buying process.  That way you can be ready to win a bidding war by being the most prepared buyer out there!