You’ve heard it said so many times, and you can’t help but roll your eyes: “Cash is king, especially in real estate.” While it’s true that all-cash bids are 97% more likely to be accepted by a home seller, that doesn’t mean you can’t compete.
There are plenty of ways to strengthen your offer and get yourself into that dream home you’re eyeing. So, once you’ve got your finances sorted and your financial documentation is all ready to go, what’s next? Here are 7 ways you can compete with cash:
1. Do Your Homework
When you’re in a tough real estate market where competing with cash is typical, make sure you do your homework before making an offer. That means researching the seller and finding out everything you can about what they’re looking for in a buyer.
Don’t presume to know what the seller cares about. Some sellers are more motivated by timeline, while others may be most motivated by your offer’s bottom line. Certain sellers might even have specific ideas about which service providers they’d like to use during the transaction.
Your real estate agent can likely find out exactly what the seller is looking for in an offer by talking with their listing agent. Knowing this upfront will enable you to meet their requirements while crafting your bid.
You’ll want to make yourself as attractive as possible to the seller. This might mean making certain concessions on your end. But remember, these concessions could be the difference between landing your dream home or being disappointed.
2. Find a lender with local loan officers
Working with a local loan officer can send a strong message to both the seller and their listing agent that you’re a serious buyer who’s likely to secure financing.
A quality local loan officer will have relationships with local Realtors and a strong record of closing deals in your area. Your loan officer’s stamp of approval can give you an edge over the competition.
3. Get underwritten upfront
Pre-qualifications and pre-approvals are important early steps in the home financing process. But the truth is, they don’t go far enough. Most are based off of incomplete financial information.
The bottom line: they can’t provide much certainty. So how can you show a seller that your financials are in tip-top shape and you’re likely to get approved for a mortgage? You can get fully underwritten upfront.
Sure, getting underwritten upfront may be a little bit more involved than a simple pre-approval (which many lenders brag they can complete in just minutes).
But there are also huge benefits: you’ll have a true idea of how much home you can afford. And on top of that, you and the seller will have a lot more certainty that your home financing will come through.
4. Meet the seller where they’re at
You did your homework, and you know what that seller is looking for. Now you have to meet them where they’re at.
Since you don’t have an all-cash offer to throw around, you’ll have to get a little more crafty. Here’s where those aforementioned concessions kick in. When you’re making your offer, be sure to include all of the seller’s musts:
- Meet or exceed the seller’s earnest money requirement.
- Agree to the seller’s timeline and closing date. Be ready to do whatever it takes to meet that timeline. That might mean getting inspections done quickly, or removing certain contract contingencies where it makes sense (more on that below).
- Let the seller choose which third-party vendors they’d like to use, such as the title company.
- Consider offering to buy the home as-is, or limit how much you’ll ask the seller to fix if inspections reveal problems with the home.
Never underestimate the power of flexibility. The more accommodating you are to the seller, the more likely you are to have your bid accepted.
5. Consider contingency removal
Another way you can compete with all-cash offers? Consider contingency removal. A contingency is a clause in a real estate contract stating that certain conditions must be met (such as financing or home appraisal) before the sale can clear.
Contingencies can hold up a home’s closing for weeks, or even months, depending on the situation. It’s no wonder sellers choose all-cash offers. They don’t want to have to deal with what-ifs. They want a sure thing.
By removing contingencies, you can show the seller you’re ready to close the deal, too. They won’t have to worry about you holding up the sale with financing delays or a list of post-inspection demands that will take weeks to fix.
One important note: by removing contingencies, you could risk your earnest money deposit if the transaction falls through for some reason. Always talk with your real estate agent and/or lawyer before removing contingencies so you can make sure you understand what you’re agreeing to—and what you could be giving up—by leaving them out of your contract.
6. Up your offer
This is a pretty straightforward tip, but we’d be remiss if we didn’t mention it. One way to strengthen your offer and beat out cash is to make a bigger offer.
Often, all-cash buyers will offer below asking, or right around asking, because they know that a sure thing already gives them a leg up. This is often referred to as a “cash discount.”
Of course, a seller would probably prefer that money in their pocket. But often, they’ll still go with the lower cash offer for the speed and certainty it provides.
If you want to attract a seller to your bid, consider upping the price and making an offer they can’t refuse. Similarly, strengthening your down payment can help attract the seller to your bid.
7. Write a letter
This is a simple tip, but often overlooked. Show the seller you’re interested in their home by writing them a letter.
Why? Both selling and buying a home are emotional endeavors. If you’ve ever fallen in love with a home before, you know that these transactions are not always all about money.
Sellers want to see that the legacy of their home will remain intact long after they’ve moved on. So you can show what a good resident and neighbor you’ll be by writing the seller a heartfelt letter on why you love their home.
Keep it short, simple, personal and to-the-point. A letter is such a small thing, but it can make all the difference in getting your offer to the top of the pile.
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