Find out how to beat a cash buyer when you are using a mortgage to buy a home…
In today’s real estate market, a buyer needs to understand that competing with cash buyers is quite possible. If you read yesterday’s post, you may have noticed that recent data from NAR showing that 33% of home sales in September 2013 were all cash transactions.
Sellers love when they get offers from cash buyers. It makes them feel that the offer is much more likely to close and they’re almost guaranteed a faster closing. Plus sellers, know that cash buyers don’t have to jump through all the hoops of getting a mortgage. Which means they won’t have any financing problems that cause many offers to fall apart.
Cash buyers can have serious advantages over buyers that are using a mortgage to buy a home. If you’ve found the home of your dreams but you face the dreaded multiple offer situation and are competing with a cash buyer, it can be tough. But there are some things you can do to level the field!
If You Liked the Home
The first thing for home buyers to remember is that a multiple offer situation is NOT some scam to get you to up your offer. If you like a home enough to make an offer, then it stands to reason that other buyers will also like the home. Don’t freak out but remember to think logically and unemotionally.
I hate when agents submit an offer without a Proof of Funds letter for a cash buyer or a Pre-Approval Letter for a buyer using a mortgage. Sellers today expect to see these documents with all serious, legitimate offers.
Something else you can include with your offer that can make it even more appealing is a letter to the seller explaining why you want to buy their home. Remember how I said YOU should think unemotionally? Well, maybe you can appeal to the seller’s emotions.
Write a short letter explaining how you want to build many years of wonderful memories just like they have. Don’t over do it and be completely honest. Sellers are human too and that means they can also let emotions affect their decisions.
Serious buyers make serious offers. If you are only putting $500 dollars as earnest money, how legitimate does this make you look to the seller? If you are secure in your ability to close, then you may want to consider upping your earnest money.
Since the earnest money will be applied to the purchase price of the home, you have nothing to fear and everything to gain.
As long as you close…
I am not suggesting that you over pay. But cash buyers often want a hefty discount off the list price. If you want to beat a cash buyer, consider paying a higher percentage of list price. I am not saying you should over pay.
Just that you may have to be willing to pay more than a cash buyer!
Don’t Ask For an Arm and a Leg
If a buyer using a mortgage is competing with a cash buyer, they are already at a disadvantage. Which means asking for closing costs, a home warranty, etc can make your offer even less appealing to the seller.
Why shoot yourself in the foot?
My advice for buyers in this situation is to forget about asking for stuff like closing costs and the home warranty (if possible). This stuff affects the seller’s bottom line and will just make your offer weaker in the seller’s eyes.
The Take Away
I will be the first to admit that a multiple offer situation sucks for buyers. Especially if the other buyer is paying cash and you are going to need a mortgage. However, some cash buyers let that cash go to their heads. They don’t realize they are not the only person capable of closing.
Beating a cash buyer when buying a home is possible. Like I said, serious buyers make serious offers. Show the seller that you are a serious buyer. Just follow the steps above and make your best offer.