You’ve finally located your perfect home. You made a deal that you thought was unbeatable. But another buyer made an all-cash offer. Although cash buyers are tempting in many markets, this does not automatically imply that you will lose out. Here are a few things you should know if you wish to compete with all cash offers.
BE A SAVVY BUYER
If you want to beat an all-cash offer, you’ll need to make sure your finances are in shape. Having a down payment of at least 20% can help your offer stand out and demonstrate that you have some free cash on hand. In addition to your significant down payment, you’ll need confirmation of a secure job and extra cash in the bank. You’ll simply need a little amount of debt and excellent credit to qualify. You can beat out a cash buyer if you can show a seller that you are not a risk.
DO YOU HAVE A LARGER SUM OF MONEY TO OFFER?
Because they are paying cash, cash buyers almost always demand a discount from the vendor. The cash buyer frequently believes that their offer is certain to be accepted. As a result, the cash buyer is more likely to offer a cheaper price. Top the cash offer, even if it means paying a bit more than the house is worth, to boost your chances. If the difference is only a few thousand dollars, the seller is unlikely to risk it. However, what if your offer is 5% greater than the cash buyers? If the seller wants the best of both worlds, he or she may ask the cash bidder to increase their offer.
Some cash purchasers will make a higher offer, although not necessarily enough to cover the difference. If you want to live in the house for a long time and it is the home of your dreams, paying a little more up front to get a better deal may only cost you $20 per month over the life of the loan. You should be able to get a monthly payment estimate from your lender based on your offer so you can have a better idea of what you can afford.
IS IT POSSIBLE TO MAKE A LARGER DOWN PAYMENT?
One of the biggest concerns for sellers during the real estate transaction is having a sale fall through due to a poor appraisal. Making a bigger down payment can assist in resolving this issue. There is less concern about the appraisal if you are simply searching for fifty percent financing on a home instead than eighty percent, for example. This increases your chances of beating a cash offer dramatically.
OBTAIN AN UNDERWRITER’S REVIEW
If you’re serious about purchasing a house, you already know how vital it is to acquire a mortgage pre-approval. However, if you’re trying to beat an all-cash offer, that might not be enough. You can take it a step further by having your loan application reviewed by an underwriter before making an offer. The underwriter will look through all of your financial documents and can issue you a loan commitment letter to include with your offer. If you think this is a good option for you, talk to your lender.
CONSIDER A LOAN WITH FEWER LOAN AND APPRAISAL CONTINGENCIES
Inquire with your lender about how quickly an appraiser can be dispatched to the property and how long the loan will take to process. Loans are being authorized in less than 14 days in some parts of the country.
WILL YOUR LENDER ORDER AN APPRAISAL IN ADVANCE?
With a larger bank, this may be more difficult. Smaller banks, direct lenders, and mortgage brokers, on the other hand, can schedule the appraisal ahead of time. Tell the seller that the appraisal has already been ordered when you write your offer. It can greatly speed up the process if you can get the appraiser out within 24 to 48 hours of reaching an agreement with the seller.
QUICKLY SCHEDULE THE INSPECTION
Get your inspector in and out along with the quick appraisal and loan contingencies. Paying a few hundred dollars and having the inspections completed within days of your offer being accepted demonstrates to the seller that you are willing to work around their schedule. It also offers them confidence that they will overcome the most difficult obstacle fast.
DO NOT BE HESITANT TO TAKE ACTION
The time saved throughout the closing process is one of the benefits of an all cash offer. If you act swiftly on your loan, you’ll have a higher chance of competing. Send the preliminary title report to the lender to see if you may get a head start on your mortgage. Make arrangements for an appraiser at the moment you draft the offer and inform the seller. In addition, the inspection should be scheduled as soon as feasible. The seller will be more inclined to consider your offer if you can help speed up the loan process by staying on top of all the facts.
Summary: How To Compete Against a Cash Offer When Buying a House
You’ve finally located your perfect home. You made a deal that you thought was unbeatable. But another buyer made an all-cash offer. Although cash buyers are tempting in many markets, this does not automatically imply that you will lose out. I hope the above details discussing how to compete against a cash offer helped.
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