11 Ways To Beat A Cash Offer On A Home

Certified Mortgage Advisor
NMLS 1701021
Published 
November 8, 2020

What the seller wants

We're talking about 11 ways you can beat out a cash offer on a home. So first you're going to learn what the seller wants. We need to figure out their motivation to be able to get that offer accepted.

11 ways to beat what the seller wants

Number two, we're going to talk through these 11 ways. So let's dive into this.

Competitive Sellers Market

If you're in a competitive seller's market, that means the sellers have the control, most likely what's ending up happening is you're putting in offers on homes and you're getting beat out by other offers. So when multiple buyers are competing on one home, you're going to be seeing more cash offers come in and these offers are normally a little bit more attractive to a seller because they don't have to worry about financing because financing sometimes falls through right buyers either can't qualify on their loans, or an appraisal comes in short, and that process is longer. Normally on average, 30 days.

Shorter process for cash

With cash, the process is only about two weeks to close cash on a home. So sellers tend to gravitate towards cash because it's guaranteed and it's going to close quickly.

Cash for Lower Offers

The problem here is cash is almost always synonymous with a lower offer. If we have a home that's listed at $300,000, somebody who's submitting a cash offer might submit an offer at $290,000. The reason why they put that cash discount on there is that they know they can guarantee those funds are there, and the money is going to move fast.

Financing = Higher Offers

Now on the opposite side, when you're using financings, so you're using a mortgage, normally you're not going to be able to have as much leverage to negotiate a lower price. The reason why is because you're offer's a little bit less attractive because you're using financing. Cash tends to be the most attractive, then financing second to that. So we're automatically at a disadvantage with the seller, because if we're up against a cash offer, that's guaranteed money that moves a lot faster than us purchasing the home.

We need to stand out, how?

So we need to be able to stand out. If the financing is pulling our contract down, we need to find some other ways that we can show the seller that we have a really strong offer.

Seller's target is to sell the home in the price that the want

We have to remember what the seller wants. The seller ultimately wants to sell a home for a specific price. What they're trying to do is pay off their mortgage if they have one and make whatever number is in their head for the profit on the sale of their home. Most of the time they want to move out of that quickly and they want to get that specific number for the sale.

Learn to play the game and how to stand out

So we want to try to figure out how do we structure our offer to be the most attractive? A lot of times buyers want to figure out how they can like rip off a seller, or how they can get a good deal. But we want to win the offer, especially in a competitive seller's market. We have to be willing to play the game and figure out how we're going to stand out amongst all the other offers, especially these cash offers.

#CalmMoment

So before we get into that, let's have a #CalmMoment for a second. Because if you're, if you're in that spot where you've put in multiple offers on homes and you keep getting beat out by other people because the market's so competitive, I know how frustrating that is. I've talked to so many buyers who are facing that right now, and it's super stressful and discouraging.

Move away and take a break

I just want you to know that it's okay to take a break. So that break could be one week, it could be one month. It could be a year you're allowed to take that break, take time to recover. Sometimes it gets a little too easy to step into the home buying world and to just have this flood of pressure and anxiety moving on top of you. Because you see something that you like, and then it gets taken away, then you see something you like and gets taken away. So it's an emotional rollercoaster. Sometimes you need some, some time and space to recover from that. So if you need to, if you're feeling overwhelmed, maybe just take a week's break from home shopping. Then come back and revisit that.

Get fully pre-approved

So let's talk about always making a more attractive offer. Number one is to get fully pre-approved. So when you're talking with a lender, submit all of your documents, all of the info, have their underwriter, take a full look at your file and give you that approval upfront.

Ask your lender to call

Then what you can do is ask your lender to call the seller. This is perfectly acceptable to do. I've done this a few times in competitive, offers where, the agent will ask me to call the seller, and then I call them up and say, Hey, this is the buyer. Just want you to know that we have all these documents in here and here credit is good. Everything is good to go. Underwriting has cleared this there's going to be no issues with the loan. That makes the seller feel a lot more confident about that loan closing.

Type of loan

Also, explore the type of loan options that you have. A conventional loan is going to be the most attractive loan that you can get followed by FHA, USDA, and VA all kind of tie in second place for the most attractive financing. Conventional loans tend to move a little bit faster and are a little bit, have higher qualified buyers with higher credit scores on a conventional loan compared to those government loans.

Offer letter

Also, consider submitting an offer letter. Sometimes people call this like a love letter to a seller, and basically, this is you showing some emotion in with that contract. So that seller sees more than black and white paper. They see that you are interested in the home because it's going to do something for your family.

Highest invest offer

Also, you need to put forward your highest and best offer. And so this is a term that realtors use a lot. It's basically saying, Hey, if you want the house, you're going to have to pay for the house. Okay. I know that everyone likes to get a discount, but in a seller's market, especially competing against a cash offer, you need to put your best foot forward. If you're willing to pay a little bit more for the home, but that in your offer, now is not the time to shortchange the seller.

Appraisal clause

Explore putting an appraisal clause in there. Sellers are often afraid of a short appraisal because the deal could fall apart. So an appraisal clause basically says in your offer that if an appraisal comes in short, you, as the buyer are willing to put up additional money to meet up that short appraisal.

Change inspection contingency

Also, look at changing the inspection contingency. So normally in a contract, there is a contingency that says you have the right to do an inspection request for repairs, and you have a certain time period to do that. So something you could do is say, we're willing to purchase the home and "as is" conditioned. So upfront you're saying, you know, we're either not going to do an inspection or if we do an inspection, we're not going to ask for repairs, and explore, shortening that timeframe because an inspection contingency can be up to 15 days.

It can be whatever you want. Maybe explore, shortening that down to maybe three days to show the seller that you want to move faster.

Reduce closing cost credits

Also, you can reduce closing cost credits. So. Remember, it's how much the seller is getting net that they have in mind. So if you have a $300,000 house that you're offering on and you ask for $5,000 in closing cost credit, the seller is only getting $295,000.

So if they were anticipating getting $300,000. You took away $5,000 from their profit that they were expecting, meaning that offer's going to be less attractive. So maybe talk with your loan officer, if you have the ability to remove closing cost credit from your contract or from your offer.

High EMD

Also, you can put high earnest money down. So an earnest money deposit, it's kind of like a good faith deposit showing the seller that you know, you're putting some money backing that offers saying, Hey, when we get under contract, we're going to go submit this into a third party account, an escrow account so that you can see that we're serious about this. And we have some skin in the game up front.

Closing time

You can also shorten the closing time. So if you're already pre-approved with your lender, you might be able to take your closing time down from 30 days to maybe 20 days or 15 days. Talk with your lender about what these closing times look like.

Shorter timeframe is always more attractive to a seller

They want to get their money as soon as possible. Most of the time, they don't want to extend that out too long.

Pre-order appraisal

Then finally you can have a pre-ordered appraisal in there as well. So you could write in a clause or let the seller know that once we're under contract, we're going to immediately order the appraisal. So you can get that rolling. The benefit of this is you're speeding along the process and showing the seller that you're serious about moving things forward.

Talk with a loan officer
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