Competing With All-Cash Offers

Competing With All-Cash Offers

When it comes to buying a home, cash is king. Despite the advantages of all-cash offers, however, they don’t necessarily preclude competition. There are ways for you and your client to compete with cash buyers. Here’s how:

Smart Strategies to Stand Out

Most sellers prefer cash offers, because they reduce hassles, time and risk associated with loan processing and appraisal contingencies. Still, just because a seller received an all-cash offer doesn’t mean the deal is done. There are ways for traditional buyers to compete with these offers. These include:

  • Put in your best offer first. If you want a specific property in a competitive market, you need to put your best foot forward. Assume you will not have a chance to negotiate on a price and make your top offer up front. If you’re worried about overpaying, look at the current appreciation rate for the market. You might pay more today, but if prices keep ascending and you keep getting outbid, you might be priced out by the end of the year. You could also end up paying much more for a similar house down the road.
  • Offer more money. Many sellers are so in love with the thought of a cash offer, they are willing to significantly reduce their asking prices. According to RealtyTrac®, cash buyers enjoy an average discount of 23 percent. By offering a little more than the asking price, you have a better chance of piquing a seller’s interest. Since many cash buyers are investors, they tend to be focused on increasing their margins as much as possible. This gives traditional buyers some negotiation power if they are willing to pay a little more than a home’s actual worth.
  • Meet the seller’s terms. It’s a good idea to assess a seller’s unique circumstances. Do they need extra time in the property while they look for a new home? Do they want a quick close or control over who processes escrow and title? Have they already picked out those services, allowing you to write an offer that won’t need to be countered? By handling these negotiations quickly on a buyer’s behalf, a real estate agent can increase the odds of a successful sale.
  • Be flexible. If a buyer needs financing, he or she will need to be creative to compete against all-cash buyers. You can do this by stressing your willingness to be flexible. This might include being more accommodating with the closing date, requesting minimal repairs or agreeing to rent the home back to the seller while he or she searches for a new home. Again, it pays to understand a seller’s unique circumstances, so you can look for alternative ways to ease their burden and sweeten the deal.

Other Considerations

One risky way to compete against all-cash offers is by forgoing a traditional mortgage contingency. While this clause protects you from losing your down payment if you or the property is denied by the bank, it’s not ideal for a seller. Obviously, to do this, you will need to be very confident that you will get approved for financing. This can be an effective, albeit nerve-wracking, way of mitigating concerns for the seller.

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