If all-cash offers and bidding wars are still popping up in your area, the strategies in this article can help you compete. Depending on where you’re shopping for a new home, the competition can be frustrating. Multiple offers and bidding wars add a lot of stress for everyone involved, and an all-cash offer can tip the balance.
Sellers often accept all-cash offers for obvious reasons. All-cash offers tend to close fast, they have fewer contingencies, and there’s no need to worry that financing might fall through for the buyer.
Your dream home is still possible. Follow these steps to beat the competition.
5 Easy Strategies to Help You Win Against an All-Cash Offer
If you’re wondering how to win in today’s housing market, these 5 easy strategies can help.
First, get pre-approved for your mortgage.
Getting a mortgage pre-approval is a powerful strategy that will set your sellers at ease. A mortgage pre-approval is much stronger than getting pre-qualified.
For one, getting pre-approved for a mortgage confirms that your mortgage lender has fully approved your loan. The lender has already verified your credit report, income, employment and financial profile. Every step of the loan approval process has been finished, and your loan is ready to move forward once an offer has been accepted.
When you’re pre-approved for your home loan, the seller knows that financing will be completed as expected.
Consider making an offer above the asking price.
Did you know that most all-cash offers are made below the asking price? Homebuyers who plan to pay cash often hope the seller will accept a lower price in exchange for a fast sale. Here’s your opportunity to offer above asking. If you’ve been pre-approved above the seller’s asking price, this is a strong way to stand out against the competition.
Talk to your realtor about including an escalation clause. This clause allows you to automatically raise your offer (up to a specified amount) if other buyers bid higher.
Increase your earnest money down (good faith deposit).
Earnest money down is the amount you offer upfront to reserve your option to buy the home. A good faith deposit shows the seller that you have serious intentions. The seller can keep your good faith deposit should you decide to walk away or back out of your offer.
In short, raising your good faith deposit show the seller how much you’re willing to risk. Of course, if the seller rejects your bid and chooses another buyer, you’ll get your deposit back.
Agree to waive contingencies.
All-cash offers typically close faster because they waive many of the standard contingencies. You can compete by waiving some of the contingencies as well. For example, if you get pre-approved for your mortgage, think about waiving the financing contingency. (A finance contingency releases you from buying the house if your financing falls through.)
When you’re pre-approved, you can be confident that your loan will fund on time. Talk to your realtor about the pros and cons of waiving other contingencies related to the sale, appraisal, and inspections. Your realtor can advise you best when it comes down to the specific property you want to buy.
Finally, write a personal letter.
Writing a personal letter can make a big difference to a seller considering multiple offers. Even with an all-cash offer in the mix, buying or selling a home is an emotional decision for most people. Writing a personal letter can help the seller envision a happy future for their home, even though they are ready to say goodbye.
Be sure to keep it simple and easy to read. Offer specific things you love about the home, why it’s a great fit for you or your family, or how you imagine building a life in this specific neighborhood. Don’t be afraid to share some emotion to help compete amid an all-cash offer.
I’d love to be a local resource to help answer your financial questions about your mortgage, home equity, or the home buying process. Feel free to reach me directly at (408) 610-8011.
Getting pre-approved is one of the strongest moves you can make in today’s housing market. We work with families, entrepreneurs and business professionals across the San Francisco Bay Area, Los Angeles, Seattle, and throughout California, Oregon, Washington and Colorado.
Our goal is to save you money on your mortgage and help you reach financial freedom. Give us a call or schedule an appointment to get an early start on owning your next home.