Depending on location and market dynamics, cash buyers (those not requiring a mortgage) currently account for about a third of all home purchases.
As a buyer who needs a mortgage to purchase a home, it will be tough for you to compete against an all-cash offer, particularly in a market where multiple offers are the norm.
From a seller’s perspective, an all-cash offer eliminates both hassle and risk, as do offers without appraisal or financial conditions, which, in a hot real estate market, can also reduce your chances of success. There are, however, some ways to make your offer more competitive.
For example:
- Try to avoid multiple offer situations.
- Consider waiving the financing contingency clause, which allows you to cancel the contract if you don’t receive loan approval, or if an appraisal comes in below expected value.
- Increase your down payment.
Talk with your lender about securing a pre-underwriting letter which may make your offer more attractive. Unlike a pre-approval letter, this one has teeth.
It contains deep income and asset documentation, which sellers like to see, as it means you are a serious buyer, plus it may move you through the approval process more quickly.
Many cash buyers are overly confident and therefore submit unrealistic, low-ball offers. So, while cash is worth a 2 percent to 3 percent discount, sellers annoyed by the low bid might just accept yours instead.
