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How To Compete With All Cash Buyers

 

Investors are snatching up as many California properties as they can get their hands on.  Can an average homebuyer compete with all-cash investors?  YES!

 

California’s real estate market is hot, hot, HOT!  But if you want to buy a home in one country’s most popular counties (I’m looking at you, San Francisco, San Jose, San Diego, Los Angeles… you know who you are!), you might find yourself up against some pretty stiff competition.  Investors of all kinds flock to popular real estate markets and try to gobble up as many available properties as possible, usually offering a quick, all-cash transaction.  The average homebuyer, who tends to be a lot more cautious when investing such large sums of money, may feel they are unable to compete with investor’s deep pockets.  But don’t be intimidated!  There are ways to beat out a cash buyer, and here’s how to do it.

 

Find Out The Seller’s Goals

Cash buyers are able to offer a quick close since they don’t have to wait for loan approval.  But that might not always be the most attractive option to a seller.  People often think that all sellers want the most aggressive, quick close, for the highest price.  Sometimes a seller needs a longer escrow to have time to move out or find another place to live.  A seller may be willing to accept a lower purchase price if you are willing to work with their specific needs.

 

Get A STRONG Pre-Approval

Cash buyers have one less contingency than mortgage borrowers, the loan contingency.  But you can soften the mortgage contingency by getting pre-approved and providing a strong pre-qualification letter from your lender.  If you’ve saved up a significant down payment and have excellent credit, your loan approval should be a sure-thing.

The #1 reason home sales fall through is because the buyer could not secure the loan.  Do some preparation before you apply for a home loan, and be sure to do your homework on your lender.  Consult with several lenders to compare rates, processes, and track record.  If your lender has poor reviews or a history of loans falling through at the last minute, that’s a huge red flag.

When buying a home in California, the seller will likely require a pre-approval letter to be submitted along with your offer.  But just any ol’ pre-approval letter might not cut it.  For a strong pre-approval, your lender should properly vet your finances.  The more information they have about your income, assets, and financial situation, they more certain they can be about your loan approval prospects.  If your lender says you qualify for a certain loan amount without really reviewing your tax returns, bank statements and pay stubs, there is a strong possibility your loan won’t make it through underwriting.

Except for the loan contingency, whether or not a buyer borrows money for the home purchase matters little to the seller, the transaction is essentially the same.  Agents and sellers know a strong pre-approval when they see one, and it can be just as good as cash.

 

Make It Personal

Home sellers are usually emotionally attached to their home.  This can be your best advantage over all-cash buyers or investors.  Often a homeowner wants to see their house go to someone who will care for it and enjoy it as they have all these years.  They don’t want to see their family home destroyed or turned into another cookie-cutter development.  It’s an emotional reason, but people are more inclined to sell their home to someone who will use it for their primary residence.

Try including a letter with your offer, telling the sellers about yourself and your hopes and dreams for their property.  Putting a face to a name and a story to a face may be your winning strategy!

 

 

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This article has 16 comments

  1. donsaun99@gmail.com

    It’s an easy thing to identify those who really need the house and those who would pay any price for the house because they just want to keep it for a while and then re-sell it to somebody else. I personally would not sell my house to a cash-buyer because I would never sell my house to anybody that is going to resell it, I definitely would sell it to sobebody I trust, that’s my opinion though, thank you for sharing.

  2. ashley03231994@gmail.com

    This is quite true. If a seller is hard up for the cash, they will most likely take the all cash offer. If they are willing to work with you and you can get a strong approval for your bank they like that idea as well. We just went through this with the man we bought our house from. He liked our offer better than the cash offer, which was about 8k less than his asking price.

  3. homebuddy

    Those are logical and realistic tips. Cash buyers will often haggle because they think that most home sellers will grab at their offer because it’s quick cash, after all. A mortgage borrower can counter the advantage with a strong pre-approval. Unless the seller badly needs cash at that very moment, most sellers will prefer to wait for a few days to get the full asking price for their property. That makes a lot of sense.

  4. theduck7

    I really don’t like those cash buyers. Seems like they are often quite greedy and are playing on people’s financial difficulties. Not really the kind of person you want to sell your home too.
    Thought this article had some good suggestions. If you are going to love and care for the home I’m selling, I’d rather let you have it than some greedy corporation.

    • donsaun99@gmail.com

      I agree with you, mostly because these corporations are interested on buying your home just because they want to sell twice the price they’ll buy it for, it really is an odd thing, I’d rather keep it, indeed.

  5. andy.j.theriault1@gmail.com

    I wish there was a program through the bank to allow financing for cash only purchases/auctions. I have been seeing cheap homes with land for so cheap lately, but I do not have the cash flow to drop $20,000 and probably another $10-20 to make it livable.

  6. gabby_18@rocketmail.com

    I personally think that a non-cash buyer with a good credit score and an all-cash buyer are equally deserving in the eyes of the seller or agent. As the one selling the property, however, I would have to have adhere to certain ethical standards and treat both types of buyer in the same light. Whoever pays first will be my priority. Even if you do not have cash on hand at that very moment, if you’re able to close the deal long before all-cash buyers, then the property is good as yours.

  7. balalzeekrya@gmail.com

    All cash buyers are definitely prone to looking like jerks in these situations, especially to a person who’s emotionally invested in their home. You’ve done a great job highlighting the benefits to taking a regular non-cash approach to buying a house.

  8. clairedanes02@yahoo.com

    I’m not quite ready to buy a house just yet, but it’s never too early to learn these things. I know I for one might not be in a position to pay cash for the house I want to buy, so this article is really very informative and useful for me.

  9. vhicks332@yahoo.com

    A strong pre-approval is probably the way to go, and I was really unaware that this was as big of a concern as it seems to be. It is crazy how the market can really change and I remember not too long it was almost the opposite with home purchases, at least from I was told. I always want to root for the little guy though, and I hope that these big companies are not taking homes away from people who need them.

  10. Sudeep

    You have got a very good article there indeed. It would be really helpful for those who seek in buying the houses and have no idea about their selection. Your article gives people with the knowledge to know something which they do not know but need to or must know before making the purchase.

  11. saygorem@gmail.com

    That was a nice tips in competing with buyers with cash in their hand. I like the last part where you make a letter to the seller that you will buy his or her house and try to preserve it as a residential house. You will assure the seller that you will make use of the house and live in it as a residential house so that the seller can sometimes visit the house anytime he wants. Maybe the seller want to see and reminisce the memories he have there.

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