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!