How to beat a cash offer?

Cash buyers in real estate have a reputation for snatching up homes out from under credit buyers. But if you’ll be financing your home purchase mostly with credit, you aren’t necessarily out of the game.

Here are 6 tips for competing successfully against a cash buyer.

  1. Structure your offer as if it’s a shoo-in. Ask your lender to write a pre-approval letter and to verify that you’re a well-qualified buyer. Get your agent or mortgage professional to provide some financial information about you with your offer. Ask your mortgage professional to take as much of your loan through the process as possible. Send the lender a copy of the preliminary title report, if available.
  2. Reduce the loan and appraisal contingency time. Ask your lender how quickly they can send an appraiser to the property and how long the loan would take to turnaround. In some markets, loans are approved in less than two weeks.
  3. Pre-order an appraisal. Smaller banks, direct lenders, or mortgage brokers can line up an appraisal in advance, though this can be more difficult to arrange with a bigger lender. At the time your offer is written, tell the seller the appraisal has already been ordered.
  4. Get inspections done right away. Along with the quick appraisal and loan contingencies, get your inspector in and out. Spending a few hundred dollars to get the inspections done within days of having your offer accepted shows the seller you are serious.
  5. Pay extra. Spending more money to beat a cash offer sounds crazy. But cash buyers nearly always expect a discount from the seller simply because they’re offering cash. As a result, the cash buyer will often make a lower offer. To increase your chances, top the cash offer. If you plan to live in the house for years, and it’s the home of your dreams, paying a bit extra may well be worth it.
  1. Make yourself known to the seller. Ask your agent to write a cover letter and an introduction. Let the seller know who you are, why you like the home and what your intentions are. It usually, but not always, helps.

Sometimes, the seller just doesn’t want to take a risk with someone getting a loan. Nothing you do — aside from paying all cash — will change that. So do the best you can and be realistic. Make sure your financial ducks are in a row. Line up a good local real estate agent. Start working with a local mortgage professional well in advance. Structure your offer to show you’re ready to roll.

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