Yes, You Can Compete Against Cash Offers
Hold onto your hats home buyers, because it’s a seller’s market out there! And you know what that means – listings are being taken off the market almost as fast as they’re being put up. That’s a sure sign that competition among potential buyers is fierce, as inventory is limited and sellers consistently receive multiple offers (some of them all-cash). So, how can you compete against cash offers in today’s hot market? Well, the good news is that there are a few great strategies that can help you close the deal on the home that you want, fast. Here’s what you need to do:
How to Compete Against Cash Offers
Before you jump in the game, you have to start with your budget. Buying a house can go from a rational decision to an emotional one way too fast if you get caught up in the race. And, you certainly don’t want to overextend yourself in a bidding war, so whatever you do, stick to a strict budget. After all, once the thrill of the buy fizzles out, you’re still going to be left with a mortgage and tax bills that you have to pay. Take the time to carefully examine the costs associated with homeownership, and create your plan of action. It should look something like this:
- Step 1: Get Preapproved for a Mortgage – Applying for a mortgage is what separates the casual browser from the serious buyer. You will need this document from a lender before you can proceed in bidding on any home you’re interested in, as it indicates that your financial history has been checked and that you are qualified for a loan. During the process, a lender will check your credit, finances, income and employment to get a clear picture of your potential risk and ability to repay a loan. If preapproved, you’ll have stronger bargaining power when it comes time to make an offer on a home.
- Step 2: Act Fast – It’s a good idea to seek the help of a buyer’s agent. They can assist you through the entire process and give you the best advice on making offers as well as alert you to new listings that hit the market. With them on your side, you’ll be ready to see and move on a house at a moment’s notice. Remember, there will be countless others out there waiting to do the same thing, so be prepared to take multiple calls from your agent so that you can act quickly. There’s no time to wait!
- Step 3: Shorten Due Diligence – The due diligence period begins when a seller accepts your purchase and sale agreement, and it ends at a time specified on the contract (usually 30 days). You can make your offer more appealing by agreeing to shorten the due diligence period, sometimes to as little as seven days. This can help ease the process for the seller, which is good for you. After the contract expires, the buyer can no longer walk away from the loan. Now, during this time, inspections will be conducted, and if problems are found, you can negotiate with the seller, request an extension on the due diligence period for further inspections or exit the deal altogether.
- Step 4: Go in with a Strong Offer – Though the thought might seem intimidating at first, you’re going to want to make a strong offer up front, so be prepared to offer the maximum amount in your budget while sticking to it. If you do happen to come up with some extra money available, and you’ve found your dream home, it may be worth it to come in a little high to win the deal.
- Step 5: Look for a Flexible Loan – There are conventional loans, and then there are unconventional loans that come with a laundry list of additional requirements that can actually hinder buyers in competitive markets. A seller is more likely going to go with the buyer who has a conventional loan in order to avoid the hassles of those that are less flexible. So, keep this in mind before you commit to one or the other, and do your research.
When it comes to purchasing a home in this highly competitive market, the best way to eliminate barriers is to take the time to explore all of your mortgage options. This will give you the best chance at having your offer accepted so that you can move into your dream home.