How to Win Against Cash Buyers
As a buyer that’s obtaining a loan in order to buy a home in today’s market, getting your offer to the top of the pile when you’re up against cash buyers may be your biggest hurdle. This can be especially common if you’re searching for a distressed property that property investors may also be interested in buying in order to remodel and rent or re-sell to make a profit.
The key to learning how to write a compelling offer and to beating cash buyers is to get to know what the seller is looking for.
A seller in today’s market is motivated by one or more of these four things:
Convenience
Speed
Price
Certainty
Generally if a seller is primarily motivated by speed or certainty, a cash buyer is going to win because they don’t have to jump through the typical hoops that a borrowing buyer would have to. There is no appraisal process, they are able to skip a lot of the typical inspections, and they are in complete control of how quickly they would like to close escrow.
When you’re buying a home with a traditional loan, you’ll have to go through the appraisal process and any subsequent negotiations. You’ll also have to get your title work done on top of a long list of items that a lender will want to see. Most of the time this is what extends the escrow process.
Ways that you as a borrowing buyer can compete against these cash buyers, are with the actual price of the property and with convenience.
Some sellers are simply only motivated by money. What is the highest dollar amount that you’re willing to give? Often times investors and cash buyers are operating under a tight budget that your pockets may be able to reach deeper than. When you close escrow, the sellers just get a check with their proceeds. They don’t care if you’re cash or if you got a loan. Even though cash might come faster, if you’re giving them a bigger price some sellers may be motivated by that.
The final way to beat a cash buyer is with convenience. Find out what the main pain point is for the seller and find a way to make it easier. Do they need help moving? Can you offer them the option to stay in the home for a short period of time post-escrow? If you can find a way to make the escrow process easier for them, this may in turn tip the scales in your favor when deciding between your offer and one that is all cash.
As an additional note, if you’re consistently losing to cash offers you may consider searching for off-market deals. They are less reliable and more rare, but sometimes the best competition is no competition at all.
The most important thing is to talk to the sellers. Have your agent find out what is important to them, and structure your offer accordingly.
