Competing against an all-cash buyer? Here's what you need to know

Homes & real estate
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Competing against an all-cash buyer? Here's what you need to know

Homes & real estate

In a real estate market where “cash is king” and “money talks”, how do you compete as a first-time homebuyer when all you’ve got is a good job and a 700+ credit score?

Well, as it happens, even though all-cash offers make it tougher to compete, they don’t make it impossible. Here are seven tips to help you convince a seller that all that glitters isn’t just gold.

 1. Pictures in Their Heads

The negotiation expert Stuart Diamond says that to be successful in any negotiation, you must first determine what pictures are in the other person’s head. Does the seller want to be admired for the amazing work they did on the garden? Do they want to know their home of 30 years isn’t going to be torn down and turned into a McMansion? Do they need an extra month or two before closing because they’re still looking for a home themselves?

Sure, some—maybe even most—sellers will simply want the highest price possible. But “some” isn’t “all”. Figure out what’s most important to each seller and you may be able to leverage that into a new address.

2. Go Big

Are you willing to pass on a home inspection? This is a risky move since hidden issues with a home could cost you tens of thousands of dollars over the purchase price, but if you absolutely, positively have to have the property, it might be a winning tactic.

3. Make Your Offer As Bulletproof as Possible

Home loans are tough in today’s market. More than just offering 20% down (though definitely do that if you can), you need to make certain every duck is dotted and every “t” is in a row.

This means having at least all of the following:

  • Pre-approval letter
  • History of steady employment
  • Low debt-to-earnings ratio
  • Strong credit
  • Bank statements indicating strong and positive cash flow

Show the seller that nothing less than a catastrophic natural disaster will keep your loan from going through.

4. Assemble the Best Team

A top-rated agent and/or broker are invaluable in any market, but especially right now. Ask for recommendations from friends and colleagues. Pore over review sites and look for bad reviews that speak of mortgages that didn’t make it through escrow because the agent/broker didn’t do all of their homework.

A strong team means fewer headaches, fewer surprises, and a much better chance for a successful escrow.

5. Hit Them With Your Best Shot

As in, a higher price than a cash-buyer might be able to afford. Again, not the optimal choice since it means you’re spending thousands more for your home. But consider this: an extra $5,000 over the course of 10 years or more translates to only an extra $42 a month or less.

Don’t submit a bid that’s sort of competitive. The market moves so fast right now the seller may pick someone else before you get a chance to make a second offer.

6. Make It Personal

Write the seller a letter to help them get to know you. Sincerity is vital. Don’t make anything up. Don’t push. Let them know you value the house as a home and not as an investment vehicle. Establishing a personal connection may help you stand out from the crush of impersonal dollar signs.

7. The Need for Speed

All-cash buyers move fast so you need to keep up.

  1. Provide your lender all available financial documentation and ask them to get started early on the mortgage processing.
  2. Get an appraisal lined up in advance. It can be a bit tougher to manage at larger lenders, but letting the seller know you can have an appraiser out within 24-48 hours might help seal the deal.
  3. Likewise, do what you can to wrap up the inspections in days instead of weeks. Nothing says, “I want this” more than rapidly checking things off the to-do list.
  4. And, of course, offer the seller as quick a close as you can.

Will you win every time with these tactics? Sadly, no. But just as baseball players up their hitting percentage by making small but crucial improvements to their swing, you’ll increase your odds of winning your next bid if you adopt these tips.