Insider Secrets when competing with a cash buyer
I understand how disappointing it is to write an offer on your dream home, only to be beat out by a cash buyer. When competing with cash buyers, you need to change your strategy. Determining what’s most important to the seller is crucial in any multiple offer situation. Likely the offered price is high on the home seller’s list, but what else? Have they lived in the home for decades? Do they know where they are moving? When a homeowner has lived in their home for years, moving is difficult, even when they know where they are moving. Often allowing the seller additional days after closing to make a leisurely move is a big benefit to the seller.
Write a love letter to the seller. It won’t hurt. They often have strong emotional ties to their home. If your Realtor is more than an acquaintance they should also write a letter about your relationship and what an easy process this will be for the seller (because you – the buyer are wonderful).
Contingencies are insurance for the buyer and a risk to the seller. As soon as your offer is accepted, you and the seller hope that everything will go smoothly. But contingencies allow the buyer to cancel escrow and have their earnest money refunded which leaves the seller back to square one.
Unless the buyer is tearing down the home, the most important contingency is their investigative Contingency (home inspection). With this contingency in place, the buyer has the opportunity to hire professionals to inspect the home. The buyer has the right to cancel escrow and have their earnest money deposit returned, if the buyer does not approve the condition of the property. The shorter the fuse on this contingency the better. Try for 5-7 days – that’s impressive.
When competing with cash buyers the necessity for a loan and appraisal contingency should be carefully considered.
Loan contingency – this is easy. You have met with a highly regarded local lender. They have reviewed your income and down payment information and have you preapproved. Ask them, do you really need a loan contingency? (Remember when competing with a cash buyer, they don’t have a loan contingency).
Appraisal: this is a bit trickier. Your lender will base your loan to value on the purchase price or appraised value, whichever is less. If the appraisal comes in low, you may need to increase your down payment. Unless you have a substantial down payment you need the advice of an experienced real estate professional to determine if it’s too risky to remove this contingency.
But the biggest trick when competing in multiple offers is to work with an experienced real estate agent.