How to Compete with a Cash Offer on a Home

Metro Indianapolis is still officially in a Seller's Market. Buyers who are getting a mortgage have often asked how and if they can beat out a cash offer on a home.

Is cash king? Not necessarily...

It's not easy to beat out a cash offer but there are some tips that can help you when you face a multiple offer situation and at least one of the competing offers is cash. 

How to Compete with a Cash Offer on a Home

When the local real estate market favors a seller, the odds of being in a multiple offer situation increase. 

A seller's market typically occurs when there are not enough homes on the market to meet the demand for homes. The competition between buyers increases and you see multiple offers. 

When you are pre-approved for a mortgage, it's often disheartening to see one or more cash offers on the home you fell in love with. However, there are more terms in an offer than just how you intend to pay. Making your mortgage offer attractive to the seller can be done in a few different ways. 

Your Pre Approval Should Be Iron-Clad

First of all, know the difference between a pre qualification and a pre approval. I guarantee you the listing agent knows and will inform his seller. 

Your pre approval should be with a reputable, local bank. Listing Agents and sellers both like to know the lender is close by in case of any challenges. 

Also, some lenders will go ahead and send your loan through initial underwriting which puts you a step ahead of the other buyers using a mortgage. That means you are ready for the appraisal step and might even be able to close sooner! 

A buyer's offer that includes a mortgage that has already been through initial underwriting makes the seller feel more secure in accepting the offer - not as much worry that the sale will fall through due to a financing issue.

If possible, sometimes making the pre approval letter for more than the asking/offer price helps as well. In a multiple offer situation, It makes the seller feel secure in that the buyer is approved for an amount higher than what they are offering. 

A bit More than Asking Price

A cash offer usually feels pretty confident. And, because of that, they will sometimes only offer the asking price or just below. If your financed offer has room and you and your agent are confident in the value of the home meeting a higher price, consider offering just above the asking price. 

A seller will sometimes go with more money over a cash offer. 

Be careful with this tactic, though. Be sure you are comfortable and don't go over your budget. Consider looking at homes just under your budget so an over the asking price offer doesn't break the bank! 

Speed Up the Time to Closing

Talk with your lender and see what you can do before you make an offer that will help speed up the pending timeframe.

In the Metro Indianapolis area, it typically takes 30 to 45 days for a financed accepted offer to close. If you can cut this back, it can help sway a seller to choose your offer, as well. 

Working with a local, reliable, and reputable lender can make all the difference! 

Inspections

There are a few ways you can go about making the inspection contingency more attractive to the seller to beat out a cash offer. 

Cash offers do still have inspection contingencies and some of them are pretty picky. 

You have a few options: 

• Waive the inspections if you are pretty sure the home is newer and/or in good condition. We don't like to waive inspections because it protects a buyer but if it's between getting the home and not, it's a consideration. 
• Instead of waiving, cut the timeframe down to a shorter amount of days. A five day inspection window looks much better to a seller than the average twelve-plus-day inspection period. 
• Put a limit on what the buyer will ask for during inspections. You can word it so the buyer will not ask for repairs or a discount for anything under a certain dollar amount. Letting the seller know upfront in your offer that you are not going to knit pick can ease their mind in accepting your offer. 

Beating Cash Offers Can Be Done

You have to get creative but a great agent like the Evelo Team agents can help you strategize and come up with a plan to formulate an offer that will compete with a cash offer! 

Remember, there are a lot of other terms in an offer that can make the whole financed offer more appealing to a seller. Working with the Evelo team is a BIG step in the right direction!