You found a house you like. Really like!
You write an offer and submit it to the sellers. It is a strong offer, the very best you can muster. And you’re waiting…
Waiting to be told, “Sorry, but the sellers liked an ‘all cash offer’ they received and went with that one.”
For many buyers, that’s not the first or last time this will happen. Too many properties are getting snapped up by all-cash buyers. What can you do to compete with all cash buyers while not being in such an enviable position?
The news is not all bad as the number of all-cash buyers seems to be lower than in previous years. Cash buyers accounted for 33% of all home purchases in June 2014, down from a peak of around 43% in late 2011 and early 2012. All cash buyers can be big competition for first-time buyers.
How to Compete with All Cash Buyers in any Market
Once you have found that idyllic home on a great lot in like new condition you must pounce. Use timing to your advantage. As a home buyer in pursuit of a new property, you must be ready to write the offer.
Get Your Documentation and Credit in Order before shopping
Another get ready, get set exercise is to have all the documents ready and available that a mortgage broker will require getting you fully approved. If you need to withdraw funds from a retirement account, go ahead and get that done. If you are using gift proceeds, then prepare for that. Keep copies of the transfer and deposit documentation. The loan officer and underwriter will need to verify the corresponding payment if the withdrawal is a loan from an IRA or 401k.
Get Credit Underwritten and Approved
Not every lender will underwrite a loan file without a ratified contract. But, there are those that will. I keep track of these lenders as it is the surest thing a home buyer can receive as far as assurance that their loan request will close and be funded. Going through a full underwriter review rather than a pre-qualification removes as much risk as possible for your situation.
As a buyer, you are in control while composing a purchase offer. Understand that an all-cash buyer is perceived to be riskless. As a buyer with a financing contingency, you will want to eliminate as many other risks for the seller as possible.
If you have a home to sell before settling on a new purchase, you need to get busy. Sell that home! Sellers and their listing agents do not like contingencies for the sale of a home. The uncertainties surrounding the marketability and timing regarding the sale pose too many unknowns.
Dropping a radon inspection is a possibility. And if you are coming with a large enough down payment you might want to consider eliminating an appraisal contingency. However, if you have the minimum equity required for your financing, then an appraisal value below the sale price could present a new set of problems.
The home inspection contingency may be the most problematic to leave out of a purchase offer. Many professionals will strictly advise against skipping such a contingency and the ability to have the property reviewed by a home inspector. Even new home purchasers can benefit from a professional home inspection. On the other hand, you may have budgeted to make any repairs and maintenance on your own.
In the end, it all depends on your sensitivity and personal preferences. I would caution you to avoid allowing the passion or desire for any one house force you to shoulder all the risk. Then again, I am not walking in your shoes. Some risk may be deemed necessary to obtain the house of your dreams.
Find a Great Mortgage Broker
Having a loan officer who performs a thorough initial analysis of your situation to gain a complete understanding of your financial profile and any potential problems is worth its weight in gold. You must accomplish this exercise prior to writing a purchase offer.
Your mortgage broker must perform due diligence while expediting approval and write a strong letter describing your ability to close the new financing per the purchase offer.
Understand Seller’s Goals | Make it Personal
A huge consideration is understanding what any seller needs beyond the highest net to make your offer the most attractive to them. Do they need to rent back until their new home is completed? Do the sellers need a delayed settlement to accommodate some tax provision in which they are trying to maximize their proceeds from the sale? Find these answers and you may gain an edge in producing the winning offer.
Finally, consider writing a personal letter of interest to the sellers. Tell them why your kids fell in love with their home. No kids? Tell them how their backyard will be perfect for the family you are planning.
Above all, be authentic. Sellers love their home. Let them know how much you love it, too.