How to Compete Against Cash Home Buyers in a Tight Market – and Win!

In many real estate markets, cash buyers have earned a reputation for scoring the best deals and best prices. These buyers also have a reputation for stealing homes out from under other buyers using financing, simply because cash purchases are assumed to be a faster process. The average buyers relying on a mortgage loan are often intimidated by what appears to be a fierce competitor. However, the truth is, someone buying a home with credit can still compete against cash buyers and win. With some financial and administrative preparation – having down payments in hand, demonstrating regular income or cash reserves in addition to your down payment, showing little debt on the book while maintaining good credit – a financed real estate purchase should be as sound as a cash buyer’s.

Here’s what you need to do to compete against a cash buyer:

Get Pre-Approved

Getting prequalified for your home loan is the first step in the mortgage process, however, it doesn’t involve an in-depth analysis of your credit. Most agents or sellers will want you to take that next step and actually get you pre-approved for a mortgage since pre-qualification doesn’t mean much when it comes to negotiating with sellers.

In addition to a pre-approval, supporting financial documents like a credit report or bank statements can help make your case. Not all mortgage lenders are created equal, so try to find one who knows

your specific market and can help you close quickly to keep the seller (and the seller’s agent) interest.

Make a Competitive Offer as Though you’ve Already Won

Ask your lender to write a pre-approval letter in addition to indicating that you are a well-qualified buyer. Get your agent or mortgage professional to provide some financial information about you with your offer, such as your creditworthiness or additional cash available. Have your lender take as much of your loan through the process as possible, including title reports. Send the lender a copy of the preliminary title report, and let the seller know how much of the closing process you have already completed.

Pre-Schedule an Appraisal

Pre-scheduling a real estate appraisal may not be as easy with a bigger bank as with smaller community banks, direct lenders or mortgage brokers, but it can entice a motivated seller to choose you over a cash buyer who still needs to request an appointment – which could be months in the future. At the time your offer is written, tell the seller the appraisal has already been ordered for a speedy closing.

Pre-Schedule an Inspection for Immediately After the Close of Sale

Along with the loan pre-approvals and appraisal appointment, ask your inspector to survey the property in and out. Shelling out a few hundred dollars and getting the inspections done within days of having your offer accepted shows the seller you mean business. And it may alert you (the homebuyer) to extra expenses you may experience once you’ve signed for the home.

Offer a Little Over Your Target Price

Paying more money to beat a cash offer may sound counterproductive, however, you should understand that cash buyers tend to expect a discount simply because they are offering cash. These buyers also tend to start out with a lower offer. To increase your chances of securing your dream home, top the cash offer.

Some cash buyers may return with a higher offer, but not always enough to match for financing capabilities. A seller may not risk financing for a few hundred or a thousand dollars, however, if you show you are ready to move on loans, closing and associated processes, then you could be a shoo-in. You may also consider offering your target financing price and sweetening the deal with additional cash for the seller.

Get to Know to the Seller

If you’re competing with a cash buyer, particularly an investor who plans to rent the home out, it can’t hurt to get a little personal with the seller. Appeal to your seller’s emotions and personal values but write them what is commonly referred to as love letters.

Include a cover letter and an introduction from your agent and/or lender. Let the seller know who you are, why you like the home and what your intentions are in real estate investment. Create a sense of empathy to encourage the seller to reward your dedication to your home buying goals.

Go After Your Dream Home

Sometimes a seller does not want to risk dealing with buyers using traditional financing, and nothing you do — aside from paying all cash — will change that. Just do your best to be realistic, ensure your financial documents are in order and appointments are made to move the closing process along swiftly.

Speak with your trusted real estate agent and mortgage lender to develop a plan for competing with all-cash home buyers. As long as you are in a reasonable price range, you have a chance to score the home of your dreams.

Skip to content