Ways to stand out over all cash buyers if you require financing
All-cash buyers are active in our market place, and they cause panic amongst buyers who require a loan to purchase a home. The main reason sellers love all cash offer is they can perform and close quickly and that give them a sense of ease and comfort. Not all sellers prefer buyers with cash. It's more about finding the right buyer, the solid buyer, the one that "speaks to them".
What do you do if you can't buy a house with all cash?
Any buyer getting a mortgage can still compete against a cash buyer. Here are the questions that play a role in where you stand:
- Do you have good credit? Pull a free credit report via your bank or a credit card even to see where you stand.
- Are you employed? Have you been with your employer for sometime now and are you earning a decent salary?
- Do you have very little debt?
- Do you have enough saved to cover the cash reserves required by any mortgage underwriter to close your transaction? You not only need your downpayment, but this is just as important to have as well.
- Do you have a 20% down payment? If you don't quite have the full 20%, do you have a family member that can help you with the down payment?
If all of these questions you can say yes to, then your offer should been just as strong as a cash buyer.
How exactly do you compete against an all cash buyer?
- Shorten the contingency periods. As your lender how quickly they can get an appraiser out to appraise the property for your appraisal contingency. There is a shortage of appraisers today, so make sure it's realist.
- Ask your lender to get a head start of the mortgage. See if your lender can move the process quickly by getting you through for underwriter approval. This means that you need to submit all the required docs before you even get an accepted offer, so you've been vetted and it makes the loan process shorter. A standard closing period if 45 days from date of a signed contract and 30 days is about as fast as a lender can close. If you go this extra step and do things ahead of time, you can close in 20-25 days.
- Inspect the property quickly. Your realtor will order the inspection and it's always good to offer a 7 day inspection period. We always get our inspectors out to a property within two to three days, so 7 days is manageable. You have to complete the inspection and make any requests from the seller in that 7 day period. That's when you'll remove your physical inspection contingency.
- Share your financial information. Whenever you submit an offer, always provide as much financial clarity as you can to the seller. Provide bank statements, or any accounts where your down payment may be coming from, so they can see that you're serious. In addition to your finances, it's always a good idea to provide a copy of your credit report or at a minimum the scores.
- Be willing to overpay. In the majority of cases, all cash buyers expect a discount from the seller, because they're offering cash and they know that's appealing. They typically offer less than asking price. To increase your chances of getting the property, offer more than the asking price, even if that means you'll pay more than you think it's worth. If you plan to live in the house for several years and it's the place you love, paying more to get the place equates to less than $50 per month over the course of a mortgage.
- Make the seller fall in love with you. Playing hard to get isn’t going to work in the current housing market. Potential buyers are pulling out all the creative stops to make an impression and win over the hearts of sellers, and we're here to tell you that it works. In these love letters, we've seen clients give personal details and explain why the seller’s home is perfect for their family. Our clients provide family photos, offer a detailed list of how the home fits their needs and describe how they can see their family enjoying particular features of the owner’s beloved home. Letters are a heartfelt way to add a personal and unique touch to the bidding process.
The reality in the West Los Angeles market today, every property will have multiple offers, because there is limited inventory. You will be competing against 13-20 other people for every property. And in this market, of course you will overbid on the house, let the sellers live there rent-free for multiple months, give them all cash tomorrow and close in five days, no questions asked. Is this crazy? Is this real? Yes and yes.