• Mortgages
    Get the Best Rates
    • Mortgage rates
    • Refinance rates
    • 30-year mortgage rates
    • 15-year mortgage rates
    • 20-year mortgage rates
    • 10-year mortgage rates
    • Mortgage lender reviews
    Use Calculators
    • Mortgage calculator
    • How much house can you afford?
    • Mortgage refinance calculator
    • Mortgage payment calculator
    • Amortization calculator
    • All mortgage calculators
    Get Advice
    • What to know about reverse mortgages
    • Home buying guide
    • Refinance your mortgage
    • First-time homebuyer loans and programs
    • Prepaying your mortgage
    • Your guide to FHA loans
    • Everything to know about VA loans
  • Homes
    Home Buying
    • Determine your budget
    • Find your home
    • Get prequalified
    Get Advice
    • Step-By-Step Homebuying Guide
    • First-Time Homebuyer's Guide
    • How Does Rent-To-Own Work?
    • What To Look For When Buying A Home
    • Homebuyer Mistakes To Avoid
    Learn How To
    • Make An Offer On A House
    • Decide Between Renting vs. Buying
    • Ace the Final Walk-Through
    • Find The Best Real Estate Agent
    • Buying A Second Home
    Use Calculators
    • How Much House Can I Afford?
    • Rent Vs. Buy Calculator
    • Cost of Living Calculator
    • How Much Should I Put Down?
  • Banking
    Compare Accounts
    • CD rates
    • Savings accounts
    • Money market accounts
    • 1-Year CD rates
    • 3-Year CD rates
    • 5-Year CD rates
    • Checking accounts
    • Bank ratings
    Use Calculators
    • Savings calculator
    • CD calculator
    • Compound savings calculator
    • All banking calculators
    Get Advice
    • How to save money
    • Federal Reserve news
    • What is a money market account?
    • Which certificate of deposit account is best?
    • How to open a savings account
    Bank Reviews
    • Capital One Bank
    • Marcus by Goldman Sachs
    • American Express National Bank
    • CIT Bank
    • Synchrony Bank
    • Barclays Bank
    • All Bank Reviews
  • Credit Cards
    Compare by Category
    • Best Credit Cards of 2019
    • Rewards
    • Travel
    • Airline
    • Cash Back
    • No Annual Fee
    • Balance Transfer
    • 0% APR
    • Business
    • Student
    Compare by Credit Needed
    • Excellent Credit
    • Good Credit
    • Fair Credit
    • Bad Credit
    • No Credit History
    • Secured Credit Cards
    Compare by Issuer
    • American Express
    • Bank of America
    • Capital One
    • Chase
    • Citi
    • Discover
    • Wells Fargo
    Get Advice
    • Credit Card Reviews
    • Credit Card Payoff Calculator
    • Balance Transfer Calculator
    • All Credit Card Calculators
  • Loans
    Compare Lenders
    • Personal loan rates
    • Personal loan reviews
    • Auto loan rates
    • Student loan rates
    • Student loan reviews
    Loan Types
    • Personal loans
    • Auto loans
    • Debt consolidation loans
    • Home improvement loans
    • Student loans
    • Medical loans
    • Bad credit loans
    Use Calculators
    • Loan calculator
    • Auto loan calculator
    • Personal loan calculator
    • Auto refinance calculator
    • Loan payment calculator
    • Student loan calculator
    • All calculators
    Get Advice
    • Student loans guide
    • Refinancing student loans
    • Refinancing personal loans
    • Refinancing auto loans
    • How to get a personal loan
    • Personal loan origination fees
  • Investing
    Best of
    • Best Investments
    • Best online brokers for stocks
    • Best online brokers for beginners
    • Best online brokers for mutual funds
    Brokerage Reviews
    • TD Ameritrade Review
    • Merrill Edge Review
    • Ally Invest Review
    • Fidelity Review
    • Charles Schwab Review
    • Vanguard Review
    • Interactive Brokers Review
    • Robinhood Review
    • Tradestation Review
    • E*Trade Review
    • WellsTrade Review
    • All Brokerage Reviews
    Use Calculators
    • Investment Earnings Calculator
    • Annuity Calculator
    • All Investing & CD Calculators
    Get Advice
    • Compare Online Brokerages
    • What is the long-term capital gains tax?
    • Passive income: What it is and 5 ideas for 2019
    • How to buy stocks
  • Home Equity
    Compare Lenders
    • Home equity loan rates
    • Home equity line of credit rates
    • Home equity lender reviews
    Use Calculators
    • Home Equity Calculator
    • Loan vs. Line Of Credit Calculator
    • Debt consolidation calculator
    • HELOC payoff calculator
    • All home equity calculators
    Get Advice
    • What is a home equity loan?
    • HELOC vs. Home equity loan
    • Consolidate your debt using home equity
    • Home equity loans with bad credit
  • Insurance
    Insurance Types
    • Car insurance
    • Homeowner's insurance
    • Health insurance
    • Life insurance
    Best of
    • Best Car Insurance Companies
    • Best Home Insurance Companies
    • Best Cheap Car Insurance
    • Top Car Insurance Comparison
    Company Reviews
    • Geico Insurance
    • State Farm Insurance
    • Progressive Insurance
    • Allstate Insurance
    • Liberty Mutual Insurance
    • Nationwide Insurance
    • The General Insurance
    • Farmers Insurance
    • American Family Insurance
    • Erie Insurance
    • Amica Insurance
    • Travelers Insurance
    Insurance by State
    • Car Insurance California
    • Car Insurance Florida
    • Car Insurance Georgia
    • Car Insurance Michigan
    • Car Insurance New Jersey
    • Car Insurance New York
    • Car Insurance North Carolina
    • Car Insurance Pennsylvania
    • Car Insurance Texas
    • Home Insurance Florida
    • Home Insurance Texas
  • Personal Finance
    Compare
    • Current interest rates
    • Compare rates
    Use Calculators
    • Debt consolidation calculator
    • Net worth calculator
    • Personal finance calculators
    • Cost of living calculator
    • All calculators
    Get Advice
    • Retirement advice
    • Debt management
    • Improve your credit score
    • Career resources
    • Tax advice
    • Insurance basics
    • Real estate tips
    • Personal finance glossary
  • Retirement
    Get Advice
    • Best Roth IRA accounts
    • Best retirement plans
    • How to open a Roth IRA
    • 401(k) rollover guide
    • Roth IRA vs. Roth 401(k)
    Use Calculators
    • 401(k) retirement calculator
    • Retirement savings calculator
    • Roth IRA calculator
    • IRA minimum distribution calculator
    • Social security benefits calculator
    • All retirement calculators
    More Information
    • What is an IRA?
    • What is a Roth 401(k)?
    • 401(k) contribution limits
    • Contributing to IRA during retirement
    • Best age for Social Security retirement benefits
    • Roth IRA 5 year rule
  • Create Account
  • Dashboard
  • Alerts
  • Settings
  • Support
  • Logout
Share

8 strategies to compete with cash homebuyers

Dana Dratch
April 15, 2016  in  Real Estate

1 of 9

How to beat cash buyers | Hero Images/Getty Images
How to beat cash buyers

Hero Images/Getty Images

In homebuying, cash rules.

Nationwide, roughly 30% of homebuyers pay cash, rather than get a mortgage, says Daren Blomquist, vice president of RealtyTrac, a real estate data company. That’s down from an average of 36% for 2011 through 2013, he says. But it’s still higher than a typical year — which sees about one-fifth of buyers paying with cash.

Cash dominates some markets. Two-thirds of buyers in Fort Smith, which straddles the Arkansas-Oklahoma border, paid cash in 2015, according to RealtyTrac numbers. In 9 other cities, at least half of all home sales were cash transactions in 2015. Seven of those cash-buyer hot spots were in Florida.

Worried about going head-to-head with cash buyers for your dream house? Here are 8 strategies to help you compete.

RATE SEARCH: Get prequalified for a mortgage today.

The Bankrate Daily

2 of 9

Offer more money | Leonardo Patrizi/E+/Getty Images
Offer more money

Leonardo Patrizi/E+/Getty Images

Money moves things. And it can speak volumes when you’re trying to buy a home.

Want to show a seller in a high-cash market that you’re a serious contender (despite your need for financing)? Pony up a hefty good-faith deposit, says Karla Goodman, Realtor with Coldwell Banker in Palm Coast, Florida.

She advises putting up 10% to 20% in earnest money. If you get the house, it goes to the down payment or closing costs, “so you give it to them now or later,” she says.

Don’t skimp on the purchase offer

You never want to pay more than the home is worth — or more than you can afford. But if you’re competing with cash buyers, you might want to offer more “if you have the means to do that,” Blomquist says.

Offering more doesn’t guarantee you’ll get the house.

“I lost an offer the other day because (my buyer) had financing, and the other person had cash,” says Goodman, who works in the Daytona Beach area, where half of homebuyers paid cash in 2015. “And (we) offered more money.” 

3 of 9

Learn what's vital to the seller | moodboard/Cultura/Getty Images
Learn what’s vital to the seller

moodboard/Cultura/Getty Images

Different sellers value different things.

Some want the highest price they can get. Others want to close in time to buy another home or get the kids enrolled in school. Some want a good caretaker for their former home.

A large offer — or even a cash offer — might not be what matters most to your seller, says Adam Leitman Bailey, author of “Finding the Uncommon Deal: A Top New York Lawyer Explains How to Buy a Home for the Lowest Possible Price.”

Find out what the seller’s goals are. If you can match those criteria — whether it’s a certain closing date or a promise to nurture a gardenia bush they planted in the yard — you’ll be a strong candidate, he says.

“If I’m the seller, I’m going to go for whoever is making my life easier,” Bailey says.

RATE SEARCH: Shop today for a mortgage.

4 of 9

Demonstrate your good credit | Eva Katalin Kondoros/E+/Getty Images
Demonstrate your good credit

Eva Katalin Kondoros/E+/Getty Images

Sellers love cash because it guarantees that there will be no last-minute snags if the buyer can’t get a mortgage.

So prove that you’re a serious contender by including a mortgage preapproval letter with your offer.

Some lenders may even go a step further, and actually underwrite your part of the loan (with a house to be added later), says ReRe K. Anderson, a broker associate with Adams, Cameron & Co. Realtors. These buyers receive a loan commitment letter that they can submit when they make an offer, she says.

But most lenders will only go as far as preapproval before you have an actual address to plug into the equation, says Rob Van Raaphorst, spokesman for the Mortgage Bankers Association.

You can boost your buyer reputation by getting several preapproval offers and including them with the offer, Bailey says.

Make all those loan applications within a 45-day period, and your credit score will count them as 1.

5 of 9

Proof of funds | Rob Daly/OJO Images/Getty Images
Proof of funds

Rob Daly/OJO Images/Getty Images

To reassure a seller that you’ve got the cash on hand to obtain and close on a mortgage, show the money, says Anderson.

With your offer, include a letter from your bank or a CPA certifying any funds or assets you’re relying on to get that loan — like the down payment money, or a set-aside account with several months worth of mortgage payments.

“That alleviates a lot of concerns,” Goodman says.

RATE SEARCH: Ready to shop for a mortgage? Find the best deal today.

6 of 9

Be ready to move quickly | Hero Images/Getty Images
Be ready to move quickly

Hero Images/Getty Images

“You just have to realize you’re at the bottom of the totem pole compared to cash buyers,” Blomquist says, so move quickly when you find a home.

Gather everything you need to make an offer in a notebook or folder, Bailey says. Include your mortgage preapprovals or commitment letter, plus anything you want to include with your offer, like proof of down payment funds or letters of reference. Line up pros for things you know you’ll need, like your home inspection.

If you have a lot of cash buyers in your target area, stay on top of the market yourself, Goodman says. Homes can come and go quickly, and you can’t rely solely on your agent.

And if you can’t reach an agent through social media, “have the foresight to pick up the phone and call,” Goodman says.

Even so, in a competitive cash market “understand going in — you may have to make 4 or 5 offers before you successfully bid on a home,” Blomquist says. “It can be tough.”

7 of 9

Write a letter | Isabel Pavia/Moment Open/Getty Images
Write a letter

Isabel Pavia/Moment Open/Getty Images

You’ve probably heard about this one: You write a letter to the seller, explaining what you love about the house, and why you want to buy it — and submit that with your offer.

Many agents swear it can be effective because it puts a human face on your offer and makes you more than just a dollar amount to the seller.

Demonstrating your humanity can be especially important if you’re going up against real estate investors who are paying cash, says Jonathan Smoke, chief economist for Realtor.com, the site for the National Association of Realtors.

A letter was the tipping point for recent buyers who were up against a cash offer, Goodman says. The buyers wrote about how the sellers had raised a family in the house and how they wanted to do the same, she says.

The sellers “wanted a family there, because it had been a very important part of their life,” Goodman says.

8 of 9

Don't forgo the inspection | iStock.com/Imagesbybarbara
Don’t forgo the inspection

iStock.com/Imagesbybarbara

One reason some buyers may prefer cash: Mortgage lenders require an appraisal, and some want a home inspection.

And with some mortgage programs, like Veterans Administration loans, those inspections may be more stringent, disallowing homes with problems like peeling paint.

So if a seller fears the home may have some issues, he or she may opt for a cash sale. In some competitive markets, sellers may try to include “as-is” language in the contract no matter how the buyer is paying, Goodman says.

But whether you’re going up against a cash buyer or not, smart money says you need your own independent home inspection, says Eric Tyson, co-author of “Home Buying for Dummies.”

Don’t let fear, haste or the specter of competition push you into doing something unwise — especially with one of your biggest investments.

9 of 9

Shop new construction | Pgiam/E+/Getty Images
Shop new construction

Pgiam/E+/Getty Images

Supplies of new homes are growing faster than supplies of existing homes for sale, says Smoke. So it can be easier to get a new home, he says.

Buyers also get a warranty, plus new homes often cost homeowners less in maintenance and upkeep in those first 5 to 10 years than an existing older home, Smoke says.

In addition, if you buy the house before or as it’s being built, “you won’t face the scenario of having a multiple-bid situation,” he says.

And, while you don’t have to use them, many builders have preferred lenders and offer incentives or money that can be used toward closing costs, Smoke says.

RATE SEARCH: Get prequalified for a mortgage today.

Related Links:
  • It’s Tricky to Get FHA Certification for a Condo, but It Can Be Done
  • kitchen remodeling ideas for under $500
  • Recourse for duped couple who bought a home built on dump site
Related Articles:
  • Homes in happy beach towns
  • Water runoff floods property
  • Pro-pot state, anti-pot HOA

You may also like

  • 6 things real estate agents wish you knew

  • 10 houses for sale in the happiest American beach towns

  • The costs of buying a home come in these 3 big waves

  • Termite damage doesn’t automatically mean you can’t buy the house

  • Termite damage doesn’t automatically mean you can’t buy the house

  • 7 deal-breakers that can sink a home sale

  • About Us
  • Press Room
  • Contact Us
  • Careers
  • Advertise With Us
  • Latest News
  • Popular Topics
  • Glossary
  • Compare Rates
  • Understand Bankrate's Averages
  • Privacy Policy / Your California Privacy Rights
  • Terms of Use
  • GLBA Annual Notice
  • Licenses
  • Sitemap
How we make money

Bankrate.com is an independent, advertising-supported publisher and comparison service. Bankrate is compensated in exchange for featured placement of sponsored products and services, or your clicking on links posted on this website. This compensation may impact how, where and in what order products appear. Bankrate.com does not include all companies or all available products.

Maximize Your Money. Get Expert Advice & Tools. Master Life's Financial Journey.

You have money questions. Bankrate has answers. Our experts have been helping you master your money for four decades.

Our tools, rates and advice help no matter where you are on life’s financial journey.

Facebook logo Twitter logo
Follow Us

Bankrate, LLC NMLS ID# 1427381 | NMLS Consumer Access
BR Tech Services, Inc NMLS ID# 1743443 | NMLS Consumer Access
© 2019 Bankrate, LLC a Red Ventures Company All Rights Reserved.

United States United Kingdom