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Suitcases Full of Cash 

Tips for Competing Against Cash Buyers


n recent years, cash buyers, many of whom are investors looking for rental properties, have made it difficult for first-time homebuyers to purchase homes in the lower price ranges. This is a common scenario for first-time buyers seeking an affordable home in a decent location. In a recent article in Housing Wire, the split is almost equal between cash buyers and mortgage buyers for starter level homes.

Sellers tend to prefer the cash buyer who typically can close quickly and for whom there is no financing contingency. In a tight market such as ours (and across the country) for starter homes, what can a buyer do to compete against cash buyers?

First of all, remember that typical real estate transactions have several contingencies that are exercised by most buyers, such as approval of the title report, home inspection, appraisal meeting the sales price and financing (loan qualification of buyers and property). The main advantage to a cash deal is the absence of the financing contingency, but buyers can strengthen their position by meeting with a mortgage lender and getting prequalified through underwriting to the point that the only contingency is the home appraising at the sales price before making offers. Going with a conventional type loan as opposed to VA or FHA also helps, as these agencies have additional qualifications on a property that can be an issue, particularly if it is a fixer.


aving a strong prequalification letter to submit with your offer and a lender who is available to get one to you quickly is important. Taking this extra step of almost full prequalification helps cut down the time for closing and assures the seller that the buyer is fully qualified.

Accompanying the offer should be a letter to the seller letting them know how you are making this your first family home and why you want to raise your family there, etc. This can go a long way in appealing to a seller's sentiments in preferring you over someone who is going to just purchase it as an investment with transient occupants.

Because it is not uncommon to have bidding wars on good deals, be prepared to offer above asking price. Your realtor can help you in determining this by providing statistics for recent comparative sales in the neighborhood.

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