To some of us, all-cash buyers are the scourge of the superhot housing market: They swoop in, supervillain-like, and snatch up the most beloved and valuable properties from under our noses.
Or at least the ones you might have loved, had you not been stuck with that pesky mortgage contingency.
Competing with cash buyers isn’t impossible, just difficult.
Sure, some sellers will take the major moolah every single time and there’s nothing you can do about it. But if you go in with a strategy, you might just have a shot. Here’s how to create one.
1. Figure out the seller’s goals
Determining what’s most important to your seller can be key to getting your dream home—even when you’re competing against an all-cash buyer.
“People often think that all sellers want the most aggressive, quick close, for the highest price. That’s not always the case,” says Shashank Shekhar, founder and CEO of Arcus Lending in San Jose, CA. When he sold his home earlier this year, the most important factor was getting back two months’ free rent, because he was also trying to buy.
“Even if the price was slightly lower but came with that offer, we would have taken that over all-cash,” Shekhar says. “Understanding what the seller needs is always the most important thing.”
2. Consider your contingencies
If you’re willing to forgo a home inspection or secondary appraisal, you may have a leg up over buyers who won’t.
“If you’re going to compete with a cash buyer, the contingencies may be a concern for a seller,” says Joe Petrowsky, a mortgage broker in Manchester, CT. “If the prospective buyer is willing to eliminate the contingencies, that may be an incentive for a seller, especially if there are some issues with the property.”
This isn’t necessarily the best strategy. Without a home inspection, for instance, the property could have crippling issues that might have precluded you from purchasing, had you known. But if you’re dead-set on this exact house and you’re pitted head to head against a cash buyer, it might be an option to consider.
Of course, there’s one contingency you can’t remove: the mortgage. (Hey, if you could, you wouldn’t be reading this right now!)
3. Get pre-approved…
You can help soften your mortgage contingency by getting pre-approved—and offering a strong pre-qualification letter from your lender. If you’ve saved up a significant down payment and have excellent credit, this might be your winning strategy.
“The seller or their agent should understand there really isn’t a chance the loan will not go forward,” says Petrowsky. With great financials and a large down payment, your mortgage officer can go to bat for you with the sellers, promising nothing serious will happen in the delicate time between offer and closure to compromise their money.
“Make your offer as cashlike as possible,” Shekhar says. “The No. 1 reason transactions fall through is because the loan gets declined during escrow.”
4. … but make sure your mortgage broker is great
“I see pre-qualifications all the time that are not worth the paper they’re written on, because the broker doesn’t know—or hasn’t done—the due diligence on the prospective buyer,” Petrowsky says.
How can you make sure your broker is worth his salt? Both Petrowsky and Shekhar recommend researching online beforehand, keeping an eye out for any negative reviews indicating mortgages that fell through at the last minute.
You’re looking for someone who’s thorough: “We do a lot of due diligence to make damn sure that person is going to get a loan,” says Petrowsky.
After all, sellers often go with all-cash “because they don’t want to get in any hassles during the loan process,” says Shekhar. “Give them that comfort, that safety.”
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