How to Compete With Cash Offers When Buying a House

Published:
March 8, 2022
Last updated:
April 8, 2022
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Cash offers when buying a house might not be the norm, but they seem to be occurring at an increasing rate. According to the National Association of Realtors (NAR), cash sales comprised 19% of existing home sales in February 2022, marking a 3% decrease from the same time the month before but a 17% increase from the same month last year.

The problem for buyers who depend on a mortgage is the challenge of competing with all-cash offers, particularly in multiple offer situations. How can you compete with a cash offer when buying a home to ensure you come out the winning bidder?

There are several things you can do, from waiving contingencies to partnering with a lender who can help underwrite your loan in advance.

Who Makes Cash Offers When Buying a House?

Considering the sky-high cost of buying a home, who has that kind of money available for an all-cash purchase?

While anyone who has liquid cash available can buy a home without financing, cash buyers more often can be classified as any one of the following.

Investors

Investors often enter into real estate transactions with cash offers. This demographic is looking to buy real estate as profit-generating machines and purchases homes to either rent out or fix and flip.

Investors who have been in the game long enough have probably bought and sold several properties. As such, they likely have a lot more cash available than the average consumer that enables them to make all-cash deals without the need for a home loan.

Downsizers

While younger buyers with growing families may have their sights set on upsizing eventually to accommodate their changing lifestyles, others may be looking to do the opposite. More specifically, many buyers may be in the market to downsize, perhaps after becoming “empty nesters” when grown children leave the home, or simply to cut down on home maintenance and housing costs.

Homeowners who have owned real estate for years have had plenty of time to take advantage of appreciation. During their time of homeownership, their home equity has had lots of time to increase.

People downsizing will often find that they can buy a home for much less than what they can sell their current home for. In this case, they may be able to turn a profit on their current home and buy a smaller property without having to depend on financing.

Unprecedented Cash Offers for Houses

Bidding wars have been off the charts over recent months, and this ‘trend’ seems to be more of a mainstay given the continued multiple-offer situations taking place across the country, especially in luxury home markets.

We’ve all heard of homes selling over the listing price, particularly when there are other buyers vying for the same property at the same time. However, what’s not as common is a home selling for hundreds of thousands of dollars more than what the seller is asking for.

That’s precisely what happened recently in Bellevue, WA, where a whopping 70.1% of homes sold for over asking price this year. In Seattle proper, 54.4% of homes have sold over asking price in April 2022.

Buyers are also getting very creative with their offerings. In Portland, Oregon, a buyer bidding on a $530,000 home offered $15,000 over the listing price and won.

That said, it was a bonus offering of 10 Ether coins that sealed the deal. Despite another buyer offering $25,000 over asking, the winning bidder’s unique cryptocurrency offering — which was worth almost $40,000 at the time — was the key factor in the deal.

Real estate closings are taking place at record speeds, too. For instance, a couple from Idaho bought a home and sold their old one within the same week. They had found the perfect home perched on a 1-acre lot and decided to put in an offer quickly to ensure the place would be theirs and included a contingency to sell their current home within five days.

That contingency was hardly needed. Little did the couple know that their current home would attract over 10 offers and sell within the week for over asking price. They inevitably closed on both homes the following month.

In some cases, homes that haven’t even made it to the market yet are selling quickly and for over asking price. Take a recent transaction in Colorado Springs, CO, for example.

The home received five offers before buyers could even book a showing. Not only did it sell before hitting the market and being viewed in person, it sold for 12% over the listing price in an all-cash deal!

Clearly, bidding wars and multiple offer situations are not just an odd occurrence. Instead, they seem to be a staple in the current real estate market across the country.

Competing With Cash Offers When Buying a Home

Find out what the seller really wants. 7 Proven Ways to Improve Your Offer and Compete With Cash

Get an Underwritten Pre-Approval

An underwritten pre-approval involves going through the entire underwriting process; however, instead of going through this process after your offer is accepted you move it to the beginning of the process before you make an offer on a home. This will allow you to make a much stronger offer and have a much better chance of getting an offer accepted on a competitive property.

In an underwriting pre-approval, an underwriter will thoroughly review your entire file, with the exception of things such as the appraisal and title policy. Although this takes longer than a standard pre-approval upfront, it will help move the final loan approval process along much faster when you find a home you want to buy.

The only things you’ll need to take care of after an underwriting pre-approval is a home appraisal, title search, and acquiring insurance. As long as everything goes without a hitch, the deal will go through seamlessly.

Come In Over Asking Price

As mentioned, many all-cash buyers are investors who plan to buy a home to upgrade, then sell for more than what they bought the home for. To ensure a profit, investor buyers may not always offer the full listing price, despite paying in cash.

Sellers are often willing to accept a slightly lower offer price for a cash offer. This way, there’s no need to deal with any hassles of financing, and the deal can close quickly and without any potential hurdles.

You can effectively compete with all-cash offers like these by offering more than the listing price. Sellers might be willing to wait longer to close to accommodate the financing process in exchange for selling at a higher price.

Be Prepared to Waive Contingencies

Contingencies are typically included in offers to allow buyers to back out of a deal if a particular condition isn’t met. Most offers include contingencies, such as financing or home appraisal contingencies.

A financing contingency, for example, allows you to walk away from the deal if you are unable to get approved for a mortgage. A home appraisal contingency allows you to kill the deal if the appraisal comes in under the purchase price, otherwise known as an “appraisal gap.”

While these contingencies are meant to protect buyers, they can make a deal take a little longer to close. By waiving contingencies, you may be in a better position to compete against all-cash buyers who don’t need any financing contingency in their offer.

Let the Buyer Stay in the Home

Sometimes, a little flexibility can help make a deal go through.

If possible, try to accommodate the sellers in the transaction. For instance, work with the seller’s desired closing date if you can, as sometimes inconvenient closing dates can get in the way of a successful deal.

Although many sellers might want to close quickly, some might want more time or allow them to find a new home or complete renovations on a property they just purchased. Flexibility can help make you appear more attractive than a cash buyer in the eyes of a seller.

Become a Diamond Homebuyer

Partnering with the right lender can help your house offer look a lot more attractive. Plenty of sellers worry about choosing either a cash or mortgage-applicant buyer and having the deal fall through at the last moment. Sammamish Mortgage offers the Diamond Homebuyer Program to help homebuyers strengthen their offer, and give the seller assurances that the deal is as good as done. 

With this program, you’ll gain the competitive advantage of having the underwriting part of the loan process moved to the front, so the seller knows your lender has already done all due diligence for mortgage approval. We’ll also call the seller or agent and assure them that a fast, easy closing is in the offing, typically with a shorter closing time than other potential buyers can offer even if they are paying cash. 

As a Diamond Homebuyer, we go to work for you to help you get your offer approved in a competitive market.

Why Choose a Sammamish Mortgage?

At Sammamish Mortgage, we can help you get fully preapproved for a mortgage, including underwriting if you’re competing for a home in a tough market.

Sammamish Mortgage has been in business since 1992, and has assisted many homebuyers in the Pacific Northwest. If you are looking for mortgage financing in Washington State, we can help you get pre approved. Sammamish Mortgage offers mortgage programs in Colorado, Idaho, Oregon, and Washington.

Contact a loan officer if you have any mortgage-related questions or concerns. If you are ready to move forward, you can view rates, obtain a customized instant rate quote, or apply instantly directly from our website.

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