Getting Your Offer Accepted - Purchasing a Home with All Cash! (Part 2 of the Series)
Paying with all cash has always been a very attractive deal for a home seller. Purchasing a home with cash has a few perceived benefits.
When a buyer pays with cash, the seller need not worry about whether or not the buyer can qualify for a loan. This fact removes weeks of stressing over the unknown. Seller's worry about what might happen between now and closing. Will my property appraise? Will the buyer change their mind and back out? Will the buyer qualify? Will the buyer get struck by lightning? Questions like these are always present in any seller's mind, causing worry and concern.
Typically a cash buyer will close quicker, eliminating these questions and easing the seller's worries.
No Appraisal Necessary
Some cash buyers forego the appraisal process, because they are savvy enough to know the value of the property without paying hundreds of dollars for someone to validate that knowledge. Appraisals are required on all mortgages, mainly because the lender wants to confirm the value of the property before lending money on it. Appraisals do have their place and are very important, but savvy investors know the market and don't need that validation. This type of buyer can offer an attractive piece of mind to a seller who doesn't want to wait.
Cash Sales Aren't Always the Ultimate for All Sellers
While cash transactions are held in high esteem, sometimes cash buyers think they are so powerful that they can offer significantly less for the home and get it. This might work in a slow market or with a buyer who has an urgent need to sell. However if the seller has time and doesn't mind waiting, a cash offer is not so important especially if the seller will net a lot more money by waiting a few extra weeks.
Alternative for Cashless Buyers:
Knowing that cash isn't as powerful for every seller should be a relief to buyers who don't have the means to pay cash. Most transactions aren't paid in cash and do require financing.
Buyers who need to obtain financing can minimize the perceived risk by preparing their financing well in advance and offering the seller a strong lender letter, stating they are credit approved.
In the end the seller receives cash whether it is a cash or financed transaction, so structuring your offer to be strong on other points appealing to the seller is the strategy when competing with a cash offer.
Structuring a Good Offer
If you are fortunate enough to be an all-cash buyer, good for you! Just bear in mind your cash may or may not get you the property. Being realistic and sensitive to the current market and the seller's needs is important for you, if you really want the property. If you are a cash buyer looking for a deal, it's probably worth a shot to send a low ball offer if you aren't attached to the outcome. Eventually you may win one!
For non-Cash Buyers:
Considering a good offer will include a variety of features, the lack of cash isn't a deal killer.
An offer with a significant amount of down-payment, say 20% or more will always be favorably with the seller! If that is not possible do what you can, down-payment wise. If you only have the minimum, use another factor to your advantage. That should be a Pre-Approval, or Credit-approval with your lender. This type of approval means the lender has actually checked into your credit score, confirmed your income/debts and is reasonably sure you will qualify for the loan.
Your lender should put this in writing in a manner that emphasizes you are ready to move forward with inspections and appraisal with no concerns for your ability to qualify. A strong letter like this should accompany your offer to the seller. It should be ready to go before you even begin looking for a home. This strategy will strengthen your negotiation position, which will benefit you in the long run.
Tomorrow I will post the next strategy, Offering a Quick Closing to the seller. I will present how to achieve a quick closing in a slow closing world! If this topic is of interest to you, be sure to subscribe to my blog, or simply check back tomorrow!
If you are looking to buy or sell real estate in Metro Denver, I'd love to work with you. Feel free to call me, I welcome your call!