How to compete with all cash offers?

Question

John Thedford · Answer

Get private or hard money lenders on board. If you have a business relationship with them, they should have no problem giving you POF. Then submit offers as a cash buyer. That being said, I personally would be careful and not get carried away. Don't be in such a hurry to buy that you pay too much. Also, look for off market deals where you don't have as much competition. Try postcards, Try driving for dollars. Try posting on Craigslist. I have bought a few deals from my Craigslist ads so I know they work.

Chris Mason · Answer

Hi @Dana Kelley,

Financed offers come with 'outs' such as financing and appraisal contingencies. There is the earnest money that sellers could get if you write with no contingencies, but that doesn't get the agent paid, so she's typically going to push the cash offers even in that scenario.

While it is possible to close in two weeks (I had docs in title in 8 days last week :P ), most listing agents will look at that and believe you (or your lender) are over-promising in bad faith. Don't offer faster than three weeks, maybe 18 days.

Really, the difference between an all cash offer and a financed offer, from the seller's perspective, is that they are judging who has the bulk of the money. If you are putting 25% down, that means you don't have 75% of the money needed. So they are 25% judging you, and 75% judging the lender whose preapproval letter was included in the offer, because they are the ones that actually have the money. That's where local reputation comes in handy, and things like the lender calling the listing agent to sell the offer.

James Maradits · Answer

So many potential headaches when dealing with buyer financing.  Bank appraisals can be tough.  Inspections for FHA loans can often cause a lot of extra work for sellers who are often just looking to get out of their situation quickly and not deal with repairs.

The last house we flipped took over 90 days to close due hang ups with the buyers financing.  90 extra days of holding costs we had to spend and 90 extra days our assets were tied up preventing us from using them for another project.

Russell Brazil · Answer

I'm with Chris on this...as a listing agent if someone with a financed offer said they could close the deal in 2 weeks I'd roll my eyes. Very few loan officers can get it done that quickly and to do so they essentially need their client on call at all moments to furnish documentation. In fact if I see a quicker than 4 week close listed on a financed offer I just assume the buyers agent doesn't know how to write the offer.

Jay Hinrichs · Answer

it just is what it is these days... you may want to work with a transactional lender that will give you CASH POF.. so you can make CASH offers.. cost you a little bit but at least you get what your aiming at.

Ned Carey · Answer

Either offer more or put down a larger deposit. From the sellers standpoint a contract with no contingency for financing is almost as good as cash but your deposit is at risk. If you need contingencies make sure they are as short as possible so the seller knows it is off market for a very short time if the deal doesn't work out.

Russell Brazil · Answer

Escalate over three cash offer by the amount you think it will take to get the deal done. Median home price in my area is about 450k, and I find escalating about 10 to 15k on a 4 week close will get the deal done.

How to compete with all cash offers?

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