How can I keep from getting beat out by cash buyers?

Question

I found a good multi family deal in Fort Lauderdale. But, I am bidding against cash buyers.
My problem is, I found a great lender who will finance the project for 3.375%! my credit score is very high. That’s great, but...

This lender won’t do a cash out re-fi. So I can’t get hard money and then re-fi with this lender. I have to buy it and finance with this lender to get that rate. (Also, I’ve never borrowed from a hard money lender.) But I’m probably going to get beat out by cash buyers. The sellers realtor says the cash buyers are “pretty close” to full asking. I’m willing to pay full price, because I can get a great interest rate. The sellers don’t need a fast close but they would prefer a closing without finance contingencies as opposed to maximizing their profit.
Any ideas?

Kevin

Owen Dashner · Answer

@Kevin Koffman, try using an escalation clause with your offer, high earnest money amount and a quick closing. Depending on your comfort/experience level, you can also waive inspection contingencies to make your offer stronger.

Don't get hung up on "asking" or "full" price. The asking price is irrelevant. Underwrite the deal like it has no price tag on it, and make your offer with an escalation clause that maxes at the ceiling where the purchase price still makes sense for the deal.

Good luck!

Steve Morris · Answer

How can I keep from getting beat out by cash buyers?

Umm, offer more?

Jonathan Greene · Answer

You have to offer an amount that is that much better that the cash deal is less attractive. Depending on the list price that can be anywhere between 15-25k. I would use the mortgage to your advantage in your letter when you submit your offer. This is who you are, this why you are using a mortgage (just getting started, but fully vetted), this is how a mortgage can help you as the seller (more money), and that at closing all deals are cash. The only issue with you overbidding and trying to beat the cash offers is appraisal.

Ryan Howell · Answer

You can put down due diligence money in NC (a check to the seller if they sign the contract, that is non-refundable). That tends to show you're serious. I also always include a letter from the lender showing you approved. Lastly, if you can discern the sellers situation, I often advise to write a letter with a picture of your family letting them know why you want to own their home and appeal to the emotional side of the equation.

Marcus Auerbach · Answer

@Kevin Koffman every offer is a cash offer on the closing table.

Most cash buyers overestimate the attractiveness of a cash offer. In reality most sellers wait 2 weeks longer for an extra 5k and if faster closing is not even desired the advantage is reduced down to risk of failed financing.

If that is a concern and you believe in your ability to finance you can put your earnest money at risk and make it an amount worth while. You'll keep the financing contingency, but you collateralize your EM.

Some of my lenders will provide loan commitment instead of a PA, meaning you are fully underwritten, only subject to appraisal.

There are so many ways to structure an offer to be more attractive, I have just recorded a video about how to get an accepted offer most of the time, link is here.

"Pretty close to asking" does not get you anywhere in Milwaukee for example, we have currently an average list to sale ration of 102%. 65% of all deals close over asking, but there are plenty of ways to get an offer accepted, even if it's not cash and even if it's not the highest.

How can I keep from getting beat out by cash buyers?

How can I keep from getting beat out by cash buyers?

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