Can I Compete with a Cash Offer with Financing?
It may not surprise you but many first-time homebuyers are seeing a lot of cash buyers beat them out with multiple offers. How is the first time home buyer that needs financing supposed to compete with these cash offers?
Cash offers used to be a rare or special offer but now with so many investors swooping down and beating out first-time homebuyers it can be difficult for the average home buyer that requires financing to compete. Many of these cash offers are due to smart investments that have paid off now that the economy has begun to improve. Real estate seems like a much safer investment for many investors but home buyers still would like to find a home that’s not outside of their realm of possibility.
One thing you need to realize is why the cash offer is so attractive to the seller. It all boils down to risk. If the seller feels that there is less risk with the same amount of cash on the table as with a financed offer they are more likely to go the cash offer than a financed one. So homeowners need to compensate for that risk by removing as much of it as possible.
Many buyers agents consider removing as much contingencies and addendum’s as possible to make the offer more attractive. If you need to sell a previous house, needed neighborhood feasibility act or an additional inspection, however important they may be, the less risk for a seller means a more attractive offer overall.
One big issue is having your finances ready to go with no hiccups along the way. As long as you don’t make any major purchases, default on any loans or miss any payments during the time of applying for the loan and closing on the home the financing seems fairly attractive. If you have a large down payment, excellent credit ratings, and even a letter of preapproval to present to the sellers all can make a difference in making a more attractive offer to the seller.
On the flipside if you do remove all these contingencies upfront you may risk losing your earnest money which can be a large chunk especially if that’s one of the major factors in the attractive offer. Speak with your buyer’s agent and a mortgage officer to find out which direction makes the most sense for you. As a California mortgage broker my duty is to help first-time homebuyers find the home of their dreams and finance that home with the best program and rate possible. Let’s see how we all can work together to make this dream a reality.
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