How to Combat Cash Offers as a Buyer

As a seller, you dream of seeing those Benjamin's on the table. They are simple, easy, and close quickly. However, if you are a buyer trying to compete for investment properties or even owner-occupant homes, cash buyers may easily beat you out if you don't know what you are up against.

What are cash offers?

Cash offers are just that….cash. The buyer is planning on paying for the property in cash. At the time they submit the offer, they must prove they have the cash in hand. It can't be "on its way" or promised, without proof.

Cash offers also mean there is no financing contingency. Financing contingencies include a bank who needs to make sure their pending loan is secured with a correctly-priced property. This means there will be an appraisal,  underwriting, and possible time delays. Cash is valuable when the property has significant defects that might make the home un-financable.

Who is offering cash?

For lower-priced properties, cash buyers are typically investors. They are looking to purchase a property, fix it up with decent repairs, then flip the house to sell or rent out.

We also see cash buyers in the high price range – people who have sufficient funds to purchase their dream home outright. These people have typically done their share of looking at available homes and when they find "the one" they are willing to pay for it.

How to combat cash offers?

To make it simple, you have to make your offer more sexy. Offer a higher price and wave contingencies. I typically don't recommend waving inspection or financing contingency because you never know what will happen. However, if you are in a hot and competitive market, like we are in Seattle/Bellevue, you MUST put your best foot forward. I've even heard of people offering a non-refundable deposit of $100,000 if they back out for any reason. These buyers were so confident that they wanted this house, they put their money where their mouth is. The $100,000 would be applied to the sales price at closing, but should they walk away for ANY reason, the sellers would get to keep the 100k. That prospect is extremely enticing.

If you can't offer 100k nonrefundable deposit, consider including a personal letter with your strong offer. Express to the sellers why you want this house. This especially works if you plan on occupying this house. If I am selling a home and have a cash offer from investors that I know will rent out my beloved home, verses an equally good offer (with financing) from people who will cherish and enjoy the work I've put into my home, I'm taking the owner-occupant letter.

In the end, cash might win out, but it never hurts to try. Put your best offer on the table when you know you are up against cash, and may the best offer win!

Cheers!

Katie Criddle