Competing Against Cash Offers

We’ve all heard that “cash is king” and cash buyers always win out. Yes, a cash offer at the same price as a financed offer if that financed offer has not adjusted their terms at all is a stronger offer. But we help financed offers win over cash offers even without going way over in price.

Cash offers are good for sellers because:

• Quick close: cash offers typically offer to close in 14 days (2 weeks)

• No appraisal risk: an appraisal is not needed by a cash offer. An appraisal is a 3rd party valuation required by banks to make sure the property is worth the sales price.

Here’s what a financed offer includes that a cash offer does not:

• Longer closing: most financed buyers offer to close in 30 days

• Appraisal contingency: most buyers include a clause that they can terminate the transaction if the appraisal does not come in at or above the sales price of their offer

• Financing contingency: most buyers include a clause that they can terminate the transaction if their financing does not go through

If you want a home that has another offer in that is cash, you either need to offer a decent amount over that offer, or you need to at least match that offer and adjust the terms of your offer to be similar to a cash offer. Here’s how to do that:

• Shorten your inspection period to 5-7 days: by shortening your inspection period, you’re making your offer more competitive and allowing yourself to shorten the closing timeline, which is the main thing you need to do to compete with a cash offer. Work with your realtor to get a home inspection scheduled as soon as possible for after your offer is accepted so that you can still do any follow-up investigations as needed.

• Shorten your closing period as much as you can: most lenders can hit at least 21 days on a rushed transaction. If you shorten your inspection period and rush an appraisal, they should be able to close even sooner. You’re only asking the seller to wait a few more days over a cash offer if you can close in ~17 days instead of a standard 30 days. Yes, it will be a bit tight, but it’s what you need to do to have a chance to compete against cash in a competitive market.

• Waive or reduce your appraisal contingency: an appraisal contingency can make a financed offer feel less certain than cash, even though it’s relatively rare that we see appraisals come in low. Waiving the contingency altogether, or reducing it to a value you’re completely comfortable with, removes that uncertainty for the seller. The key is making sure that if the appraisal does come in at that lower value, covering the difference won’t materially change your financial picture.

By adjusting the terms of the sale agreement that likely won’t even have a negative impact on you, you can make your financed offer almost as competitive as a cash offer even if it’s the exact same price. But if you REALLY want the home, a little extra money always helps. Oh, and make sure to write a home love letter too.