Over the last few years, in real estate, cash buyers- primarily out-of-state investors looking to transform homes into rental properties, have been snatching up homes from under credit buyers. These buyers have obstructed the loan-dominated financing paradigm. For the average family searching for their dream home, they’ll be financing their home purchase with mostly credit. This doesn’t disqualify them from the game. While all cash offers are alluring to sellers, there are strategies to make your offer more enticing. Here are seven tips for buyers to secure a loan-backed offer.
1. Structure a winning offer
For starters, you MUST get preapproved for a home loan. Without it, your offer means nothing, and the seller is sure to decline. Getting preapproved for a home loan is easy and doesn’t take much time. You can boost your notoriety by getting several preapprovals offers to show the seller. If you conduct all these loan applications within a 45-day period, your credit score will count them as 1.
Ask your lender for an actual underwriter to submit with your offer. If you have good credit, this should be fairly achievable. You can reassure the seller that you are financially stable by including a letter from the bank or a CPA validating your funds and assets that you’re using to back your loan.
Finally, pre-order an appraisal. Typically, smaller banks, direct lenders, or mortgage brokers can line up an appraisal in advance, some can take less than two weeks. When your offer is written, tell the seller the appraisal has already been ordered.
2. Best offer first
Go into with the understanding that you won’t have the option to negotiate on price. To increase your chances, top the cash offer. Cash offers usually get cut a deal, so topping them can be possible. Paying extra may seem crazy, but if we’re talking about your dream home, then it may be worth it. In the end money talks-despite what form it comes in. With that being said, you never want to pay more than its value or beyond your budget. Check the current appreciation rate of the home. Take a look at the neighborhood to see if the home prices are increasing. Just remember offering more doesn’t guarantee you’ll get the house.
Since there is always a chance that the home will be appraised below the contracted price, your lender may not let you borrow enough to purchase the home. To decrease the chances of this happening, you should put down a large down payment if it falls in your budget. An offer with 50% financing has a stronger chance of closing than a purchase with 80% financing. The higher your equity the less concerned the lender will be with the appraisal.
3. Find out what the seller wants
Have your agent, ask the seller’s agent what they are looking for in an offer before making your initial offer. No two sellers are the same. Find out what they want, maybe it’s the highest bid they can get, or they’re looking to close quickly, some may care about the right person buying their home. Factor their needs into your offer and it will serve you as an advantage.
4. Remain flexible
As stated, playing into the seller’s needs will serve you in the long run. Make it clear from the beginning that you are willing to work with them. Commit to closing at the seller’s convenience. Flexibility in closing is a simple tactic that can go a long way. If the seller is looking to move fast, you will probably lose to the all-cash buyer. However, if the owners haven’t found a place to live yet and are looking to move slowly, then the ball may be in your court. When it comes to repairs, consider an “as is” offer. Be willing to buy the home without asking the seller to make repairs or for the money to fix anything that comes up in the inspection.
5. Write a personalized cover letter
This is a common strategy, but often buyers have their agents write a letter. Instead, you should address the sellers themselves. Show them who you are, what you love about their home, and why you want to buy it. This brings some humanity into the process and makes you more than just a dollar to the seller.
6. Move quickly with inspections.
Whether you’re going up against a cash buyer or not, it’s advised to have your own independent home inspection. Along with prompt appraisal and finance contingencies, have your inspection done as soon as possible. Lining up your inspection right away shows the seller that you are serious about buying their home.