Beating The All-Cash Homebuyer

As of January 2024, all-cash buyers made up 32% of home sales. This is the highest since 2014. Data shows that these buyers are more likely to be investors and vacation buyers. However, primary residence buyers are also in the mix these days. Many of these primary residence buyers owned a home, sold it, and then could purchase their next property without a mortgage. Making an all-cash offer remains uncommon among first-time homebuyers. In 2023, only 6% of first-time buyers paid all cash.

As of the beginning of the year, sellers received an average of 2.7 offers. This was down from 3.2 one year earlier. Due to the lack of housing inventory, the pace of the market, and the use of technology, 8% of buyers purchased a home based only on a virtual showing, without physically seeing the home. Contracts typically closed in 30 days.

All-cash offers make it challenging for homebuyers who plan to use a mortgage. Sellers look upon the all-cash offer favorably — but it is not always the final word in the deal. There are other ways to attract a seller and beat an all-cash offer. Buyers relying on financing can strategically position themselves to compete and win.

How to Compete

Of course, the most obvious way is to offer a higher amount than the cash buyer. The additional amount compensates the seller for potential delays or additional paperwork associated with your financed deal. Paying more is easier said than done, though — and you don’t want to offer too much just to win the home. Another option is to increase your earnest deposit. This is a sign of good faith that shows the seller you’re a serious buyer and less likely to back out. 

Removing the contingencies is another good way to grab a seller’s attention. Contingencies can slow down a deal and even allow the buyer to walk away — a risk many sellers don’t want to take. Waiving the appraisal or financing contingencies can make your offer more competitive, but you should first consider the risks. Consult your real estate agent and your lender to understand everything involved before making your decision. Some lenders offer loan programs that can protect you from paying the difference if you choose to waive the appraisal contingency. 

Several buyers are choosing to sell off assets and pay for properties, only to regain their assets by investing again in a few months’ time through a mortgage. Also, buyers who need to finance the purchase of a home are not left out, as they can close Jumbo loans quickly using home equity lines of credit, second mortgages, and quick closings to beat all-cash buyers — options are always available provided you go to the right lender.

Understanding the housing market where you hope to purchase is essential for your success. Work with your loan officer and real estate agent to put together the best possible offer without letting the all-cash buyer slow you down.