Cash Is King

If you’re shopping for a house in Westchester, there’s a good chance you’ll be competing with all-cash buyers. Cash buyers are attractive to sellers because the closing is not contingent on a mortgage or appraisal. Strict bank lending standards combined with low inventory give cash buyers the advantage in the housing market.

An increasing number of buyers are skipping the lengthy mortgage process and paying with cash. Wealthy buyers, real estate investors, foreign buyers and downsizing baby boomers are increasingly able to buy homes with cash.

Financial institutions are scooping up investment properties to rent out or flip. These are often distressed properties bought in all-cash deals. Sellers of distressed properties don’t consider offers from purchasers who need financing because banks are reluctant to issue mortgages on properties that require substantial repairs. International buyers are also often all-cash deals, in part because they can’t get mortgages.

In general, all-cash buyers tend to buy either lower market value properties or high-end homes, not properties in the mid-value range. But then there are baby boomers who have accumulated equity or savings. The proceeds from a home sale combined with savings can be enough to pay cash for the next property.

If you’re relying on a mortgage to buy a home, there are some strategies you can employ to get your purchase offer accepted over an all-cash buyer’s offer.

Make your best offer up front

Beat out cash buyers by making your best offer up front. You could also tell sellers you won’t ask them to fix minor problems discovered during the home inspection, only structural and safety issues.

Increase your downpayment

The most common reason a home sale doesn’t close is because the buyer’s financing falls through, and financing often falls through after the appraisal. By increasing your down payment you will increase your likelihood of getting your mortgage. With more equity in a home, a lender has less risk and is, therefore, going to be less concerned with the appraisal.

Go beyond pre-qualification

Presenting a mortgage pre-approval letter from your lender when you make an offer is the traditional way to show you’re a serious buyer. Pre-approval is more rigorous than pre-qualification and gives the seller confidence your financing will come through. But, an even better option is getting an underwriter’s review of your loan application prior to making an offer. When you can’t outbid a cash buyer, this step puts you on closer-to-equal footing with them.

Sell before you buy

If one of your contingencies is selling your home first, the deal is far from a sure thing. This contingency will make you uncompetitive in all but the slowest of housing markets. In a strong market like this one, especially one with a high percentage of cash buyers, it’s a deal killer.

If you would like to discuss these trends, don’t hesitate to give us a call anytime (o)914-437-6292 or (c)914-804-6098/954-609-8668.