Whether you’re a new agent or simply navigating a tough market, all-cash offers can be an innovative part of your strategy when working with buyers, says New American Funding’s Rick・Mr. Albiero writes.
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Not so long ago, paying cash for a new home seemed like an option only available to the wealthiest people. However, all-cash home sales this year are at historic highs.
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Paying in full in cash is a win-win strategy for both buyers and sellers. For buyers, paying cash greatly increases their chances of securing the home they really want, while for sellers it provides more predictability and ease when choosing between offers.
Importantly, there are new tools available to prospective home buyers of all income brackets that are making paying all cash for a home a very viable option.
Here’s what agents need to know to help their clients make cash offers, and the benefits of working on a cash offer to get the home you want in a highly competitive market.
Today’s difficult real estate market
The real estate market has tightened significantly since the coronavirus outbreak. Available inventory is historically low and a large number of Millennials are considering entering the market. The result is a seller’s market where many homebuyers feel they have to make an offer significantly above the asking price of a home.
This situation could get even worse in the coming years if Wall Street decides to re-enter the real estate market. If that happens, you may be able to outbid many prospective home buyers with an all-cash offer.
Benefits of an all-cash offer
Selling a home comes with many challenges. There can be several delays in the process, from home repairs to buyer financing uncertainty.
This is why sellers often prefer all-cash offers. This shows the buyer is very interested in the home, expedites the sales process, and provides more certainty that the offer won’t go away.
From a buyer’s perspective, offering all cash puts you ahead of buyers who are financing your offer. It can also provide significant leverage. In fact, we have many clients who take advantage of all-cash offers.
Sellers often prefer the security and convenience of an all-cash offer, winning a bidding war against many other buyers who had secured the home they wanted using a traditional mortgage. I was able to do that.
In some cases, all-cash buyers were able to purchase homes at discounted prices. A recent study from the University of California, San Diego found that this amount could be up to 10 percent lower than for buyers with a mortgage, as sellers were also attracted to the security of all-cash.
I’ve even seen home builders accept $70,000 less than the asking price for a new home.
Keep in mind that this strategy may be more effective in certain markets where all-cash offers are common.
Reduce buyer contingencies
Many home buyers today are faced with the contingency of having to sell their current home before purchasing a new home. This often creates fear and uncertainty for buyers and delays and relisting headaches for sellers.
With the advent of new options that make it easier for more home buyers to make all-cash offers, more borrowers are now able to purchase a new home before selling their current home.
New option to make an all-cash offer
The advent of new programs for making all-cash offers on homes has opened this strategy to even more homebuyers. It also helped reduce stress, uncertainty and delays for both buyers and sellers.
Qualified buyers can have a finance company make an all-cash offer on their behalf. Once that’s done, the buyer can get a new mortgage and repay the finance company whenever they want after selling their previous home.
5 Tips for Successful Home Buying in Today’s Market
The most important strategy for buyers to successfully acquire the home they want is to differentiate themselves from other offers and encourage sellers to prioritize. Here are some effective strategies that industry experts can recommend to homebuyers.
Work to improve your credit score to qualify as a reliable buyer. Create a budget and have a clear understanding of how much you can spend. Choose a real estate professional who knows your specific market well, has a proven track record, and knows the listing agents in the area you’re considering. Find out whether all-cash offers are common in the market you want to buy from. Consider qualifying for an all-cash home purchase for a clear advantage in getting the home you want.
The good news for home buyers is that despite the challenges of today’s tight real estate market, agents are available to help buyers get the home they want without paying excessive costs. There are new options and strategies. This method not only eases the purchasing process but also saves a lot of hassle and headache for buyers, sellers, and their respective agents.
By implementing these tips and reducing stress, uncertainty, and delay for buyers and sellers, real estate agents can stay on top of their game while establishing continued trust with their clients.
Rick Arvielo is co-founder and CEO of New American Funding. Connect with Rick on Linkedin.
