Some areas of the US have become a hot market. Even when you are pre-qualified for your mortgage, and have a 5 – 10% down payment ready to go, you may still come up short when you compete with cash buyers. Based on the National Association of Realtors’ Profile of Home Buyers and Sellers 2013 over 88% of home buyers are financing their home purchase and still many of them are getting priced out of the market due to hard cash buyers who do not need anything but a few days to close the deal.
Keep in mind most cash buyers are part of an investment group or company that has bigger pockets that can support a higher offer than what you might be able to afford. Here are some tips on how to outsmart a cash buyer especially when it comes to you wanting your dream home in an area where there is a huge influx of cash buyers pushing other buyers out of the market:
When you are making an offer on a property make sure you have a nice size down payment. Speak with your lender to find out how much they recommend or are requiring. Some might ask for as little as 5% and others might even ask for up to 10% to 20%.
The bottom line for the seller is what they will walk away with at the closing table. When you ask for a lot of buyer incentives the seller’s bottom line will be affected and they may not take your offer. Secondly, they are looking at time. How soon the deal can be closed. DO you have another home to sell? The sooner the deal can be closed the better for the seller in many cases.
When you like the area, but you still have not been able to compete with the cash buyers who buy every ready to move in home they can get their fingers on, you might consider buying a fixer upper. In many cases a fixer upper, even in a hot area, will be less and when your mortgage qualification is for more than the asking price of the home, you might speak with your lender and find out if there is a chance that you could start with a construction loan, fix up the property, and then switch the construction loan to a mortgage.
When you are looking for advice or help with your real estate needs feel free to contact us.