This year, pending home sales have reached their highest level in over a decade. With this increase, however, the housing market has expanded from solely a buyers’ market to include a large number of cash investors. In fact, according to RealtyTrac, about 1 in 3 homes purchased in the US today is an all-cash purchase—meaning investors have become big competitors! Luckily, we have six great strategies for today’s homebuyers to overcome their competition.
- Be more prepared—get pre-approved by your lender: Rather than simply getting prequalified for a loan, talk to your lender about completing the pre-approval process. To do this, you will need to complete a home loan application. In addition, you will need to provide income and asset documentation. A local mortgage lender can assist you further with this process. When you select your lender, however, make sure he or she can close your loan in under 30 days—making your offer more competitive against cash offers!
- Offer more earnest money to show you’re serious: A great way to put yourself ahead of cash-offering investors is by offering as much earnest money as you can. If it’s possible, you may even offer to put forth the entire down payment. This will show a seller that you’re extremely interested and serious about your offer. You may even want to attach the check to the offer—a cash investor’s favorite trick.
- Be open to offering a higher price: In most cases, a cash-wielding investor is not going to increase their offer because they already have an idea of how much they want to make when they flip the property. If you raise the price, you will therefore have a better chance of appealing to the seller. Especially with today’s low interest rates, your monthly mortgage payments may not increase by much! Again, your local lender can help you determine these costs.
- Shop foreclosed properties: You have a good chance of securing a foreclosed property because government sponsored agencies give preference to families who plan to live in the home they buy. In addition, when foreclosure properties are put on the market, owner-occupant buyers are generally given a few days to make an offer before investors are allowed to compete.
- Get personal with the sellers: Many agents recommend attaching a short note to your offer complementing the home and detailing how you plan to use it. Sentiments can go a long way and the homeowner may be more inclined to sell to a family who is going to raise their children in the home rather than an investor who is just going to flip it. Don’t be afraid to include some specific reasons why you love the home, for example, you could write “my daughter’s favorite color is pink, and she would really love to have that pink bedroom”. Making a personal connection with the seller may sway them to sell you their home.
- Stay focused on the long-term: It’s important to remember that out-bidding an investor isn’t everything. There are plenty of properties on the market, so don’t get caught up in the competition. When you select which house you’d like to pursue buying, make sure you factor in any additional costs you may need to pay further along in the buying process, such as repairs and homeowners’ association fees.
If you’re looking to buy a home or want more information about applying for pre-approval, contact one of our loan officers today!