A recent real estate market analysis found that nearly one-third of all home purchases nationwide were cash transactions between January 1, 2021, and April 30, 2021. Remember, what is happening nationwide reflects what’s occurring in the housing market on the local level. Adding that housing inventory is low in Farmington Hills, Michigan, it’s becoming increasingly tricky for non-cash buyers to get a foothold in the home purchasing race, never mind winning it, taking the prize of homeownership.
Tips To Beating Out Cash Buyers
So you’ve found yourself going up against cash buyers in purchasing that dream home. Don’t give up! There are several ways to get yourself on an even playing field when dealing with cash home buyers in Farmington Hills.
Increase Earnest Money Deposit
Earnest money is essentially a deposit put up in good faith that reserves your right to purchase the home. If you back out of the contract without reason, the seller retains the earnest money. Increasing your earnest money deposit shows the seller that you’re serious about buying their house.
Get Mortgage Pre-approval
Mortgage lenders typically offer fully underwritten preapprovals. Meaning they’ve run a credit check and verified your finances for your mortgage loan before bidding on a property. Pre-approvals give the seller an added layer of credence that you’ll follow through as a qualified buyer. Generally, the document required by a lender for pre-approval is proof of assets and income, optimal credit, and verification of employment, typically called a VOE.
Better Adherence To Seller’s Timeline
A seller’s goal is likely a smooth transition. However, keep in mind they too are making a move, possibly to a new home. Extenuating circumstances possibly command a quicker process, or they may require some extra time before vacating the property. Be agreeable when it comes to meeting the seller’s needs if you’re in the running with an all-cash home offer.
Appraisal Gap Guarantee
An appraisal gap guarantee guarantees that the home buyer covers the monetary gap between the contract price and the appraisal if it comes in too low. To overcome a low appraisal, a buyer pays the difference or renegotiates with the seller.
Go Above Asking Price
Cash buyers are notorious for going below the asking price, knowing a quick sale is enticing to some home sellers. A buyer has the option to include an escalation clause that automatically increases your offer to a maximum stated amount if a cash buyer outbids you.
Limiting or waiving contingencies isn’t entirely without risk, but it shows the seller you’re willing to work with them to secure the deal. The financing contingency, inspection contingency, sale contingency, and appraisal contingency are items to consider waiving to simplify the home buying process. Keep in mind that waiving these items waives certain rights like an inspection, backing out of a contract, or renegotiating.