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Not long ago, paying cash for a new home seemed like an option only the wealthiest could afford. However, all-cash home sales have seen historic highs this year.
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Paying all cash is a win-win strategy for both buyers and sellers. For buyers, paying cash can significantly enhance their chances of securing the home they really want, while it gives sellers more predictability and simplicity when choosing among offers.
Significantly, there are new tools available to prospective homebuyers across income brackets that make offering all cash for a home a very viable option.
Here is what agents need to know about helping their clients position themselves to be able to make cash offers, and the benefits of working with cash offers to win their desired home in a very competitive market.
Today’s challenging real estate market
Post-COVID, the real estate market has tightened significantly. There is a historically low amount of inventory available and a large number of millennials looking to enter the market. The result is a seller’s market where many homebuyers feel forced to make offers well above the asking price of a home.
This situation may get worse in the coming years, if Wall Street decides to re-enter the real estate market. If this happens, they may be able to outbid many prospective homebuyers with all-cash offers.
The advantage of all-cash offers
Selling a home can involve numerous challenges. From home repairs to the uncertainty of buyer financing, the process may experience several delays.
This is why sellers often give precedence to all-cash offers. It indicates the buyer is very interested in the house, expedites the sales process, and provides more certainty that the offer isn’t going to disappear.
From a buyer’s perspective, offering all cash enables them to move ahead of buyers who are financing their offers. It can also provide substantial leverage. In fact, we’ve had a large number of clients use an all-cash offer to their advantage.
In many cases, they have been able to win a bidding war against numerous other buyers who were using a traditional mortgage and securing their desired home because the sellers preferred the security and convenience of their all-cash offer.
In other cases, buyers using all cash have been able to buy their homes for a discounted price. According to a recent University of California at San Diego study, this can sometimes be up to 10 percent less than mortgage buyers, because the sellers, again, were attracted to the safety of all-cash.
I have even seen homebuilders accept as much as $70,000 less than the asking price of a new home because it was an all-cash offer and free of contingencies.
Keep in mind that this strategy may be more effective in certain markets where all-cash offers are more common.
Reducing buyer contingencies
Today, many homebuyers face the contingency of selling their current home before they can buy a new one. This often creates anxiety and uncertainty for buyers, as well as delays and re-listing headaches for sellers.
With the advent of new options that make it easier for more homebuyers to make all-cash offers, more borrowers can now buy a new home before selling their current home.
New options for making all-cash offers
The arrival of new programs for making all-cash offers on homes has opened up this strategy to many more homebuyers. It has also helped relieve stress, uncertainty and delays for both buyers and sellers.
Qualified buyers can have a financing company make an all-cash offer on their behalf. Once that’s done, the buyer can obtain a new mortgage and pay back the financing company after selling their previous home at their leisure.
5 tips for successful homebuying in today’s market
The overarching strategy for buyers to be successful in acquiring the home they want is to try and distinguish themselves from others making an offer and incentivizing the seller to prioritize them. Here are some effective strategies that industry experts may want to recommend to homebuyers:
- Look to improve their credit score, ensuring they qualify as a credible buyer.
- Establish a budget, and clearly understand what they can afford to spend.
- Select a real estate professional who knows the specific market well, boasts a solid track record, and is acquainted with listing agents in the area they are looking into.
- Explore whether all-cash offers are a common practice in the market where they wish to purchase.
- Consider qualifying for an all-cash home purchase to give them a distinct advantage in getting the home they want.
The good news for homebuyers is that despite the challenges in today’s tight real estate market, there are new options and strategies available for agents to help buyers get the home they want without having to overpay for it. The methods not only facilitate the buying process but also significantly reduce the hassles and headaches for buyers, sellers and their respective agents.
By implementing these tips and relieving stress, uncertainty and delays for buyers and sellers, real estate agents can remain at the top of their game while establishing continued trust for their clients.
Rick Arvielo is the co-founder and CEO at New American Funding. Connect with Rick on Linkedin.
