Is Cash Still King? How Mortgage Buyers Can Get Their Dream House
Most people looking to buy a house will do so with financing. There is nothing shameful in borrowing money to buy a house. Mortgages have distinct advantages but most of them are for the buyer in a long-term situation. Buying a home with someone else’s money, paying it back over thirty years and having the satisfaction of home ownership may have lost some of its luster following the Great Recession but it is still the best way to go.
Yet cash is quickly becoming king in many areas and the presence of buyers willing to fork over full asking price is beginning to derail some mortgage buyers from getting the house of their dreams. So what can you do? Here are six tips that should help if you find yourself in a situation where cash on the table is the threat to the home you want to purchase.
Most home shoppers will look for a home at the maximum end of their approved loan amount. While this is perfectly understandable, after all, you want as much house as you can buy, it leaves you no room to compete with a cash offer that might offer only slightly more. It is not a guarantee but in a hot housing market like the one in Central Oregon, having some room to bid upward increases your chances against an all cash offer.
Know the Seller
Okay, you may never meet the seller but an agent can help determine what motivating factor for the sale is. The “why” they are moving can often open a window into how you will compete with a cash offer. Sellers understand that cash offers often come from flippers. Sellers who are anxious to move on quickly, for whatever reason, will focus on the offer, not the kind of offer. Some homeowners have an emotional attachment and will wait for the right offer from the right buyer in the hope that their stewardship will follow on to the next owner. That owner is focused on the neighborhood and giving the next home owner the same experience.
Line up the Money
In most cases, this begins with stellar credit and a hefty down payment. This may allow you to gain an underwritten loan without a house. But for most people, a pre-approval letter will ensure that you won’t hit some sort of snag. It also won’t hurt the process by showing the seller you have assets (a certified CPA letter will work). As a precaution, prudent buyers will have not only the down payment accounted for but several months of mortgage payments available as well. This will allow you to move quickly in a target-rich environment where cash is competing. You might even want to have your inspections tentatively lined up. Speed is essential.
Put a Face On It
I have had some clients actually write a letter to the seller and include it in the offer. No cash buyer will bother with this step so this might just pull on the seller’s emotional heart strings, even if cash is offering more.
Expect and Inspect
You will miss out on several homes. This is a fact of the process. The competition against cash, which is speedy, can be brutal. Sun Tzu once said: “He will win when he knows when to fight and when not to fight.” In other words, you will lose a few. But do not forgo the inspection to speed up the process.
Central Oregon is growing and the chances of finding a new home are better than finding one in an established neighborhood. Cash tends to stay away from new construction because the profit margins (buying at one price and selling higher) are almost non-existent. Builders may even offer financing and of course, there is the customization option. Cash may be king but where you shop will help determine the competition.
How can we assist you today?
On behalf of The Jones Group @ Sunriver Realty
Nola Horton-Jones, Principal Broker/Realtor | ABR, C-RIS, e-PRO, GREEN, RSPS, CCIM Candidate
Bryce Jones, Broker/Realtor | ABR, CRS, e-PRO, GREEN, GRI, RSPS, SFR
Karen Marcy, Broker/Realtor
The Jones Group @ Sunriver Realty | 57057 Beaver Drive | Sunriver, OR 97707
Mobile: 541-420- 3725 | Mobile: 541-420- 4018 | Mobile: 503-327- 9611 | Fax: 541-593- 5123
Licensed in Oregon