Cash Offers & How To Compete Against Them

Written By: Graeme MacPhail, REALTOR of Royal LePage Nanaimo Realty. I’d love for the opportunity to earn your business and assisting during the complicated process of buying and selling at the same time! Give me a call.

First off, before getting into strategies to competing against cash offers, or multiple offers in general, lets first understand what a cash offer is. Even though multiple offers are not as prevalent as they have been in years past, they still do exist, and make it much more difficult for a buyer in need of mortgage financing to compete with an all cash buyer.

As a result, buyers now need to adapt, come up with unique strategies, and take active steps towards making their offer as attractive as possible to the seller.

What is an all cash offer?

A cash offer is one where the buyer has the cash funds available to them to purchase the home without the support of mortgage from a lender/bank

Why is an all cash offer attractive to a seller?

To a seller, when looking at an offer where the buyer does not need mortgage approval or an appraisal of the home it will be seen as more attractive to the seller since it has no risk of not getting financial approval that another buyer may need. An example of a risk with a mortgage backed buyer is that should the property not appraise at/near the purchase price, the buyer may be forced to provide a larger down payment. This could be a recipe for the buyer not getting its mortgage approval. With a cash offer, you can be 100% certain that the buyer has the funds, and won’t have the risk of not obtaining that approval.

But fear not, that doesn’t mean you can’t compete against an all cash offer. If you’re dealing with a multiple offer scenario, consider the following steps to strategies to help make your offer as attractive as possible.

How to win in multiple offers

  1. Obtain a pre-approval letter from your lender
    A letter from your lender speaking to your financial pre approvals can demonstrate to the seller of the home you’re writing an offer on that you’ve already done your due diligence by actively taking steps to get qualified before submitting the offer. You should consider doing this before you even start looking at homes so you can have the letter in your back pocket and ready to go if ever thrust into a multiple offer scenario.
  2. Write a clean offer
    A good strategy to competing in multiple offers is to do your best to have as many questions answered on the property before submitting your offer, and being able to submit an offer with the least amount of ‘subject clauses’. This can be an aggressive strategy, and does need to come with some acknowledgement of the risks associated with it.You might find yourself comfortable enough with your mortgage pre-approval, and enough back up plans (ex: Parents co-signing or providing cash for a larger down payment) that you’re comfortable enough to write your offer without your subject to financing? If you’ve got any friends that are contractors or home inspectors, see if they’re willing to come to your showing with you and if they’d feel comfortable about the home not needing an inspection clause? Are documents like the title and property disclosure statement available to you before writing the offer? If so, get a hold of them and potentially avoid needing a subject to obtaining & approving of the title and disclosure statement.
  3. Keep Your Subject Removal Period As Short As Possible
    If you’re going to be subject to financing, call your mortgage broker before submitting the offer and see how quickly they can get your approvals done. Or if you’re having an inspection, call and book an appointment before submitting your offer so you can write your subject to dates accordingly, and not just blankly put in 10-14 days when maybe you only need 5.
  4. How Big Is Your Deposit
    Id say a good goal for a deposit is 5%, but if you have means to, consider going larger. Its best to consider the deposit and the size from the eyes of the seller. A larger deposit shows that you’re more committed to the purchase and more serious about your intentions with the purchase. A buyer that is wishy washy about their purchase may not be willing to put in much as a deposit since they’re not fully committed and do not want to tie up their money in a trust account if they chose not to proceed.
  5. Flexibility on dates
    When considering the dates to write into your offer in a multiple offer scenario remember that you’re competing with others and want to do as much to stand out as possible. Get your REALTOR to ask the listing REALTOR what is the best case scenario for the sellers. Id strongly recommend bending over backwards to try to accommodate those dates. The sellers of the home may have a very specific need for those dates, and having your purchase line up perfectly with their ideal scenario may play a large roll in you being selected as the winning offer.
  6. Write A Letter
    Time to pull at those heart strings of the seller! It’s a good possibility that this is an emotional decision for the seller who may have some fond memories of this home. Write a letter to the sellers about their home and the things that you love. Tell them about yourself because maybe there will be some unique stories in common that have them feeling drawn towards you. If picking between two equal offers, its likely that they’d want to go with the one that they like the story of, or have most faith that would be taking care of their old home.
  7. Increase your purchase price
    Money talks! At the end of the day the highest purchase price has the best odds of being accepted by the seller. Yes, some sellers will have specific dates they are looking for, however the majority of them are just looking to net the most profit from their sale and may be willing to look past dates that don’t line up, or lots of subject conditions, if it means more cash in their pocket at the end of the day.
  8. Ask Your Realtor To Present In Person
    You’ve completed the 7 tips previous to this one and now have put together a really strong offer. Now ask your REALTOR to present the offer in person. Most commonly, offers are just submitted to the listing REALTOR via email, so the possibility that your REALTOR presenting the offer in person. This allows your offer to be communicated as clearly as possible to the sellers, and possibly to further tell YOUR story to the sellers and help sell the sellers on you as the next owners of their home. I personally have presented offers in person with a letter from the mortgage broker, letter from the buyer, and told their story to the sellers and had their offer accepted despite another offer being of a higher dollar amount.

The more of these methods that you can deploy the greater likelihood that you’ll be able to be successful in your multiple offer. Multiple offers can be a difficult scenario and you aren’t always going to win on your first go since ever sellers needs and expectations will be different, and sometimes you’ll just come up against another buyer that you simply cannot out bid or out strategize your way around.

If you’ve lost a multiple offer scenario before, or are thinking of getting into the real estate market with a purchase in the near future, give me a call or text at 250-667-3441 or email at graeme@macphail.net.Id love to sit down and go through the strategies discussed here and how I might be able to help you win in your next multiple offer. I’d love to have that opportunity to earn your business!