When it comes time to buy a home, many people think that the best way to ensure a successful transaction is to make the offer with cash, with a single payment without mortgages and loans.
So, cash offers seem to be the best, but what happens when you are not the one making the cash offer? You must resort to other methods to make more attractive offers to sellers, even if you haven’t got cash.
Make good earnest money deposit
It is very normal when even cash buyers offer the sellers an earnest money deposit. This way, they make the sellers see their true intentions to buy the house.
Since the seller would keep the entire earnest money deposit if you were to decide to retract the offer and cancel the purchase, this deposit should only be made when you are sure about buying the house to avoid losing the money.
One of the best ways is to make a substantial security deposit to beat cash offers. Ideally, it should be a deposit much larger than the one offered by the cash buyer.
The seller will feel more confident with someone willing to offer a larger earnest money deposit. It lets them see that you’re interested and so confident in your purchase that you are willing to risk loosing a significant amount of money.
Submit a mortgage approval
One of the reasons sellers prefer cash payments is the inconsistency sometimes generated in obtaining a mortgage. In other words, it is not in the seller’s best interest to wait for the buyer to be approved for the mortgage.
In the worst-case scenario, the seller may turn down other offers to close the sale with a certain person, and that person may not be approved for a mortgage. Not only would they have lost not your time but the opportunity to sell their home.
To avoid this insecurity by the seller, the best thing to do is to present them with a mortgage approval. With the approval, you are telling the seller that you have the means of payment agreed upon available to purchase the house .
The seller feels much more at ease when he has confirmation of the mortgage approval for his prospective buyer. He is certain that this particular buyer will be able to meet his agreed-upon payments without much trouble.
You must apply for the mortgage approval directly to the entity where you receive the loan. The buyer must ask for approval from the lender, who will evaluate the finances and situation before granting it.
In addition, to give an extra touch to this strategy, you should try to obtain approval for an amount greater than the offer on the house. For example, if the house costs $300,000, approval for $400,000 would be very welcome.
Talk to the seller about your financial capabilities
This tip is more applicable to those with good equity. People with a lot of money or assets can let the seller know even if this is not reflected in the mortgage approval.
It is enough to have a little chat with the seller and present documents or evidence of assets or money. The seller feels much more comfortable selling to someone who can pay outside the mortgage.
Although this is not related to any strategy in the legal field, it can be an essential plus to convince the seller to let the house to you as buyer.
It will also be very helpful to explain to the seller why, even having the possibility to defend one of the estates or to pay with cash, the buyer should do it through a mortgage.
Use an escalation clause
Escalation clauses show the seller how willing you are to buy the house. An escalation clause sets the maximum amount the seller is willing to pay if other, more attractive offers come along.
For example, when the initial offer on the house is $300,000, the potential buyer, instead of venturing directly to offer much more money, can make an escalation clause.
With this type of clause, when the seller makes an offer higher than $300,000, the buyer automatically increases his offer up to a certain amount. Logically, it is a higher amount than the other offer.
These clauses must have a limit. They should not be so high that the buyer ends up paying an inflated price for the house, but neither should they be so low that they end up being unattractive.
They should be good enough that the seller would prefer to prioritize your offer with your escalation clause over the cash offer.
Make a better offer
This tip is probably one of the most efficient on this list, as nothing works as well against a cash offer as offering more money without further ado.
The offer must be substantial; it is not enough to offer $1000 or $2000 over the cash offer. It would help if you thought about how much money would make them change their mind and provide that difference for the seller.
Of course, it must be a reasonable offer; it is also not worth offering too much money for a house that is not worth it.
Hire a professional
Real estate agents are usually prepared for this situation and know the best way to approach it.
With their experience, they not only have excellent techniques to convince the seller but also help the buyer exercise proper boundaries as to when it is better to walk away or not to continue offering more.