Competing with cash buyers is one of the most frustrating scenarios for anyone seriously looking for a home these days. The lack of homes for sale and higher prices are hard enough on buyers. But even buyers with competitive bids can still lose to a lower bid because cash is still king. Without the waiting factor of whether a buyer’s financing will come through, a cash buyer is often the most attractive type for a seller.

Who are these cash buyers?

They aren’t always the extraordinarily wealthy. Many are mature buyers who have amassed a healthy savings and have profited enough from the sale of a larger home to pay cash when downsizing to a smaller one. Another type of cash buyer is the investor who has been in the property business a long time. Their business model is flipping or renting homes, so paying cash makes sense for them.

4 Ways You Can Compete

1. Go through an underwritten pre-approval before your home search. Once you’ve chosen a lender, go through the entire process of getting pre-approved upfront instead of after you’ve found a home and made an offer. This can put you in a much better position to be chosen because you’ve already proven a lender is ready to give you the money. It removes more risk of the deal falling through due to financing and puts you as close to on par with a cash buyer as possible. The only steps left after an underwritten preapproval are home appraisal, title search, and acquiring insurance.

2. Offer above list price. Sure, lots of people are offering above list price these days. If you can afford it, go well above list price, not just a couple of thousand dollars. Cash buyers think they don’t have to offer the highest amount to win a bid, so take advantage of that with your absolute best price in case they’ve bid too low. Every market and home is different, so combine your comfort level with the experience of your local Realtor.

3. Include an appraisal gap guarantee with your offer. An appraisal gap guarantee states you’re willing to cover the gap between purchase price and appraisal price if the home doesn’t meet appraisal when going through the financing process. With the price of homes rising quickly in the last couple of years, it’s not uncommon to come across homes that don’t appraise for the purchase price. That can be a deal killer. But if you’re a motivated buyer, offering this coverage in your contract gives the seller more assurance that your deal is a sure thing.

4.Use a company that offers a cash-buying solution. You might be able to level the playing field by becoming a cash buyer yourself through a company that will loan you the money, such as or HomeLight Cash Offer. Each company has its own stipulations, but generally a buyer goes through an online application process. Then the cash loan company provides proof of funds so that an offer can be made with cash. After closing, the company refinances the cash loan into a mortgage. Make sure you understand all the fine print beforehand.

Bottom Line

Competing against cash buyers can be challenging, but remember, they aren’t always invincible. You can prepare by strengthening your position in advance. While you can’t control who a seller chooses, you can improve your odds of winning a home with these competitive strategies.

Real Estate Term of the Week

Underwriting:The process of a lender verifying your income, assets, debt and property details in order to issue final approval for your loan. An underwriter is a financial expert who takes a look at your finances and assesses how much risk a lender will take on if they decide to give you a loan.

Platinum Service Realty