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Competing With Cash Buyers–The Word is Out

Compete with cash buyersThe upturn in real estate activity brings many changes in the way we and other mortgage originators are doing business. We’re crazy busy, but we and many of our clients (and their Realtors©) are navigating some choppy waters.

Recently, I’ve written a couple of blog posts on how financed buyers  can compete with cash buyers in today’s tight real estate market (see A Risky (But Effective) Purchase Strategy, and A Different Strategy for Home Buyers). I was tickled when Diana Arqa from Mortgage Professional America picked up my recommendation in her story, “Help your clients beat cash investors on home purchases.”

It’s true – investors do have the luxury of buying up homes in cash, but sometimes sellers will prefer a financed borrower if the offer is right and has no strings attached, said Joe Parsons, senior loan officer at PFS Funding in Dublin, California.

This means that originators should partner-up with realtors to encourage borrowers to make offers higher than cash buyers (sometimes slightly higher than asking price) and give up certain contingencies associated with that offer, Parsons said.

One of the most critical contingencies that a borrower might want to give up to push through a financed deal is the loan contingency – the condition that if the loan doesn’t close, the borrower can walk away from the deal.  By removing this contingency and offering say, a US $5,000 deposit that the loan will close, the borrower gives the seller added assurance and may make the deal more attractive than a cash deal, Parsons said.

Loan officers and realtors must be sure they can close a loan when encouraging borrowers to do this, he added. It is only a good idea when it is almost 100% certain they can close the loan.

It takes a lot of work on the part of the loan officer…and borrower to work these types of negotiations to win over cash buyers, but financed borrowers can win in fierce bidding wars when they have a loan package that appears perfect, Parsons said.

As I’ve mentioned in my blog posts and what was reiterated in the article, forgoing contingencies can be a risky move for buyers; loan officers must be absolutely certain that they can fund a client’s loan. But when other mortgage pros and journalists start sharing my advice, I have a feeling that I just may really be on to something.

1 comment… add one
  • Blackdown440 November 6, 2015, 5:10 pm

    This means that originators should partner-up with realtors to encourage borrowers to make offers higher than cash buyers (sometimes slightly higher than asking price) and give up certain contingencies associated with that offer, Parsons said. cash buyer

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