Can a Financed Offer Win Over a Cash Offer?

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Due to the strong seller’s market in real estate, many buyers have turned to offering cash as an advantage over people using financing.

A recent analysis by a leading real estate company found that in the first quarter of 2021, 30% of home sales were purchased with cash. That’s the highest since 2014.

As a buyer looking to finance, the best way to compete is to create confidence in an offer. We’ll explain how to do so, but first let’s explore why cash offers are winning a lot of bids.

Sellers prefer cash offers because they usually come with faster closings, no contingencies, and no requirements for appraisals or inspections. These factors give sellers more confidence in cash offers — even at times when they are for less money than a financed offer. There’s a safe bet that the closing will happen quickly and will happen as effortlessly as possible.

So how can buyers who finance create more confidence in their offers? Here are a couple ways:

1. Get Preapproved

Many borrowers get prequalified to shop for homes. This process involves providing income, assets, and debts before finding out how much house can be afforded.

A preapproval takes it one step further. Documentation that verifies income, assets, and debts is provided and then reviewed by underwriting, vetting the information on a loan application. In cases where an appraisal can be waived, typically all that is left for a financed transaction to close is homeowners and title insurance, which oftentimes can be done quickly.

While a preapproval alone will not win a cash offer, it may impact the gap of a seller’s confidence when considering between financed and cash offers.

2. Work with Local Industry Professionals

Working with a local, accountable mortgage provider is one of the most effective ways to ensure confidence in an offer.

The seller, and his or her agent, will typically see a local, reputable mortgage provider as a strength when compared to a financial institution without the reputation of accountability and consistent results.

They know that their closing matters not only to the financial success of the transaction, but also to the more valuable long-term brand of the institution that is putting its name on the line for its client. Local providers simply have more to lose should an issue arise.

While cash offers may remain superior, the right mortgage approval type and provider may reduce the gap of a seller’s confidence when cash offers are also on the table.

*** Florida Mortgage Firm is a mortgage brokerage that has access to a multitude of underwriters and programs that other outlets may not. This means more options and solutions for your specific financial needs. Confidence comes from knowledge, so working with a local professional, expert, and integrated member of your community may give you and a seller the assurance that closing is around the corner.