Cash Transactions No Longer Offer a Significant Advantage

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There was once a time, not too long ago, that cash transactions put investors on the top of the list for potential buyers and lenders. In today’s market, where cash sales made up nearly 40% of all purchases last month, that is no longer the case. Sellers now have their pick between cash offers, and there is barely any discount given to do so. Inventory is still limited in many parts of the country and there is increased access to private money lenders. Cash transactions still reign, but with so many other offers coming in cash, it has greatly diminished the effect of submitting such an offer.

There has to be a change in the way you go about submitting your offers. Low offerings through cash transactions may have worked years ago, but not today. Quick closings with little or no contingencies are still a plus, but you need to be more aggressive with your offer price. Never offer more than you feel comfortable with on any property, but if you find value in a full price offer, go for it. You don’t want to lose a profitable property opportunity by trying to save a few thousand dollars. Of course, money is money, but look at the bigger picture when making your offer.

Speed, aggressiveness and the language of your contract are going to result in more offers in today’s market. As soon as a new listing hits the MLS, there are half a dozen investors ready to pounce. In most cases, there is already a buyer lined up before the house even hits the market. This is why you need to have everything ready to go without any delay. Proof of funds, a fully executed contract and disclosures all need to be submitted in a presentable and timely fashion. The seller, especially a lender, is probably not even going to look at your offer if the contract isn’t signed or your proof of funds letter is even 30 days old.

Some investors are going so far as to waive any inspections or other contingencies and close in a little as seven to ten days. This is where you need your attorney to be able to turn the title around and get insurance coverage within 24 hours. Having to wait, even an extra day or two, can cause you to lose the deal. Sellers will always value price, but they want to feel confident that the deal will really be able to close when the contract states it will. Having the ability to pay cash will still put you in the game, but now it is not such a guarantee that your offer will be accepted. There are many other investors in the same boat and you really need to dot your “I’s” and cross your “T’s.”

It doesn’t appear that there will be a run on mortgage financed deals any time soon. Cash offers will be here for a while and will be a large segment in all purchases moving forward. This may be difficult to accept, but this is the way the business will be for the foreseeable future. If you want your offers accepted, you need to change the way you view them and focus on what will really get your offer to stand out. Having the ability to pay cash is not enough anymore.