All cash offers make it harder to buy a home; here’s how to compete

Encouraging homebuyers entering the home market this year are facing headwinds from all directions, with near-record high home prices as well as high mortgage rates double what they were two years ago.

But there’s another trend that’s making life difficult for buyers: competition from “all cash” offers from investors and wealthy buyers willing to write a check on the spot.

In the last couple of years, you couldn’t make a house offer without facing stiff competition from 5 or 10 other buyers, some of whom were ready with all the cash.

But housing experts say things are starting to change as the red-hot market begins to slow down.

That means buyers like Keenan Krigler, whom we met last fall, could have better luck than they did in 2022.

“I really had to start cutting my budget,” a frustrated Krigler told us.

Realtor Michelle Sloan of RE/MAX said competition from all-cash offerings makes it difficult for people taking a conventional mortgage to accept an application.

“They don’t have collateral to win the bidding war,” she said.

Hope on the horizon for cashless shoppers

But things could improve, according to Daryl Fairweather, chief economist at online brokerage Redfin.

“The good news is that right now you probably won’t face as much competition,” she said.

Fairweather says that with mortgage rates close to 7 percent, the market is slowing down and cash-bought homes are starting to fall.

About a third of US homes were paid in cash in December 2022, according to Redfin, slightly below an eight-year high in November.

“Many investors are buying in cash,” she said, “and some of those investors are leaving the market.”

If you have the funds, of course, the cash offer is a way to avoid those high interest rates.

Plus, sellers are more likely to accept your offer knowing they don’t have the credit to approve.

But if you can’t pay cash, Fairweather advises, don’t give up: make an offer that suits you.

“Sellers these days can’t be that choosy,” she said. In some areas, “they have to accept any offer they get.”

what can you do

Realtor Michelle Sloan says it’s best to buy with cash only:

• Get pre-approved for a loan.
• Prepare an initial deposit (the more you can deposit, the better).
• Consider postponing more “deposit” to show how serious you are.
• Let the seller know that you plan to live there, which can give you an advantage over investors who want to resell or rent the house.

“I’ve had a lot of sales people say, ‘Michelle, I’d rather have a family that’s about to move into the house. I don’t want my house to become a rental,” Sloan said.

Appealing to sellers in this way and having your loan fully pre-approved can help you win over these cash investors.

So you don’t waste your money.

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