Monday, May 9, 2011

How a mortgage puts a Buyer at a Disadvantage?

For home buyers who need to finance their purchase using a mortgage, a cash buyer can be their worst enemy. Well, sort of…That’s because when a buyer makes cash offer, the seller knows it’s a solid deal. Of course, when it is verified as some buyer might want o pull the “I have the cash but not showing you where it is”.  Financing hiccups won’t delay a closing and sometimes, that’s enough for the seller to accept a lower bid for a cash deal instead of a higher bid from a financing buyer.

It’s becoming more common with the number of cash buyers on the rise, swooping in for deals on low-priced properties. Yet while cash is king, there are some things financing buyers can do to better their chances of having an offer accepted. Perhaps the most important tip: The smartest thing the buyers can do is make sure they talk to a competent mortgage banker (preferably a large, well know bank) to pre-approve them ahead of time

Also, remember that the more cash you’re willing to put down, the more secure your job and the better your credit, the better off you will be in getting the seller to accept your bid.

In February, all-cash deals made up 33 percent of all home sales—a record high, according to the National Association of Realtors ( In 2010, 59 percent of those who bought a home as an investment paid cash for the home! That is a staggering number!
People are plunking down cash on properties for a variety of reasons. One popular one: With low housing prices, some people are pulling their money out of the stock market and investing in rental properties, with a plan to own them long term. And, in my opinion is a smart move as I never trusted paper money… Investing conservatively is always my advice as I never bought properties in the bubble even with a great promise of return a anything over a 10% annual return would impose too much of a risk for me.

Some parents may be providing the cash to help their children buy homes, at a time when financing can be out of reach for young adults as first time home buyers made up 50% of the US market in the past 2 years!!! Instead of applying for a loan from a bank, the kids make their payments to the Bank of Mom and Dad. Meanwhile, the parents can charge 5 percent to 6 percent interest on the loan—earning them more than they’d get on a safe investment such as a certificate of deposit. Cash offers often win out when the bank is the seller. Those are most likely foreclosures now back on the lender’s books.
When dealing with a bank, remember that lenders are typically more analytical than a homeowner seller! As I would say, they are much harder to “get along with” these days….. And for an institution, they’re more apt to go with the safest bet.

When you have an equity seller, they don’t have to take a lowball cash offer or any offer so instead, they’ll most likely opt for the best and highest offer, since they may not be as motivated by time.  To compete with a cash buyer, you’ll need a bit of strategy. Here are some suggestions:

·         Get pre-qualified—or better yet, pre-approved—for a mortgage. Along with a high down payment, preparing to put down a high deposit could also up your chances of beating out a buyer who is bidding with all cash, he says.
·         Act quickly- to beat the deep pockets. If you did your home work, do not hesitate.
·         Learn the seller needs- an agent or a self buyer should do some “socializing” with the seller or his/her agent. Flexibility might be a good selling point to the seller.
·         Make the offer professional- a well-prepared contract that is typed out, plus a cover page summary of the contract details, is another way to show you’re serious
·         Have patience- if you’re interested in bidding on bargain homes including foreclosures, you might end up looking at 40 different properties and make seven or eight offers before you get one accepted

Please contact me with any questions: Thomas Wohl, Broker or

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