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5 Killer Tips For Beating a Cash Buyer

By Bill Gassett | May 1, 2022

Tips For Beating Cash Offers

If you are looking to buy a home in a hot seller's market, there is a strong likelihood you'll be up against buyers who will be making a cash offer.

If you've lost out already to cash buyers, you're probably wondering what you can do to potentially level the playing field. A cash offer on a house is undoubtedly hard to beat. Offering cash for a house is usually at the top of a home seller's wish list.

We will be going over everything you need to know on how to beat a cash offer for the house you love. There are many ways to get an offer accepted. Let's dive in!

How to Beat a Cash Offer on a House
Do you know how to beat a cash offer in real estate?

Research The Current Real Estate Market

When trying to beat a cash offer, it's essential to understand the current local real estate market? How low is the inventory? Does the number of buyers far outweigh the number of homeowners looking to sell?

To make an informed decision, it's important to understand the following:

1) What is the inventory of houses for sale?

2) How low is the demand for houses?

3) Are there any restrictions on who can make a cash offer?

4) What are buyers' expectations in regards to price and condition?

5) What are sellers' expectations in regards to price and condition? Once you have answered these questions, you can begin to formulate strategies that will help you win the battle against a cash offer.

Get A Preapproval Letter For The Maximum Amount

When trying to compete with cash offers, getting a bank letter at your maximum loan amount is helpful. You'll want to be able to show the seller there is minimal risk in accepting your offer.

It can be advantageous if your preapproval shows a figure well above your offer amount. Getting a bank letter from a reputable lender is also a significant plus. You don't want to hang your hat on a seller looking at a pre-approval letter from some no-name lender.

Also, make sure it is a bonafide preapproval letter and not a prequalification. You could create a last-minute buying hurdle if your letter isn't up to expected standards.

Offer Well Over The Asking Price

Be prepared to make an offer that is higher than the asking price. Most homes are going well over the asking price right now.

Lean on your buyer's agent for what they have seen with other properties. Are they going 5 percent over asking? Ten percent or more? It is crucial to have this information.

It's also important to have a realistic appraisal that considers the wear and tear on the property. You may need to think about saving some money to budget for upgrades and improvements.

For example, if the home is going to need new bathrooms soon, you'll need to keep funds available to make those improvements when you're ready.

Consider Using an Escalation Clause

Escalation clauses are often included in house purchase agreements to allow you to go over other offers by a set amount of money. You will also be able to put a cap on the most you're willing to pay.

For example, if a home is listed for $500,000, you might consider offering $520,000 with an escalation clause that says you'll pay $5000 over the highest offer not to exceed $550,000.

In this scenario, if another buyer offers $530,000, you would need to pay $535,000. If your budget allowed for you to go to a maximum of $550,000, you would be saving $15,000 in this circumstance.

An escalation clause is a great way to potentially beat a cash offer if your price is much higher. Some sellers will choose the higher offer when you've got solid financing credentials.

Waive The Home Inspection

One of the bigger stumbling blocks in any home purchase is the home inspection. You'll take a big worry off the seller's plate by waiving the inspection. Is it risky? Sure it is, especially with homes that show wear and tear.

Unfortunately, it has become commonplace in the scorching hot real estate markets across the country. It is a significant tool to beat other offers, including those that are cash.

Keep in mind that many cash buyers will do this, so you need to stay on even footing with them. Just make sure there are no red flags before doing so.

To beat a cash offering on a house, you're going to need to go outside the box and get rid of common terms and conditions in an offer.

Waive The Real Estate Appraisal

Another item in your tool bag should be waiving the appraisal. Cash buyers don't have any financing issues. With bidding wars, it increases the odds the bank appraisal will come in less than the sales price.

You can make this less an issue by offering an appraisal gap coverage clause. It is a guarantee that you will make up the difference in the form of an increased down payment if the home doesn't appraise.

Doing so takes that worry off the table for a home seller.

Give The Seller Their Desired Closing Date

The seller's closing date is often critical when competing with a cash offer. Find out what it is and give it to them. There could be specific reasons why a seller needs a specific date, like trying to move elsewhere and check their kids into the local school system.

If a seller has purchased another home already, they may desire to line up their closing dates for simultaneous closings.

Let The Seller Rent Back The House

Another tactic to sweeten your offer is to allow the seller to rent back their house from you. Maybe the closing dates just can't line up, or the seller hasn't located a home they want to purchase?

They probably want to avoid the dreaded double move. Allowing them to stay in the home for a set amount of time could seal the deal with your offer.

Typically, a seller agrees to rent back by paying the buyer's carrying costs: principal, interest, taxes, and insurance for the property.

Final Thoughts

These tips can increase your chances of beating out a cash buyer. By following the advice, you could be well on your way to landing a house you really want.

While cash home buyers are tough to beat, these things can help level the playing field. Best of luck with your next offer.

Bill Gassett is an authority in the real estate industry with 38 years of experience. Bill is well respected for his informative articles for buyers, sellers, and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, the National Association of Realtors, Inman News, Newsbreak, Credit Sesame, Realty Biz News, and his own authoritative resource, Maximum Real Estate Exposure. He has been on of the top RE/MAX agents in New England over the last two decades.
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