Mortgage vs. cash

Randall Brennan REALTOR Highlands Ranch Colorado

photo by Mary R. Vogt

Picture this: you’ve been looking for a home for months after thinking about it for years. You’ve found the home you want, and it meets your needs. You write a contract, but before it’s even presented to the seller, another offer comes in. With all the homes on the market, you’d think you wouldn’t have to deal with multiple offers but you’d be surprised how many times it does happen. When you find out the other contract is based on an all-cash offer, your heart sinks. It doesn’t have to, though.

Think about it for a minute. At the end of the deal, the seller is going to be collecting cash. The buyer is either going to be using personal funds, or the buyer will be supplementing personal funds with money borrowed from the bank. At that point, it won’t make any difference to the seller because regardless of the source, it’s going to show up in the seller’s column when all is said and done.

Of course, getting access to the bank’s funds means that the buyer has some extra hoops to jump through, and every time the buyer has to jump through another hoop, there is a chance that the deal will fall apart. The seller won’t want that to happen, and will be rightfully leery of any offer that includes mortgage financing. If you’re the buyer who needs to borrow money to pay for your new home — as most buyers do — there are some proven strategies that can minimize the advantage of an all-cash buyer.

  1. Get pre-approved, and submit the letter from the lender with the offer
  2. Move fast to minimize competing with other offers, and use a short acceptance window
  3. Submit larger than normal earnest money to show your sincerity, which is nothing more than pre-paying part of your down payment
  4. Be flexible about closing and possession
  5. Avoid unnecessary contingencies in the contract
  6. Write a letter emotionalizing why you want the home

Will all this guarantee that the seller will accept your offer, and not another? Of course not, but it will help. As always, I’m here to help you explore your options.