All-cash home purchases have flourished over the past few years, with 32% of housing paid for without a mortgage in 2021, according to Zillow, and 62% of sellers receiving at least one offer without a financing contingency this year.
But you don’t necessarily need hundreds of thousands of dollars in the bank to be competitive in the current housing market, especially as it starts to cool. More than two-thirds—68%—of buyers purchased their home with a mortgage since the beginning of 2022.
“Even if you have a cash offer, someone with a mortgage might have a better offer,” says Nicole Bachaud, an economist for Zillow.
The competition between buyers boils down to the seller’s top two priorities: money and time.
Unsurprisingly, the top priority for 55% of sellers is getting top dollar for their property. And the majority of sellers are okay giving buyers more time to secure cash financing in order to get the guaranteed greatest profit.
“Cash is usually more desirable because the money is there, and you’re not worried about the buyers losing their financing at the last minute,” says Bachaud. “But that doesn’t [necessarily] make it the strongest option.”
If you don’t have the cash on hand, though, there are a few ways to strengthen your offer, like getting a mortgage preapproval before making an offer to give the seller confidence you’ll follow through on the sale.
Additionally, 35% of sellers are also willing to forgo an all-cash option if it means selling within their preferred time frame—and the faster the better, in many cases.
To expedite the process, a buyer could consider waiving provisions like a sales contingency, which states the potential buyer must sell their existing home before following through with the new purchase. This is generally unattractive for sellers whose top priority is selling within their preferred timeline because it can slow down the process, according to lending experts at Chase. But there may be risks involved for the buyer, so consider consulting a real estate or mortgage expert to decide what makes sense for you.
One of the best ways to decide what to offer is to work with a local realtor who knows what other contracts are being made in the area, says Bachaud. The realtor should be able to negotiate an offer that makes the most sense for the buyer while still sweetening the deal for the seller—but be mindful, there’s no surefire hack to beat out the competition.
That said, some buyers have been dropping out of the market since the Federal Reserve started raising interest rates in the spring. Sales are now slowing down, and inventory is beginning to rise. With fewer buyers, sellers are receiving fewer offers—giving those who need to finance with a mortgage more power to compete.
