How an All-Cash Offer Can Help You Win a Bidding War

In today’s real estate market, the inventory of homes is improving, but cash homebuyers still have an advantage. In fact, a recent study from researchers at the University of California San Diego found that in the last 10 years, cash buyers have paid about 11% less than those using a mortgage. If housing inventory is low and the market is competitive, buyers might offer cash to improve their odds of getting an offer accepted. Sellers might be more likely to choose a cash offer over someone who needs financing since they can close faster.

Key Takeaways

• Cash buyers pay around 11% less than homebuyers taking out mortgages.
• The housing shortage following the pandemic led to higher housing costs and bidding wars.
• Although an increase in inventory has made bidding wars less common, buyers in hot housing markets that are popular might face bidding wars.
• Making an all-cash offer can make you more appealing to sellers looking to close their homes.

The Rise of Bidding Wars

The pandemic led to some notable upswings in the housing market. Throughout 2020, the desire for homeownership increased and many residents of big cities such as New York and San Francisco began to seek housing in lower-cost suburban areas. In turn, this shift led to a highly competitive market with new areas of the country seeing significant growth.

While the competitive nature of the market endured for years, the real estate industry has adapted and there are plenty of resources available to help buyers navigate the path to homeownership. Knowing how to navigate each step is a great starting point and it can take the guesswork out of the process.

Some of the most important steps to take include prepping your budget, finding a real estate agent, taking out a mortgage, and researching properties. Being able to make a cash offer can also offer a significant competitive advantage.

Why An All-Cash Offer Can Help You Land Your Dream Home

Making an all-cash offer doesn’t mean showing up with a briefcase of money, but it does mean buying a home outright. With an all-cash offer, buyers must have the money necessary to purchase the house in an account that allows for immediate withdrawals and transfers. These accounts are usually checking accounts, savings accounts, or money market accounts.

There are several advantages to making all-cash offers, and their popularity has grown dramatically in recent years. In July 2021, cash sales accounted for 23% of existing-home sales, a 7% increase from the previous year. The share of cash sales has since trended up. In 2024, cash buyers make up 27% of all home purchases. 

Some of the advantages of all-cash offers include limited contingencies, less hassle and fees, streamlined closing procedures, and possible savings. All-cash offers can also speed up the homebuying process and even lead sellers to accept a lower bid. One of the reasons cash offers are more appealing to sellers is that they don’t entail as many buyer-financing risks. They also allow for relatively quicker closing times.

How to Choose the Right Lender

While buying a home with cash has historically been reserved for those who had the funds readily available, this has changed in recent years. Several lenders now offer the ability to buy a home with cash and secure financing afterward. It’s important to note, however, that not all lenders can offer the same benefits. Choosing the right lender can help ensure you can get approved quickly and close on your new home without delay.

As a trusted lender with an A+ BBB rating, New American Funding can help. Their Buyer Accepted Program lets you bid with confidence knowing that you’re backed by a cash offer. Once the sale goes through, Buyer Accepted will sell the home to you once you have permanent financing in place with New American Funding, and will even rent it to you through the close of the second escrow.

An added benefit of choosing New American Funding is that you’ll be partnering with one of the nation’s top mortgage lenders who is diligently working to provide you with a simplified cash offer process. Your home search will start with getting approved by New American Funding, then finding your dream home, and making a competitive cash offer. What’s more, if you currently own a home, you won’t need to sell it before purchasing a new one. Homeowners using the Buyer Accepted program will have up to 90 days to sell their existing homes.

For more information, please visit New American Funding now.

Why Is an All-Cash Offer Better?

Sellers and their real estate agents usually see cash offers as less risky since the financing isn’t as likely to fall through. Plus, since the buyer doesn’t have to go through the financing process, agents are able to close the deal faster.

Do All Cash Offers Ever Fall Through?

It’s possible for cash offers to fall through if the potential buyer can’t actually get their money together. They may also choose to withdraw their offer, especially if a home inspection reveals concerns.

How Do You Beat a Full Cash Offer?

If you’re up against a cash offer, it’s essential that you have pre-approval from a lender and you’re willing to make a higher offer. You might eliminate contingencies like waiving an inspection. Some sellers also have luck in writing a personal letter to the seller explaining why you want the home. If possible, put down even more of an earnest deposit to prove you’re commitment.

The Bottom Line

Cash is king during a bidding war, but the same is true even when it’s a buyer’s market. Using cash to purchase a home makes you appear as less of a financial risk, and having funds available can speed up the homebuying process, something that makes you more appealing to sellers who may have multiple offers to entertain.

Read the original article on Investopedia.