Purchasing a home with a cash offer provides buyers with a distinct advantage in negotiations in the current housing market. Homebuyers see their chances increase dramatically when offering cash in a market currently short on supply but high on demand.
Limited household inventory is pushing up prices, a condition that will likely remain for the foreseeable future as builders struggle to complete new construction homes. This is further complicated by Wall Street’s bet on residential real estate with investors purchasing large volumes of properties. These investors are also using cash — and that matters.
Cash is the ultimate difference-maker when it comes to helping homeowners navigate today’s real estate market. Sellers want cash because all the uncertainty is removed. For homebuyers, cash purchases offer them a better chance of winning the deal and negotiating a better price. Cash purchases are so appealing to sellers that homebuyers using cash pay 11% less on average compared to buyers using a mortgage, according to a study by the University of California San Diego’s Rady School of Management.
“Cash purchases are so appealing to sellers that homebuyers
using cash pay 11% less on average compared to buyers using a mortgage.”
Now, cash has become even more indispensable with today’s supply- demand imbalance. Homebuyers can come in with cash, walk to the front of the line and potentially get discounts in the high five-figure range. Cash sales accounted for 32% of all home purchases in January 2024, and this is only increasing, making it harder for people to purchase properties if they don’t have access to the cash needed to make all-cash offers.
Competitive options
Some potential homeowners are facing challenges when it comes to all-cash offers. If these potential homeowners can’t compete for the property they want because they’re fighting a cash war with financed options, then they need to find a different route to success.
Having access to this cash is often perceived as something only a small percentage of the population can achieve. Wealthier homeowners already on the property ladder easily can access cash and continue their upward trajectory.
This isn’t always true. There are options available to homebuyers who lack cash in hand. Americans can place their foot on the property ladder and achieve the American dream of owning a home by working with companies offering innovation solutions and services — companies with the capacity and product structure to provide the cash they need to make an exceptional deal on a new home.
Many funding solutions are designed to help people from all backgrounds make the move with cash and seal the proverbial deal. For example, many veterans struggle with unemployment, which impacts their ability to easily achieve homeownership when they return home.
There are mortgage lenders with dedicated veteran initiatives designed to reduce risk and provide veterans with a clear path to homeownership. There are also structured finance options designed to help everyone achieve the dream of homeownership, regardless of background and status.
Fault lines
Working with a mortgage lender with a solid reputation and proven track record is one part of the process. Mortgage lenders can utilize strategies that allow aspiring homeowners to make a competitive all-cash offer, which benefits both parties in the short and long term.
For example, many mortgage lenders provide cash-offer financing where the mortgage lender purchases the home on the buyer’s behalf before the home loan has closed. Originators still receive an agreed-upon commission in these cases. It also allows their referral partners to close more transactions.
There is the misconception that wealthier individuals have a lot of cash easily accessible and can make a downpayment of up to 20%, but that’s not always true. There is also a perspective that diverse communities lack the financial resources and education to compete with all-cash offers. Diverse communities that are traditionally underrepresented by financing programs can still set themselves up for success by following some clearly defined strategies.
The first is to prioritize how you save and earn. This is something that can be influenced by culture and environment. The ways a person earns and saves may not fit into traditional underwriting boxes, which can inhibit their ability to get a loan or the cash they need to make an offer.
There are companies that prioritize working with potential homebuyers early in the process to unpack where the fault lines lie and help them to refine their profiles, so they become increasingly attractive to lenders. For example, having too many open credit accounts will impact one’s credit, so it is recommended to close some of those accounts as soon as possible to improve their credit profiles. If a person lives by cash because they don’t trust financial institutions, then that will also affect a potential homeowner’s ability to get approval for a loan.
While having a bank account can offer many advantages, including easier access to credit and homeownership, many diverse communities have a lifelong distrust of financial institutions. This skepticism is often due to concerns of ongoing discrimination, privacy and the security of funds being at risk. There can also be fears that banks may withdraw services from areas primarily serving diverse populations.
“While having a bank account can offer many advantages, including easier access to credit and homeownership, many diverse communities have a lifelong distrust of financial institutions.”
These are just some challenges diverse communities encounter when purchasing a home. If these hurdles are removed, then homeowners can be ready; they have moved from a risky prospect to an attractive potential homeowner in just a few short steps.
Fulfilling future
Buying a home isn’t a quick process. It starts with cleaning up a potential homeowner’s profile and then moves slowly forward, step by meticulous step, toward the finish line.
Potential homeowners should start working with a mortgage lender that has originators willing to do the work and put in the time. Also, it is imperative to start early — get on the ladder and get processes started even if a prospective buyer currently falls outside of the traditional homeowner box.
Homeownership is an investment into an exciting, fulfilling future. It can create generational wealth and can remain in a family for years to come. Potential homeowners should move into the homeowner space with care and precision. Help your clients choose the right company to partner with, work with them to clean up their profile and credit rating so they become a solid investment, and then advise them about how a cash offer can net them the perfect home with a great discount and an affordable repayment plan. This is the route nearly anyone can take to own a home today and build for their future.
