Help your clients beat cash investors on home purchases

Investors may be snapping up the sparse number of homes on the market, but close realtor relationships and savvy personal, customer service skills can be the ticket to helping financed borrowers win over a cash buyer.

It’s true - investors do have the luxury of buying up homes in cash, but sometimes sellers will prefer a financed borrower if the offer is right and has no strings attached, said Joe Parsons, senior loan officer at PFS Funding in Dublin, California.

This means that originators should partner-up with realtors to encourage borrowers to make offers higher than cash buyers (sometimes slightly higher than asking price) and give up certain contingencies associated with that offer, Parsons said. 

One of the most critical contingencies that a borrower might want to give up to push through a financed deal is the loan contingency – the condition that if the loan doesn’t close, the borrower can walk away from the deal.  By removing this contingency and offering say, a US$5,000 deposit that the loan will close, the borrower gives the seller added assurance and may make the deal more attractive than a cash deal, Parsons said.

Loan officers and realtors must be sure they can close a loan when encouraging borrowers to do this, he added. It is only a good idea when it is almost 100% certain they can close the loan.

It takes a lot of work on the part of the loan officer and borrower to work these types of negotiations to win over cash buyers, but financed borrowers can win in fierce bidding wars when they have a loan package that appears perfect, Parsons said.

The main thing that sellers are looking for is “certainty”. If loan officers can prove a borrower’s income and financial status timely and diligently to get the loan contract ready ahead of a purchase, they just might be able to “cheerlead” borrowers to the finish line.