In today’s tight inventory market, trying to help buyers with financing and limited funds feels a little like getting into a boxing match with Mike Tyson. While losing a deal to a cash offer might not hurt as much as getting punched by Mike Tyson, it’s still frustrating for your buyers, and more work for you. After getting punched in the face a few times, you have to decide to either quit or come up with another strategy. 

Luckily, beating a cash offer on a house is not as hard as many agents think. We’ll share our strategies to improve your offer by reducing the negative aspects of financing while creatively solving some of the other concerns a seller may have. Here are the top 10 that have helped my team successfully beat out cash offers—yes, even in this red hot market.

Disclaimer: All suggestions mentioned in this article are for informational purposes only. We are not offering legal advice. Laws and restrictions are different in each area. Check with your local real estate commission and attorney for guidance before using any of the techniques listed.

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1. Use a Cash Lender

One of the best ways to beat a cash offer is simply to transform your offer into a cash offer by using a cash lender. Born from the needs of mortgage buyers to compete with cash buyers, cash lenders will buy a home with cash then allow the buyer to refinance or purchase the property after closing. 

Here’s how it works. Once a buyer is qualified with a cash lender like Homeward Mortgage, they can select a house and Homeward will place a cash offer on the property. Once the property is purchased, the buyer rents the property from Homeward until their loan is finalized.

There is a charge for this service. The fee is about 2%, but it is reduced if the buyer uses Homeward Mortgage for their final loan. For buyers with a home to sell, they also offer a buy with cash before you sell option.


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2. Submit Your Offer Early

Competing with cash offers can be stressful, but don’t give up hope. Many listing agents today will not review the offers for three to four days after the property becomes active. This allows more buyers to have the opportunity to see the property so the seller can receive more offers. 

Some buyer’s agents believe the best strategy is to wait until the last minute before submitting an offer. Don’t do this! We have found that the best practice is to submit your offers early! 

There is nothing worse than finding out the day before the offer deadline that the seller got tired of having to be out of the house for showings and decided to accept an offer the day before. Think of it this way: If your buyer’s offer is on the table, at least they will have a fighting chance, and if you follow some of my other suggestions, your buyer’s offer may even win!


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3. Offer a Signing Bonus

A common seller negotiation tactic today is to hold all offers through the weekend and present all the offers received on Monday. This allows the listing agent to pit desperate buyers against each other and drive the price up even further. This technique also increases the chance of getting a cash offer that sweeps the rest of the competition.

The best way to overcome this is to offer a “signing bonus” for accepting your buyer’s offer quickly. To be successful at this, your buyer must put their best foot forward and make the “signing bonus” the highest and best offer they can make.

Assuming the list price of a home is $400,000 and your buyer is willing to pay 10% over asking. Instead of offering $440,000 and waiting through the weekend, structure the offer so the sales price is $420,000, but if the seller accepts the offer within the next four hours, the sales price will be $440,000. A $20,000 bonus just for accepting your offer sooner.

This approach allows your buyer to submit their offer early, eliminating the competition, and the seller gets to feel like they got a fair price. A true WIN-WIN! The best part is if the seller doesn’t accept the offer, it stays in the mix so your buyer can still have a chance to win.

However, to win against cash offers, you need to do more than just offer a signing bonus.

Related Article
18 Top Real Estate Negotiation Strategies From the Pros

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4. Be Memorable & Likable

Winning an offer is a competition—literally. It’s your buyer’s offer against all the other buyers. So, if you want to win against cash offers, you need to be memorable and likable! 

I’ll deny it if asked, but in the past, I have been known to help polite agents that I liked get their offers accepted. On the other hand, I have not lifted a finger to help an agent who was rude and standoffish. So if you want to beat out a cash offer, kill them with kindness. Here are two easy ways you can be more memorable and likable to the listing agent:

Leave Unique Feedback

When your buyer is interested in a property, you have a great opportunity to set the tone. Instead of leaving the same old feedback, mention how your buyer loved the home, the neighborhood, and how they can see themselves living there. 

In many cases, the feedback goes directly to the seller. This is their first impression of your buyer’s offer. Just be mindful not to mention anything about your client that can be considered discriminatory under Fair Housing

Think of it as a mini-buyer love letter without the potential issues that love letters present.

Related Article
Are Buyer Love Letters a Waste of Time in 2022? (+ Example Letter)

Send the Listing Agent an Introductory Video

Next, record a quick introductory video of yourself to the listing agent. (Due to Fair Housing, I don’t include videos of my clients.) Let them know you will be submitting an offer and for them to keep you abreast of any status changes. 

These extra little touches can be the difference between your buyer’s offer being in second or first place!

Related Article
21 Real Estate Videos Top Agents Use To Generate & Nurture Leads

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5. Offer an Appraisal Gap

One of the main reasons cash is king in bidding wars is because of the requirement of an appraisal for mortgages. Bidding wars are causing sales prices to rise far beyond what we as agents or appraisers can realistically justify. 

The difference between the sales price and the lower appraised value is called the appraisal gap. When a financed buyer offers to cover any appraisal gap, they are putting up additional money for the down payment and closing costs. For example, if a property is marketed for $400,000 and it gets bid up to $420,000, the financed buyer may agree to bring in an additional $20,000 in the event the property doesn’t appraise.

Coach your clients who don’t have the additional funds for an appraisal gap to try to restructure their loan to a lower down payment option. If that won’t work, have them ask parents, grandparents, or even borrow from their 401(k) in order to cover the gap in the event the appraisal comes up short.

Remember, they will only need this money if the appraisal comes in lower than the agreed sales price and in most cases, the deficient amount is less than the agreed appraisal gap. While this is a top strategy, today many buyers are offering appraisal gaps. So, to win your offer, you may have to pull out the big guns.


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6. Have Your Buyer Pay Your Commission

When you are competing with cash offers, sometimes you have to pull out the big guns. Commissions have always been a touchy topic for buyers and sellers, and many sellers feel that it isn’t fair that they pay commissions for both their agent and the buyer’s agent.

How I Used This Strategy to Beat a Cash Offer: With a Handshake!

I recently won a bid on a house with an offer that was less than the competing cash offers simply because my buyer agreed to pay for my commission. I was working with a client who only had $30,000 total for down payment and closing costs.  

The first thing I noticed when pulling up to the home was that the seller had chosen a limited-service brokerage that charged a low flat fee for the listing service and offered a co-op commission to a buyer’s agent. This made it clear to me that the seller likely didn’t see the value of paying for an agent.

Making matters more awkward, the seller was home when we toured the home. After the viewing, the seller walked right up to the buyer and asked her what she thought of his home. 

She politely responded that she loved the home. He smiled and said, “Then you should buy it!” She explained to him that she wished she could, but he would receive multiple offers and she feared she would get beaten out by a cash offer, as had recently happened to her.

He replied, pointing at me, “Give me my asking price and pay his commission and I will sell you my house.” Without a second’s pause, she exclaimed, “OK!” Then we all shook hands and they hugged each other.

With the handshake deal in mind, I rushed to my car and wrote the offer. With 3.5% down and the lender covering the closing costs (with the interest rate spread), the buyer had just enough left over to pay my co-op commission.

Within 30 minutes, the offer was written, signed, and in the listing agent’s inbox. I immediately got a call from a frustrated listing agent who said, “Why would we take your offer; we already have cash offers for $20,000 more than yours.” I replied cheekily, “Because we shook on it.” 

After the awkward silence, he said he would talk to the seller, but he was going to advise against taking our offer. Two long hours passed and then I got the call that the seller had signed our offer. Was it because he liked the buyer or because the buyer agreed to pay my commission? We may never know, but she is happily living in the home today.

Since this experience, I have successfully used this technique to differentiate my offers to gain an advantage over the competition.


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7. Add an Escalation Clause

Escalation clauses often get a bad reputation. However, if used correctly, they are powerful tools that allow your buyers to make their strongest offer without the risk of overpaying compared to the other competing offers. 

For example, a home I sold recently had six offers. This beautiful four-bedroom, three-bathroom home in a small rural town east of Denver was listed for $460,000.

Three of the offers were under $470,000, two were at $480,000, and one was $500,000. The buyer who offered the highest amount had already sold their home (without a contingency to find a new home) and had to find a home ASAP or they were going to have to rent. 

They were in a pinch and because of their situation, they made an over-the-top offer to ensure they would win. What they didn’t know is that the other offers were $20,000 less than their offer. 

To prevent the buyer from overpaying, the buyer’s agent could have made an offer of $475,000 with an escalation clause of $1,000 more than any viable competing offer up to $500,000.

Had they done this, we would have had their offer accepted at $481,000 ($480,000 highest competing offer + $1,000 escalation), thus saving the buyer a whopping $19,000!

This technique is sure to place your buyers in the top spot, but this alone won’t always beat out cash.


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8. Pay the Seller’s Closing Costs

While this next tip will give you an edge when the offers are close, sellers today feel like they are getting nickeled and dimed. That sounds funny when they are getting offers 10%+ over asking, but ask a homeseller and that is what they’ll tell you.

In most real estate transactions, the seller pays for the costs of the title insurance, escrow, and homeowner association (HOA) fees. Despite the common practice of having the seller pay for these fees, there isn’t a requirement for the seller to do so. Combined, these fees can range from $1,000 to $5,000, depending on the location, HOA, and the price of the home.

One benefit of this is that in most cases, when the buyer pays for the title policy, they are able to select which title company they wish to purchase the title insurance policy from. If your buyer wants this option, be sure to make this clear in your offer. Also, be sure to get estimates of the fees prior to having your offer accepted, or place a limit on the costs your buyer is willing to pay.

While saving the seller a few thousand dollars seems miniscule compared to the hundreds of thousands buyers are paying for the house, this little gesture goes a long way with some money-conscious sellers.


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9. Give the Seller a Flexible Possession Time

Since many sellers also need to buy a home, many get nervous about finding a home they can afford and actually want to buy. To relieve the seller’s fears, your buyer can be flexible with the seller when it comes to them having to move after they sell the home.

Of course, cash offers have an advantage when it comes to flexible possession dates. However, there are two main strategies buyers with financing can use to give the seller more time to move. Each has benefits and drawbacks for both the buyer and the seller. The key is finding the right solution for both parties.

No-cost Rent-back 

If the seller needs time to stay after the home is sold, then a no-cost rent-back can give them time to stay in the home long after the home has been sold. 

The challenge with this strategy arises when your buyer needs a mortgage loan. FHA loans and conventional loans have a requirement that the new buyer occupies the property within 60 days of ownership. If the seller needs more time than that, your buyer may have to qualify for an investment loan.

Recently, our team had a seller who was waiting for their new home to be built. The winning buyer agreed to get an investment loan so they could allow the seller to rent back the home for up to six months after closing. This saved the seller from the cost and inconvenience of having to move twice. Once moved in, the buyer plans to refinance the home to a lower interest rate owner-occupant loan. 

Most states provide a pre-approved form for post-occupancy. To protect your client and yourself, if your state doesn’t provide these forms, advise your client to have a lease drafted by a local real estate attorney.

Replacement Home Contingency

If a no-cost rent-back doesn’t work for your buyer, try using a replacement home contingency. A replacement home contingency is a two- to four-week contingency for the seller to find, contract, and inspect a replacement home. If the seller cannot complete this by the end of the time period, they may extend the time or the buyer or the seller may terminate the contract.

The benefit of this technique is that you don’t run into the 60-day occupancy requirement as you would with other options, since the closing and possession will be coordinated with the seller’s replacement home purchase.  

The downside is that if the seller cannot find a replacement home, they can terminate the contract and stay in their current home. In this case, the buyer may lose any money they paid for inspections and appraisals.

Having good communication with the listing agent and understanding the seller’s needs is key to making deals like this work.


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10. Communicate!

I am appalled when I get offers in my inbox from agents who didn’t even bother to call or text before they sent it over. What kind of agent does this? A lazy agent who doesn’t really want to do their job, that’s who!

When writing an offer for my buyers in this competitive market, I want to make accepting it as easy as possible for the listing agent. To do this, I always call the listing agent (yes, on the phone! … and no, not in a text message!) to get a crystal-clear understanding of what the seller’s situation is and how we can draft an offer that meets their specific needs. 

Call me old-school, but I appreciate the details when I’m presenting offers to my sellers. Many of the other listing agents I know do too. So write a detailed cover letter that contains bullet points of key features of the offer, and how the buyer’s offer takes into account the needs of the seller. If needed, explain the buyer’s situation and their financing. 

Lastly, I call or text the listing agent and let them know that I sent them an offer and ask them to confirm that they received it. This shows them that I am proactive and communicative.


Bottom Line

The way to beat out cash offers on a home is to relieve as much stress and eliminate any fears the seller may have. You can do this by writing your offers in a way that reduces the hassles of financing and takes into consideration some of the other concerns a seller may have. We wish you the best in applying my team’s 10 strategies for writing winning offers!

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