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This article originally appeared on SparkRental and has been republished here with permission.
Beaten by a cash offer on your last real estate offer to purchase? You’re not alone. The percentage of cash offers in real estate markets across the country have surged to 25% per the National Association of Realtors, up from just 15% a year ago.
Still, you don’t need to make a cash real estate offer to win a purchase contract. As in all negotiations, the secret is simply that not all sellers are motivated by the same thing. Here’s how to level the playing field and beat out all-cash offers in real estate investing.
Related Read: The Basics of Investing in Real Estate
Savvy buyers know that each seller has unique needs, unique motivations. The trick is to identify what motivates each seller before you make a real estate offer.
You can ask directly of course, or have your Realtor ask the listing agent. Maybe they will come out and tell you in hopes of getting the deal done. But since most sellers are motivated by one or more of the same few factors, often it’s easier to indirectly inquire about those factors.
Not all sellers are created equal. By understanding what the seller wants more than anything, you can tailor your real estate offer to purchase so that it speaks to their personal needs.
Below are the most common seller motivators and how to work within them to appeal and persuade the seller to take your offer, rather than an all-cash buyer.
Some sellers want their property sold yesterday.
They might not come right out and say it to avoid looking desperate, but some sellers need to move quickly. It’s a source of anxiety for them. Perhaps a new job awaits them, and they must close quickly to relocate and buy a new home to avoid moving the family twice. Or, maybe they need the money quickly for another investment opportunity.
Or, most motivating of all, they’re in financial distress and need money now. Whether they’re in foreclosure, in tax sale, getting a divorce, or have some other lien hanging over them, some sellers will take the fastest closing they can get–even if it means a lower sales price.
You can find distressed sellers through services like Propstream or Foreclosure.com.
Related Read: Real Estate Stocks: What They Are and How To Invest In Them
Sellers may want to go with a more relatable buyer, but the assurance of working with a corporate investor is hard to pass up. That goes doubly when they make a real estate cash offer.
You may be offering more money and expedited settlement, and still the seller remains hesitant. At that point, it may be time to employ other tactics to increase your credibility.
Find out everything you can about the seller’s situation. They could want to sell the home but live in it for a while longer. They could be renting out the home and want to sell it, but allow their tenants to renew their lease agreement and stay.
Whatever the motivator is, identifying it and working with them can make all the difference.
Some people simply abhor the idea of selling to someone who is going to modify or use their home differently than they did. In some cases, they would even pass on increased selling price to do so. In short, sellers don’t always make their decisions rationally. It often comes down to a sense of personal connection and continuity.
Money is always a motivator in some form or another. Many buyers have seen their neighbors’ homes sell for big bucks, and they start seeing dollar signs. If money is a primary motivator for your seller, be prepared to offer more than a cash buyer to level the playing field.
Don’t be greedy with earnest money. Always be prepared to give what the seller is asking. Better yet, double the earnest money deposit – just make sure you include real estate offer contingencies to get it back should the deal collapse due to financing or an unforeseen major property issue.
If these tactics don’t work, what else can you try?
Think outside the box. If you have tried these methods and they haven’t worked, it could be time to switch things up. Maybe you have come close, maybe you haven’t, or maybe it doesn’t feel like you have made any progress. Real estate investing is a competitive field, and a numbers game requiring many offers before one goes through successfully.
To close the deal, it might be time to starting thinking outside of the box and consider the following:
One way to decrease competition is to find opportunities on your own. This is a tried and true method of established real estate investors. Consider these to get you going:
Wealthy, coastal cities tend to have a higher density of real estate investors than rural and smaller markets. Go where the competition isn’t.
It may take dozens or even hundreds of offers before one settles!
Sure, cash real estate offers are compelling. But that doesn’t mean you can’t compete with them and win, when you’re financing your purchase.
Learn as much information as you can about each seller, and what motivates them. Every seller is different, and while one may want nothing more than an immediate sale, another may prefer the flexibility of renting the property after selling, as they await their new home purchase.
Most of all, remember it’s a numbers game. Keep making offers, keep negotiating, and eventually, one of your deals will go through. Your success is inevitable–if you remain patient and disciplined.
September 13, 2021
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