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Is cash always king? The secrets to scoring a home in a hot housing market.
Agents are getting creative to get their buyers to closing day.
Last month, Kathy Bennett had up to 40 sets of buyers come through her open house for 23 Downing Road, a three-bed, two-bath ranch-style home in Peabody priced at $760,000.
Entirely redesigned, the home had amenities ranging from a state-of-the-art primary bathroom to a hot tub and bocce court in the backyard. With the average price of a home in Massachusetts sitting at almost a million dollars, Bennett, an agent with eXp Realty, knew the competition would be fierce. A few days prior, an agent had even called and asked whether the seller would cancel the open house if they came with an early offer. (Bennett politely said no, explaining that wasn’t in her seller’s interest.)
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After the open house, one potential buyer made an offer that included $500,000 cash. However, that buyer wasn’t the one who ultimately scored the property. Instead, the buyers whose offer was accepted already had gone through the underwriting process and had an escalation clause, which meant they would automatically top the highest bid. Also, they had significant flexibility on a moving time frame that could accommodate the seller’s schedule.
“It’s the terms of the contract that are just as important as the dollar amount,” Bennett said.
Sure, cash is king and always will be. But many aspiring homeowners can’t come up with enough cash to avoid mortgaging a property.
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“Not everyone has a million dollars in cash,” said Sarah Maguire, managing director of the Aranson Maguire Group at Compass. “Not everyone has rich parents that are lending up the cash.”
As a result, agents are getting creative to get their buyers to closing day. Amid a sea of cash offers, bids over the asking price, and lightning-fast responses, realtors are using every tool in their arsenal to help their clients cope in this seller’s market.
In suburban markets where the inventory is particularly thin, Maguire has several tactics she uses to help her buyers. She frequently works with lenders that have special programs — like Leader Bank’s Purchase Pass and Guaranteed Rate’s PowerBid Approval — that help strong buyers compete with those working with all cash.
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“They’re not giving you just a preapproval,” Maguire said. “They’re giving you a fully underwritten commitment that, in turn, allows the buyer to waive their financing contingency, which in turn, allows them to compete with all-cash offers.”
Maguire’s second tactic for competing in super-competitive markets is offering free lease-backs, which allow a seller to stay in their property for free for up to two months after closing. (Most loans require new buyers to move into the property within 60 days of closing.) This can be helpful for a variety of reasons, including when sellers need more time to find somewhere else to live or want to time their move perfectly based on their needs.
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“That way, those sellers have money in their pocket. You can put that money in the bank, and you can stay in your home,” she added.
Jason Niles uses a variety of tactics to help buyers in a seller’s market in which competitors are coming with cash. One is appraisal gap coverage, which puts a clause in the contract that explains the buyer is willing to pay the difference between the appraised value of the property and the purchase price.
“So if it appraises $10,000 under, you’ll make up the difference up to $10,000,” said Niles, a realtor with Coldwell Banker Realty-Cambridge. Another tool he uses is pre-home inspections, which allow prospective buyers to assess a property’s condition for any major issues before an offer has been accepted. While not typically as thorough as a full inspection, a pre-home inspection makes it clear to the seller that the buyers are seriously interested and potentially gives the chance to waive the home inspection with a clearer conscience. Of course, many potential buyers may get the same idea. Niles noted that he did one on a multifamily home in Dorchester that had multiple potential buyers with the same idea.
“There were like 30 groups of buyers with their home inspectors, including my clients,” Niles recalled, laughing. “We were all running through the place doing pre-home inspections.”
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If you’re not willing to waive the inspection, Niles said, another tactic is doing an inspection “for informational purposes only.” This takes place before your offer, or if you want to give it more power, after the purchase and sale. However, it is designed not to allow the buyer the right to demand the seller make any repairs before closing.
Another option is providing a larger down payment, which indicates a buyer’s interest in a property.
“It shows you really like the house and you’re a strong buyer,” said Niles, who joked that he probably has another 30 tactics tucked away in his journal. “It just works like a charm. If you do that, mixed with doing stuff with your home inspection, you’re really checking some boxes that make sellers comfortable.”
While competition is certainly fierce in this market, that doesn’t mean sellers should get too big for their britches. Bennett noted that she frequently sees properties come back on the market in Peabody because the financing wasn’t accepted or there were problems during the inspection. She points out that she recently saw price reductions on several pieces of new construction in Lynnfield, indicating that buyers didn’t think they were worth the hefty price tag.
“I always say this to sellers: Your house is worth what a buyer is willing to pay. The sellers and the agents do not pick the price — the market does,” Bennett said. “Your house is worth what a buyer is willing to pay for it. Write that down, because that is the key to selling a house.”
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Send comments to [email protected]. Follow Megan Johnson on X @megansarahj and Address @globehomes.
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