Gone are the days of wooing home shoppers with a vanilla diffuser during open house tours. Our low housing inventory has created a high-demand seller's market, in which cash is king and speed is queen.
According to data from the Realtors Association of Sarasota and Manatee, the number of cash sales of single-family homes more than doubled between April 2020 and April 2021—rising from 319 last year to 770 this year. More than 40 percent of single-family sales in April were cash transactions. At the same time, the median time between listing the home to having a sales contract has plummeted to just seven days.
What can the common home shopper do to compete with limited liability companies, developers and out-of-towners who don’t need financing?
Judie Berger, a realtor with Premier Sotheby's International Realty, has more than 20 years of experience in the area, and says that competing with cash buyers comes down to two main strategies: using an experienced real estate agent who cares, and getting to know sellers and their unique needs, with some creative strategizing in between. Here are some of her tips:
Write a letter
"For example, if the sellers are an older couple who would love to see children raised in their home, a letter that tells your story can be helpful,” she says.
Consider writing an escalation clause
An escalation clause is a real estate contract that lets a home buyer say, "I will pay X amount more than your highest offer, and I'm willing to go up to Y."
"The days of pondering are over. Write your strongest offer and don't even think about negotiating. Include a waiver of the inspection or commit to very short inspection periods," she says.
Make a sizable deposit if possible
"It used to be 5 percent, but lately, that's been exceeded. A strong candidate will put down 10 percent. As a buyer, you can break it down into separate payments, so you don't have to come up with it all at once. An experienced realtor will fill you in on that," she says.
Learn more about the seller
"Find out in advance when the seller needs to close. A good agent will talk to the seller's agent and tailor the offer to what the seller needs. Questions should include, 'Where are they going?' 'Are they downsizing?' 'How much time do they need?' 'Do they need to stay past closing?' Some sellers want to sell, but may need to live in their homes a little longer, for example. An option might be to let the seller stay there rent-free for a certain amount of time. If all the offers come in at the same time, this may put you ahead of the others and make it more attractive to the seller," she says.
Find the right realtor
Find an agent who is a listing agent in the area where you want to live in. They have the inside knowledge of what's coming up in the market, and what area homeowners are thinking. When shopping for a realtor, avoid relying solely on reviews. While those can help, how many homes a realtor has sold is a better indicator.
"This is probably the largest purchase of your lifetime. People do a lot of research on a car—they should do even more on their realtor," says Berger.