How to make a cash offer on a house when you don’t have cash

June 2, 2022
Posted in Programs
June 2, 2022 derekevansteam

You may have read the title and thought, huh? How is it possible to make a cash offer without actually having the funds on hand to back it up? It would be nice, after all, considering that it seems the only offers that are getting accepted these days are people paying cash. First-time homebuyers and those who want to buy but aren’t able to walk away from their current home with enough equity have found themselves drowning in this market. This is why we’re sharing what you can do to come up with a cash offer ⁠— yes, without the actual cash!

First, what is a cash offer and why is it more competitive?

A cash offer is essentially what it sounds like: an offer to buy a home, in cash or with assets that can be liquidated into cash. This is as opposed to a financed offer, which is contingent on getting a loan to finance a portion of the offer. There are a few reasons why cash is more appealing to sellers, but ultimately what it comes down to is a faster close and lower risk. 

  • No financing issues. Loans are never guaranteed even with pre-approval, therefore an offer that is contingent on financing is going to be more of a risk. Financing issues account for around 21% of contract delays and around 7% of canceled contracts according to data by the National Association of Realtors
  • Cash can bypass appraisal problems. One of the main factors that go into a lender approving a loan or not is how much the home appraises for. An appraisal determines the home’s value, and if the value comes in as less than the asking price, the lender will not cover the difference. But if a buyer is paying all cash, they can choose to waive the appraisal, meaning there’s no risk to the seller in that area.

How you can get a cash offer minus the cash

Get an underwritten pre-approval.

Oftentimes lenders will give you pre-approval letters that haven’t gone through the underwriting process. This means they are drafting the letter based upon the information given and essentially things that have not been fact-checked. However, with an underwritten pre-approval, the lender gathers documents from you and sends everything to expert underwriters who meticulously analyze the facts and figures to come up with a much more accurate pre-approval amount. For example, our pre-approval letters always go through our in-house underwriting team to ensure that you are able to come to the negotiating table with complete confidence. The seller will be able to see that your pre-approval is backed by underwriting, and this will be much more appealing than a standard letter.

Use a cash guarantee program.

An offer that is contingent on financing carries more risks than a cash offer that could 

lead to the sale not closing — in other words, a seller’s worst nightmare. Sellers don’t want to go through the pain of relisting the home, missing out on other offers, delaying their move, etc. 

We noticed that due to the extremely competitive nature of the real estate market of the last couple years, buyers who needed financing simply could not compete with cash offers. Not only were homes going for tens of thousands over asking, there were also numerous cash offers that were simply much more appealing to sellers. Because of this, Fairway created the Cash Guarantee program as a means to allow buyers to come to the table with an offer just as good if not better than cash offers. A few highlights are:

  • Fairway will purchase the home or give the seller $10,000 if the buyer’s financing falls through.
  • Seller security guaranteed.
  • Close on time guaranteed.
  • Available in all 50 states. 

Want the power of a cash offer?

If you’d like to get an underwritten Fairway Advantage Pre-Approval or Fairway Cash Guarantee, or if you’d simply like more information, feel free to reach out to us. One of our experienced loan officers can walk you through everything and help you figure out what the best next steps are to get you your dream home!