Competing With Cash Buyers in a Tight Housing Market

In areas dominated by cash buyers, homebuyers who plan to get a mortgage need to go the extra mile.

In areas dominated by cash buyers, homebuyers who plan to get a mortgage need to go the extra mile
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4. Send a love letter. Investors typically buy real estate to renovate and resell or rent out for income. But if the seller feels emotionally invested in the home, he or she may prefer the idea of another family making memories there. "If it's not a lender-owned property, we write a letter complimenting them and the property and I guide [buyers] through that process and the letter," Horan says. He might also enclose a cute family photo, and if possible, a photo taken in front of the property to tug at the seller's heartstrings.

[Read: Secrets of Successful House Flippers.]

5. Free up additional cash. A down payment of 20 percent or more allows buyers to avoid private mortgage insurance and qualify for a better interest rate. Freeing up even more cash could help seal the deal. Cheryl Farley, a San Jose-based financial adviser for Bank of the West, has worked with homebuyers who used an investment line of credit in lieu of a mortgage to secure a new home. "It gave them the temporary ability to use a cash bid and then turn around and put a delayed mortgage behind that," she says.

Farley points out that even buyers who can afford to pay cash may choose to get a mortgage so they qualify for the tax deduction and take advantage of low interest rates while investing their money elsewhere.