Traditional Finance Buyer vs. Cash Buyer
In a previous post, we discussed the benefits to cash buyers. While they can offer several benefits, traditional, or what we call conventional buyers, can be just as beneficial.
Traditional, or conventional buyers, often follow processes that can mean less hiccups for you. They’ll do what the authorities, like banks or mortgage brokers tell them to do, verses trying to challenge you. They also typically have money saved for a down payment. While you may not get all your cash quickly, you may get more than you would if someone were negotiating a cash deal because they may have a higher preapproval than the cash buyer was able to come up with. A lot of times traditional buyers will base their offer off what they’re pre-approved for, not necessarily what you’re asking for.
They usually have better credit or more established credit than a cash buyer so there is the likelihood their approval will go through, and they’ll secure the funding. A cash buyer may not have good credit, which isn’t a problem if they’re paying cash but can be something that may cloud their decision-making process if they know they can’t secure funding traditionally in the future. They may get cold feet.
At the end of the day, a buyer is a buyer is a buyer. A cash buyer often buys a property as is, in its current condition without a lot of contingencies so that’s helpful. But it’s common that if someone is paying cash, they may also be getting a discount. A traditional buyer may offer a higher price because the bank may be willing to lend them a higher amount, especially if the property appraises higher than expected. If the bank will not lend at the higher amount, you may still be able to price the property at retail or top dollar and offer something creative like a lease option or rent to own so that you can create your own terms on the deal and maximize your profits.
For more information on lease options and other creative real estate strategies, visit our website to enroll in a course that will teach you the processes step by step.
Areas of Review
Big picture takeaway points
- The average traditional loan buyer follows processes and systems that the banks tell them to. Less of a challenge for you and most likely will have a down payment.
- Cash buyers, in most cases, will negotiate a larger discount on the property due to paying in full upfront.
- Another way to make a return on your investment is to list the property at retail or top dollar and offer something creative like a lease option or rent to own so that you can create your own terms on the deal and maximize your profits.
Self-reflection questions to think more about the content
- Am I available to buy properties cash? It is important to know different strategies in real estate so you can have options for more deals. What creative financing strategies do you know?
- What is my favorite way to invest or buy properties? The term “Cash is King” is very true in a lot of cases. However, knowing what you qualify for and having creative financing strategies in your toolbelt can make you a more successful investor.
- Have I spoken to a loan officer at my local bank?
Legacy’s Building Wealth Club offers you the financial education needed to pursue your goals. Let our education and experience lead the way!