I had a buyer call me to check on status of an offer on one of my Short Sale listings and in the conversation the subject of all cash offers came up. The buyer who had made an offer was under the impression that an all cash offer would be looked upon by an investor/bank as the best offer.

The offer was under asking price, I informed the buyer that at the current pace of submitted offers he would be no where near the highest offer I had received. One of the biggest misconceptions of most cash buyers is that this gives them an advantage, the truth is that most investors have already taken huge losses on these homes and ultimately any investor is looking for highest net to mitigate their losses.

Some buyers even use cash offers as a tactic to get their foot in the door in a multiple offer situations. I have seen this bait and switch offer plenty of times with the intent of coming back to the negotiating table and asking the negotiator to accept a lower price or additional repairs on a home. Bank negotiators and asset mangers are under so much pressure to move the inventory that in some cases it works.

Banks are now doing everything they can to defend against these practices by setting very short time lines and having backup offers ready to go just in case.

As a listing agent I now use my own process to qualify cash buyers and their agents to make sure they are committed to the purchase and the time lines required to successfully complete the transaction.

So what do you do if you are a cash buyer?

1) Adjust your search criteria by looking for homes that are under your maximum purchase price. If $300,000 is your limit then look for homes under $250,000. This will give you buffer to allow you to be an aggressive negotiator.

2) Inventory is low, make your best offer the first time. Most bank negotiators and asset managers will pick from the first group of offers that come in. The likelihood of being able to come back to the negotiating table is very low.

3) AS/IS offers are always favorable and will be considered first. Understand that affordable homes in many cases are priced to move because they need to be updated or repaired. Negotiator are always looking at the bottom line for the investor.

Cash used to be king but it has lost it’s luster with the low levels of inventory and high volume of buyers competing for the few homes in this hot market.