What's the best way to make an offer on this house?
October 16, 2021 9:00 AM   Subscribe

I live in an expensive city and I'm trying to move to a much more affordable area where I can afford a (tiny) starter house for the first time. For reasons (I work in an uncertain industry, etc), I want to buy a house that's quite a bit less expensive than a lender says that I can afford.

I read that buyers often submit a preapproval letter tailored just to the specific amount they're offering, so that if there's any negotiation the seller doesn't assume that they can ask for a lot more. But what should happen if it's a cash offer?

I'm interested in a house that is cheap enough that I could pay in cash. My bank won't write a "proof of funds" letter and just provides an account summary that shows the total amount of money I have. Do you know of a bank that will write a letter simply saying that I have sufficient funds to make an offer of $x, rather than spelling out exactly how much money I've saved up?
posted by pinochiette to Home & Garden (12 answers total) 2 users marked this as a favorite
Without going to a different bank, maybe you could just transfer the appropriate amount to a separate account, and then offer that account's statement?
posted by jon1270 at 9:14 AM on October 16, 2021 [1 favorite]

Response by poster: Sorry, I guess I have a follow-up question- I had considered transferring the money, but then wasn't sure how much more should be in the account (it seems like maybe it shouldn't be the exact amount)?
posted by pinochiette at 9:16 AM on October 16, 2021

First, if you're asking these questions, you should have a realtor. They'll know exactly how to make this work for you.

Second, at least where I'm located (WA state, USA), there's a standard offer form that's filled out and once the seller accepts the offer and countersigns, you're under contract. There are a few triggers that let you walk away - the inspection, financing, and appraisal contingencies - but otherwise from that point you're committed to buying the home. The guarantee of that is your earnest money, which you submit to escrow within a few days of going under contract, and if you walk from the contract, you forfeit that money to the seller unless it's due to a contingency.

If I were in your shoes - and this is not legal or real estate advice, this is just what I would do - I would have a buyer's agent for sure. Beyond that, I'd probably make sure to offer a generous amount of earnest money to reassure the seller that my offer is sincere, and since I'd know I have the cash in the bank, I'd probably waive the financing contingency too.

But again, a professional knows how to win an offer. Use that.
posted by Special Agent Dale Cooper at 9:28 AM on October 16, 2021 [8 favorites]

Response by poster: Just to clarify, I have a buyer's agent and she hasn't been helpful on this point. She told me that I shouldn't reveal the amount in my bank account, but that's the only option my bank offers.
posted by pinochiette at 9:35 AM on October 16, 2021 [1 favorite]

+1 for what Special Agent Dale Cooper wrote. I would add that your agent can give whatever assurances the seller needs in terms of ability to close with cash. To me, and in every home I have purchased, the important part of the negotiations was not what the seller was doing with negotiations, but, rather, what I was. By that I mean, I knew what the absolute top I was willing to pay and I was willing to walk away if it was even $1 more. On one house, I gave them my best bid and told them it was a take it or leave it. They took it.
posted by AugustWest at 9:36 AM on October 16, 2021

Best answer: I ran into this when putting in some cash offers. I was planning on offering much under asking on one of the houses that was very overpriced. My financial advisor wanted to tailor the letter to what i would offer, but this was during COVID and they wouldn’t even let me tour the place without proving I could offer asking. It was fine. As my realtor explained, no one expects you to spend ALL your cash on your house. So even if your letter says you can afford the exact amount, everyone knows you have more money than that, and you really can still negotiate.

That being said, I wouldn’t want them to see my exact bank account, so I like the transferring idea. Just round up from the asking price (if its $285k maybe put $290 or $300 in) and you should be fine. They will know that’s not every single penny to your name either way.

I’d also consider getting a new bank - if not in time for this purchase than after. A bank should be able to write a letter like that for you, mine did.
posted by sillysally at 9:37 AM on October 16, 2021 [4 favorites]

Based on your update, perhaps you need a new agent or their manager can help.
posted by AugustWest at 9:37 AM on October 16, 2021 [1 favorite]

Also I’d like to add - the preapproval letters for mortgages are to give some peace of mind to the seller that the deal won’t fall through due to financing issues. If you are paying cash, you may not need this letter anyway, unless they request it, because your offer is basically a contract saying you can afford this with cash.
posted by sillysally at 9:39 AM on October 16, 2021

Based on your update, perhaps you need a new agent or their manager can help.

Agree! Your agent should help you work through other options if that’s what you want.
posted by sillysally at 9:40 AM on October 16, 2021

You absolutely need a buyer's agent who can walk you through this process. A few things to remember that might help you:

1) how much money you have vs how much you are willing to spend are very different and sellers will know this. In the market I'm in, "regular people with mortgages" are often competing with cash buyers who are very wealthy, and "regular people" often win. A home is worth what it's worth! And sellers sometimes don't want to sell to investors and instead want to pass homes on to people who will cherish them as they did.

2) In my state, there is, as someone mentioned up thread, a process by which you put in your offer, and you can put in additional contingencies and something called an escalation clause with a cap, in the event of a bidding war. So, say you offer 250,000, but there are other offers coming in or there are likely to be. You'd say "250k up to 265 in 5,000 increments". Then, either you win because your upper limit was higher than the others, or your limit gets hit and they ask you if you want to go higher.

If I were you I'd shop around for a better bank and a better buyer's agent. This process is so complicated that you want someone who is going to be available to you and answer all of your questions.
posted by pazazygeek at 10:09 AM on October 16, 2021 [1 favorite]

My realtor just put white out over the approved mortgage loan amount when they submitted it with our offers. In my state, the buy/sell is dependent on financing regardless and once they accent the offer they can’t ask for more, but it was a step that they just wanted to see we had something approved. If you feel you need, you can also speak with a real estate attorney in addition to having your realtor. They get paid a rate or fees, not commission from the sale. Or a new realtor but I don’t I don’t know if you have a contract with your current one.
posted by Crystalinne at 10:54 AM on October 16, 2021 [1 favorite]

I recently bought a house with cash and I agree that you need a better realtor, or for your current realtor to step their game up. It costs nothing to talk to a variety of agents so you might want to schedule a few phone appointments just to see who else is in the area. In all of our interviews, we explained our unusual financial situation and asked what the realtor would recommend to make us more attractive buyers. We then brought all of those suggestions to the realtor we eventually chose, and got her perspective on the options we had.

We ultimately included a letter with our offer that my family lawyer wrote. It stated his knowledge of our assets, and that they would cover the cost of the house, without getting into specifics. He was handling other legal business for us and didn’t charge for the letter, but he is an unusually nice guy. You will likely need a real estate lawyer anyways to complete your buy so you could probably get this letter bundled with general closing costs for not too much more.

We got our realtor to talk to the lawyer, and explain exactly what the letter should say to the sellers and their agent. Our agent led the charge on that whole process, I just put her and the lawyer in touch with each other. The fact that you are writing this question is an indication that your realtor isn’t doing their job. They should be talking to their realtor buddies to solve the problem, rather than you talking to other laypeople.
posted by Summers at 4:36 PM on October 16, 2021 [2 favorites]

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