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How to Compete in the Lake Home Market Without Cash

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Negotiating real estateA lake home can be a great investment, whether you’re looking for a vacation property for your family to enjoy or a primary residence. Finding the right lake home can be difficult as there are a lot of different factors to consider, including proximity to the lake, proximity to town, homeowners insurance requirements and much more. This means that there’s no better feeling than finding that perfect lake home. However, you may run into problems if you are bidding for the lake home against another home buyer – especially if that home buyer is offering to pay in cash.

The following are a few tips that you should use in order to compete for your dream lake home against someone willing to pay in cash:

  • Get a pre-approval – You should really get pre-approved for a mortgage before you even begin looking for lake homes – this way you know exactly how much you can spend and won’t waste your time looking at lake homes that you won’t be able to afford. There’s nothing more frustrating than finding your dream lake home and then realizing after the fact that you won’t qualify for the price of that home. Having a pre-approval on hand will also show the lake home owner that you will be able to pay for the lake home. A lake home owner that is faced with two bidders, one with cash in hand and the other with nothing, is going to choose the bidder that can prove that he or she can pay for it.
  • Have proof of funds – In addition to having your mortgage pre-approval for the lake home owner to see, you should also provide proof of funds that shows that you can afford the down payment and the monthly mortgage payments. While a cash payment might still look a little more attractive to the owner, showing the owner that you have the means to pay for your pre-approved mortgage is a good start.
  • Personalize your bid – Provide some information about yourself and why you want the lake home. You can swing the seller’s emotions into your direction by telling him or her a little about yourself. For example, explain why you want the lake home – maybe it reminds you of a vacation home you used to visit when you were a child, and you want your own children to have a similar experience. This could help make the seller favor you, especially if they have no idea who the other bidder is, or if the bidder is simply someone that’s buying up property in order to flip it at a later date. There’s nothing wrong with tugging on the seller’s heartstrings, especially since it’s not like you’re trying to get him or her to come down on the price.
  • Offer more – If the lake home truly is the perfect lake home in your eyes, then maybe you would be willing to offer a little bit more for the home than what the seller is asking for (as long as your pre-approved mortgage will cover it). Most buyers who are looking to buy property in cash aren’t willing to go higher than the asking price, which means you’ll have a better chance of outbidding them. You can even have an escalation clause added to your bid. This basically gives authorization to your real estate agent to offer a specific amount above the best offer that the lake home seller receives. This is an excellent way to get a foot up on any potential bidding war and shows the seller that you are serious about the lake home. If you decide on an escalation clause, just realize that you may end up overpaying for the lake house.
  • Waive the home inspection contingency – If you’re very serious about the lake home you are looking at, have a home inspection before you make an offer. If everything looks okay, offer to waive the home inspection contingency, which would favor the seller.
  • Waive the appraisal contingency – If you can afford to cover the gap between a low appraisal of the lake home and the offer you have made, offer to waive the appraisal contingency.

If you find the lake home of your dreams but are competing against someone willing to pay in cash, don’t give up just quite yet. Keep in mind that at the end of the day, the seller of the lake house usually only cares about how much money he or she will get, not whether it’s in cash or if it’s financed. While straight up cash will always be slightly more attractive, you can still win over the seller by using these tips.

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