All-Cash Offers Most Effective Strategy For Winning Bidding Wars

Homebuyers who offered all cash won more bidding wars in 2021, making it the most effective strategy to beat out other buyers, according to a new Redfin report.

Waiving the financing contingency and conducting a pre-inspection also increased potential buyers’ chances when facing off with other bidders, making them 31% and 25% more likely to win, respectively.

Escalation clauses and waiving inspection contingencies are frequently seen strategies, but because they’re so common they’re also ineffective. They also do not benefit one buyer over their competition.

Redfin also suggests offering more than asking price and waiving the appraisal contingency to set buyers apart from the crowd, as many can’t afford to pay all cash. Buyers planning to offer over asking may want to start looking at homes under their budget.

“I let buyers know what to expect and try to prepare them, financially and emotionally. The home they’re touring will probably sell for significantly over asking price,” said Amanda Peterson, a Fort Worth, TX agent. 

Cash offers are becoming more common as investors flood the housing market. All-cash sales made up 27% of transactions in January, compared to 19% in January 2021. Individual investors or second-home buyers, who make up many cash sales, bought 22% of homes sold.

Equity can ease the way for some buyers facing cash-heavy bidders. But first-time homebuyers who have less access to cash are at especially high risk of being squeezed out.

“Investors are coming in and pushing out the first-time buyers,” said Lawrence Yun, chief economist for the National Association of Realtors. 

“The investors picking up properties at the expense of first-time buyers means that there is less chance for realizing the American dream, particularly among moderate-income families.”

Companies such as Flyhomes offer all-cash services in lieu of mortgages.

 “In today’s ultra-competitive housing market, it has become increasingly important for us to level the playing field for the average consumer, especially as the presence of iBuyers and institutional investors grows,” Flyhomes co-founder and CEO Tushar Garg told Forbes.

The company increased its transaction volume by 240% since May 2020. Last year it raised $150 million in Series C funding, valuing it at more than $800 million.