6 Ways to Help Home Buyers Compete With Investors

6 Ways to Help Home Buyers Compete With Investors

Cash buyers are a formidable force competing with your clients for homes on the market. Making up 26% of the marketplace, there’s a greater share of cash buyers—mostly investors and second-home purchasers—today than before the pandemic, according to data from the National Association of REALTORS®. Even so, many savvy investors are waiting out the inventory-starved market, potentially ready to come out in greater numbers once more housing options emerge. You can develop strategies to increase the chances that your client’s offer will stand out from the competition.


1. Advise Clients to Get a Mortgage Preapproval from a Local Lender

Many agents and their clients have had bad experiences with national and retail lenders, and oftentimes, large banks have a poor reputation. A preapproval letter from a local lender that sellers and listing agents likely know and trust may suggest your client’s readiness and ability to purchase. If your client has the funds for a 20% down payment, work that into the preapproval letter as well. (Just know that your client will have to prove they have the money.) Your client can always choose to put down less later when a sale contract is written.


2. Send an Agent Introduction Letter

While not as common—or contentious—as buyer “love letters,” an agent introduction letter can be just as impactful. This is where you highlight your own experience and your buyer’s intentions. Talk about what your client has done to prepare for becoming a homeowner and their motivation to buy. Also, discuss any experience you have relevant to the specific transaction and what you’re doing to ensure your client gets to the closing table.


3. Highlight the Downside of Selling to an Investor

Tell the seller why your buyer may be more reliable when it comes to closing than an investor. Having no emotional attachment to the purchase, investors are focused on the bottom line and will walk away for a better deal at any moment. They’re less committed to closing than your client, who has likely spent time bonding with the home. Investors also are less likely to work through transactional issues that may arise with sellers, such as surprises in the inspection report. Remind sellers who express sentimental value in their home that your client is likely to be a more thoughtful and caring owner than an investor who is managing a portfolio.


4. Narrow the Contract Terms

Bidding wars have returned to the market, so your buyer’s offer may be up against several other similar offers in terms of dollar amount. In this case, the seller may look at the terms of the offers, and the one with the fewest contingencies is likely to win. In particularly active markets, you might even encourage buyers to include incentives in their offer, such as increasing earnest money or offering to pay HOA transfer fees.


5. Offer a Leaseback Option

Moving is stressful, and leasebacks offer convenience to sellers who need a flexible timetable. Consider offering an inexpensive or free leaseback to stand out from competing buyers. 


6. Appeal to Seller's Emotions

Most sellers love their home and want someone else to love it, too. Home buyers have a distinct advantage over investors here. Buyer love letters aren’t guaranteed to work—and come with certain risks—but can communicate your client’s genuine intentions for the home. Many sellers are skeptical of investors and don’t like the idea of their home turning into a mere asset.


Source: 6 Ways to Help Home Buyers Compete With Investors REALTOR® Magazine (August 9, 2023) Eric Bramlett