Many of the phone calls I receive are inquiries about the homes I am selling. They are called sign calls. It is very important for me to identify the person on the other side of the call and to qualify them as best as I can. The very first question I ask them is, “Do you plan to pay with cash or financing?” This is a question that preps the buyer to think in terms of their means to purchase property.

Many people use financing to purchase homes in today’s market. People will save up a down payment sufficient for a loan and then will seek counsel from a Mortgage Loan Originator (MLO) to get qualified for one of the many programs available. Where money is tight, people may ask for gift funds from a close friend or relative. Gift funds must always accompany a gift letter, where it is made clear that the funds are a gift and not a loan. With these steps in play, a person may qualify for a home loan.

Cash buyers are less common, but they exist and we service them frequently. Paying for the entire purchase in cash makes sellers more confident that cash buyers can perform, often in a shorter period of time than financed buyers. But we have a saying in the business: that sellers should choose the “highest and best offer.”

What does Highest and Best mean? It means that not only price is important when selecting the best offer out of the lot, but also that terms are important as well. Terms include the offer’s attractiveness in timeframes, in performance of other duties of the buyer that basically give confidence to the seller that the buyer is giving the seller added value.

So here’s the million dollar question: how does a financed offer get chosen over a cash offer? The financed offer must be more attractive than the cash offer in terms of price and terms. Even if a cash offer can close quickly (because no loan and appraisal contingencies exist), if the financed offer provides a higher price and more favorable terms, the seller, being a rational consumer, will have absolutely no problem choosing a financed offer over a cash offer, even if the cash offer can close sooner. If a seller can wait 15 more days for $20,000 more, then, why not?

In summary, it is important that I qualify each and every phone I receive from marketing media and real estate signs, because buyers will have to think hard about their bargaining power and loan qualifications when making a purchase in real estate.