Report: Cash offers more than triple chances of winning a bidding war

The saying holds that cash is king, and this certainly holds true in the housing market. According to a recent report by the real estate site Redfin, all-cash offers more than tripled a buyer's chances of winning a bidding war for a property.

Redfin collected data from 9,000 of its agents, who recalled the experiences of customers who faced competition on a home offer between January 2018 and September 2019. The analysis found that offers where a buyer did not need financing improved their likelihood of success by 206 percent – up from a similar study in 2017 where all-cash offers roughly doubled a buyer's chances of winning a bidding war.

"A couple of years ago, the market was much more competitive than it is now. Sellers might have had multiple all-cash bids to choose from, and offer price more often ended up being the determining factor," said Daryl Fairweather, chief economist at Redfin. "Now that bidding wars are less common, an all-cash offer is often enough to make an offer the winning bid. Sometimes, financed offers fall through because the lender decides the buyer can't afford the purchase or the buyer is too risky a customer. Especially in a less competitive market, sellers value an offer they know isn't dependent on financing."

Only 13 percent of Redfin offers in the study period faced competition, while 55 percent had multiple offers in the 2017 report. According to a separate update from Redfin, bidding wars hit their lowest point in a decade in October with just one in 10 offers written by Redfin agents encountering competition.

All-cash offers continued to be a much stronger incentive than other strategies. Writing a letter to a seller improved a buyer's chances of winning a bidding war by 59 percent, up from 52 percent in 2017. While waiving a contingency was found to boost an offer's competitive edge by 58 percent in 2017, it only improved its chances by 20 percent in the most recent report.

Redfin also noted how it has become popular in competitive markets for sellers to complete a pre-inspection in hopes that buyers will waive a home inspection. Buyers in these markets are also more willing to waive an inspection contingency if they believe other buyers will do the same. The company said that since these tactics have become more commonplace, they did not significantly increase a buyer's chances in a bidding war.


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