Strategies for Bidding Against a Cash Buyer for a Chicago Luxury Home

Even with the high-end price tags of luxury real estate in Chicago, it’s not uncommon at all to find buyers snapping up covetable properties with an all-cash purchase. And it’s not just about offering the highest price with cash in hand. Buyers who pay cash often have the upper hand in a multiple-bid situation, since the financing is guaranteed and the sale can close quickly.

So in a competitive market, what’s a non-cash buyer to do? As long as you have the financials to back it up, a jumbo loan is still a great option for luxury real estate buyers. Even when pitted against cash buyers, jumbo borrowers can still bring a strong offer to the table with the right negotiating strategy.

Here are a few steps for jumbo borrowers, as recently highlighted by the Wall St. Journal:

1. Go beyond the pre-approval letter. A pre-approval letter from a lender is a no-brainer when shopping for a home; it shows your able to secure the right amount of financing for the purchase. But they aren’t foolproof. Jumbo borrowers should take this one step further and get a pre-underwriting letter from a lender. This requires a deeper analysis of the borrower’s income, assets and tax returns and therefore holds more weight than a pre-approval alone. It can also help you close a loan in just 14 days, compared to twice as long for a pre-approval.

2. Waive the financing contingency in the purchase contract. This is what allows a buyer to walk away from the deal if their loan isn’t approved or if an appraisal comes back higher or lower than expected. This is attractive to sellers who don’t want to deal with a potentially shaky deal. And while they aren’t paying for the home in cash, jumbo borrowers may very well have enough cash to cover any appraisal/loan differences, so they wouldn’t need to back out of the deal.

3. Consider waiving the title or property inspection contingency. This is another part of the contract that lets the buyer walk away from the deal if anything comes up in the property inspection. But that’s not to say you shouldn’t do your due diligence before choosing this option. Buyers can conduct a title search, review a building’s financial history or other research to see if everything is in line. And many luxury buyers plan to make significant changes or upgrades to a home, so you may not even be too concerned with what is there to begin with and won’t require an inspection.

4. Look for cash. See if you can get temporary access to cash by liquidating assets or borrowing against them, then refinance after your home purchase is complete. Even a part-cash offer brings some weight to the negotiating table, even if you still plan to take out a mortgage for the long term. Though, don’t forget about your taxes—cash buyers who plan to refinance need to do so within 90 days of the home loan in order to deduct the mortgage interest on your income taxes.

5. Be flexible with the seller. Does the owner have certain move-out terms? Accommodating any special requests from the seller can make your offer even more attractive, so be sure to communicate any extra factors like this in your offer.

Above all, it’s important to work with an experienced real estate agent who has successfully won deals for borrowers in multiple-bid situations. Like I said before, it’s not always just about who is bringing the highest price, but who is bringing the right price on the right terms.

There are a number of nuances involved in this process that I would be happy to walk you through if you’re considering purchasing luxury real estate with a jumbo loan. Contact me at (312) 498-5080 or email me at ssalnick@dreamtown.com.

For a Smooth Chicago Real Estate Closing, Know the Details and Get Them in Writing

Making a real estate purchase is nothing if not exciting—the anticipation of the deal, the clock-watching as things move through escrow, and the promise of a fresh, new space at the end of it are all a part of the exhilaration.

That excitement makes it all too common for Chicago real estate buyers to get caught up in the process. Swirling in the thrill of making a purchase often means that buyers and sellers alike tend not to question some of the more mundane issues that can come up. They might think the “little things” will be easier to deal with once the deal is done, or not want to bring up any issues that could slow down the process.

But the closing process is certainly not too late for issues to arise, and believe it or not, some minutia can even kill a deal that is that far in. An article in The New York Times this week discussed the many ways a deal can unravel over seemingly small negotiations that weren’t in writing at the time the deal was made.

One of the main issues is who gets what. It’s very likely the seller has one expectation for which pieces of the home will come with them and that the buyer has another. Or maybe the buyer spots something they’d like the seller to throw into the deal to get to a certain price.

Here are a few things I’d urge all buyers to think about and settle in writing when a Chicago real estate deal:

Ceiling fans and light fixtures: What might seem like a standard overhead fan in a room could be something the seller special ordered or spent a decent amount of money on and therefore expect to take with them.

Hardwood floors: A seller isn’t going to take the wood planks with them of course, but buyers should take a look under floor coverings and area rugs to ensure the wood is in the condition they’d expect—that it’s not bleached or otherwise un-livable. If it is, you’ll want to work a fix or negotiation into the contract.

Kitchen and bath fixtures: It’s not entirely uncommon for a buyer to move in and find that the seller took everything AND the kitchen sink—literally. Especially if the fixtures in a home are high-end or special installations, it’s important to make sure the plan for those parts is outlined in the contract.

Fireplace accouterments: Some fireplaces are free-standing pieces that a seller could plan to take with them. Buyers have even been surprised to learn that the seller planned to haul off a stack of wood meant for the fireplace use. Again, no detail is too small to ensure everyone is on the same page.

Wine-racks: These can sometimes be an issue if it was custom-built or not part of the “permanent” space. Again, make sure you know what is and isn’t part of the home and what you expect to be there when a seller has moved out. If in doubt, ask.

Especially if the home is occupied upon making a deal, it is critical that the buyer and seller clearly identify what belongs to the owner versus the tenant. All “wants” and needs should be put in writing when the contract is written.

If there are changes or additions, they should be initialed by both the buyer and seller—all of them. So if the seller is a husband and wife or the buyers are two non-married individuals, get everyone’s John Hancock where it needs to be on that final contract.

Little details like these can easily blow up into a much bigger headache for both sides of a deal. To learn more about navigating the nuances of a Chicago real estate deal, contact me at (312) 498-5080 or email me at ssalnick@dreamtown.com.