Homebuyers

All-Cash Offers: How Homebuyers Can Stay Competitive with Investors

There goes the neighborhood. It’s a sentiment often shared by homeowners across the country as investors swoop in and buy up properties to flip, rent, or turn into trendy Airbnbs.

This presents a challenge for potential homebuyers hoping to purchase with a mortgage. Investors making all-cash offers are often more enticing for sellers, leaving families with financing in their dust.

It’s more common than you might think: Investors represented 25% of single-family home purchases in the U.S. in the third quarter of 2024, according to data from CoreLogic.

So, how can homebuyers compete? Making a cash offer themselves. But it’s easier said than done, especially for first-time homebuyers with fewer years of saving and investing. They also don’t have equity in a current home to leverage.

With that in mind, let's look at an alternative way to pay cash for a new home—and the advantages and pitfalls of doing so.

You can make an all-cash offer — with a mortgage

The median sale price for a home was nearly $350,000 as of the end of January 2025, according to Zillow data. The typical family likely doesn’t have that kind of cash lying around.

That doesn’t mean cash offers are off the table. Some lenders offer a unique concept: cash-backed mortgage programs.

Here’s how it works: You identify a home you want, and the lender buys it for you, with cash. Then the lender sells you the home at the same price, typically plus a service fee for using the company's cash. This gives you more time to get a traditional mortgage.

“Cash-backed mortgages are an absolutely game changer,” said Anthony Ramirez, a loan consultant with New American Funding based in San Diego. “It puts my clients on the top of the stack of offers.”

Cash makes you competitive with investors

Sellers like investors who pay in cash because closings are often faster. There is also the perception that the deal is less likely to fall through if the financing doesn’t work out.

But if you can also offer cash, you eliminate the investor’s advantage. In fact, some sellers may prefer to sell their home to a family who will live and make memories in it, rather than sell to an investor planning to turn it into a rental property.

“Sellers can feel a great attachment to their home,” said Hoboken, N.J.-based real estate agent Jonathan Ayala of Hudson Condos. “I have seen that sellers usually prefer a family eager to move in and make the house their own.” 

Paying with cash means fewer costs and faster closing

The same components of an all-cash offer that are attractive to sellers are also compelling to buyers. 

By paying with cash, you can save money on lender fees. Not to mention, you won’t have to deal with private mortgage insurance if you put down less than 20% of the sale price or pay hundreds of thousands of dollars in interest over the life of the mortgage. (However, you will be responsible for those costs if you submit a cash offer through a lender and then get a mortgage.)

Plus, if you need to move urgently—whether it’s to start a new job, move closer to a sick loved one, or vacate your current home by an impending date — an all-cash offer could be your ticket to a speedy closing.

Cash also gives you speed when making an offer. In a hot market where houses can be listed and sold on the same day, you can make an offer quickly, while other interested parties are busy obtaining pre-approval letters from their lender.

Cash gives you more negotiating power

Sellers may agree to a slightly lower sale price simply for the reliability of your offer and faster closing.

For instance, if a seller can close on a home in one to two weeks, rather than one to two months, they could save themselves a mortgage payment or two.

Use that in your negotiations to potentially shave some money off the price.

Beware of the risks of all-cash offers

All-cash offers increase your power as a seller, but there’s more risk involved, too.

If you forgo an appraisal, you might pay more than the home is worth. And skipping an inspection means you could miss critical issues, such as a leaky roof or termite damage. (If you do work with a lender to put in a cash offer and then get a mortgage, you will be required to get an appraisal.)

“It’s important to still make sure the move is sound,” said Ramirez. “Closing in less than a couple weeks can be a blur. Running fast is great, until you forget to tighten your shoelaces.”

There’s also a liquidity issue: To pay in cash, you might have to drain your savings or investments. This could be problematic the next time you have to cover a car repair or emergency vet bill. 

There are also other financial considerations.

“A buyer paying a massive sum of cash for a house may miss out on prospective financial benefits, such as mortgage interest deductions [on your taxes] or leveraging their cash in higher-return investments elsewhere,” said Ayala.

Notably, those who partner with a lender to make a cash offer don’t have to worry about liquidity issues or missing out on investment opportunities and will still be eligible for tax deductions.

Anthony Ramirez NMLS # 249819