The other answers provide a good explanation. I have seen quite a few times where an all cash offer is accepted over any other type just because it is less trouble and faster. Again, it does depend on the lender.
Anything to do with REOs generally takes time, but if your offer is rejected you might have an opportunity to submit a counter offer. If you based your offer on market value? You may find properties that are "hot" and getting a lot of offers. If I was the selling bank, I would chose the offer with the most cash for me, that is, $274K less $5K - wouldn't you?
The seller/bank shouldn't know if you're using FHA or not. Cash offers aren't necessarily better as they may not be real. If you presented a strong mortgage loan pre-approval then you'll be given serious consideration.
I hope this helps, and good luck!
First, Congratulations..... you have made a wise decision in deciding to purchase at this time. This is a great time to buy!
The fact that you are submitting an FHA offer should not affect things if the property is in good shape. If the property is a fixer you may be in trouble. Remember, FHA wants properties in tip top shape for their clients. If the property needs a lot of work the FHA appraiser will require these items to be repaired. The banks know this and knows if they accept an FHA offer the approximate amount that will need to be spent to fix these repairs. So ultimately it comes down to the banks net after all expenses...Period.
Prudential 24 Hour Realty
Cash deal can close in 3 to 4 days with no title issues.
Conventional loan can take 30 days on average.
FHA loans can take 45 days on average.
In the end, the bank is looking at 250k, 273k, & 269k minus closing costs as nets. With a strong preapproval, the 285k offer with no other conditions will probably win out. Banks are fickle, so you never know!
Good Luck and don't give up if you don't get this property.
These are all a good answer in summary...the bank wants highest net for lowest risk. Period.
If the listing agent is representing you as well...they will likely support your offer strongly but they will have to provide for the bank the reasons your risk is best and if you are FHA risk is typically higher. However, control of the transaction is appealing to the bank as well. This listing agent would have data and control of the transaction on both sides and would know you aren't out shopping for other deals as well and that could be a plus too.
Keller Williams Arizona Realty
Having worked with many FHA buyers, here are some ways to make your offer stronger.
1. Make a 3% good faith deposit. You have to pay the 3.5% down payment anyway, so showing that you are serious by putting your money on the table up front goes a long way.
2. Get pre-approved by the seller's preferred lender (and use them if you can).
3. Shorten your inspection periods to 5 - 7 days. Make sure to line up your inspections when you submit the offer. You can always cancel or reschedule, but the seller likes to know early on if you are going to request repairs.
4. Do not request termite work. Make sure one of your inspections is a termite insepction (most termite companies do not charge for these). That way, if there is a ton of termite damage you know in advance and can either request it in repairs, walk away, or budget to do the work after closing.
5. Pay the extra $$ to expedite the FHA appraisal. This way you will have the FHA required repairs early and can negotiate on those immediately (within the first 5-10 days).
If you have a great realtor, they will be able to help you pull this off. Good luck and Dare to Dream.
Shel-lee Davis, CDPE
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
Good Luck! Lots of unknowns. For instance what are the credit scores and reserves of the two offers not paying cash. If their scores are very strong, the higher offer may win. Where are the comps priced? Would the highest offer appraise?
I think you are going to have to wait this one out.
Best of luck,
April Tavares, GRI
Realtor, DRE License #01742179
If I were the bank though, here is how I would rank potential offers
1. Cash offer - it's within 5% of the list price and not subject to any contingencies other than probably an inspection. This is a sure thing for the bank
2. Conventional financing - depends on the down payment and seller concessions. Large down payment with fewer concession means less hassle in getting financed
3. FHA financing - FHA loans take longer to process and the home needs to meet minimum property standards so sometimes FHA appraisals come back requiring repairs, which a bank is hesitant to do
As the saying goes, "Cash is king". Even if the other offers are higher, remember the home needs to appraise that high. And with appraisals these days a lot of appraisers are hesitant to bring in a higher value knowing that the home was listed at $256k. The price increase needs to be justified.
I sure hope you guys get the home, but if not keep your head up!