When the market gets competitive, all-cash offers typically win out as inventory tightens and bidding wars commence. This leaves borrowers who choose to finance at an extreme disadvantage – until now. One unique tip from an article in The New York Times could be the key difference in locking in a home, but it's not for everyone.
While some homebuyers don’t have the resources to put in an all-cash offer, others are simply unwilling to deplete their savings, according to an article by Vivian Marino for The New York Times.
From the article:
Of course, not everyone has the means to make such a hefty purchase with cash, and even those who do may not want to deplete their savings and investment accounts for a single real estate deal. Nationwide, cash sales accounted for a little more than a third of all home sales at the start of this year, according to the research firm CoreLogic. But in Manhattan, that figure is higher, and rises with price: In the first half of 2016, more than 44% of all sales were cash only, and nearly 81% were for homes above $5 million, according to numbers compiled for Douglas Elliman Real Estate by the appraiser Jonathan J. Miller.
So what is the suggested solution? Delay financing. Buy the home using all cash in order to win the bid, and soon after refinance the home to get much of the cash back.
From the article:
There are different ways to use this strategy. For more modest purchases, there is a little-known Fannie Mae program that took effect five years ago. It allows certain buyers without mortgages to obtain a cash-out refinance soon after closing on a home — which means they can get much of their cash back almost immediately. (Before the delayed-financing program began, borrowers had to wait at least six months before tapping into home equity.)