"What’s a reasonable price to offer on a home?"

This will depend on each individual house.

Check out time on the market.

Are the sellers in a hurry?

There's a bit from the book "Never Split the Difference" that I want to reference. Chris Voss mentioned negotiating with hostage-takers in Haiti.

He knew that these people would release hostages for a lower price when you got closer to the weekend. These guys wanted money to party over the weekend. The closer it got to Friday, the more flexible they became.

The point I'm trying to make here is the seller might have his own deadline. "I have to sell the home by _ date"

Getting that information is key. You need a good agent who is willing to talk it out and extract that information, and use it like an assassin.

If the seller is in that position, it could make sense to offer something lower. Structure the contract so it closes quickly, and at a low purchase price.

Here's a real-example:

A home went back on the market. Something happened with the previous buyer's financing.

The seller was under contract to buy another property, and it needed to happen in 2 weeks, or things could fall apart.

We agreed, but for a price. $20k lower price and $13,000 in seller paid closing costs. It would net the seller $33k less than the offer they previously had.

People could complain that we took advantage. But first time buyers have a lot to be upset about too.

Deadlines and other circumstances can help you get a good deal. Getting a good agent is important here.

Each house and the reason for sale has a story. Find the story, and you may be able to find out the best price to offer.

Here's the opposite example

2020 isn't over in some areas.

Some areas are competitive BECAUSE they lack inventory.

Other areas are competitive AND they lack inventory. (double whammy)

Other areas may have price points that are more competitive than others. Example: starter homes might be gobbled up from a new wave of first time buyers.

In the case of high competition, it is not uncommon to see offer prices exceed the purchase price.

Before rushing to make that above-asking offer, check if you can make an appealing offer without dumping your savings.

How do I compete with cash buyers?

I have a feeling there are fewer cash buyers than there really are.

It's just a suspicion with no evidence.

I think bad agents are too afraid to call the other agent. They text, and email. If they don't get a response, and the home gets under contract, they chalk it up to "we lost to an investor, cash offer."

Okay so I looked it up, and cash sales are actually at close to 1/3 (33%)

I stand corrected. But I still think there are timid agents out there.

Anyway, here are some ideas on beating a cash offer, and it really depends on what you can extract from the seller's motivation:

• Offer cash with delayed financing
  • Delayed financing lets you buy the home in cash (which looks great to the seller), then get a mortgage right after closing to get most of the cash back. It’s not a cash-out refinance. Fannie Mae actually has a rule for this. As long as you can prove the funds were yours and you meet the loan to value requirements, you can get most of your cash back within a few weeks of closing. Not every lender does it though, so check ahead of time.
• Write an escalation clause ("I'll beat any offer by $__ up to $__ ")
• Remove contingencies (be careful)
  • Be careful removing things like the financing contingency. If you can't get the loan, you could get sued to fulfill the contract.
  • Appraisal waivers exist, even on financing. The lender may waive the appraisal, so check with your loan officer before submitting your offer (if you have time to check in)
• Shorten your deadlines
  • It's possible the seller wants it to be done quickly. A cash buyer may want more time to close. Check with your lender on how fast you can get it done.
• Give a generous leaseback agreement
  • If you and your agent find out that the seller needs flexibility with move out arrangements, then offer it (if you can afford to give flexibility). A leaseback agreement means that you'll allow them to stay in the home after the sale, for a certain amount of time at specific financial terms.
• Have your lender go the extra mile
  • I've covered this earlier, but if your lender can provide guarantees and also call to endorse you as a strong buyer, that will make your finance contingency seem like less of an issue.
  • Get pre-underwritten, not just pre-approved.
• Write a letter that might tug at the seller's heartstrings

I hope this helps!