Cash Offers Rule in Frenzied Market

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Key Highlights

  • In April 2021, 25% of all home sales were all-cash deals, according to the National Association of REALTORS® (NAR)
  • One year ago, all-cash offers represented 15% of total home sales

All-Cash Deals More Attractive to Sellers than Financed Deals

In a real estate market with -21% fewer homes to sell than there were just one year ago, competition for those homes is stiff.

Such a low-inventory real estate market is defined by bidding wars. How can sellers decide which potential buyer will become “the” buyer?  Often, sellers choose the buyer who put in an all-cash offer for their homes.

Why?

All-cash offers appeal to sellers for two reasons:  there’s less chance of the deal falling apart and all-cash deals usually close faster than mortgage-contingent offers.

Arlene Gonnella, an agent with New Jersey’s Weichert Realtors, said, “It (all cash offer) makes a stronger offer in this market where sellers are faced with many competing offers. Sellers are able to know with certainty they have a done deal.”

All-Cash Offers Don’t Always Mean All-Cash Deals

Many all-cash offers do not translate into all-cash deals.  Some cash-offering buyers ultimately finance the home.

Even if buyers have all the cash, “Interest rates are fabulously low,” said a San Francisco Compass agent.  “Everyone would like a mortgage so they can keep their cash and do something more productive with it.  It’s just a mater of, ‘How do I win in this competition?’”

PropTech Firms Can Help

 HomeLight, a prop tech firm and lender, is a resource some buyers enlist to “help” them make all-cash offers.  HomeLight confirms that their clients can qualify for a loan, approves the buyer and underwrites the loan for an all-cash offer.  Its in-house valuation team evaluates the home and then makes an all-cash offer on behalf of the buyer.  If the offer is accepted, HomeLight buys the home, and then holds the home and title while the buyer obtains traditional and secure home financing.

Currently, HomeLight operates in Texas and California with plans to scale nationwide. The company charges a fee of 1% of the purchase price for its service.  If the buyer uses another lender to obtain that traditional financing, HomeLight charges a fee of 3% of the purchase price for its services.

Vanessa Famulener, vice president of HomeLife Cash Close,said, “You shouldn’t be penalized just because you don’t have a massive amount of liquidity.  We want the average person who is well-qualified to be able to compete with someone with very deep pockets.”

 

Thanks to CNN Business. National Association of REALTORS®, Compass, Weichert Realtors and HomeLight.

 

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