Cash Offer: How to rule when cash is king.
If you’re a buyer in today’s real estate market, you know without a doubt that you are one of many horses in a highly competitive race. The current climate in real estate today is decidedly in the Seller’s corner. Those looking to purchase a home find themselves in a chokingly aggressive situation and quite often, left in the dust. A hot market is either in favor of the Buyer or Seller. But regardless of who is wearing the crown, the one thing that makes moves on the board is good ol’ green. We’re talking money, baby…specifically, a cash offer.
Buyer vs Seller’s Market:
Before we dive into the nuances, what constitutes a Seller’s market vs a Buyer’s market anyway? The answer to this lives on the scale between Supply (available houses) and Demand (available buyers). When one of these buckets is more weighted than the other, the whole balance upends. Currently the desire for purchase exceeds the inventory of homes available. So those with the keys to the castle hold most of the power.
According to a report by Realtor.com, the national inventory of active listings declined by almost 30% over last year. Newly listed properties in large metros are down almost 12% as well. Compounding these dismal numbers is that these statistics are stacked on anemic inventory counts from the previous year.
So as the flurry of purchasers bear down on the few-and-far-between available properties, those with fistfuls of cash are dominating the race. According to an article in Bloomberg.com, 30% of the U.S. home purchases in the first four months of this year were all cash. This bloated percentage is already higher than it was last year. And the spike doesn’t look like it’s retreating any time soon.
What does this cash offer statistic mean to you?
Well, it means that – if you are a Buyer – that number is telling you that more and more Seller’s heads (and signatures) are being swayed by the almighty dollar.
But how do you compete in market like this if your pockets aren’t lined with gold and you are unable to make a cash offer? The answer could be more simple than you think. It comes in the form of a drawbridge that will help turn the borrower into the Queen or King of the Castle. These companies can assist in putting those without the immediate cash-in-hand into a cash offer situation.
Not all of these bridges are created equal so let us introduce you to a few of our favorites that have gotten others over the line:
Cash Offer: Assistance Resources
Home Partners of America:
Home Partners of America operates from a commitment “to making homeownership a reality for more people.” They specialize in a program that focuses on leasing with the right to purchase. Their niche takes HPOA pre-approved borrowers and places them in an advantageous position for a cash purchase. How it works is:
- HPOA approved buyers can search for houses within neighborhoods that have been sourced and approved by Home Partners of America. They make it even easier for their borrowers by including their communities on their website to maximize the guest’s valuable time.
- Home Partners of America act as the buyer in the transaction. They produce the cash offer, which we’ve already established is the thing that is turning Seller’s heads these days.
- Once HPOA and the Seller are under contract the borrower will sign a lease and right to purchase agreement.
- Upon sale closure, Home Partners of America leases the home back to the perspective buyer. These leases can range but rule of thumb is that they will typically be one-year and renew annually.
- The mutual goal remains making the borrower the owner of the home so there is a maximum of five years on the lease. Once the borrower is approved for a mortgage loan, they can then purchase the home back from HPOA on an agreed upon price.
- In the rare occasion that the borrower no longer wants to purchase their chosen home, one would think that they are stuck. But that’s the good news – they are under no obligation to purchase the home at the end. The only considerations will be their lease agreement, but they do not have to purchase the home if they don’t want to.
- Much like HPOA, Ribbon turns the borrower into the cash buyer, making it easier for the borrower to buy the home of their dreams.
- Similarly, the buyers must be preapproved by a lender.
- Once approved, Ribbon will act as the buyer and go to contract on the home.
- On closing day, the borrower will pay 2-2.5% of the purchase price if Ribbon closes on the home.
- Once the sale is closed, the borrower rents back the house from Ribbon for up to 180-days or until their loan closes for the purchase of their home.
- Ribbon will sell the home back to the borrower at the original purchase price
- Dream America is another lease-to-purchase company.
- Borrowers will need to meet some minimum requirements and are required to be pre-approved.
- Once approved, borrowers can search for any home of their dreams up to $400,000.00.
- Dream America will purchase the home and once closed, will lease the property back to the borrower for 12-months.
- Their team focuses on steps to help borrowers to become mortgage-ready within that timeframe.
- Borrowers will have the opportunity to purchase their home at any time, at the preset price. There is no minimum rental period and borrowers can renew the lease as needed
When cash rules in a highly competitive market, the above companies all understand the value of cold, hard coin. With more and more Sellers leaning into cash offer transactions, the average purchaser needs a leg up. To become a force in a competitive market, having access to these drawbridges can be the access to your throne.
To learn more about how we work in tandem with these teams to ensure that every person’s home buying dream becomes a reality, contact us now. We’re at your service!