Real Estate Tips & Resources
The Hidden Discount of an All-Cash Offer On a Home
Psst...we have a home buying secret that you’ll definitely want to hear. Did you know about the hidden discount for buyers who make an all-cash offer on a home? Whether it's a buyer’s or seller’s market, leveraging the power of cash isn't only about winning a bidding war, it can also mean big savings for the everyday homebuyer. So, what type of cash purchase savings can you expect? And how can you tap into the same benefits as a cash buyer? Here’s a closer look. Is there a discount for paying cash on a home? In today’s cutthroat real estate scene, all-cash offers can give prospective buyers a real edge to win a bid. But what many buyers don’t realize is that cash purchasers have more leverage in a negotiation, providing numerous money-saving opportunities as well. Whether it’s a reduced total sale price, a lower down payment, more immediate equity, or more seller concessions, the advantages built into a cash offer means more green for your balance sheet. We're talking about tens of thousands of dollars, if not more. How much can you save when buying a house with cash? The average home price in the U.S. is currently at an all-time high, reaching over $400,000 in 2021 according to Statista. In a desirable and high cost of living (HCOL) city, home prices can be much higher. Denver's median home price soared to a record $600,000 in the summer of 2021 – a 25% increase over the last year. It's unlikely that housing prices in popular and expensive cities will drop dramatically in the foreseeable future. And for buyers, that means even a small cash discount on a house is a huge win, putting free money, or more equity, back in your proverbial wallet. According to new findings published by researchers from the University of California-San Diego, cash buyers paid approximately 12% less than those who used traditional mortgage financing over the past 40 years. Think about it: what would you do if you had the opportunity to save $72,000? The ability to negotiate better terms is considered a "hidden" cash discount because sellers aren't advertising a separate list price for cash buyers. But cash sales are the most attractive. Attractive enough to translate into savings. What kinds of concessions can you ask for when paying cash? When your superior cash offer gives you leverage, you may choose to bid lower than the list price or a competing offer. Or you can ask for concessions. You can also use findings from the home inspection as a bargaining chip, for example. Seller concessions can include anything from a credit for closing costs to certain repairs on the home. For homebuyers, closing costs can cost anywhere between 2% and 5% of the home’s purchase price, or $5,000 to $12,500 on a house valued at $256,000. However, depending on the state, that percentage can be as low as sub-1% or as high as 4+%. After forking over a pretty hefty down payment for a home, these closing fees can be a burden for buyers. As a homebuyer, you can benefit from cash purchase savings by asking the seller to cover all, or a portion of, your closing costs. Having extra cash in your pocket? That’s a win in our book. In a similar vein, you can request a closing credit to cover big-ticket repairs that the seller doesn’t want to do themselves. For instance, maybe the chimney needs repairing or the driveway is riddled with cracks and needs to be refinished. If the seller agrees to provide a credit for these items, it won’t reduce the home’s purchase price, but it will lower your out-of-pocket costs. In reality, there are other factors sellers care about beyond just the purchase price, such as net proceeds. By asking for a credit towards closing costs, it’ll decrease the amount needed to complete the sale, speeding up the closing timeline – which is just one of the benefits, to a seller, of accepting a cash offer. Cash offers are a better deal for regular buyers, too! Ok, sure. You're convinced that making a cash offer translates to cost savings on a house. But is this another case of only the ultra-wealthy being able to take advantage of hidden savings loopholes? Not at all! Anyone who qualifies for a mortgage can make a cash offer with the help of iLending pioneer Accept.inc. The process of making a cash offer with a mortgage is simple with our process. Even if you don't have the funds on hand to buy a house in cash, once you're Cash Approved, Accept.inc will provide you with the upfront funds needed to make an all-cash offer. Then you'll pay back the loan over time like a traditional mortgage. What does that mean? It means you'll get the leverage of cash to negotiate a discount AND you have the liquidity that comes with using a low-interest loan rather than sinking all your cash into property. The icing on the cake: you’re 4X more likely to win your dream home with a cash offer and it doesn’t involve any funny business or hidden fees. So, the real question is, what will you do with your cash purchase savings? Enjoy all the benefits that come with making an all-cash home purchase by becoming Cash Approved today.
Kelly K. | Jan 7, 2022
Delayed Financing for Cash Offers: Pros and Cons
It’s no mystery that an all-cash offer on a house is a huge advantage. In a highly competitive seller's market, a cash offer on a property can be the difference between getting your dream home or not. And in a buyer's market, a cash offer gives you extra leverage to negotiate on price or seller concessions. But most prospective homeowners aren't sitting on a giant stack of cash. Even if buyers do have the cash available, it may not be the best financial choice to tie it all up in a home purchase. This is where delayed financing begins to look like an attractive option. Delayed financing is a term you’ve probably heard before. So, what is it? And who can do it? We’ll unpack everything for you. What is delayed financing? Delayed financing is a way of buying a home with cash upfront and then, right after the purchase is complete, doing a cash-out refinance. In this case, you buy the house free and clear, and then take a loan out against the home afterwards in order to get back liquidity rather than keeping your cash tied up in your house. Essentially, delayed financing is a delayed mortgage. Homebuyers and investors get the advantage of being a cash buyer, then get a mortgage shortly afterward to get cash back out of the property. This avoids tying up cash in a house that could be used more productively elsewhere. Delayed financing exceptions and requirements There are certain eligibility requirements for homebuyers to take into consideration before using delayed financing. With traditional home equity financing, there is a requirement for the new homebuyers to be on the property title for at least six months. Delayed financing is an exception. The delayed financing exception allows homebuyers who pay cash upfront to apply for cash-out refinancing immediately. There are different delayed financing exceptions depending on Fannie Mae and Freddie Mac loans. And these can affect your cash-out refinancing. Researching these in advance and knowing your lender is important. When you choose a mortgage lender, ask questions about their loan processing time, documentation requirements, and their standards for a delayed financing cash-out refi loan. Some of the other qualifications you have to meet for delayed financing include: The purchase of the property has to be an arms-length transaction. The buyer must use cash to buy the property.The buyer must provide the source of the funds.If the cash used to make the initial purchase came from a HELOC on a different home, the proceeds from the delayed finance mortgage must be used to pay off that HELOC.The new loan amount cannot exceed the purchase price. Lastly, for delayed mortgages, homes also have to stay within a local loan limit based on location. For example, for single-family homes in most counties in Colorado, the loan cap was raised to $647,200 for 2022. But in Denver, the limit is $684,250 for a single-family home in 2022. Loans above these limits are considered "jumbo loans" and may not be eligible for delayed financing, depending on your lender. The Pros and Cons of Delayed Financing To recap, a delayed financing strategy requires cash upfront and has lots of special requirements. So, why would buyers want to do it? For older homebuyers looking to downsize and who have cash available, delayed financing could be a great option. Buyers who are downsizing typically have cash available from selling their more expensive house. Taking advantage of delayed financing means this homebuyer can act more quickly when buying their new, cheaper home with cash on-hand, because all-cash offers close faster and are more attractive to sellers. Then, this buyer can turn around and do a cash-out refinance immediately, under the delayed financing exception, to regain liquidity and take their time repaying the new loan. Similarly, for property investors, delayed financing keeps assets more liquid to support their real estate investment strategy. These types of buyers are in a category all of their own, usually with large sums of money allocated for buying and then flipping or renting houses. These are not your average homebuyers. That said, there are some advantages and drawbacks to consider when deciding if delayed financing is an option for you. Pros of delayed financing Gives buyers a competitive edge when buying a house with cash.Allows buyers to bundle closing costs and financing costs into the cash-out refinance.Helps buyers regain cash immediately instead of waiting 6+ months to refinance. Delayed financing may be a smart and strategic financial move if you have the money available to buy a house outright. However, not all homebuyers are sitting on this much cash. In order to take advantage of delayed financing, cash on-hand is a fundamental requirement. And one that disqualifies a lot of buyers. Cons of delayed financing Requires cash upfront to purchase a home. Requires that all qualifications (listed above) are met. These can vary by lender.Limits which lenders buyers can use depending on cash-out refinancing availability. Has loan limits for refi that cannot be exceeded. Requires leaving some equity in the home to avoid PMI.Allows only certain types of conventional and some jumbo loans. FHA and VA loans are not eligible.Comes with the risk of not closing the refi quickly or locking in the best rates, should rates rise by the time of the refi closing. . Comes with higher interest rates than a traditional mortage. If you are able to make an all-cash offer on a home but want to stay liquid, then a cash-out refinance with delayed financing could work. But there are calculated risks that come with this strategy that the average homebuyer is probably not willing to take. How to make an all-cash offer without delayed financing Delayed financing isn't the right option for most homebuyers. Whether it's the risk, the higher loan rates, or the upfront cash requirements, this type of delayed mortgage strategy attracts a small subset of buyers. Let’s say you’ve done your research and delayed financing just isn’t going to work for you. There is another option available for making cash offers on homes! At Accept.inc, we are the mortgage lender of choice for everyday Colorado homebuyers who want to make a cash offer on their next home. If you qualify for a mortgage, you can get Cash ApprovedTM. Once approved, you can make your next house offer backed by Accept.inc's proof of funds -- in other words, you're a cash buyer. But unlike with delayed financing, you'll already have the details of your Accept.inc loan, including your competitive mortgage rate, with no hidden fees. Once the closing process is completed, you begin paying back the loan just like a traditional mortgage. Accept.inc levels the playing field for any qualified homebuyer to compete with other cash buyers. All without needing upfront funds or complicated financing tricks. Now that you know the pros and cons of delayed financing, we think you'll agree that the Accept.inc alternative is superior in every way. Get Cash Approved today and start making cash offers without any uncertainty.
Olivia G | Dec 30, 2021
Should You Use an Escalation Clause in Your Denver House Offer?
Imagine it: you find your dream house in Denver. It’s absolutely perfect for your family...and about a dozen other families, too. Let the bidding war begin! Buyers looking to get an edge in the Denver real estate market often add an escalation clause to their offers, stating how much higher they will go in response to competing bids. Should you? Learn how an escalation clause in real estate works and if it’s right for your situation. What is an escalation clause in real estate? An escalation clause in a real estate contract spells out that you’re willing to raise the offer price in response to a higher, competing offer the seller might receive. The clause sets a specific amount above the competing offer that you would be willing to pay, up to a maximum limit. Here’s an example of how it works: you find the perfect home and submit an offer of $300,000. With your offer, you submit an escalation clause, setting the maximum limit of $325,000 for your final offer. The terms of the clause state you will escalate your bid $1,000 over the next highest offer (meaning someone who bids higher than your $300,000 offer), until the maximum escalation limit of $325,000 is reached. So if someone else bids $310,000, your escalation kicks in and transforms your offer into a $311,000 bid, and so on, until you hit $325,000, at which point your escalation stops. The idea is that by using an escalation clause, you might prevent another buyer from outbidding you in a situation where you'd be willing to pay a little more than your initial offer. The escalation clause lets you "escalate" automatically. But, don’t jump the gun on submitting one. According to realtor.com, escalation clauses “should only be used when the buyer is fairly confident that there will be multiple offers, or when the buyer expects to pay an increased price.” Is an escalation clause a good or bad idea? Whether an escalation clause is a good idea or bad idea depends on the market. In Denver, with the combination of low inventory and low interest rates, competition in the real estate market has been more intense than ever. Using an escalation clause might give you an edge; or, it might just be table stakes. On the other hand, an escalation clause would be a bad idea if you can’t cover the difference between your pre-qualified loan amount and the escalation price. Going back to your perfect home scenario: if you qualify for a loan of $300,000 — based on your financials and the assessment of the property’s value — and you choose to bid higher than that, you will be responsible for coming up with the escalation difference out-of-pocket. Also, some sellers choose not to accept offers with an escalation clause because they want you to submit your highest offer up front. How do you write an escalation clause? The best thing to do is talk to your real estate agent about whether escalating would help your offer; and if so, under what terms. According to realtor.com, an escalation clause should focus on the following: What is the original offer of purchase price?How much will that price escalate above any other competitive bid?What is the maximum amount that the purchase price can reach in case of multiple offers? It’s also a good idea to make sure your escalation clause includes language requiring documentation from the seller proving there was a higher offer. Without it, you might end up paying more for no reason. Have you considered making a cash offer? An escalation clause may or may not be the most effective tool for securing your new Denver home, depending on your goals and situation — however, making a cash offer might give you the big advantage you need. Cash sales are on the rise, according to the National Association of Realtors, whose August 2021 survey showed that cash sales accounted for 23% of existing-home sales. In a multi-offer situation, it's not necessarily the highest bid that wins. A real estate cash offer can be more attractive to the seller, giving you more leverage to make a competitive offer, winning at a lower price or getting more concessions. With Accept.inc, you can get Cash Approved™, and gain the power to make real cash offers at no additional cost. Accept.inc offers beat an average of nine offers in multi-offer situations, and data shows that Accept.inc. buyers save on average $13,000 in multi-offer situations, when compared to the highest offer. Learn how to gain the competitive advantage of an all-cash offer with Accept.inc. today!
Stella W | Dec 21, 2021
Home Selling Resources
Should You Sell to a "We Buy Houses"-Type Buyer?
Have you driven by a "we buy houses" billboard or yard sign recently and wondered who is behind them? They’re often accompanied by the mention of “we pay cash now” and “for any condition home” and “call now!" They're catchy and get your attention. And are they a legitimate way to get cash for your house fast or are they a scam? The first thing to understand if you're looking to sell your home is that these "buy fast" offers are not the same as an all-cash offer that you may receive when you list your house. So, what’s the difference? The “we buy houses” companies are often run by investors and real estate moguls who want to flip houses. They have the leverage to pay in cash and turn their investments around quickly. Let's quickly walk through the difference between investors promising quick cash for ugly houses and an all-cash offer from a homebuyer. Understanding the “we buy houses” business model Also known as quick house sale companies, these buyers aren't buying houses to live in. So, are the “we buy houses fast” offers a scam? Not necessarily. But while a reputable quick house sale company may not be trying to scam you, they are certainly not going to offer you top dollar for your home. Sellers who call these companies usually receive an offer quickly, within 1-3 business days. While they do promise to pay cash, they pay below market value for homes. Their goal is to flip your home and sell it for profit. According to a CNBC report from December 2020, the gross profit for house flipping is over $73,000. This is money that could've ended up in the seller's pocket, instead. So, why would someone opt to sell to a company like this? It boils down to personal circumstances. But if you can avoid it, there are better options to sell your house for what it is worth. Understanding a “cash offer” from a homebuyer A cash offer for your house from a prospective homeowner is one of the most attractive offers you can get. Your agent will advise you that homeowners prefer all-cash offers because of the speed and certainty that the deal will close quickly. Accept.inc is an innovative lender making it possible for any buyer who qualifies for a mortgage to make a cash offer in Denver or Portland, Oregon -- an offer as good as cash, no strings attached, proof of funds in the bank. That means you're not just waiting around hoping your house attracts the attention of the small number of buyers who have enough liquid cash laying around to pay for a whole house out of pocket at current sky-high prices. Nor are you pressured to sell to a house flipper who will only offer a fraction of what you could get in a more competitive market. What does that mean for you, the seller? You can sell your house quickly, not subject to any financing or appraisal contingencies, at a sale price that makes everyone happy. Pros and cons of both types of buyers The real estate market in many cities across America was hot, hot, hot in 2021. Buying a house in a popular city, like Denver, Portland, D.C., Austin or Oakland, for example, required making an even more competitive offer than in previous years. In Colorado Springs, houses sold 2.8% above asking price in the month of June with an average sale price of $492k. Also according to the Denver Market Trends Report, the metro area housing market is similarly competitive with close-to-list prices, in the month of July, around 104%. For homeowners looking to sell, it continues to be a great time to be a seller. And as the seller, it’s important to have all the information you need to make a smart decision about what offers to entertain. Selling to the right buyer could easily equal many tens of thousands of extra dollars in your account at the end of the day. Plus, it can determine how smoothly the process goes from start to finish. So what's the catch? Let's compare. Quick house sale (“we buy houses”) companies: For people trying to sell their homes quickly due to a job change, a potential repossession, needing to sell an inherited home out of state, or other emergency life circumstances, quick house sale companies can seem attractive. Pros: No pressure to do repairs or make improvementsNo house staging, showings or real estate agent requiredFast sale and access to cash Cons: Selling house way below market valueHigh potential for getting scammed by a con artist preying on desperationHidden fees and contractual agreements Homebuyers with all-cash offers: Selling your house to a buyer who is actually interested in a primary residence is still the more traditional scenario -- but more often, these can also be cash buyers. Whether you're weighing your options in a multi-offer situation (also known as a bidding war) or you only have a single offer, here's what you want to know about an all-cash offer from a homebuyer. Pros: Fast closing time -- days, not weeksNo risk of buyer finances falling throughNo appraisal contingency Cons: None, really! As a seller, you can refuse or accept any offer. How to sell your house fast … the right way The key difference between (1) companies that promise to “Buy your house now!” in Denver and (2) homebuyers coming forward with cash offers boils down to who benefits from the transaction. With quick house sale companies, they’re the only ones benefiting. The seller is getting bottom dollar, and the company walks away with a massive profit margin. With all-cash offers from a homebuyer, everyone benefits. It's a win-win-win. The buyer gets all the advantage of having cash on-hand when entering the housing market to buy. And the seller is guaranteed a much-faster-than-typical closing process. And agents don't deal with the hassle of deals that don't close and houses that need to be relisted. Know the difference between “we buy houses for cash” and cash offers It’s important for Colorado sellers to know that who they’re selling to is legit. The differences between “we buy houses for cash” and a homebuyer with a cash-offer are significant. Learn more about the benefits of accepting an Accept.inc-backed offer.
Olivia G | Dec 17, 2021