Real Estate Tips & Resources
7 fees & closing costs associated with real estate cash offers
You’ve made an exciting decision: you’re ready to begin searching for the home you’ve always dreamed of – covered patio and all. Whether you’ve just started to explore different neighborhoods, or you’re in the initial stages of budgeting and planning, successfully navigating the homebuying process requires a solid understanding of the costs and expenses you’ll incur along the way. What to expect for closing costs, for example, is an important detail when figuring out how much you can afford to pay for a house. Closing costs are the fees and expenses you pay, outside of your down payment, to complete the sale of the house. According to data gathered by The Motley Fool, in 2020, the average closing costs for a house were $5,749. However, this number can vary greatly based on a home’s market value and geographic location. As a homebuyer, you can expect to pay 3%-6% of the home's purchase price on closing costs, but that number can be as low as sub-1% or as high as 4+%, depending on the state. What closing costs do you pay with cash offers? Increasingly, homebuyers in competitive markets are learning that "cash is king" -- that is to say, buying a house with a cash offer increases your chances of winning when there are multiple offers on a home. Sellers prefer an all-cash deal as it eliminates the uncertainty and slow process of transacting with a traditional mortgage lender. Seriously, high-fives all around! It’s a common assumption that in order to make an all-cash offer, you have to have hundreds of thousands of dollars already stashed away in your bank account, or a wealthy relative who does and is willing to front you the cash. However, there’s another option for buyers who aren't high rollers: making an all-cash offer facilitated by an iLender like Accept.inc. The same benefits of a cash offer without the need for upfront liquidity? That’s what we call a win. Do cash buyers pay closing costs? Yes, if you're making a cash offer on a house facilitated by a mortgage lender, you are still responsible for paying closing costs. In fact, all-cash offers are subject to many of the same closing costs any buyer pays when following the old-fashioned mortgage process. To delve deeper, here’s a look at the closing costs you'll pay with a cash offer on a house. Earnest money deposit (EMD) Earnest money, also known as a "good faith" deposit, refers to money paid to a seller, accompanied by your offer, to communicate to the sellers that you're serious about following through with the purchase. It's held in escrow until closing. How much you'll want to put down for your EMD depends on a couple of things. From market demand in the neighborhoods you are considering to the terms outlined in your purchase agreement, you can expect to pay a good faith deposit to be around 2%-5% of the purchase price. Your real estate agent will be a great resource to help you determine a specific earnest money amount that is appropriate for a competitive offer. The good news? This amount is not an additional fee but a deposit that is credited towards your down payment at closing. Title insurance & title search fees Title insurance is a one-time fee that serves as a form of protection against any unexpected title issues that may arise while you own the property. On average, title insurance costs about $1,000 per policy. In addition to procuring insurance, a majority of states require a title search to access public records and verify the seller is the home’s rightful legal owner. A title search, which can cost between $75 and $250 for a single-family home, will also reveal any undiscovered or undisclosed claims on the property, such as liens, wills, outstanding mortgages or deeds – all of which could affect the purchase process. Homebuyers who use Accept.inc's partner title company will not incur this additional expense -- we pay it for you. Escrow fees An escrow fee, or closing fee, is generally paid to the title company – an independent third party that handles title transfers, paperwork – like recording the deed – and the distribution of funds involved in the real estate transaction. Typically, the escrow fee is based on a percentage of the home’s purchase price (rather than a flat cost), but it’ll ultimately vary by company and locale. It can range, on average, anywhere from less than 1% to as high 2%. So, if you’re buying a $250,000 home, for instance, it could cost anywhere from $1,000 to $5,000. An escrow account, which operates similarly to a savings account, is used to collect and safeguard funds during closing, as well as throughout the lifespan of the loan. In addition to protecting your earnest money deposit, your lender may utilize an escrow account to fund your homeowner’s insurance and annual property taxes. Property taxes Property taxes may also be part of your closing costs, even when making a cash offer. Some states charge property taxes in advance – collecting either 6 months or an entire year’s worth of taxes upfront. Because property taxes are often prepaid by the seller, when ownership is transferred, the buyer will be responsible for reimbursing the seller for a prorated portion of the taxes. This number is calculated by dividing the total amount of property taxes paid by the seller by the number of days remaining in the year. Homeowners insurance Buyers are typically responsible for paying the entire annual premium for their homeowner’s insurance at closing. The cost of a homeowners policy varies greatly – using factors like coverage amounts, location, the value and size of your home and the deductible to calculate your premium. For instance, your new humble (or not so humble!) abode may be located in an area that requires your policy to include flood or earthquake coverage for added protection against these potential threats. HOA transfer If you’re purchasing a piece of property located in a community governed by a homeowners association (HOA), you may be responsible for covering a transfer fee. Separate from your yearly dues, the transfer fee exists to compensate the HOA board for recording and distributing the proper paperwork and documents. Private mortgage insurance (PMI) An Accept.inc all-cash offer is similar to a traditional mortgage when it comes to private mortgage insurance -- Since you are still receiving a mortgage at the end of the process, if your down payment is less than 20% of the home's purchase price, you'll still pay PMI. The cost, which ranges from 0.5% to 1% of the loan amount, is calculated annually and added to your monthly mortgage payments. Closing costs on cash offers typically include the buyer’s first month’s payment. How do you buy a house with cash without all the cash? All-cash offers provide a smoother, quicker real estate transaction – and they’re highly attractive for sellers, so cash offers are more likely to win a bidding war. But, let’s face it: most homebuyers don’t have access to the kind of liquidity or money required to fork over the price of the entire house up front. When you're competing with institutional buyers and those with deeper pockets, that feels unfair. That’s why Accept.inc is here to level the playing field. We believe anyone who qualifies for a mortgage deserves the speed, certainty and competitive advantage that comes with making a cash offer – but with the ability to pay back funds over time like a mortgage. We provide homebuyers just like you with competitive rates and no additional costs (or hidden fees). Ready to start making strong real estate offers that stand out from the pack? Get Cash Approved™ today!
Kelly K. | Jul 14, 2021
Rich relative no longer required: A big moment for Accept.inc.
Today is an exciting day for Accept.inc as we move closer to our mission of putting an all-cash offer on every home. I wanted to share a bit more about me and why we started Accept.inc. It all changed over a gin & tonic I grew up in a stable middle class family in Long Island, NY. My father was in the mortgage industry and real estate was a daily conversation. I was lucky enough to spend my summers in Fire Island, NY building Wagon Express, a hauling company that I started with my identical twin brother, Benjamin. It wasn’t fancy, but I got to work the docks with my best friend, delivering bags and beer for weekend travelers eager to enjoy a few days of paradise in their summer rentals. That said, having seen first-hand the impacts the real estate crisis had on my family, I swore I’d never go into real estate. Instead, I thought I would concentrate on getting into a good college and pursue a traditional, stable career path. Adam Pollack (left) and Benjamin Pollack (right) haul the cargo of a visitor on Fire Island. The Pollack brothers run perhaps the last schlepping business on the island and have abandoned their radio flyers for larger, plastic wagons. Phillip Montgomery for the Wall Street Journal. Around the end of high school, something shifted in me. I became more interested in public service and the pursuit of something more meaningful. That shift started with small decisions, like dropping the standard math and econ classes at Harvard and choosing to study Social Theory and Argentine Tango (I totally bombed the “lab portion” of this dance class). I met Nick Friedman, one of my co-founders, freshman year (he was dormmates with my twin brother), and it didn’t take long to realize that we both wanted similar things out of our careers and lives. We ended up spending a few summers developing venture ideas that we thought were brilliant, but in hindsight were complete duds. They are still on a whiteboard in the basement of my parents' house! For whatever reason, we kept at it and in 2016 became fixated on the idea that while technology had changed the way many things were bought and sold, including homes, few ventures had changed the way homes were transacted. We asked ourselves, “What is the best, smoothest transaction in real estate and how do we provide that experience to everyone?” You don’t need to be the son of a mortgage attorney to know that a cash offer that can close in 3 days is a whole lot better than waiting 1.5 months to know if a home sale is going to go through with a mortgage. The problem is, the majority of buyers don’t have hundreds of thousands of dollars sitting in their bank accounts to make a cash offer. So then came a big decision: I left school with Nick in mid-2016 to build the cash offer for everyone who can qualify for a home. Shortly thereafter, we joined forces with our technical co-founder, Ian. Now, all we had to do was prove our concept with our first transaction and raise money. You’ve heard of the overnight success story. This isn’t one of them. We had so many failures along the way to getting our first transaction done. We got ripped off. We got told “no” hundreds of times by investors and customers alike. Potential buyers, industry partners and investors laughed us out of the room. Some told us that what we were trying to accomplish was just too good to be true, or, there had to be some catch. In August 2018, we hit rock bottom. I had to tell Harvard whether or not I was coming back or deferring (again). We had just hit another obstacle and it seemed ludicrous to keep going. I remember calling Nick that afternoon, saying we should call it quits. Nick offered to buy me a gin and tonic, and we went to our favorite bar perched where the Denver skyline meets the Rocky Mountains... I was done. Beyond done. We had just 800 bucks left in our bank account from our pre-seed round, no viable way to run the business, and we hadn’t paid ourselves going on two years. Six hours and many drinks later, we mapped out our options and decided that we’d give the venture until the end of the year. We called everyone we knew, cold call after cold call, pitch after pitch. We had our first break in November when Y Combinator agreed to fly us out for a 10-minute interview. When the interview team asked us why the hell they should invest in us after two years of failing, I told them that we were an encyclopedia of a 1000 ways this venture wouldn’t work... and because of that we finally had the one that would. There’s a lot of trust that’s built between partners when your chips are down. That’s when you learn who you are and who you are with. And it makes the victories along the way all the more sweet, in our case getting into Y-Combinator 7 days before we had planned on killing the company. And yes, the business model Nick, Ian, and I pitched to YC is the very same Accept.inc uses today. YC DemoDay Pitch with Nick & Ian. Back then, Accept.inc was named Board after the company’s roots from our college dorms (i.e. room and board). The fundamental problem with a traditional mortgage transaction is that sellers and agents really have no way of knowing the creditworthiness of buyers who place bids on their home. That means sellers end up waiting 40+ days on a lender to know if the buyer is going to get a loan and the home sale is actually going to go through. Think of early Ebay (pre PayPal) when sellers wouldn’t even send a buyer’s item before they received a check by mail and knew it wouldn't bounce. Cash, on the other hand, is great for home sellers because they don’t need to wait anxiously for the buyer’s lender to OK the transaction; the transaction will fund the moment the buyer and seller want it to. The unfair advantages of being a cash buyer are hidden in plain sight: cash buyers are up to 4X more likely to win the bid than buyers who need a mortgage, get discounts off the home price, and can close faster. This unfair advantage bestowed on those buyers capable of paying all-cash began to exclude the everyday buyer from competing on desirable homes, which doesn’t seem right. Buying a home is one of the biggest transactions of anyone’s life. It’s a crucial part of creating good towns, communities, schools and a society where people can thrive. So, we created a new kind of lender that facilitates cash purchases on behalf of buyers that qualify for a mortgage. We invest in evaluating the buyer upfront -before they even identify a home- and approve them for our cash offer program. Once the buyer finds a home they love, we purchase the home all-cash at the price the buyer and their agent negotiate. We hold onto the home until their mortgage with us is ready to close and sell it to the buyer at the exact same price we bought it for. Sellers and agents can close in days instead of months, and any buyer who can qualify for a mortgage can put their best foot forward with an Accept.inc cash offer. Because we make money off the loan like ordinary banks and don’t commission our loan officers, we don’t need to charge buyers, sellers, or agents any additional cost to upgrade their offer to a cash offer. Nick (left) and me(right) celebrating the first ever Accept.inc (then Board) cash offer, which closed hours before YC demo day in March, 2019. Even as the company has grown and the roles have become more specialized, I still find myself asking about different individual buyers and their experiences with us. I guess you could say it’s my way of staying close to the product, but it’s more about reminding myself about the real-world impact Accept.inc has. One of my favorite success stories was from when we helped a teacher who had been struggling to win a home for 4+ years. The condo she wanted to purchase was popular with home flippers and the seller would only accept cash. She applied with Accept.inc (then called Board) and won – on her first offer! A lot has changed since we started out in 2016: we’ve transacted hundreds of millions of dollars' worth of homes, grown the team to over 90 amazing people, and helped thousands of buyers, sellers, and agents. But one thing will always endure: our commitment to ensuring everyone has an equal shot at homeownership. As we announce our $90 million that we raised over the past year to get us closer to this goal, to keep adding new markets and to hire more people, I want to say a big thank you to the buyers, sellers, agents, investors, and of course employees who have supported and believed in us. We still have so much to do, but we could not have gone this far without you. Oh and Nick, thanks for that gin and tonic 😉
Adam Pollack | Jun 24, 2021
How to Buy a Home - Step Six: Make an Offer
If you didn’t catch our last blog post on how to house hunt in a hot market, you can get caught up here. In today’s blog, we take a look at the sixth step to purchasing a home: how to make an offer on a home. The day has finally come: you’ve found a house that feels right and are ready to claim your stake and submit an offer. But where do you begin? And how can you compete when there are so many other buyers? The pandemic has created an insatiable demand for home ownership. With both interest rates and housing inventory hitting rock-bottom lows, the average price for a single-family home is now valued higher than ever before. House prices have skyrocketed over 15% across the nation in just the past year, creating the perfect storm for a multiple offer frenzy. Buyers are pulling out all the stops in 2021, letting sellers know why they should be named the chosen one. From cash offers to season Broncos tickets, no consideration is too creative or crazy in this hypercompetitive market and the highest price isn’t always the best offer. How do you know if you are prepared to submit an offer? Here’s a quick list of what you should complete prior to submitting an offer: Reviewed comparable sales so you are familiar with the local housing marketYou or your real estate agent have asked the right investigative questions to the seller’s agent to uncover the seller’s true motivation for sellingYou have done research on the listing and the seller; you know if other offers have been made and why they didn’t cross the finish lineYou are prepared to show them the money; you have a Cash Approval or mortgage pre-approval letter dated within last 30 days to submit as part of your offer packageYou have researched inspectors and have a short list you can call to do a an inspection that same week in case your offer is accepted Step into the Seller’s Shoes In a seller’s market, a winning offer is one that can get ahead of a seller’s hopes and fears. Your offer should demonstrate you are a serious and motivated buyer, whose deal is unlikely to fall through and will close smoothly and quickly. In a balanced market, finding out the owner's reasons for selling can be a tricky game of cat and mouse. One of the upsides of a seller’s market is that sellers have so many options that they will often cut to the chase upfront and tell you or your agent their bottom line. What are the weakest parts of an offer? They are the same things that keep a seller up at night after they signed the contract. Let’s take a look at how you can strengthen your offer so it is more appealing to a seller. Focus on the 3 big rocks of an offer: Money, Conditions and Timing Big Rock #1: Money Earnest Money Deposit (EMD) An earnest money deposit, often referred to as EMD, is the amount you pay after the seller accepts your offer. This is a “good faith” gesture demonstrating you are committed to the deal. This is your cash you are willing to put “on the line” and stand to lose if you back out without a reason that was outlined in the offer. Make sure your agent explains to you how and when your EMD will become non-refundable as different contingencies in the offer are satisfied such as inspection, appraisal and financing. Price Feeling overwhelmed about what price to offer? In a seller’s market this fierce, the rules on price and negotiation are exponentially different than in a buyer’s market. With sellers often receiving as many as forty offers the first day a home is listed, your realtor might advise you to submit your highest and best price from the start. This will send a clear message that you are serious, rather than attempting to low-ball the price. Pro-Tip: If the seller is asking a price that equates with a mortgage you were approved for, but the monthly payment tied to that mortgage amount starts making your stomach queasy, it’s probably a sign you need to offer less or look at other homes that are priced lower. Knowing and sticking to the monthly housing payment you originally planned for can reduce a lot of unnecessary stress and simplify the offer process. Big Rock #2 Conditions of the sale- Contingencies Contingencies are clauses that establish minimum terms and conditions that must be met for the sale to go through. Contingencies can give you a way to back out of the deal, and get your earnest money back, so it should come as no surprise that sellers prefer buyers with fewer contingencies. Here are the top 3 contingencies that give buyers an exit strategy: Inspection- A home can look great on the outside but reveal expensive and time- consuming work once a trained inspector gets inside to examine it. The inspection contingency gives you the right to conduct a professional home inspection with a licensed inspector. The inspector will evaluate and provide you with a report on the condition and safety of the home at that point in time, plus feedback on any suggested repairs that need to be made. If that report reveals serious issues, you can reconsider your offer or terminate. Pro-Tip: Limiting the period of time to submit inspection objections can show the seller you are serious about your offer and not playing games. Appraisal-If you’re getting a mortgage, your lender will not loan you more money than the home is worth. An appraisal provides you and your lender with the fair market value of a home before the mortgage closes. Lenders will refuse to provide a loan that is greater than the appraisal value, and if you do not have the cash to cover a possible gap between the appraisal value and your offer amount (or feel comfortable paying for the gap), this is another opportunity for you to renegotiate or back out. Financing- Also known as a mortgage contingency, this condition is essential if you are getting a traditional mortgage which is not backed by a Cash Approval. In a multiple offer situation, sellers will typically rule out a potential buyer with anything less than solid financing approval in place. The financing contingency says that if your loan does not receive full underwritten approval by the end of the transaction, you can back out of the deal without losing your deposit. Pro-Tip: Get Cash Approved™ and remove the financing and appraisal contingencies from your offer. Big Rock #3 Timing Your offer will have a proposed closing timeline, which includes the inspection period. Once a seller accepts an offer, that day of acceptance becomes the effective date of the contract and that’s when the transaction’s clock starts ticking. Wes Stewart, Broker Owner of Mile High Luxury, says one of the most effective strategies to make an offer attractive is to prioritize the seller’s timing. “Buyers should be thoughtful when proposing dates and deadlines, such as the projected closing date, title work or other due diligence,” says Stewart. “Sellers hate having staggered dates. A strong offer will align those dates-so multiple deadlines are completed and crossed off the same day. That’s going to be very appealing to the seller.” Keep a cool head, stick to your limits and trust your realtor’s counsel If a seller’s market is leaving you with limited choices, it can become easy to get caught up in the heat of the moment when you finally find a home you like. “The offer stage is not the appropriate time to become emotionally attached,” says Stewart. “If you love a house, you need to realize there are twenty other buyers out there who probably feel the same way and are also going to write an offer.” Crafting a winning offer is an art, and in today’s red-hot market, can feel like rocket science. But just like all the steps presented in this homebuyer’s blog, preparing beforehand is key to a smooth experience. If you have done your offer homework on the purchase agreement, the house and the seller, you will feel a lot more confident going into a bidding war. Stick to your limits while remaining open and optimistic. Remember: an offer is your one opportunity to start a direct conversation with the seller. Take a moment to reflect on what will make your offer the most compelling in this interaction.. And if you would like to learn more about how an Accept.inc Cash Offer can remove finance and appraisal contingencies to make your offer stand out from the pack, consider getting Cash-Approved today.
Jennifer Shapiro | Jun 9, 2021
The Ultimate Guide to Spring Organizing
You’ve purged out the clutter, so now what? In this blog, I’m going to take you through the process of transforming your piles into an organized system that will serve YOU! So put on your favorite music, throw your hair in a bun (or not), and get ready for my favorite form of self-care: organizing! Start Small As we discussed in the purging blog, motivation comes from small wins, so start small with a linen closet or even just one drawer so you don’t get overwhelmed. Take everything out of the space Yes, everything! Spread the items out on a counter or on the floor so you can see everything at once. Separate out items into categories While everything is out of the space, separate the items into categories. If the grouping is too large, create smaller categories within the larger category. Now that you can easily see everything you have – purge! If you haven’t done so already, now is the best time to purge any clutter from the space you’re working on. See the previous blog on purging for the complete process and tips. Clean the shelves and drawers in the space This is your chance while everything is out! If it’s dusty or there are a lot of crumbs and dirt, vacuum first and then wipe down with an all-purpose cleaner. Measure your shelves and drawers for bins and dividers Measure twice, buy once. This ensures that you aren’t making additional trips to the store unnecessarily! Measure the depth, width, and height of the shelves and drawers and be sure to take into consideration any hinges that may encroach on the cabinet space you have. Purchase bins and dividers if necessary You can use bins you already have, or start fresh if you want to have a uniform aesthetic. Many stores have organization products now, but The Container Store has the widest variety of options to fit any aesthetic, budget, and size. There are storage solutions for virtually anything now! To select the best product, consider the space that you have, where the items will be stored, what items will be stored, and how you want to access them. To reduce visual clutter, choose an opaque binIf you prefer to see what’s in the bins from a glance, choose a transparent binIf you want to easily access every bin, consider adding shelves so you’re not stacking bins, or choose stacking drawersWill it be stored in the garage or basement that could flood but it’s important paperwork or mementos? I recommend a weathertight tote with a seal to keep moisture out of the bins and away from your valuables! Place each category into its own bin, divider, drawer, or area Keep like items togetherBy utilizing bins and dividers to store your items, you keep each category from growing out of their ‘zone’ and becoming a massive pile again. It gives you a visual boundary of how much of that category you have the space for. If you have extra space and want to have room to grow for a certain category, go ahead and include extra empty bins in the space so the organizational system is prepared to accept the new items. Keep frequently used items easily accessible If possible, keep these items close to the area you use them in (i.e. spices and oils close to the stove).Store less frequently used items in harder-to-reach places. Label, label, label! This makes it easy for everyone using the space to know where items belong. Pro Tips: Vertical space is commonly overlooked for storage solutions, and vertical space is vital in small spaces: The back of doorsWall space behind a doorUnder the bedAdditional shelvesCabinet shelves and shoe shelves are great non-permanent solutions to add shelving to smaller spaces File fold clothes in drawers this allows you to see everything you have at once and avoids the mess that comes from grabbing whatever is on the bottom of the stack. Store food storage lids in a bin and nest the containers by shape and size If you love a clean aesthetic - decant anything and everything possible! The more you decant, the cleaner your space will look because you won’t have 100 different colors of (sometimes empty) cardboard boxes everywhere. Food Snack bars out of the box and into a binFlour, sugar, brown sugar, etc.Tea and Coffee Bath items Hair TiesBobby PinsCotton SwabsQ-tipFlossers Keep the minimal amount of items on countertops. Too many items on countertops, desktops, etc. instantly make it look more cluttered. If it doesn’t need to be out or isn’t used every day – put it away! Have a dedicated spot in your garage, mudroom, or a closet for a donation bin and a bin for borrowed items. This will keep these items in one location easy to find and keep them from taking over your house. Utilize the open space between the open studs in your garage Utilize the open space between the open studs in your garage to store items like skis, snowboards, camping chairs, fishing poles, etc. You can do this by screwing in cup hooks into the studs and hooking a bungee cord to the cup hooks, or screw in a 2x4 across the studs to contain the items. Create a system that will work for YOU! Every organizing system should be tailored to those using the space. There are organizing systems that work perfectly for some and how they think and work, but don’t work for you. Find what works best for you! # 1 Pro Tip to Staying Organized: Put items away as soon as you’re done using them! The quickest way to ruin a beautifully organized space is to simply not put things back where they belong. Conclusion: ‘A place for everything and everything in its place’ really is the organizer’s mantra to live by. When items have a home, they’re happy and so are you because you always know where to find them! Bonus: you now have the time you would’ve spent looking for something to spend on what you REALLY want to be doing! Happy organizing!
Elizabeth Calender | Apr 28, 2021