What is an iLender?
Technology has revolutionized our world — making our lives easier and, dare we say, more fun. Modern technology has shaped the way we interact, do business and navigate life, including how we approach the buying and selling process in real estate. And now there’s a new player in town that’s making waves in the mortgage lending space – the iLender. What is an iLender? An iLender is a technology-enabled lender that empowers buyers who qualify for a mortgage to submit all-cash offers on a home. The business category of iLender — the "i" stands for "instant" — was originally established in 2016 by Accept.inc and iLending is now a quickly growing category in real estate financing. The term “Power Buyers” has also been used in conjunction with “iLender” to describe this new segment of real estate technology companies. The rapid rise of Power Buyers can be attributed to the low supply and high demand for housing – creating the need for products and services that’ll help potential home buyers stand out from the crowd. How does the iLender process work? iLenders like Accept.inc perform the underwriting process upfront, fully approving potential buyers for a loan before they ever submit an offer. This stands in contrast to the traditional mortgage offer, where the buyer isn’t fully underwritten until after a home is under contract. After undergoing an iLender underwriting process, buyers can shop the housing market with confidence, speed and the power of cash in their back pocket. Once they’ve found that perfect home, the buyer’s agent will submit an all-cash offer with proof of funds. The iLender then purchases the home in cash on behalf of the buyer. Once Accept.inc acquires the home, we immediately sell the property back to the buyer at the same exact price under a mortgage, allowing the buyer to pay back the money over time just as they would with a traditional mortgage. Note that unlike Accept.inc, some iLenders charge for their cash offer service in the form of a flat rate or percentage of the home purchase. In the iLender model, the buyer purchases the home and secures the loan through an iLender, but the buyer remains in full control over the offer to the seller. This provides potential buyers with the advantage of making an all-cash offer, while still receiving a traditional mortgage at the end of the process. iLenders make offers on homes more competitive, particularly in multi-offer situations, by providing buyers and their agents with more negotiation power. In both buyer's and seller's markets, the power of a cash offer isn't just about winning a bidding war — cash buyers can negotiate cash savings! How does paying 12% less sound? That's the hidden discount of an all-cash offer compared to bids relying on traditional mortgage financing. From a seller’s perspective, cash offers backed by an iLender are highly attractive because they remove pesky financing and appraisal contingencies and offer a speedier close. Instead of the average 47 days to close through a traditional mortgage lender, Accept.inc offers typically close within 14 days. iLender vs iBuyer: what’s the difference? If you've been following the real estate market for the past few years, you may have heard the term "iBuyer" and read how iBuyers are driving up housing costs. So, what's the difference between iBuyers and iLenders? iBuyers are akin to institutional house flippers. They use a system of algorithms to determine a home’s value and use cash to purchase the house directly from the owner. According to The New York Times, “On average, iBuyers offer 0.22 percent less than fair-market value for a home and charge the seller slightly higher fees, about 1.3 percent more than a conventional listing agent would. The trade-off is a faster transaction — the process takes days rather than weeks, as there are no extended escrow periods — and fewer of the hurdles that give sellers headaches, like open houses and multiple showings with strangers.” Once a piece of property is purchased by an iBuyer, it’s turned around and listed for sale for immediate profit (in theory). The challenge for home buyers is that they have to compete with these institutional investors when they are making offers in an already tight market. In contrast, iLenders give buyers the opportunity to make all-cash offers — but with the flexibility of a mortgage. In other words, buyers can now compete on a more level playing field with other cash buyers — and also reap the benefits of speed, certainty, and convenience of an all-cash offer — while still having the ability to spread the cost of the home into affordable monthly payments over a 15 or 30-year term. iLenders level the playing field Let’s be realistic, the average homebuyer doesn’t have the liquidity to simply pay outright for a home using cash. And, even if you do have that type of cash on hand, obtaining financing is still the more strategic option when interest rates are favorable. From building home equity and the tax-related benefits of a mortgage to freeing up dollars to invest in other areas, partnering with an iLender lets you enjoy the benefits of a cash offer and the advantages of having a mortgage (otherwise known as having your cake and eating it too). That’s why we created Accept.inc: to level the playing field. We believe anyone who qualifies for a mortgage deserves the speed and competitive advantage that cash buyers are enjoying. Sarah Frohnapfel, a Denver real estate broker on the Abell to Sell team at Compass Real Estate, has this to say about using Accept.inc instead of a traditional lender: "It's our obligation as real estate professionals to provide all of the resources and options that are available to our clients. Being able to make a cash offer in this market will likely set your offer apart from others. Sellers in some areas of Denver Metro are receiving more than 10 qualified offers, and submitting a cash offer is a major advantage during a competitive buying process. Having closed over a dozen deals with Accept, I know what to expect and can honestly say to my clients that we will find their home faster in this market by using their services. Former clients have also found the ability to close much sooner a true benefit of using Accept. It's fast and furious but with the right team in place the buying process can move very smoothly and much more quickly. “Not only are cash offers through iLenders 4X more likely to win over traditional mortgages, and to do so at a lower offer price, but Accept.inc provides homebuyers with competitive rates with no additional costs or hidden fees. That sounds like a win-win to us. Ready to take the next step in your home buying journey? Learn more about all the advantages of buying a house with cash. And once you’re ready to begin shopping the market with the power of cash, apply to become Cash Approved™ today!
Kelly K. | Apr 6, 2022
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
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
How to Win a Real Estate Bidding War
You found it! The listing for your dream home. After months of searching, finally, here it is. The house has the perfect number of bedrooms, the right number of bathrooms, an enormous walk-in closet and so much storage space you’ll have to buy more stuff to fill it all. The backyard is to die for, and it’s also near a dog park. Restaurants and shops are nearby and the neighborhood elementary school is the best in the county. Best of all, you can actually swing the asking price. Score! There’s just one problem. If the home is in Denver, you will almost definitely have competition. To get their hands on the home they want, Denver homebuyers have been going toe-to-toe in heated bidding wars for the past year. According to one real estate agent's research in the spring of 2021, the majority of houses were expected to sell above list price. Sometimes far above. A bidding war happens when a seller gets multiple offers on a house or condo, and potential buyers must compete by submitting new offers to the seller. Learn more about what causes bidding wars, and the strategies you can use to win one. How to Spot A Real Estate Bidding War Low inventory and low interest rates have sent homebuyers on the prowl all over Denver. Even though the Denver real estate market has cooled down a little in the past few months, "cool" is all relative. Most sellers can still expect more than one offer on their house or condo. Denver home prices are still at record highs. The median selling price for a home in the Denver metro area was $545,000 in June, according to the Denver Metro Association of Realtors. Those prices are up six figures from early 2020. That means if anything comes on the market that seems even remotely affordable, expect a bidding war. If the house needs only a few repairs and improvements—expect a bidding war. If it’s near restaurants, coffee shops, bars and nightlife—expect a bidding war. A desirable property with a great location, nearby amenities, good schools, parks and rec, will tempt more buyers to compete, even going beyond the seller’s asking price. A bidding war can raise the price tag anywhere from a few thousand to more than $100,000 over listing price. How Does A Bidding War Work? So what happens in a bidding war? Once the seller gets all of the bids, if there are multiple offers to choose from, the seller can choose one or allow prospective buyers to submit new bids. The seller might be looking for the highest possible bid, or other terms like an earlier closing date, waived contingencies, or a more convenient financing option, like an all-cash offer—or all of the above. Many first-time buyers are surprised to learn that the highest offer isn't necessarily the automatic winner. The best thing to do before getting carried away by a bidding war is to work with your real estate agent to develop a solid plan. How Can You Win A Bidding War? Here are three strategies to consider for winning a bidding war. Strategy 1. Make an All-Cash Offer Did you know that you don’t always have to have the highest bid to win? Sounds crazy, but making an all-cash bid might be more attractive to the seller than other more complicated options. Partnering with Accept.inc. gives you the power to make a cash offer on a house even if you don’t have hundreds of thousands of dollars in the bank. Once you're Cash Approved™, you’re ready to compete in a bidding war with the power of cash. The best part? When you buy a house with cash the Accept.inc way, you can still pay for the house over time, just like a regular mortgage. According to national statistics, a cash offer is four times more likely to win in a bidding war over an offer with a mortgage. And Accept.inc’s buyers save on average $13,000 in multi-offer situations, when compared to the highest offer. That means that even when the offer isn’t the highest, making a cash offer may give you a huge advantage and help you win a bidding war. Strategy 2: Include An Escalation Clause An escalation clause in a real estate contract states how much you would be willing to raise (or "escalate") your offer price in response to a higher, competing offer that the seller receives. The clause sets a specific amount above the competing offer you would be willing to pay, up to a maximum limit. Talk with your real estate agent about whether to use an escalation clause with your offer. Strategy 3: Adjust Your Offer Think of how to solve problems for the sellers and make their lives easier. Whether it’s offering the seller a quick closing or covering the cost of home improvements and repairs, anything you do to reduce risks, costs, and hassle for the seller could make your offer stand out as the most attractive option in a bidding war. Work with your real estate agent to choose the strategies that will fit your goals, financial resources, and the current state of the market. Your real estate agent can advise you about when to make your move, and when to play it cool. Get organized, be prepared, and stay informed! Start Bidding With the Power of Cash Ready to start with a big advantage when shopping for houses in Denver? Learn how to make a cash offer in Denver, with Accept.inc at your side.
Stella W | Dec 3, 2021