Mortgage company’s new offer lets frustrated buyers make all-cash offers

Daniel Chelgren entered the white-hot housing market earlier this year and quickly became frustrated with a super-competitive playing field that favored cash buyers.

In one case, he and his wife offered $ 20,000 more than the asking price for a Denver-area home. The winning bidder exceeded the list price by more than $ 100,000.

“We have encountered cases where there were 30 or 40 offers on the table,” says Chelgren. “It’s one thing to lose, but it’s another to find out you weren’t even in the top 15. We just felt like if we couldn’t offer money, we wouldn’t be. not even in the game. “

The Chelgren have decided to change their approach. They started working with Accept.inc, a Denver mortgage company that makes cash offers on behalf of borrowers, and the couple closed a home this spring.

“Think of us as a rich uncle,” says Adam Pollack, co-founder and CEO of Accept.inc. “We want to make every buyer a cash buyer and every bid a cash offer. “

In the hot housing market, money is king

During the coronavirus housing market, bidding wars have become commonplace in many areas. When sellers are evaluating multiple offers, they tend to favor the safe value of a cash offer over the slightly less certain offer that is dependent on funding.

As a result, cash buyers can often get a small discount compared to buyers who rely on finance. And cash buyers may be able to negotiate more difficult inspection contingencies.

Accept.inc launched in 2019, ahead of today’s intense seller market. The company announced this week that it had raised $ 90 million from investors.

A new generation of “power buyers”

It’s not the only startup that sees potential in cash offers. Another company, Homeward of Austin, Texas, has also started a business around the concept of making cash offers on behalf of creditworthy buyers who do not have $ 500,000 to wire to sellers. Homeward, which recently raised more than $ 370 million from investors, charges buyers fees of up to 1.9%.

Another player, Ribbon, also allows bidders to bid in cash. It charges a fee of 2% to 2.4%. Ribbon service is available in North Carolina, South Carolina, Tennessee, Georgia, and Texas.

Mike DelPrete, real estate technology strategist and advisor to Homeward, explains that the new generation of businesses is distinct from iBuyers who offer quick deals to sellers. “I call them ‘power buyers’,” he says. “They allow buyers to offer cash deals, fund relays and buy before they sell. “

The Homeward Buy-Before-Sell Offer allows homeowners to make cash offers before they’ve sold their current home. This is another way to give buyers a little sway in a market that leans in favor of sellers.

“Buyers are looking to get all the benefits they can get,” says DelPrete.

How it works

Accept.inc says it doesn’t charge buyers any fees. Instead, he uses the cash offer as a way to attract customers who need mortgages. Pollack Says that Accept.inc views cash offers as a marketing tool; she earns her money by creating loans and then reselling them.

When working with clients, Accept.inc assesses the creditworthiness of borrowers. Then, when the buyer wants to bid on a home, Accept.inc analyzes the property to make sure the bid is reasonable. If everything is verified, Accept.inc makes a cash offer on behalf of the buyer.

“It looks like any other cash offer,” Pollack says.

If the seller accepts the offer, Accept.inc closes in about two weeks. Then, in two weeks, Accept.inc resells the house for the same price to the buyer, who closes the deal with standard mortgage financing.

Chelgren says the cash offer is not a panacea. He lost five homes through Accept.inc before eventually gaining a home in Englewood, Colorado.

But he says he was happy with the process. He obtained a mortgage at a rate of less than 3% and did not pay any additional fees for the cash offer that Acpet.inc submitted on his behalf.

“It sounds too good to be true,” says Chelgren. “We were waiting for the take, and the take never came.”

For now, Accept.inc offers cash offers only on behalf of borrowers who take out conforming conventional loans or Veterans Administration mortgages. Its service is not available for jumbo mortgages or Federal Housing Administration loans.

And its services are only available in Colorado. Although the team at Accept.inc does not say where it plans to expand, the company is licensed in a number of states, including California, Texas, Florida and Arizona, according to National Mortgage. Licensing System and Registry.

While Pollack sees his business as an innovator, Accept.inc does not aim to disrupt the mortgage industry. “We’re not looking at this issue from the point of view that the mortgage industry is down,” he says.

Tips for buying a home in a sellers’ market

If you are not shopping in a market served by Accept.inc, Homeward, or Ribbon, you may not have the option of an all-cash offer. Here are some other ways to make your offer stand out:

  • Get pre-approved for a mortgage and have the money for closing costs.
  • Be prepared to move quickly when you find a home you love.
  • Go through the entire subscription process before you make your offer.
  • Make sure your offer is aggressive enough to stand out, but not too expensive for you.

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