Real estate cash financing: what you need to know
“Money is king” when it comes to buying a house, Fannie Mae, Chief Economist Doug Duncan, said in a recent interview with National Mortgage News, and in 2021, statistics show that is the case.
The evidence is evident in the growing number of all cash offers on new purchases, according to Gay Cororaton, senior economist and director of housing and business research at the National Association of Realtors. While buyers paying for a new home in cash are not new, they have seen a noticeable recovery in the first half of 2021.
“The offer is very tight. Cash offers are what sellers prefer simply because the deal will be closed faster – you don’t need to have a review. And so that’s what we saw about 25% follow, ”she said.
In another recently released analysis of county public registers conducted by Redfin, the data also showed that cash offers accounted for over 30% of home purchases in the first four months of the year.
Supply chain issues and a shortage of stocks pushed prices to records this year and trivialized bidding wars, often resulting in bids well above the original list price. While a year ago a house on the market might receive two or three offers, it now averages around five, according to Cororaton.
To help buyers who do not have enough equity to make a cash purchase, a number of businesses and programs have sprung up that provide customers with the ability to compete by buying homes on their behalf and then by selling or transferring the properties to them at exactly the same price. If current buying trends continue, these types of businesses and products are likely to gain a larger share of the market.
“I think before you know it, every offer will have to be a cash offer. Sellers are going to demand that people bring in cash offers because it lowers their risk, ”said Tim Herman, co-founder and CEO of UpEquity, an Austin-based mortgage technology platform that provides financing to buyers to close these deals. transactions.
No two programs serve buyers exactly the same, but they were designed with similar goals. Here are some things to know about the products and those who offer them.