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CHICAGO \u2013 Some newer instant cash-buyer firms help homebuyers compete in a market that\u2019s heavy with all-cash offers. iBuyers, for example, have been helping buyers make cash-backed offers or provide cash financing as a way to help buyers catch a seller\u2019s attention in a bidding war.<\/span><\/span><\/p>\n

The increasing presence of these companies is at least partially behind the increasing percentage of homebuyers bringing cash to closing. In July, cash sales comprised 23% of existing-home sales, up from 16% a year earlier, the National Association of Realtors\u00ae (NAR) reports. Support from iBuyers and fin-tech companies is behind much of that growth, whether making cash offers on their own behalf or helping to provide cash financing to homebuyers, NAR says.<\/span><\/span><\/p>\n

Buyers who use an all-cash offer program generally do it to hopefully win a bidding war. Sellers often prefer all-cash offers because they don\u2019t have to worry about a buyer\u2019s financing falling through.<\/span><\/span><\/p>\n

iBuyers \u2013 such as Opendoor, Redfin Now, Zillow Offers, Keller Offers and others \u2013 have previously offered to buy homes in all-cash transactions. But a newer business model has emerged in which the institutional buyers are purchasing a property not for themselves but on behalf of buyer, who can make a more competitive offer.<\/span><\/span><\/p>\n

For example, Opendoor launched a cash-backed offer program in March. They will back up a buyer\u2019s offer with a cash offer to the home seller if the buyer fails to secure financing by the closing date. If the buyer is unable to get financing, Opendoor purchases the home for the buyer, and holds it for 120 days with a fee of 1% of the purchase. If the buyer still can\u2019t get financing, Opendoor will continue to hold the property for another 120 days, though at an increasing fee structure.<\/span><\/span><\/p>\n

Another company, Ribbon, purchases the homes for cash on a buyer\u2019s behalf and provides the homebuyer more time to secure mortgage financing.<\/span><\/span><\/p>\n

Many of these companies work on a structure where they\u2019ll buy the property for the buyer with cash but charge the buyer a percentage of the purchase price for holding it.<\/span><\/span><\/p>\n

\u201cThe cost of obtaining a cash-backed offer or cash offers is not much higher than the 3.7% to 4.4% average percent above list price that buyers have already been offering to sweeten their offer,\u201d says Gay Cororaton, research economist for NAR. \u201cMoreover, cash-backed or cash offers give assurance to the seller that there is a ready institutional buyer who will purchase the home should the buyer not be able to secure mortgage financing.\u201d<\/span><\/span><\/p>\n

The role of fin-tech companies, or iBuyers who provide cash-backed buyer offers or cash financing, will likely increase in the future due to the competitive market, Cororaton says.<\/span><\/span><\/p>\n

Source: \u201cCash Sales Rise to 23% With Growing Entry of iBuyers and Fin-tech Companies,\u201d National Association of REALTORS\u00ae Economists\u2019 Outlook blog (Aug. 24, 2021)<\/span><\/span><\/p>\n

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\nAuthor: kerrys<\/p>\n","protected":false},"excerpt":{"rendered":"