Cash offer programs are becoming an increasingly popular way for homebuyers to get a leg up on the competition in today’s real estate market. A quarter of home sales are to cash buyers, and companies like Orchard, Flyhomes, Better Holdco and Homeward make it easy for prospective buyers to use their own funds to get the house they want at a price they can afford.
The Pros and Cons of a Cash Offer Program
A cash offer is the best way to buy a home if you don’t have a large down payment or are unable to qualify for a mortgage. They’re also a great option for first-time homebuyers, as they typically close faster and have fewer requirements than mortgages.
They’re also much cheaper than traditional mortgages. But that doesn’t mean all cash offers are equal, as some are more expensive than others.
It’s important to check the terms of a cash offer program before signing on the dotted line. Often, they’ll require you to pay fees and other charges in order to use the program, so it’s worth shopping around before deciding on the right one for you.
The Pros of a Cash Sale
Many cash sale options allow you to move into your new home within a week of getting the contract accepted. This is especially helpful for people who are trying to sell their old home before securing financing for a new one. Read more https://www.southernskyhomebuyers.com/tn/pigeon-forge/
But if you’re not ready to move into your new home yet, there are other cash offer programs that let you rent it until you’ve found and secured a permanent mortgage. They might charge you a convenience fee in addition to the purchase price of the home, but these fees can be offset by the money you’ll save on your monthly payments.
Depending on the company, you can rent your home for anywhere from one month to three months or longer. Some companies, like Better Real Estate, will even give you a seller leaseback so you can stay in your new home as long as needed while you work on selling your existing home or securing a new mortgage for the home you’re buying with the cash offer program.
The Cons of a Cash Sale
As with any transaction, cash offers are risky. While they often come with fewer contingencies, there’s still a chance that something will go wrong and you won’t be able to close on the home.
These risks can be mitigated by working with an experienced real estate agent who will guide you through the process. They can also make sure you’re protected if something goes wrong in the future.
If you’re a buyer, it’s also important to consider that many cash offer programs are considered nominee situations. If the third-party cash offer provider purchases your new home, they might have to pay excise tax on the sale of your new home, which can be a big bill.
In 2022, the majority of homebuyers used a conventional loan to get their homes, and this trend could lead to even more challenges for would-be homebuyers who don’t have a traditional loan. But a number of startups, including Orchard, Flyhomes and Better Holdco, are taking steps to offer a cash-based option for those who are struggling to find a mortgage or who don’t have enough cash to make the down payment required to purchase their dream home.