The average borrower has to submit 8.5 offers before they finally have one accepted. One of our lenders has a full cash offer program with NO cost to the borrower, that has lowered the ratio from 8.5:1 to 1.4:1.
That means they start with the house of their dreams, but ultimately go with a house where the seller simply accepts their offer. As you know, there are several reasons why an offer gets pushed to the bottom of the pile. Usually the FHA mortgages go first, followed by the ones with the funkiest mortgage contingencies, until they find the cash offers with the highest offer price. More often than not, an offer with a mortgage contingency is overlooked by an offer of cash. In a market short of inventory, we need to have creative outlets for borrowers. From an average of 8.5 offers, to 1.4; get your borrower the house of their dreams…
- This Cash Offer program comes at no cost to the borrower. Other lenders have similar programs but charge any where from 2-4pts.
- They’ve seen a Year-over-Year increase of 23% purchase business, while most have seen >50% drop.
- They are a top 25 National Lender
How does it work, and how is it no cost?
- The lender formed a Private Equity Firm, under the Company’s umbrella, and put just under 100M in the account. The point of this account is to back the borrowers with real cash assets, so the lender wins the overall financing, and the borrower wins their home. The PE was not set up to be an income source for the lender.
- When a borrower is pre-underwritten TBD, they are also qualified for their Cash Offer Program. (Min requirements are 640 FICO and 43% DTI, and up to 1.5M loan amount)
- If qualified, they submit their offer, that is backed by a bank account showing just under 100M, no mortgage contingency, and a guaranteed closing date.
- When the borrower closes, the house closes with the lender’s standard financing (up to 97% LTV through home ready or home possible and 100%VA).
Do other lenders offer similar programs? Yes, BUT at a cost.
Other lenders have similar cash programs, but they come with a cost of 2-4pts to the consumer. This lender charges zero to the borrower or seller. Truly no cost.
How can they afford to do it?
The lender has a substantially larger cash position, than the majority of the industry. If you compare their cash position to their annualized total volume, they have a stronger cash-to-volume ratio than 3 of the top 5 lenders in the country. They utilize a portion of that to fund the PE, but they are still financially backed to thrive in one of the toughest markets we’ve seen.
How do you learn more?
Call me at 860 383 8100, or email me at [email protected]