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Looks like you the buyer also assume a ton of risk in addition to the fat fee, since the "advantage" of this all cash offer is the middleman company closes on the house in a mere 8 days, giving you effectively zero time to do typical due-diligence on inspection stuff.
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Jan 14, 2022 21:22
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alnilam posted:If the cash offer is actually coming from the "all-cash lender," then wouldn't the offer read as being from HomeLight LLC? If so, the seller could just recognize the offer as effectively being financed, despite being nominally cash, which would kill or at least greatly diminish the supposed allure of an all-cash offer. Does it though, since they're still getting $XXX,000 in cash? I agree with you it sounds sketchy as hell and I'm not super excited about it, but like, they're getting the money regardless whether it's from Mr. Bwee or HomeLight?
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Jan 14, 2022 21:22
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 No time for inspection, estimates on any work discovered that needs to be done, etc. Massive risk and a price premium just to get a chance to have your offer accepted in a crazy market.
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Jan 14, 2022 21:24
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bawfuls posted:This “cash lender service” sounds fishy It's a niche but legit thing in some hotter markets. Usually the bank has pre-underwritten the loan for up to $X (e.g. the buyer went through all of the documentation work that normally takes place after an offer is accepted), and then the bank is buying the house in cash and selling it back to the buyer. The bank can still require that you have certain contingencies on the offer (such as a satisfactory inspection and appraisal). It's a true and factual cash offer, proof of funds come in the form of a statement for an account that the bank owns
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Jan 14, 2022 21:25
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bawfuls posted:
I'd expect this is much more for when people are making no contingency offers that that stuff wouldn't matter for, even if a bad idea
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Jan 14, 2022 21:28
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Bwee posted:Does it though, since they're still getting $XXX,000 in cash? I agree with you it sounds sketchy as hell and I'm not super excited about it, but like, they're getting the money regardless whether it's from Mr. Bwee or HomeLight? The seller gets cash no matter what kind of offer it is. In a usual sale, the bank literally shows up with half a million in cash or whatever, and that is the loan. The supposed allure of an all cash offer is that it can't fall through during financing, but if the cash offer is from a lender... it seems to defeat that purpose? I wouldn't trust it as a seller.
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Jan 14, 2022 21:28
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marjorie posted:Heck yeah, my recent purchase was for SE Portland as well! Agreed that the market wasn't quite as crazy as I thought it'd be either (noting that I actually started my process in late September), and it helped balance everything since I was buying and selling. That may have been a good time to buy (comparatively). Inventory is super low again and buyers have rabies again. I currently own in SE and would like a slightly larger place, but I'm not sure I have the stomach to deal with the market.
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Jan 14, 2022 21:34
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alnilam posted:If the cash offer is actually coming from the "all-cash lender," then wouldn't the offer read as being from HomeLight LLC? If so, the seller could just recognize the offer as effectively being financed, despite being nominally cash, which would kill or at least greatly diminish the supposed allure of an all-cash offer. The offer is not financed from the perspective of the buyer, it's a cash offer for them. The advantage of a cash offer is that there's no risk of financing falling through. This kind of offer has those advantages because it is not actually financed; the bank is buying the house in cash, period.
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Jan 14, 2022 21:37
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QuarkJets posted:Okay you say that but then you follow up with literally the worst thing that a roommate can do? that aint behavioral though
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Jan 14, 2022 21:45
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All cash offer makes sense in a couple of situations. We were approved for $ludicrous_amount at 10% down, but nobody would touch our offers because their agent warned them off on us that we were a higher risk of not being able to finance the deal etc etc We had another lender that would work with us with ZERO percent down up to $2 million but they wouldn't write us a pre-approval letter, they would only finance us if we already had an accepted offer which is a bit of a chicken and egg problem Had we known about the cash offer lender we probably* would have done that, financed through the 0% down at 3.00% and moved into a SFH with a back yard instead of a condo as we were primarily down payment poor but monthly payment rich All cash offer financing is probably a stupid idea if you're buying in the middle price range suburbs of Kansas City, but in the best neighborhoods of LA/SF/Portland/Seattle/NYC/Miami it's probably a valid option if you want an A class house/condo with lots of competition/bidders *probably investigated
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Jan 14, 2022 21:51
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All cash offer means you don't have to interact with an appraiser, and anybody would pay more for that
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Jan 14, 2022 21:53
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8 days is not a whole lot shorter than the default 10 day window for inspections here, and good lucking getting estimates for anything in that time unless you're already talking to a contractor that likes you. That being said, it said "as few as" and I imagine most people using these services are waiving nearly everything.GoGoGadgetChris posted:All cash offer means you don't have to interact with an appraiser, and anybody would pay more for that You still have to get your own financing, just not for the seller to get their money
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Jan 14, 2022 22:03
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What kind of price premium does an all-cash offer really command? From my experiences buying a house in a mid-sized west coast city last year, I would argue something on the order of 1-2%. A financed offer for 550k with pre-approval letter is probably going to beat a 540k cash offer in most cases. So if a "cash lender" is charging you a 1% fee (not to mention having you over a barrel for their subsequent mortgage interest rates), if you have that kind of cash ready to go, why not just bump your offer up by that much? In fact, if you have that extra 10k cash lying around, you could up your offer by as much as 50k if you are financing 80% of the purchase. This is a much better use of your extra 10k compared to flushing it down the drain toward cash lending fees.
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Jan 14, 2022 22:09
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I think we are assuming in some markets there is a stack of offers to pick from and all cash will beat a similar financing contingency offer which has the appraisal problem etc.
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Jan 14, 2022 22:11
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In the bay area you might have six people put in offers for a 2b/2ba, it's listed at 1.2mm and say the three most competitive offers $1.22 with 20% down 7 days to close, $3mm in cash in the bank (with copy of bank statements) $1.25 all cash no contingency $1.28 with 15% down 30 days to close, $250,000 cash in bank (statements upon request) $1.32 0% down no letter no statements The $1.25 deal is a done deal, order your McLaren F1 from London now it'll be here by the time the payment is due, enough time to order strippers and blow for the weekend $1.22 is low but that deal is almost certainly going through but not as good as the cash offer $1.32 is an extra $100,000 in your pocket but who knows if they're good for it $1.28 will probably go through but if it falls through your house will have been on the market for 30+ days and people in hot markets won't touch relisted houses because often if the deal falls through it means something bad came up on inspection, now you might have to accept $1.17 so that just cost you $110,000 for being greedy
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Jan 14, 2022 22:22
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alnilam posted:What kind of price premium does an all-cash offer really command? From my experiences buying a house in a mid-sized west coast city last year, I would argue something on the order of 1-2%. A financed offer for 550k with pre-approval letter is probably going to beat a 540k cash offer in most cases. As a seller having the deal fall through because the buyer's financing fucks up can be bad. Hell, just a few pages ago in this thread we have someone asking about how big of red flag it is that two previous sales fell through on a house they're offering on. It doesn't matter if it's because the person who's offer you accepted got hosed by their bank, other buyers are going to look at it and wonder if the sewer is hosed or it's built on a wendigo graveyard or whatever. Add to this whatever your own risks are regarding poo poo like needing the funds from the house you're selling to make an offer on another house etc. For a lot of people having that security of an all cash offer is worth taking a somewhat lower price. Obviously there's a point at which that isn't true - no one is going to accept $300k cash over $1M financed - but the offer of a sure thing is still attractive to a seller. Hell, it's one of the reasons why waving financing contingencies is a thing - it signals to the seller that you're 110% sure your financing is in order. Of course YMMV, depends on your market, etc. If you're selling in some crazy market where people are waving everything and houses sell in 8 hours on their first day of showing it might not matter as much and people might be willing to take riskier financed offers as the cost of that falling through isn't as bad. edit: also from a seller's perspective, 1% isn't much. That's $5,000 on a $500,000 sale. Like, it's nice, but it's not huge.
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Jan 14, 2022 22:24
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Also, a lot of you being all incredulous about this marvel and timely lending product seem to not be referring back to the thread title frequently enough.
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Jan 14, 2022 22:26
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gwrtheyrn posted:
I don't understand what this means, maybe I missed some element of the conversation. Aren't we talking about a buyer paying cash for a house?
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Jan 14, 2022 22:29
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no we're talking about this extra middle man business that allows buyers who need financing to still make an "all cash offer" on a house
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Jan 14, 2022 22:31
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Hadlock posted:In the bay area you might have six people put in offers for a 2b/2ba, it's listed at 1.2mm and say the three most competitive offers Let's suppose the $1.25M cash offer person is using a cash lender since that's what we're talking about here. This means they are paying 12.5k (1%) in non-recoverable fees to the cash lender. Let's imagine that when the buyer then mortgage-buys it from the cash lender, they are then financing at a traditional 20% down just to keep things simple (and likely ending up with a shittier mortgage rate). Suppose they instead choose to do a regular financed offer with 20% down. This means they are leveraged 5x. They could turn that extra 12.5k into a 62.5k higher offer with the cash they have on hand. That is twice the difference in your example. So now the seller is looking at: $1.25 M all cash no contingency $1.3125 M, 20% down, good letter and proof of cash in bank etc., e: and no contingencies Hell if the person is financing 15%, they can turn their 12.5k into an offer 83k higher! Now we're at $1.33 M. Is that enough to tempt the seller away from the all cash offer? I sure as hell think so. e: also to make a fair comparison you have to assume the buyer is waiving all contingencies in both the financed and cash offers. So in the unlikely event that the loan falls through in the financed offer, the seller gets paid 5% for their time too. alnilam fucked around with this message at 22:44 on Jan 14, 2022 |
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Jan 14, 2022 22:42
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Ohhh Homelight, they're.. fine. No horror stories, but the sellers know it's a Homelight-backed offer and that they are not actually dealing with a true cash buyer, so there is still some financing risk that the seller will consider I would say they are not worth it as far as getting your offer selected, because you WILL be up against true cash offers and so you've lost your advantage. It does let you "defer" the financing process which can be incredibly helpful if you're selling & buying simultaneously. It's expensive though, and even more expensive if you go with a competitive lender rather than accept HomeLight's 3.5%+ rates
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Jan 14, 2022 22:46
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alnilam posted:
In a lot of cases we came across it was one of two situations 1) elderly couple/widow ready to move to retirement home, bought the condo for $320,000 in 1984, they're gonna clear $800,000 after taxes no matter what which should put them in the best nursing home money can buy for the rest of their natural life 2) elderly couple/widow died before executing on plan. #1, they have 2 or more kids and for whatever insane reason don't want to keep it as a rental property that generates $4,000 a month in cash with $1200 a year in property taxes, want to cash it out to buy a Nissan GT-R and take a vacation to Hawaii every year for the next 30 years In both cases the house is paid off and it's a huge windfall, $50k extra isn't worth losing $110,000 over since they're getting A Literal Million Bucks We had several cash offers $50k under our financed offer take the cake, it definitely happens, especially in risk adverse families.
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Jan 14, 2022 23:04
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Obviously market-specific but is it still super risky to offer an appraisal gap, despite making your offer look better? I'd imagine comps have somewhat caught up with the markets by now.
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Jan 14, 2022 23:05
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jaffyjaffy posted:Obviously market-specific but is it still super risky to offer an appraisal gap, despite making your offer look better? I'd imagine comps have somewhat caught up with the markets by now. Why is that the slightest bit risky if the amount you offer is something you can afford?
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Jan 14, 2022 23:09
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One thing I don't understand about Homelight offers: how do they deal with inspection contingencies? Say you come in with an all cash offer on a house through Homelight and waive all contingencies. The appraisal I get, but say the house turns out to be built next to an open pit and in danger of collapsing at any time. If you end up walking away/defaulting does Homelight just eat it/make up for it by charging everyone else a premium for their service? Now that I type that out, it's probably exactly how it works, right? Residency Evil fucked around with this message at 23:14 on Jan 14, 2022 |
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Jan 14, 2022 23:11
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Residency Evil posted:One thing I don't understand about Homelight offers: how do they deal with inspection contingencies? Say you come in with an all cash offer on a house through Homelight and waive all contingencies. The appraisal I get, but say the house turns out to be built next to an open pit and in danger of collapsing at any time. When homelight pays for your house, you enter into an agreement to pay them a % of the price every 30 days until you finance it. They would love to keep sucking you dry! Since they are not your lender I don't know what the process is like for you to default/walk away, but somebody probably comes and either breaks your kneecap or ruins your credit
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Jan 14, 2022 23:16
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GoGoGadgetChris posted:When homelight pays for your house, you enter into an agreement to pay them a % of the price every 30 days until you finance it. They would love to keep sucking you dry! Oh I thought Homelight could be your lender as well (presumably at usurious rates, but  ).So after you buy the house with Homelight you have to find your own lender, who will presumably want an inspection/appraisal/etc? lol
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Jan 14, 2022 23:20
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Residency Evil posted:Oh I thought Homelight could be your lender as well (presumably at usurious rates, but Apparently they will sell you a mortgage, or you can use another lender, but if you use another lender then their flat cash-lending fee triples. So they have you trapped enough to give you lovely rates, or else you have to cough up tons more cash.
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Jan 14, 2022 23:23
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GoGoGadgetChris posted:When homelight pays for your house, you enter into an agreement to pay them a % of the price every 30 days until you finance it. They would love to keep sucking you dry! 
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Jan 14, 2022 23:28
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alnilam posted:Yeah I can see the way you interpreted it too... if they are for sure planning to buy a new, bigger, parent-friendly place after the year away, then yeah selling now is fine, renting for a year probably also fine if slightly risky. Sorry for the ambiguity, the plan is to move down to Brighton to help my parents in law help look after their dementia suffering parents, ie my grandparents in law. For a bunch of reasons, we don't think it would make sense for us to be doing that for more than a year, so the plan was to just rent somewhere down there for a year, then either move back or look to buy at the end. But, looking at the economy of it, it we just can't afford to let the place, because the tax will gently caress us too hard. The let after tax won't cover the mortgage, let alone the fees of the letting agency, so instead we'll probably look at moving. The thread immediately deteriorating into "you cannot let your flat because renters will definitely build a shanty town in your living room and steal everything" suggests maybe this wasn't the right place to ask, which is 100% on me, and I apologise.
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Jan 14, 2022 23:30
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!Klams posted:Sorry for the ambiguity, the plan is to move down to Brighton to help my parents in law help look after their dementia suffering parents, ie my grandparents in law. I think it probably is the right place to ask, but the majority of the thread is (for good reason) super risk adverse.
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Jan 14, 2022 23:39
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Pilfered Pallbearers posted:I think it probably is the right place to ask, but the majority of the thread is (for good reason) super risk adverse. Goons jumping into threads to ask for opinions and then rejecting everyone's advice because it didn't reinforce the poor decision they wanted to make is a time honored SA tradition. I only ask that they then navigate to the Bad With Money thread to share the details with the rest of us.
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Jan 15, 2022 00:28
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SpartanIvy posted:Goons jumping into threads to ask for opinions and then rejecting everyone's advice because it didn't reinforce the poor decision they wanted to make is a time honored SA tradition. the OP has changed their mind thanks to Goon Advice so not sure what the gently caress you're on about exactly
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Jan 15, 2022 00:36
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SpartanIvy posted:Goons jumping into threads to ask for opinions and then rejecting everyone's advice because it didn't reinforce the poor decision they wanted to make is a time honored SA tradition. KYOON GRIFFEY JR posted:the OP has changed their mind thanks to Goon Advice so not sure what the gently caress you're on about exactly Yeah, I literally took all this on board as like, "It's not a great idea".
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Jan 15, 2022 00:42
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bawfuls posted:Looks like you the buyer also assume a ton of risk in addition to the fat fee, since the "advantage" of this all cash offer is the middleman company closes on the house in a mere 8 days, giving you effectively zero time to do typical due-diligence on inspection stuff. gwrtheyrn posted:8 days is not a whole lot shorter than the default 10 day window for inspections here, and good lucking getting estimates for anything in that time unless you're already talking to a contractor that likes you. That being said, it said "as few as" and I imagine most people using these services are waiving nearly everything. Yeah, that's an important observation: that specific company advertises 8 days as the floor, not the ceiling. You can still write an offer for 3 weeks to close if you want a bunch of inspections and know that it'll take that long, but for people throwing caution to the wind they'll let you use 8 days. IIRC last summer the companies that we talked to about all-cash offers never promised anything less than 14 days
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Jan 15, 2022 00:43
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KYOON GRIFFEY JR posted:the OP has changed their mind thanks to Goon Advice so not sure what the gently caress you're on about exactly Mostly making a joke because they still didn't think it was the risky proposition it is. But joking aside I do wish the best for OP because taking care of parent(s) with dementia is rough and it sucks far more than dealing with even the worst tenants.
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Jan 15, 2022 00:46
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!Klams posted:Sorry for the ambiguity, the plan is to move down to Brighton to help my parents in law help look after their dementia suffering parents, ie my grandparents in law. I thought your post was pretty clear for what it's worth, and I do think this is the correct thread for your question even if some posters jumped immediately to rattling off doomer scenarios Selling is probably the simpler option to be quite honest, it certainly does eliminate some risks. If it's not your dream home anyway then that's what I'd suggest doing. Many many people do just fine renting their old house while they live somewhere else, and some small number don't. I don't know whether your assessment of the taxes is correct, you should really talk to an accountant who can explain that.
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Jan 15, 2022 00:49
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jaffyjaffy posted:Obviously market-specific but is it still super risky to offer an appraisal gap, despite making your offer look better? I'd imagine comps have somewhat caught up with the markets by now.
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Jan 15, 2022 03:03
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!Klams posted:Sorry for the ambiguity, the plan is to move down to Brighton to help my parents in law help look after their dementia suffering parents, ie my grandparents in law. Personally I would try to keep it and see what happens for a year but I also know nothing of the UK, the laws there, or your personal financial situation so it might not make sense. It is not like you can't ask for way more in rent and cover your costs until you decide what is best at least asking the market rate.
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Jan 15, 2022 04:00
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In the UK the main issue is your rental income will be subject to income tax which can't be offset against mortgage payments. You may also become liable for some capital gains tax depending on when you sell the property. If it's just for a year, and you can get sufficient rental income to offset the costs, this still may be worthwhile. I'd probably sell up and bank the equity until ready to move again.
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Jan 15, 2022 14:37
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