Cash Backed Offer
What is a Cash-Backed Offer?
It’s a way to get your offer accepted when financing and appraisal contingencies are holding you back.
Traditional offers are contingent on appraisal and underwriting – things that happen just before closing. When sellers have the upper hand, they are not interested in offers that could fall apart weeks into the deal because of a failed contingency. That’s why sellers keep choosing investor offers over regular homebuyers. The cash-backed offer was created to enable you to compete with the investors and wealthy all-cash buyers.
How does it work?
It works like insurance – you pay a fee, and if needed they bring a bunch of cash.
The same as regular home-buying transactions, with one extra piece. Your AtlantaSuburbs agent pairs your mortgage approval with the cash-backing insurer, then it’s time to shop for your new home. When you’re ready to make an offer, we include the cash-backing paperwork that says if there is any problem with your appraisal or mortgage approval, they’ll cover it in cash. The seller feels assured of success and accepts your offer.
Why use a Cash-Backed Offer when trying to buy a house?
Cash offers are 3 times more likely to be accepted than traditionally-financed offers in today’s housing market. When multiple buyers are willing to buy their house, simply put, sellers choose what is best for them. People use our program to successfully get their offer accepted, and sellers get to know it will definitely close at the full agreed amount.
Even though no one is really calling it insurance, I do because that’s what it functions like. Both the buyer and seller are insured against any problems you might have with your bank loan or your bank’s appraisal. Getting your offer accepted over so many other buyers, that’s the hard part these days. A cash-backed offer often rises to the top when a seller is deciding which offer to accept.
What’s the next step? FILL OUT THE FORM BELOW
- Apply with your mortgage lender. Need a lender? Let us know
- Send us your pre-approval letter. We’ll get your cash-backed approval
- Shopping! We’ll email you every house on the market that fits your critieria
- House Tours – let’s go find your new home
- Offer, Contract, Closing
Why is there a need for cash-backed offers?
Lots of reasons! They all lead back to Econ 101, supply vs demand.
CERTAINTY – Sellers simply choose the cash offer over the old mortgage offer because it provides them with certainty. Certainty that money isn’t going to be a problem that brings this transaction crashing down. And right now, sellers have the power because of the next two factors.
LOW SUPPLY – There are not enough houses, sometimes called inventory or supply. There has long been a manageable balance between the number of people that wanted to buy a house and the number that wanted to sell. The population grows, old houses fall down, new ones are built. Let’s say 1.5 million new builds per year is a good idea to maintain equilibrium. For the past decade, new builds have been HALF that. Such a backlog of new builds has fueled the hyper-competitive level of demand for limited supply. There are three main causes of low supply.
- 2008 financial crisis – When the bankers’ jenga stack of subprime loans fell down, it wrecked the whole economy. Banks had no money, so buyers and builders had no money. The pace of homebuilding has been 50% what it needs to be every year since 2008.
- Skilled labor shortage – Houses take longer to build when builders do not have the people to hammer in the nails. This goes back to a pivot away from the trades in the 1970s, and if you’re interested in this topic check out the dirty jobs guy’s foundation.
- Supply chain – The world sure has gotten smaller with our deeply interwoven global economy. Just-in-time inventory replaced actual inventory, which was mostly working until Covid hit, and supplies arrived late or not at all. The biggest builder in the world told me that production was behind because they couldn’t get metal brackets for frames. Wow.
HIGH DEMAND – There are too many buyers, especially in the Atlanta Suburbs.
- Investors – There have always been investors in housing, though largely “mom and pop” owners of 2-20 houses. When low bond rates led Wall St to look for another way to make financial returns, the American domestic housing market seemed like a safe bet to make 8% per year. With billions of dollars and relatively few strings attached, investors began winning contracts at a dizzying pace.
- Domestic migration – With the cold and high cost of living up north, plus the lack of jobs in the rural south, metro Atlanta is a hotbed of relocation for work or moving near family. The buyer who recently sold their house in a market with much higher average values comes to town with a lot of cash, beating local buyers in bidding every time.
- Millennial homebuying backlog – People are buying later for various reasons, which along with the Great Recession mean a boatload of millennials burst onto the homebuying scene in the past several years.
Even as rising interest rates knock some people out of the market, there are still more than enough buyers with cash that kept winning all the houses. Thus the cash-backed offer was born!