Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Also, these lenders who are making these "All Cash" deals possible are going to dictate what the interest rate is and the terms of the loan that the borrower will have to pay. Further, they will set a limit on how much the borrower can pay for the house they're making the offer on.
The lender realizes that it's his/their money that's on the line, and they're not going to hand it out to just any Tom, Dick, or Harry who comes down the pike. And those who DO get the loans will pay handsomely for it. That's Business 101.
My last two home purchases were cash. It started with selling a home in MA for $475K which I owed $200K on and buying a build home in SC for $207K which I paid cash for. Next was selling that house for $280K and buying a new build patio home in SC for $135K which I paid cash for.
We didn't use stocks as collateral, we sold stocks and held cash for the months it took to find our "new" home. After buying new home we listed previous home and put sale money back into brokerage acct.
20 years since we had a mortgage, HATE filling out those forms and being robbed for points and all kinda fake fees they add in for profit margin.
All cash offers are making up a larger proportion of all successful bids. Where is all this money coming from, considering that institutional and foreign investors are still purchasing a small minority of all homes?
I came across a service which I will not name so as not to advertise it, that offers short-term loans such that buyers can make an all-cash offer and then pay off the short-term loan by refinancing after the purchase.
I have also heard stories of people with significant stock holdings using those stocks as collateral to obtain financing for an all-cash offer. That's not so bad unless the stock market declines.
I was always skeptical that there was all this money lying around to enable so many all cash purchases. I'm not sure how prevalent the above two practices are, but I wouldn't consider them all cash purchases just creative financing. And I wouldn't be surprised if a lot of all cash transactions involve some sort of financing.
We made cash offers on our last two houses out of the three we have owned. We purchased our current home slightly before our previous home passed papers for considerably more than our previous home. We had most of it in cash and had a line of credit on our previous home that we planned not to use and instead utilize my 401K and then rolling it back into my IRA but we jumped the gun a little bit on determining how long it would take to get the money and had to use the line of credit then paid that off at closing. Yes, we used a bit of creative financing but if we knew how easy it was to get the money out of my 401K we wouldn't have had to.
First time buyers? Probably Mom and Dad are lending the money as they have cash around.
www.RibbonHome.com I have spoken with a rep from Ribbon. Interesting process, but in the end, my clients didn't need to proceed with them. Sellers wanted a rentback, and at that time, Ribbon wasn't allowing rentbacks. I am under the perception that they have updated that policy.
IF one feels the need, I would consider recommending them again.
Any of them may not be available in a specific market.
NONE of these are comparable to traditional hard money lenders. They put up the cash, for a cost, and want to see you succeed.
The costs are MUCH lower than traditional hard money lender costs. MUCH lower. Many hard money lenders are fine if you fail to refinance with traditional product, because they will not hesitate to take the house, your upfront fees, and all the equity.
Quote:
Originally Posted by Lillie767
Not sure they are all that discerning:
Express Cash Approval Criteria
Conventional, conforming mortgages only (no jumbo, VA or FHA)
FICO score ≥ 720
Minimum Down payment ≥ 5% for Primary, ≥ 10% for Second Home, ≥ 15% for Investment Properties
Debt to Income Ratio ≤ 40%
2 yrs continuous employment history (no gaps)
W2 full-time salaried employee (qualifying with base income only, not bonuses or commissions)
Hourly employees, only if they have been with the same employer for the past 2 years
May only have 1 currently owned, retained property (must qualify with full payment)
Primary Residence, Second Home, and Investment Properties all eligible
"A hard money loan is a short-term loan from private investors. A hard money loan focuses on the property (collateral) not the borrower. Since hard money loans are non-bank funds, sellers often accept a hard money loan for a cash-only home.
The largest difference and the key to why sellers accept hard money loans is hard money loans focus on the property’s after repaired value versus today’s value. Banks look only at today’s value and if the home is in disrepair, it probably won’t meet the value necessary to buy the home, which leads to mortgage denial.
A hard money loan uses all information including the potential renovations you’d make on the home to come up with your loan amount. Investors focus on the property’s future value after you make the renovations and make a profit – that’s where the money is and is why hard money lenders help investors buy distressed homes."
The hard money market should never be equated with the lenders in my own post quoted above. Not in any way.
Those three lenders are focused on the borrower and qualifications.
As you say, hard money lenders are focused on the property. I.e., with so much fat and so much equity in the deal, they are well taken care of whether they get paid off or if they take the house back.
When I posted those links, I also looked at Better.com, but I didn't consider them to be comparable.
I came across a service which I will not name so as not to advertise it, that offers short-term loans such that buyers can make an all-cash offer and then pay off the short-term loan by refinancing after the purchase.
Some real estate tech companies will underwrite/approve the buyer, and they will make an all-cash offer on the buyer’s behalf. It’s a quick closing (as short as seven or eight days); said company then holds the home/title until the buyer secures traditional financing or is able to liquidate sufficient funds for a cash purchase.
It typically requires an additional 3% or more (no matter the loan terms) to stay competitive with an all-cash/no contingencies offer at list, particularly relative to the luxury (property) market.
It absolutely is. They do some rudimentary UW with a really short term with a balloon payment, then foreclose, leverage the equity and turn it into a rental.
That makes no sense at all. If the lenders of the cash want the house for a rental, why would they bother with the charade of lending to a private buyer who may or not make the payments? They could simply buy the house for cash for themselves and turn it into a rental. No need to fool with some "buyer" who may or may not follow their script.
The "money" to be made is in the repeated short term turnover of lending cash for a year or two and charging high closing costs and high interest rates. That's how all these mortgage brokers make their money. Their "product" is short term cash with high closing costs, not long term loans. They sell the long term loans to insurance companies and other investors looking for long term income.
They get the interim loan payments as cash flow, while also accruing the inflation of the house price - relatively protected from volatility in the stock market.
C’mon man. It’s not that hard. These aren’t brokers for one.
It's clear that you've never owned or even been inside a recently foreclosed home. No one in their right mind would lend a high percentage (80% or more) of the purchase price of a house hoping/expecting to get it back through foreclosure.
NEWS FLASH! Houses being foreclosed on aren't typically appreciating in value. They're usually being destroyed while the owner-occupant drags out the foreclosure and possession proceeding for months on end. If you're paying more than 60% of the recent market value of a house going through foreclosure, you'll lose money more often than not.
All cash offers are making up a larger proportion of all successful bids. Where is all this money coming from, considering that institutional and foreign investors are still purchasing a small minority of all homes?
I came across a service which I will not name so as not to advertise it, that offers short-term loans such that buyers can make an all-cash offer and then pay off the short-term loan by refinancing after the purchase.
I have also heard stories of people with significant stock holdings using those stocks as collateral to obtain financing for an all-cash offer. That's not so bad unless the stock market declines.
I was always skeptical that there was all this money lying around to enable so many all cash purchases. I'm not sure how prevalent the above two practices are, but I wouldn't consider them all cash purchases just creative financing. And I wouldn't be surprised if a lot of all cash transactions involve some sort of financing.
That is an interesting way of putting things, as to a buyer who accepts an all cash offer, they don't care if the person has signed over his soul to the devil, so long as the money is in the bank on the day of closing.
In many cases in this insane sellers market, terms can be the difference between one person with cash, and the other with an equal financed offer, but having get inspections, appraisals, insurance for the mortgage, etc.
The examples you gave make perfect sense to take advantage of low interest loans, even if they have that amount in cash. That way they stay liquid and can use the cash for other investments.
As to de-risking the housing market, I am not exactly sure what you mean by that.
Regarding where the money is coming from, you mentioned overseas investors, and I was recently outbid by an Oriental gentleman for a piece of property I had been working on for several years.
Also don't forget that many people in high salary states that could not move because they needed to go to the office every day, have sold their high-rises and/or homes in places like NY/NJ/CT, and can go to places like TN, GA, etc. and buy mansions for less money.
Since they can now work remote, it enables them to move anywhere they like, and many (including Democrats) are fleeing the high tax (D) controlled cities/states, for places like FL & TX.
They get lipstick flips and resold for gains, or moved to rental properties. You keep moving the goalposts on this. The REIT-backed companies are only banking on asset “appreciation” (unrealized gains), while showing net positive cash flow for investors while they collect more money.
Your whole argument is based on a flawed premise. The lender is NOT going to get a house back that is worth thousands of dollars more than is owed to them on the mortgage loan. If the house is worth more than the loan balance, the owner of the house will typically sell it and pocket the difference. Why should the owner let their equity simply flow to the lender when it in fact BELONGS to the owner?
Again, your argument lacks credibility with real world situations. In short, it doesn't pass the smell test. The first reason is that if the lender wants the house for a rental, they'll simply buy it rather than going through this unpredictable/contrived situation you proposed which could drag on for months and years and leave the lender with a loan that's WAY behind in payments and a house that's severely damaged and needs many tens of thousands in repairs.
Secondly, if the house is really worth more than the owner owes on the mortgage as you surmise, even the dumbest of owners will figure out that he can simply sell the house and pocket the difference between the sale price and the mortgage amount.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
