Mortgage company’s workaround lets desperate buyers make all-cash bids

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Daniel Chelgren waded into the white-hot housing market earlier this year, and he quickly grew frustrated by a super-competitive playing field that favored cash buyers.

In one case, he and his wife bid $20,000 over the asking price for a Denver-area home. The winning bidder exceeded the list price by more than $100,000.

“We ran into some cases where there were 30 or 40 offers on the table,” Chelgren says. “It’s one thing to lose, but it’s another thing to find out you weren’t even in the top 15. We just felt like if we couldn’t offer cash, we wouldn’t even be in the game.”

The Chelgrens decided to change their approach. They began working with Accept.inc, a Denver mortgage company that makes all-cash offers on behalf of borrowers, and the couple closed on a house this spring.

“Think about us as a rich uncle,” says Adam Pollack, co-founder and chief executive of Accept.inc. “We want to turn every buyer into a cash buyer and every offer into a cash offer.”

In hot housing market, cash is king

During the coronavirus housing market, bidding wars have become commonplace in many areas. When sellers weigh multiple offers, they tend to favor the sure thing of a cash offer over the slightly less certain bid that’s contingent on financing.

As a result, cash buyers often can score a slight discount compared with buyers who are relying on financing. And cash buyers might be able to drive a harder bargain around inspection contingencies.

Accept.inc launched in 2019, before today’s intense seller’s market. The company announced this week that it raised $90 million from investors.

A new breed of “power buyers”

It’s not the only startup that sees potential in cash offers. Another company, Homeward of Austin, Texas, also has been building a business around the concept of making cash offers on behalf of buyers who are creditworthy but don’t have $500,000 available to wire to sellers. Homeward, which recently raised more than $370 million from investors, charges buyers a fee of as much as 1.9 percent.

Another player, Ribbon, likewise lets bidders make cash offers. It charges a fee of 2 percent to 2.4 percent. Ribbon’s service is available in North Carolina, South Carolina, Tennessee, Georgia and Texas.

Mike DelPrete, a real estate tech strategist and an advisor to Homeward, says of the new breed of companies is distinct from iBuyers that offer quick deals to sellers. “I’m calling them ‘power buyers,’” he says. “They’re empowering buyers with cash offers, bridge financing and buy before you sell.”

Homeward’s buy before you sell offering lets homeowners make cash offers before they’ve sold their current homes. It’s another way to give homebuyers a bit of leverage in a market tilted in favor of sellers.

“Buyers are looking to get every advantage they can possibly get,” DelPrete says.

How it works

Accept.inc says it charges no fees to buyers. Instead, it uses the cash offer as a way to attract customers who need mortgages. Pollack says Accept.inc sees cash bids as a marketing tool; it makes its money by originating loans and then reselling them.

When it works with clients, Accept.inc evaluates the borrowers’ creditworthiness. Then, when the buyer wants to bid on a home, Accept.inc analyzes the property to make certain the offer is reasonable. If everything checks out, Accept.inc makes an all-cash bid on the buyer’s behalf.

“It looks like any other cash offer,” Pollack says.

If the seller accepts the bid, Accept.inc closes in about two weeks. Then, in another two weeks, Accept.inc resells the home for the same price to the buyer, who closes the deal with standard mortgage financing.

Chelgren says the all-cash offer is no panacea. He lost out on five houses through Accept.inc before finally winning a home in Englewood, Colorado.

But he says he was pleased with the process. He scored a mortgage at a rate below 3 percent, and he paid no extra fees for the all-cash offer Accpet.inc submitted on his behalf.

“It sounds too good to be true,” Chelgren says. “We were waiting for the catch, and the catch never came.”

For now, Accept.inc is offering all-cash offers only on behalf of borrowers taking out conventional, conforming loans or Veterans Administration mortgages. Its service isn’t available for jumbo mortgages or Federal Housing Administration loans.

And its services are available only in Colorado. While the Accept.inc team won’t say where it plans to expand next, the company is licensed in a number of states, including California, Texas, Florida and Arizona, according to the Nationwide Mortgage Licensing System and Registry.

While Pollack considers his company an innovator, Accept.inc isn’t aiming to disrupt the mortgage industry. “We don’t come at this from the perspective that the mortgage industry is broken,” he says.

Tips for buying a house in a seller’s market

If you’re not shopping in a market served by Accept.inc, Homeward or Ribbon, you might not have an option for an all-cash offer. Here are a few other ways to make your bid stand out:

  • Get preapproved for a mortgage and have the cash for the closing costs.
  • Be ready to move fast when you find a house you love.
  • Go through the full underwriting process before you make your offer.
  • Make sure your offer is aggressive enough to stand out — but not too expensive for you to afford.

Learn more:

Written by
Jeff Ostrowski
Senior mortgage reporter
Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal.
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