Month: May 2018

With bidding wars on homes flaring up all over the country, cash offers trump all

as reported by Jeff Andrews May 22, 2018, 1:30pm EDT on Curbed.com

Anyone who has sold a home knows there’s a fair amount of uncertainty in the transaction between receiving an offer and actually closing the sale, which can take as long as 90 days. A buyer’s mortgage application could unexpectedly be denied, or the buyer could walk away from the deal at the last minute, forcing the seller to start the whole process over again by putting the home back on the market.

It’s no wonder then that when armed with an all-cash offer on a home, the offer is 97 percent more likely to be accepted, according to Redfin. Cash offers remove much of the time and uncertainty associated with obtaining a mortgage for the transaction, allowing sellers to move in short order and on coordinated timelines.

With one economist calling this spring “the most competitive housing market in recorded history,” all-cash offers have become a trump card for the wealthy in home-bidding wars that have erupted all over the country. But Ribbon, a startup that launched last week, wants to give the cash-offer advantage to everyone.

Backed by venture capital firms NFX, Bain Capital, Greylock, and NYCA, the startup launched in Charlotte, North Carolina, and represents both home buyers and sellers, and, in short, provides a guaranteed offer to facilitate all-cash home transactions, in exchange for a 1.95 percent fee.

“We’re taking that single value proposition that a lot of these institutions and iBuyers have, which is access to capital, and we’re democratizing that capital for the benefit of consumers instead of using it for corporate profits,” said Ribbon CEO Shaival Shah. “Cash discounts that consumers earn from our program flow directly back to the consumer. Based on our early deal volume, customers are seeing an average of 5 percent savings to the purchase price by using Ribbon.”

“This is what happens when the economy is strong,” Sam Khater, Freddie Mac’s chief economist, said in a phone interview. “All the higher-rate environment does is it either causes them to try and rush or look at different properties that are more affordable.”

The solid data that’s boosting confidence in the economy has sent benchmark Treasury yields soaring, and homebuyers — encouraged by income growth and low unemployment — are rushing to lock in loans before borrowing costs climb even higher. With a short supply of listings, the increased competition is only making their purchases harder to afford.

Home prices jumped 7.6 percent in April from a year earlier to a median of $302,200, and sellers got a record 98.8 percent of what they asked on average, Redfin said Thursday.

Bidding wars aren’t uncommon. Mary Sommerfeld, a Minneapolis-area Realtor, said a family she works with offered $33,000 more than the $430,000 list price for a home in St. Paul. The listing agent gave her the bad news: There were nine offers and the family’s was second from the bottom.

For Sommerfeld’s clients, the lack of inventory is a bigger problem than rising mortgage rates. If anything, they want to close quickly before they get priced out of the market — and have to pay more interest.

“I don’t think it’s hurting the buyer demand at all,” she said. “My buyers say they better get busy and buy before the interest rates go up any further.”

With this week’s jump, the monthly payment on a $300,000, 30-year loan has climbed to $1,540, up from $1,424 in the beginning of the year, when the average rate was 3.95 percent.

Kristin Wilson, a loan officer with Envoy Mortgage in Edina, Minnesota, tells customers to keep things in perspective. When she bought a house in the early 1980s, the interest on her adjustable-rate mortgage was 12 percent, she said.

City Point- soon to be the tallest building in Brooklyn – for a few months anyway.