Cash offer programs
A cash offer program buys the home you want with its own cash, then sells it to you or converts to your mortgage once your financing closes.
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How do cash offer programs work for homebuyers?
A cash offer program buys the home you want with its own cash, then sells it to you or converts to your mortgage once your financing closes. In competitive markets, that cash offer can win against higher financed bids. You pay a program fee, commonly 1%–3% of the purchase price, and still need to qualify for the mortgage.
On this page
How it usually works
- You're approved for the mortgage and the program.
- The program makes an all-cash offer and closes quickly.
- You move in, then buy the home back with your mortgage, typically within weeks.
Use a free calculator, or get your HELOC rate from Shawn.
What to compare
- The program fee and who pays it
- Rent or holding costs between their purchase and yours
- What happens if your financing changes
If you have equity in your current home, compare a bridge loan too.
What it costs
Program fees commonly run 1%–3% of the purchase price, on top of normal closing costs. On a $900,000 home, that's $9,000–$27,000. Some programs charge rent while they own the home before you close your mortgage. Compare that cost with what the cash offer actually wins you: a lower price, a faster close or simply getting the home.
How a typical program works
- You get approved with the program and its lender.
- The company buys the home with cash under your offer.
- You move in, often under a short lease.
- Your mortgage closes and you buy the home from the company, usually at the same price plus fees.
Alternatives that make an offer stronger
- A fully underwritten pre-approval, so the seller knows financing won't fall through.
- A short loan contingency and quick close.
- An appraisal gap guarantee, if you have extra cash.
- A HELOC on your current home for the down payment, so your offer isn't contingent on a sale. HELOC for a down payment.
Example: a cash offer in a multiple-offer situation
A family wants a $1,050,000 home in Irvine with four other offers. Their financed offer at $1,060,000 would carry loan and appraisal contingencies and a 30-day close. Through a cash offer program, they offer $1,050,000 cash with a 10-day close. The seller takes it, valuing certainty over $10,000. The family pays a 1.5% program fee of $15,750 and closes their own mortgage three weeks later. Net, they paid about $5,750 more than the financed offer would have, and got the home.
That math only works if the cash offer is what wins. In a market where financed offers are getting accepted, the fee is wasted money; ask your agent how many recent sales went to cash buyers before you pay for one.
Mistakes to avoid
- Paying the fee in a market that doesn't reward cash.
Also asked
Do I still need a mortgage with a cash offer program?
Yes. The company buys the home with cash, then you buy it from them with your mortgage. You need to qualify for the mortgage just as you would otherwise.
What if my mortgage falls through after a cash offer program buys the home?
Each cash offer program handles a failed mortgage differently: some let you extend or rent, some sell the home, and some charge fees. Read the agreement's terms for what happens if you can't close.
Do home sellers really prefer cash offers?
Often, because cash removes the financing and appraisal contingencies and closes faster. In a slower market, the advantage shrinks.
Is a cash offer program the same as an iBuyer?
Not quite. iBuyers buy your current home for cash. Cash offer programs buy the next home for you. Some companies offer both.
Can I use a cash offer program with an FHA loan?
Sometimes. Some cash offer programs support FHA and VA financing for the final purchase, after the company buys the home with cash. Check each program's rules before you apply.
Is a cash offer program fee refundable if I change my mind?
Usually not after the company buys the home. Before then, terms vary. Read the cancellation terms and ask what happens if the deal falls apart for reasons outside your control.
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Sources
Official sources behind this guide.
- What is the difference between a home equity loan and a HELOC? · Consumer Financial Protection Bureau
- What you should know about home equity lines of credit (booklet, PDF) · Consumer Financial Protection Bureau