As Chief Real Estate Officer for Homeward, I’ve fielded a lot of questions lately about the state of the 2022 housing market. Specifically, agents express concern about the market cooling. Many of these questions come from agents who have only ever worked in a hot market. More experienced agents are still haunted by the ghost of the 2008 housing crisis. And even real estate agents who were literally children in 2008 have voiced their concerns with me over the cooling market and whether we’re heading into 2008: The Sequel.

Yet when I ask agents around the country about the state of their local market, they all say the same thing: they’re still selling. No, they’re not getting twenty offers on every property anymore, but they still have two or three. No, they’re not massively overbidding, but they still overbid. And they don't get offers on a property within an hour, but it still sells within five days.

Which begs the question: if people are still buying and selling homes at a solid rate, why are we still talking about the market crashing?

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Our fearful conversations about the housing market keep scaring us about the housing market

A quick look at the Google results for “housing market,” and it’s clear to see why everyone is panicked. Here’s some of what I found lurking in the search results:

• “A housing bubble requires 3 elements. The 2022 housing market has hit 2”
• “The 2022 Housing Market Is Different Than 2008. Will It Still Crash?”
• “The 2022 Housing Market Crash.”
• “Rising interest rates are crushing the US housing market”

There are plenty of even-keel takes on what’s happening floating around the internet, but it’s the doom-and-gloom articles that too often dominate the headlines. I get it: clickbait gets page views! But I can’t help but feel that the real crisis amongst real estate professionals is that we keep scaring the pants off ourselves. The market likes a sure thing, and agents like a sure thing, and we’re all a bit jumpy when things start showing the slightest signs of friction.

So let’s cut the clickbait and face the music: the market is definitely cooling. But that doesn’t mean agents need to ration food, bury their life savings in the backyard, and start new careers. The causes of this correction could not be more different than those that triggered the 2008 housing crisis. And those agents who calmly anticipate and prepare for the market shift will find themselves in a terrific position to guide their clients through the challenges to come.

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2008: A housing bubble fueled by bad mortgages

Make no mistake: 2008 was rough. I was there. I started flipping houses in the Phoenix area in 2005, right at the height of a massive market incline. Housing prices appreciated so quickly that it was hard not to make money as an investor.

Lenders, borrowers, and even Wall Street were making bets that the incredible price appreciation would last forever. Economists call this practice speculation. Speculation can lead to terrific returns when the market’s hot, but even marginal dips in the market can wipe out entire investments. Out-of-control speculation helped lead to the 1929 stock market crash. It’s just not a sound strategy.

But lenders were approving everyone for mortgages — and I mean everyone. There were three types of mortgages that were popular at the time:

1. Subprime mortgages. These loans were offered to those who couldn’t qualify for a standard “prime loan.” They carried high interest rates to offset the high risks the lenders were taking on.
2. Stated-income mortgages. I could walk into a bank, tell them I made $500,000 a year without a lick of proof, and they’d loan me the money for the entire property’s value.
3. Adjustable-rate mortgages. Borrowers paid less in the initial years of the term and more as time went on. (If that sounds a bit like kicking the can down the road — don’t worry. We’re getting there.)

This mass approval of high-risk mortgages quickly became absurd. I remember being in a general education class when a sponsoring lender came to visit. He was promoting his — I kid you not — “One Day Out of Bankruptcy” loan. The idea here was that there was no one better to lend a fistful of cash to than somebody who just had all of their liabilities cleared. That might sound ludicrous by today’s standards, but at the time, no one had a problem with it. Obtaining financing was simple — too simple, as we’d quickly come to find.

The bottom falls out

Like so many others at the time, I wasn’t prepared when the market crashed in 2008. I found myself owing more money on the properties I held than they were worth. The bill had come due on all those high-risk mortgages that banks had been cutting for years. People started defaulting on mortgages they should never have been approved for in the first place. There were more than 2.3 million foreclosures in 2008 alone.

The collapse of the housing market in Fall 2008 brought Wall Street to its knees as well, resulting in a full-blown recession. Recessions have a funny way of dragging down housing prices as incomes plateau or shrink and fewer people seek to move. 2008 was no exception. Those still barely paying on their high-risk mortgages suddenly found they owed more on their houses than the houses were worth.

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2022: Yes, the housing market is cooling — back to normal

Flash forward to 2022, and now the housing market is cooling again. But let me be clear: the current market is nothing like 2008.

The difference is that what happened in 2008 can’t happen again because of safeguards put in place in its aftermath. The high-risk mortgages and speculation that fueled 2008 are history. Lenders operate far more conservatively now, both out of their own interest and because of increased government regulations and oversight. Long gone are the days of blanket mortgage approval. For instance, nowadays, you actually have to prove you make a certain amount of money before lenders let you borrow their money (Go figure).

A recent Fannie Mae report shows just how much has changed since the rock bottom that was 2008. You must maintain a 620 FICO score for a bank to approve you for a conventional loan. The average FICO score of American home buyers currently sits at an impressive 754 as of March 2022. Plus, the total mortgage debt in the United States is less than 43% of current home values.

So I get why agents feel nervous about the current cooldown. It looks similar at first glance: several years of rapid appreciation followed by a sudden market slowdown. But if bad mortgages and speculation aren’t bringing the market down, then what is?

An unsustainably hot market

“The average price of a house in the U.S. jumped from $403.9k to $497.3k between Q4 2020 and Q4 2021.”

To answer that, we need to identify what caused the hot streak that dominated most of the 2010s. I’d argue three things primarily caused our extended seller’s market:

1. Limited housing supply. When people stopped buying houses during the 2008 crisis, companies stopped building them. Demand outstripped supply for most of the last decade, which drove up housing prices.
2. Record low interest rates. Interest rates hit a downward trend throughout the 2010s, making mortgages extremely affordable. The average interest rate in 2021 was 2.96%, which is about as close to a net neutral interest rate as you’ll ever see. This all-time low was due largely to the fact that the Fed was worried about the pandemic fueling a recession.
3. External factors. No one could have predicted that a pandemic would strike in 2020. Even fewer people could have seen that what at first appeared to be a nightmare scenario for agents would actually superheat the market.

It’s hard to overstate just how hot the market was heading into 2022. House prices have historically risen over time, but we’re talking double-digit appreciation. The average price of a house in the U.S. jumped from $403.9k to $497.3k between Q4 2020 and Q4 2021. That’s a difference of more than $90,000 in just 12 months! There is no historical precedent to compare that jump to. It’s simply never happened before.

Welcome to course correction

All of that’s to say that the market has long been overdue for a correction. You can't sustain 20% to 25% appreciation in certain markets like South Florida year-over-year indefinitely. It just doesn't happen. Most bull real estate cycles last six to eight years at the most, and the post-2008 crisis cycle ran for eight to 10 years even before the pandemic hit — and then it got even hotter!

There are a number of factors currently putting the economy through the wringer, but it’s the end result — inflation — that’s having the biggest chilling effect on the market. The Federal Reserve board has increased interest rates to fight inflation. The Fed’s interest rate changes don’t directly impact long-term investments like 30-year mortgages, but they do have a ripple effect that impacts mortgage pricing. Generally speaking, when the Fed raises the interest rate, mortgage rates spike. The latest rise in mortgage rates means homeowners pay a decent amount more on a mortgage now than they would have at this same time last year.

Truthfully, historically low interest rates have spoiled us these last few years. Interest rates were at 2.68% in December 2020 — literally the lowest they’ve ever been. But reaching back to the 1970s, the historical interest rate averages closer to 7.7%. Mid-July 2022’s interest rate for a 30-year fixed-rate mortgage sits around 5.3% — still well below the historical average.

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What real estate agents should expect from the 2022 housing market going forward

Single-digit appreciation and a climbing interest rate might freak out homebuyers, but I have to tell you: this is the “real” normal. The last decade outperformed historical trends, and things have started to calm down. Given the economic outlook, you can expect a cooler market to continue for some time. Through the coming year and potentially beyond, agents should expect:

Continued supply issues

This is the chief reason agents shouldn’t fret about a market correction. Demand still outweighs housing inventory and likely will for several years. The rate of new home builds dropped in recent months in response to inflationary pressures, supply chain issues, and increased cancelations. And if higher interest rates discourage some segments of potential buyers from upgrading to a new home, there will be fewer homes on the market, further exacerbating this shortage.

Ultimately, simple economics plays in real estate agents’ favor here. Until the number of homes built outpaces demand, the housing market has an attractively high floor.

Normalized appreciation

Again, double-digit appreciation is simply unsustainable. Even with the market starting to cool, Austin saw 19% year-over-year appreciation this past May. 19%! Markets like Austin that have overperformed in the last two years may chill to the point where they see house prices drop slightly. But this isn’t a “crash” — just a return to sanity.

Most other markets are more likely to see a slowing rate of appreciation — somewhere closer to the 4-5% you’d expect to see on average. An important thing to remember is that looking at short-term trends in the real estate market doesn’t reveal what to expect down the line. The market can be volatile month-to-month, and the current economic situation is only likely to make it more erratic than usual. It’s not worth panicking over pricing stagnation or depreciation in any given month when the long-term trends are still friendly. (If we’re seeing either of those things across the board come 2023, I’ll have to write a new article.)

Decreased competition

Newsflash: 20 bids in a day isn’t “normal” real estate. We’ve been spoiled, and we’re regressing to the means. The sort of competition you’ll see in the next few months is more akin to what you’ll see over the course of your career than the windfall of the last few years.

Your sellers can’t be as picky as the market swings back in favor of buyers. Many would-be buyers will look at the rising mortgage rates and say, “I refinanced last year at 3%, and now the interest rate’s almost 6%. Why would I pay more money over time for that house than I’m paying for the house I’m in?” The buying power is just not what it was a year ago, and it’s going to prevent people from moving.

And remember: prices are still mostly appreciating. People will still pay a premium for a new house in an economic climate where their dollar doesn’t go nearly as far. Higher interest rates mean even fewer people will be able to compete for a house, further reducing the number of offers on a property.

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3 things every agent can do to weather uncertain housing markets

There’s no need to fear a sudden market crash, but that doesn’t mean everything’s smooth sailing from here. Inflation’s not slowing, and the external conflicts fueling it show no signs of subsiding anytime soon.

The cooler market will test the skills of every agent out there. Sales are no longer automatic. Commission checks will shrink. Clients will ask more of you at a time that you stand to make less. You can’t just show up with a lockbox key, show a property, and cash a check 30 days later.

That said, agents who understand the current climate will be okay. In fact, most agents who buckle down and prepare themselves for selling in this cooler market will come out the other side better at their jobs. I did back in ‘08 — though I certainly took my lumps as I figured things out along the way.

My advice for agents? Spare yourself the pain of figuring things out the hard way and prepare yourselves for new normal with these three strategies:

1. Scale back your expenses

The glory days of oversized commission checks are over (or, at least, they’re on a temporary hiatus). You’re still going to bring in revenue, but you need to run a lean operation to ride out an uneasy market. I’ve seen too many agents go out of business because they're overwhelmed with expenses when revenue dips.

Make sure your expenses are controlled and that you have your cash reserves in a position where even sudden market shifts can’t sink you. This means making some difficult decisions around cutting overhead or tools you love but don't really need. Also consider shifting your marketing to focus on more cost-effective lead generation methods like social media, email newsletters, or video—with an emphasis on converting to a face-to-face appointment!

2. Expand your offering to improve customer experience

While agents should function as consultants in any market, it’s especially important in a market downturn. Agents looked like heroes in the latest hot streak for just showing up, listing a property, and receiving an offer an hour after it went on the market. 

But it won’t be enough to “just buy or sell” in a market downturn — any ol’ realtor can do that. You need to provide a suite of services to your customer beyond facilitating home sales. The consummate agent in today’s market will:

• Educate clients on the state of the market
• Walk clients through the ins and outs of the home purchase/sale process
• Meet regularly with clients to review strategy and make necessary adjustments
• Use PropTech tools to improve meet clients in digital spaces and make more competitive offers

The idea of the “agent as a consultant” is at the heart of what we do here at Homeward. Imagine showing up at a prospect's house and being able to show them a menu of services you provide. Do they want to buy a home before they sell the one they’re presently in? Hey, you have a Homeward solution for that. Is the local market still competitive and your prospects need a cash offer to get a seat at the negotiating table? Of course you have a solution for that, too!

3. Learn from those who came before you

If I had to hazard a guess, I’d say 80% of agents out there right now have never been through a substantial market shift. That means 20% of agents did make a living during the 2008 crisis. Since they’re still out there making money, I have to assume they have countless nuggets of wisdom about how to weather a cooler market.

If I were a young agent, I’d come to the table with a willingness to learn and network and engage with any agent who’s been through it before. I’d be picking their brains clean of any tidbit that can help me strengthen my business in the long term. Believe it or not, many agents didn’t just survive during 2008. The ones who dug deep and adapted found a way to thrive.

If thriving sounds good to you, start here:

• Connect on social media. Facebook groups like the Homeward Agent Network are goldmines for helpful tips and anecdotes. Meanwhile, if you’ve ever been on LinkedIn, you know people love to give advice freely.
• Find trusted blogs. We’re smack in the middle of a glut of terrific real estate content. (Case in point: You’re reading an article on real estate advice right now.) You know there’s great information out there just waiting to be unturned.
• Pick up a book. News reports are reactionary. The market dips, and they report on it. Agents or other experts who lived through 2008 have had the time to sum up their experiences and give actionable tips removed from what’s happening right now.

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It’s time to earn that commission check

The most critical thing to remember while working in a cooling market is that your clients are anxious, too. They read many of those same news articles and think-pieces that predict nothing but storm clouds for the housing market over the next year. Your customers have their entire lives invested in their homes and the prospect of finding a new one — and they’re depending on you to provide some stability amidst all the uncertainty.

So be honest with them. Tell them the truth about the current climate and temper their expectations — but also provide them with the tips, resources, and support as you guide them to their new home. The wins (and commission checks) are still out there. It’s time to prove you can earn them.

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The most expensive investment a person makes in their lifetime is most often a house. Many lenders require 20% down on a home before they’ll offer their more favorable mortgage rates. As of July 2022, the average house price in the U.S. hovers around $428,000. That means homeowners hoping to put 20% down will have to fork over a whopping $85,600.

Your down payment and subsequent mortgage are the obvious costs of purchasing a home, but hidden costs sneak up on buyers who already feel financially strained. Mortgage lender requirements, closing costs, and other lesser-known fees add up for homebuyers, especially those with little to no experience navigating the real estate market.

You’ll want to study the potential hidden costs of buying a home to better budget for your next home purchase. You won’t be taken by surprise when a hidden cost comes knocking — and you may even find a way to avoid certain unnecessary costs entirely.

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Process costs

It takes an average of 45 days to close on a house. Several costs pile up within that nearly two-month window, including:

Earnest money

Earnest money acts as insurance for the seller in case you back out of the deal. It’s typically 1-3% of the home's total sale price and is due within three days of the seller accepting and signing your offer.

You forfeit your earnest money if you change your mind about buying the house. However, you’ll keep it if the seller backs out. You’ll also keep the money if the sale falls through due to a reason covered by a contingency. For example, if the home inspection fails and you have a due diligence contingency in place, your earnest money will be returned.

The good news: Your earnest money counts toward your down payment on your closing date.

Read more: Four common types of homebuying contingencies

Home appraisal fees

Your lender will want to ensure that the home you purchase is actually worth what the seller says it is. This requires a home appraisal, and (surprise!) you get to pay for it.

A designated appraisal management company (AMC) will appoint an appraiser to perform this duty, so it’s not something you can price shop. The total cost of your appraisal will depend upon several factors, including:

• The size and value of the property
• The type of mortgage you’re applying for
• The property’s geographical location

Expect to pay at least $300 for an appraisal, but it could be closer to $1,000 depending on your situation.

Home inspection

Your lender won’t require a home inspection, but 85% of homebuyers still get one to avoid purchasing a house with serious structural issues. Home inspections save homeowners money on repairs in the long run, but scheduling one will cost you money upfront.

The factors that affect the cost of a home inspection mirror that of a home appraisal — namely, square footage, cost of living, and the state of the housing market. The costs between the two are similar as well, with prices averaging $300–$400 but often costing more depending on where you live and what you’re buying.

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Closing costs

There’s nothing quite like sitting down to officially take possession on your closing date — and then finding out you weren’t prepared for the litany of closing costs. ClosingCorp pegs the average price of closing at $6,837 including taxes, which is a hefty bill if you’re not expecting it. These costs must be paid before you can take ownership of your house, so come to the table with your checkbook.

Loan origination fee

Your lender undergoes an intensive process to review, underwrite, and approve your mortgage — and the loan origination fee is what they charge for the work involved. Most loan origination fees cost 0.5% to 1% of the total loan rate, meaning you’ll owe a sizable $2,000-$4,000 on a $400,000 house at closing time. 

Homeowner’s insurance 

During your closing meeting, you’ll need to prove that you’ve protected your investment with a homeowners insurance policy. Lenders typically require you to have paid for a year of insurance before signing off on your mortgage. NerdWallet figures the average cost of homeowners insurance in the U.S. to be $1,784 a year, but the rates are higher in states with consistent rates of severe weather and natural disasters.

Property tax

You’ll also be expected to pay the property taxes on your new home as part of your closing costs. The amount you’ll pay is prorated based on how many months you’ll own the house for the current calendar year. For instance, if you close on May 1st, you’ll likely be on the hook for eight months-worth of property tax.

Your property tax bill will depend on two variables: the value of your new home and the going tax rate. The city, county, and state you live in all impact your tax rate. (For curious minds: as of 2020, Hawaii has the lowest property tax rate at .37%, while New Jersey ranks highest at 2.2%.) 

Escrow fees

Your escrow account is where your earnest money is held while all parties hash out the sales process. Down the line, your lender will use the account differently. They’ll put money into escrow from your mortgage every month and periodically use the funds to pay off your property taxes and homeowners insurance premiums. 

Your lender pulls funds from your escrow account, but a third-party escrow company manages and operates it. They don’t set it up for free, though, with companies usually charging 1-2% of the total sales price for their services. This cost is often split between the buyer and the seller, though these terms may be negotiated in favor of either party as part of the initial offer.

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Situational costs

Other situations add to your overall homebuying cost depending on where and how you’re buying your house. These costs don’t apply to every purchase situation, which is why they often take homebuyers by surprise.

Homeowners association fees

You have to do more than join the club and follow the rules if you buy a house in a neighborhood governed by a homeowners association (HOA). You must also pay HOA fees to enjoy its benefits. 

There’s an additional cost that often catches homebuyers off guard: the HOA transfer fee. The HOA charges this fee to cover administrative costs whenever a home within the association changes possession. Most HOAs charge around $200-$250 for this fee, and the seller typically covers the cost. However, it’s become increasingly popular for the buyer to cover this fee to make their offer more attractive. Keep this fee in mind as a negotiation tactic if you’re buying in an especially hot market — and prepare to shell out for it if you include it as part of your final offer.

Mortgage insurance

Mortgage insurance offsets some of the risks a lender takes when it allows people to buy a house without substantial money down. Mortgage companies know that not everyone can afford a sizeable down payment for their homes, but small down payments equal more considerable risks for lenders. Lenders charge a small premium in the form of mortgage insurance instead of denying mortgages for cash-lacking prospective buyers.

Lenders usually require you to purchase private mortgage insurance (PMI) on a conventional mortgage loan when you put down less than 20% on your house. It shows up as a premium in your monthly mortgage cost, and you’ll typically pay it until you’ve paid off at least 20% of your home’s value. Meanwhile, those taking out Federal Housing Administration (FHA) loans without putting at least 10% down will pay a mortgage insurance premium (MIP) for their mortgage term. 

Most annual PMI and MIP rates average between 0.22% and 2.25% of your total cost spread out over monthly mortgage payments. NerdWallet has a handy tool that allows you to estimate the cost of your PMI based on factors like your total home value, down payment, and interest rate.

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Lower the hidden costs of buying a home with Homeward

Homeward helps eliminate one of the highest costs of homebuying: buying a new house before selling your old one. When you find a new home on the market, waiting to sell your old one before making an offer is risky. Someone could snap up the home you want while you wait for your home to sell, but most people can’t afford to pay the mortgage on two houses simultaneously.

Additionally, many people simply can’t afford to purchase a new home until they’ve sold their old one. Their liquidity is locked up in their existing house, making it impossible for many homebuyers to put down 20% on a new home without selling first.

Buy before you sell allows you to buy your dream home and gives you time to sell your old home — without paying two mortgages. Once pre-qualified, Homeward will buy your new home for cash and let you move in for a low rental rate. Meanwhile, you can work to put your old house on the market and purchase your new home back from us once it sells. It’s that easy to save yourself stress and money as you make one of the most significant purchases of your life.

Simplify the homebuying process with Buy before you sell.

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Real estate professionals commonly estimate that the house-closing process lasts between 30-45 days. However, data from Ellie Mae shows that it takes homebuyers 50 days, on average, to close on a new house as of September 2021.

The nearly three-week difference between the lower 30-day estimate and the actual national average boils down to theory versus practice. Your home close could take 30 or even fewer days if everything goes smoothly. However, the closing process consists of many moving parts. A single delay at any point in the process could delay your close by days or even weeks.

Many homebuyers assume a long closing process is just part of doing business in the modern housing market. However, short closing periods are possible for any homebuyer who takes the time to understand the process and implement a few simple tips.

What are the key steps in the closing process?

The oft-cited “30-day” minimum figure stems from the average time it takes to complete the following tasks:

1. Application process and documentation requests: 1 week

Well-prepared homebuyers can complete these tasks within a matter of days. First, you need to formally apply for your mortgage. Your mortgage lender will then need to see documentation pertaining to your identity and finances, such as:

• Tax returns and W2s
• Proof of assets, such as retirement account and bank statements
• Debt statements
• Your credit report

2. Appraisal, the underwriting process, and conditional approval: 1-2 weeks

These tasks occur in the middle of the closing process. Your bank first completes an appraisal to ensure the loan money you’ve applied for aligns with the actual value of your house. Then, the underwriters get to work verifying the information you provided to ensure you are capable of paying back the lender. Your lender may conditionally approve your loan while waiting for additional closing documents from you.

3. Clear-to-close and final closing review: 1 week

Your mortgage company will issue a closing disclosure detailing the terms of your mortgage once they’re satisfied with your application. Your lender is then legally required to give you three days to read over the disclosure before you can sign off on the mortgage. Finally, you’ll meet with a closing agent to seal the deal, and your new house will be officially transferred into your name.

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Total time to close: 4 weeks, or roughly 30 days

What obstacles affect how long it takes to close on a house?

The fact that the average home takes 50 days to close instead of 30 reveals just how often the closing process hits a stumbling block. Certain seller-related obstacles — like title concerns — are out of your control, but there are many (often avoidable) ways you may delay closing times as a buyer.

1. Financial changes

Lenders don’t make money by loaning money to borrowers who can’t pay them back. Your lender deeply scrutinizes your current financial situation before making a determination as to whether they’ll approve your mortgage. Any major financial development occurring during the evaluation stage may force the underwriter to start back from square one with your application.

Most borrowers understand a good credit score and stable employment situation help make a better case for approval. Severe financial issues that impact you in these areas may even cause a mortgage company to reject your application outright.

Those looking to avoid prolonging their closing process should avoid:

• Changing jobs
• Missing a bill payment
• Bouncing a check
• Making a major purchase, like a new car

2. Contingencies

Contingent offers force sellers to satisfy certain conditions before closing can move forward. This protects buyers from completing a problematic transaction, but meeting certain contingencies takes time and extends the time it takes to close.  

Contingencies are an important means to protect a homebuyer’s interests during a home sale. For example, a title contingency gives homeowners a way out of a sale in the event of title issues, such as if a title search produces evidence of liens against the house. 

However, the more contingencies that are included in a home offer, the longer the closing process can take. Additionally, sellers may choose an offer with fewer contingencies over one with more in hotter housing markets.

Some of the more common contingencies include:

• Financing contingencies. This contingency guarantees that buyers will have a set amount of time to find a way to finance their new home purchase. If they cannot do so within this time, the buyer can walk away without having to pay a fee to the seller.
• Home sale contingencies. These force sellers to grant buyers a certain amount of time to sell their own house. If the home does not sell by the end of this period, the buyer can walk away from the sale without penalty.
• Appraisal contingencies. Your lender will require a home appraisal of the new home to ensure that the amount you’re asking for aligns with the home’s determined market value. If the appraisal comes in lower than the purchase price, the sales price will need to be renegotiated, or the buyer will need to provide the difference themselves. Otherwise, this contingency allows the buyer to walk away from the sale.

Read more about the most common homebuying contingencies

3. Delayed response times

Your lender will contact you constantly throughout the closing process to ask for documents, documents, and more documents. Many first-time homeowners especially don’t realize the amount of communication required to get a mortgage approved. Any delay in the returning of even a single email or phone call stands to increase the amount of time it takes the underwriters to sign off on your loan.

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4 ways buyers can speed up the closing timeline

Certain aspects of closing on a home are out of your control, but there are a few steps you should take to streamline the process. Homebuyers who manage to close quickly, often:

Get pre-approved

Before you even start searching for a home, find a lender to work with on getting pre-approved for a mortgage. Pre-approval allows your lender to estimate how much they’d be willing to loan you based on your income, assets, and credit score. Pre-approval doesn’t guarantee formal approval for your mortgage once you find a home to buy, but it gives you a sense of what price range your lender is likely to approve you for. 

Pre-approvals minimize the risk that a homebuyer will attempt to buy a house that they ultimately cannot afford. No one wants to spend weeks in the closing process only to find out that their deal has fallen through due to financing issues. Sellers prefer offers from buyers with pre-approvals for this same reason.

Additionally, a pre-approval forms the basis of your eventual home loan application. Your lender will have the documents you submitted for pre-approval on hand, saving you from wasting time looking for tax returns and Social Security numbers during the closing process. You’ll likely have to submit additional documentation for your official mortgage application, but a pre-approval will still save you from a good deal of back-and-forth at closing time.

Schedule the appraisal ASAP

Work with your lender to schedule the appraisal as soon as your loan application is accepted. As mentioned, your lender will most likely require an appraisal of your new home to make sure what you’re approved for coincides with the value of the property. 

The actual appraisal only takes a few hours, but a busy appraiser may not be free for days or weeks. They’ll also require time to write the actual appraisal report and deliver it to your lender, so be sure to make yourself available for the appraiser’s first open appointment.

Come prepared on closing day

It’s easy to assume smooth sailing once your lender approves your mortgage, but there’s still one potential cause for delay: your closing date. Your home sale becomes official at this meeting, but you’ll need even more documentation to finish the job. The lack of final paperwork may only push back your close by hours or even a couple of days, but any delay that close to the finish line is sure to frustrate.

Anticipate this potential roadblock and bring these items to your closing meeting:

• Your closing disclosure
• A certified cashier’s check covering the closing costs outlined by your lender
• A copy of homeowners insurance
• Your photo ID
• Any documents requested by your lender

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Use cash offers to eliminate contingencies and close faster

A little forethought and a good deal of preparation will help you minimize the amount of time it takes to close on your house. Thirty days may be on the low end of the average estimate, but some homeowners are able to close on their homes even faster.

Take Kyle Donald. Kyle managed to close on his new house in just 14 days in a hot Atlanta market — 36 days faster than the national average.

Kyle and his real estate agent used an increasingly popular method to get the win and speedy close: the cash offer. He showed up to the bargaining table fully qualified for an all-cash offer through Homeward. He proved he had liquidity upfront with our Buy with cash solution, eliminating the need for a financing contingency. He also didn’t need to worry about a home-sale contingency because Homeward allows customers to Buy before you sell.

Cash offers have become hard to beat, with almost a quarter of home sales involving all-cash transactions. Kyle had the right idea: using Homeward as a means to sweeten his offer and facilitate a quick close. For those tired of waiting on their next home, it’s hard to find a better tool than all-cash offers with help from Homeward.

Use Homeward to close on your house — and fast

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Miami’s famous for its steady sunshine, beautiful beachfronts, and vibrant nightlife. Lately, the entire South Florida region has gained attention for another reason: its sizzling and hyper-competitive housing market.

Real estate agents across the country face serious challenges in the current market — challenges especially difficult for agents working in the greater Miami metro area. Low supply and skyrocketing demand combine with Miami’s attractive locale to make the area especially difficult for agents assisting local home buyers.

And so Miami agents are faced with a dilemma: they can make serious money from soaring housing prices — but only if they can close sales amidst fierce competition. Agents must retain a competitive edge to win in the Miami real estate market — and a cash offer is sure to sweeten the pot.

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The Miami real estate market is growing hotter — and real estate agents are getting burned
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You’d be hard-pressed to find a region where the housing market isn’t hot, but Miami’s is especially difficult for anyone looking to buy a home. Median home prices leapt 17.4% since April 2021 to $430,299. This isn’t an issue that just impacts luxury homes on the beach, either. Prices have jumped across the board, as the median price of even a one-bedroom home in Miami-Dade County rose more than 27% between April 2021 and April 2022.

Several factors have contributed to this surge in Miami-area housing prices and created a headache for local real estate agents and their customers.

A low supply and an increasingly crowded market

Mortgage rates climbed to start the year, but only after a decade of staying consistently low. This long run of attractive interest rates helped fuel the current demand for homes in the Miami area. Now demand far exceeds supply. Miami-Dade saw a 10% decrease in available homes just between March and April of 2022.

Increased demand and high housing prices may at first appear like a windfall to agents, but the limited supply of available houses puts them in a difficult position. Dozens of offers on homes stream in as soon as a home is listed, and most of the offers come well above the asking price. An agent in Boca Raton hosted an impromptu open house just one day after listing the property and received a whopping 40 offers. Each was a contingency-free cash offer that was significantly above the asking price.

And it’s not just your average buyer that Miami agents compete against. Hedge funds and investment firms use their considerable resources to snap up homes and sell them for a tidy profit. These organizations have more flexibility in how much they can offer and often make cash offers to make their bids more attractive. Their maneuvering leaves locals in the lurch too often, driving prices sky-high and out of the range of the typical Miamian.

Customers expect their real estate agents to produce results

An agent’s customers may be understanding of a rejected offer or five. Most people understand the competitive nature of the housing market in 2022. However, this goodwill won’t last as rejections continue to stream in. Hot market or not, eventually, customers tend to blame their agent for repeated rejections.

And there’s no shortage of alternatives for customers dissatisfied with their agents. Housing availability may have decreased over the course of the pandemic, but the number of real estate agents in the country has exploded over the last few years. Over 156,000 people became real estate agents over the last two years, and the National Association of Realtors now counts more than 1.5 million agents as members.

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This places enormous pressure on Miami agents to use whatever means they can to close deals — which is why the most successful agents have turned to cash offers.

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Cash offers get real estate agents a seat at the table

Homebuyers have historically used cash offers as a way to strengthen their bid. Cash offers are four times more likely to beat out non-cash offers, which explains why 23% of all home sales in the US were cash (as of July 2021). This ability to differentiate an offer from others is vital in a market like Miami’s. Homeward’s own Chief Real Estate Officer Brian Gubernick sums it up:

“In March alone, 64% of properties in Miami received multiple offers. Sellers aren’t just looking for the highest offer — they’re looking for the strongest offer that they can rely on not to fall through.”

Last year in Palm Beach County alone, an incredible 40% of home sales involved cash offers. The involvement of investment firms and hedge funds and their formidable cash flow has only emphasized the importance of cash in transactions. The increased likelihood of a listing receiving multiple cash offers means cash is no longer just a competitive advantage. If a listing receives 30 offers and yours is the only one that’s not cash, you’re not likely to have the seller seriously consider your offer. Make a cash offer to earn a seat at the bargaining table.

However, an agent’s average client doesn’t have hundreds of thousands of dollars tucked away to make cash offers. Homeowners often need to sell their current home to come up with the funds to purchase a new one. This lack of available cash and inability to move quickly on a listing hinders agents’ ability to close for their clients.

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Homeward gives agents (and homebuyers) a path to cash offers

A few short years ago, a lack of cash on hand would have sunk deals in such a competitive market. Luckily, Homeward empowers real estate agents and their clients through our innovative cash offer solutions: Buy with cash and Buy before you sell. Homeward can help, whether your client doesn’t have the cash upfront to make an offer or needs to sell their current house first.

Homeward takes a traditional real estate transaction and breaks it into two separate parts. First, we buy the home for cash. Then, your clients buy the home back from us. This simple process allows us to turn conventional offers into cash offers for agents and their clients. Here’s how it works:

Buy with cash

Imagine your customer has found their dream listing, and they want to make the strongest possible offer. They’re willing to forego contingencies, but they don’t have the liquid assets to make a cash offer.

This is where Homeward’s Buy with cash comes to the rescue. You fill out an application on behalf of your clients. Once we accept it and approve them to make a Homeward Cash Offer, we’ll work with you to make a cash offer on the property. We’ll purchase the house if your offer wins, and your client can move in the day after the title is ready. They pay rent until their mortgage is set, and then they buy the home back from us with the money from the bank.
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Homeward is founded and largely staffed by real estate agents, so we’ve built Homeward to keep real estate agents at the center of the transaction. Our focus on helping agents extends to our fees, as well: agents get to keep every penny of their hard-earned commission.

Buy before you sell

Imagine this: Your client purchases their new home now before its sell price climbs any higher. In the meantime, they hold onto their existing home a bit longer, wait for it to appreciate further, and sell it for a higher rate. You’ve just used Homeward to make your customer more money on their move than you could have in a traditional transaction.

Homeward’s Buy before you sell takes the cash offer to the next level. We approve your clients for a set amount of money. You work with us to make a cash offer on a listing, we purchase the home, and your client moves in ASAP. Meanwhile, your clients list and sell their former residence and pay rent to us until the house sells and their new mortgage is finalized.

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‍The ability to make a cash offer before you’ve even sold your home eliminates roadblocks that too often slow down the homebuying process. New Miami listings often receive countless offers, making the ability to make a cash offer without needing to sell your current home first critical to winning for your clients. In most cases, we can also purchase your home after six months if it doesn’t sell, so you’re not stuck with two houses indefinitely. However, it’s unlikely you’ll find difficulty selling your house in Miami anytime soon.
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Use Homeward’s cash solutions to win for your clients in Miami

The increasing level of competition in the Miami housing market only confirms the desirability of selling in the region. Everyone from local agents to foreign investors knows there are buckets of money to be made for those who can close — and everyone who can close knows to use cash offers.

Success in South Florida starts with giving your clients every possible means of making a strong offer. Add the Homeward Cash Offer to your existing toolset and carve out your niche in this hot Miami market.

‍Win big for your clients in Miami with Homeward.

What is a Preliminary Title Report?

Congratulations on finding that perfect house! After months of effort, you’re excited about finally opening escrow and getting the keys to your new abode. But is that perfect house really that perfect? Before proceeding, you should look into getting “title insurance.”

Title insurance provides you (and your lender) protection against losses you may incur from issues with the title of the real property you’re about to purchase. A common example of such a loss is a legal fee resulting from ownership claims made by an unknown heir. The company that provides this insurance is known as a “title company.”

However, getting title insurance isn’t as simple as paying a premium. Your title company will first need to create a “preliminary title report.” While it may seem like another unnecessary formality in an already wearying task, getting a preliminary title report will help protect every party involved in the real estate transaction.

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What is the purpose of a preliminary title report?

A preliminary title report is a document that provides details regarding the title and the background of a property. It helps ensure that the home you’re about to purchase legally belongs to the seller and not an unknown heir who may try to claim the property. The report also lists any encumbrances — such as tax liens, mortgage liens, and easements — on the real estate. If left unresolved, these encumbrances and potential conflicts regarding ownership of the property could affect you after you’ve bought the house.

Your title company is responsible for creating the report before issuing the title insurance policy. They do this by checking public records and official documents. Any issues that are discovered and reported in the report — known as “exceptions” — are excluded from title insurance coverage. The buyer, lender, and the seller are then liable for any losses arising from these exclusions.

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Who is responsible for requesting the preliminary title report?

Lenders ask for preliminary title reports and title insurance coverage as one of their requirements. In a typical real estate transaction, it’s customary for the seller to initiate the process with a title company after escrow is opened. The seller then presents the preliminary title report as a part of their disclosure packet, which consists of important documents the buyer and the lender are interested in.

The seller also usually pays for the prospective owner’s policy once all the details have been ironed out. This may vary based on the customs of the real estate market in your region. However, the buyer is always responsible for bearing the cost of the lender’s title insurance.

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What to look for in a preliminary title report

The first thing you want to look at is the extent and nature of the ownership of the seller. First, it will help confirm the identity of the real owner. Second, it will tell you what adequate rights they have over the property and how that could affect your future ownership of the house.

There are different types of property ownership in the U.S. The most common one is “fee simple,” which gives the owner the complete right to sell the property. However, there might be certain conditions set by a former owner that the current and all future owners must adhere to. For instance, the owner may state that the property may not be turned into a hotel or an inn.  Work with your real estate agent and attorney to understand the type of ownership stated in the report.

Also, look for liens resulting from owed mortgage amounts, property taxes, or construction/repair payments. All of these debts, along with any limitations and interests of a third party, will be listed in your preliminary title report as numbered items. Review them carefully before you purchase the property to avoid any surprises later. In the sample preliminary title report below, the property has a lien on its solar equipment — if the debt isn’t repaid, the creditor could claim that asset:

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A preliminary title report could also list any standard exceptions that aren’t specific to the property- but relate to the general laws of a region or municipality. Examples of these exceptions include any laws surrounding construction work and the use of the property. For instance, you might not be allowed to extend the garage in certain geographical regions. The title insurance policy would not cover any costs resulting from the violation of such rules.

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Why you need a Preliminary Title Report as a buyer

A preliminary title report raises any red flags regarding title ownership and any outstanding debts and liens before you purchase a property. It’s essentially a get out of jail free card that gives you a chance to address those issues before it’s too late or back out from the deal. Here’s why it matters.

Reassurance there’s no other current owner of the property

First and foremost, a preliminary title report will help confirm who actually owns the property and whether they have the right to even sell it.

A preliminary title report will also reveal any other existing owners or heirs. A third party with interest in the property may try to sue you and claim it as their own. With the report revealing everything, there’s no way for the seller to conceal the identities of any co-owners or heirs.

Find out about any liens on the property

The preliminary title report will tell you if any creditor has placed a lien on your dream house. A lien is a legal notice sent by a creditor to ensure they get their money back from the borrower. They can result from unpaid taxes, mortgages, and repairing/renovation costs, among other things. Liens can even lead to foreclosure, in which a creditor will forcefully sell the property to collect their debt.

Naturally, you’d want to know if the property you’re about to purchase has a preexisting lien on it or not. If there is one, you should either have the seller agree to pay it off or demand a lower price to offset the cost of paying back owed debts.

Discover restrictions and easements

Chances are that you’ve imagined how you’d like to remodel and use your future home. Maybe you want taller fences. Or a completely different garden. Or perhaps you wish to bring a certain number of pets with you.

You might not be completely free to modify or use your new house however you want. It’s actually dictated by the covenants, conditions, and restrictions (CC&R) set by the Homeowner’s Association and the zoning laws of the local government. The preliminary title report will help reveal such restrictions and rules (if any) that apply to the property. Keep in mind that CC&Rs and zoning laws are non-negotiable. Hence, the report will give you the choice to either compromise on how you intend to use your house or reconsider the deal.

Furthermore, the preliminary title report will reveal if there is an easement on the property, which would give a previous owner the right to access it anytime they want for a specific purpose. For instance, a power company could have an easement to fix or maintain an electric poll installed on a piece of land that falls within private property. This would be a deal-breaker, so make sure to factor that in when evaluating your real estate deal.

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Benefits of a Preliminary Title Report for sellers

A preliminary title report will also help you if you’re planning on or are currently selling your existing house to buy a new one. As a seller, the report can help you:

Gain the confidence of your prospective buyer

Sharing a preliminary title report with your disclosure packet will show the prospective buyer you don’t have anything to hide. That way, you’ll earn their trust. And the faster that happens, the sooner the deal is likely to close. From there, it’s only a matter of negotiating and working with the buyer to address any potential issues with the property’s titles and encumbrances.

Without preliminary title reports, buyers and lenders can take ages to run background checks on properties. They provide an instant way to check for title defects, which helps sellers close deals quickly.

Avoid potential lawsuits

A preliminary title report will also help you reveal any existing encumbrances on your listed property to the buyer. That way, the buyer can’t sue you for failing to disclose a lien or a restriction that would have initially been a deal-breaker.

It would also potentially reveal restrictions or conditions set by a former owner or the local housing authorities that you weren’t aware of. That way, you do your due diligence in informing the buyer about everything that may affect them if they proceed to purchase the house.

Once you have a Preliminary Title Report, what’s next?

The next step is to carefully evaluate all the numbered items and standard exceptions in the preliminary title report with the help of your real estate agent. If there’s anything that might affect you financially (like a lien) or your dream home (like a CC&R), talk to the seller.

Negotiate until all the parties involved reach a middle ground. Remember that you can still back away from the transaction if you feel like you’re walking into an unfair or shady deal.

At this point, you’ll probably be closely involved with a title company. If you’re interested in learning more about their role in a real estate transaction, check out this guide.

Why do contingencies matter?

Buyer’s remorse is the worst. And since a new home may be the largest purchase you ever make, buyer’s remorse on a home purchase is a next-level kind of regret. If you’re a homebuyer looking at a new property, you want to feel confident that your investment is solid and your new home is up to snuff. 

That’s why contingencies exist. A contingency is a condition you put in your real estate contract. Contingencies are protective mechanisms that give you an easy way out if certain situations occur.

Contingencies are common in real estate transactions, although they tend to get “waived” more often in competitive markets. Data from the National Association of REALTORS® (NAR) shows that in 2021, contingency waivers peaked mid-year then began a steady decline. 

While it may be tempting to wave contingencies to make your offer more competitive, you should always tread carefully because contingencies are one of the few mechanisms that protect you as homebuyer. “With a traditional offer, every homebuyer needs to strike a balance between ensuring appropriate contingencies to protect themselves while also putting a competitive offer on the table,” says Brian Gubernick, Homeward’s Chief Real Estate Officer. “That’s why we created The Homeward Cash Offer. It’s the lowest risk and most flexible way to waive contingencies.” 

There are four common contingencies that every homebuyer needs to work through:

• Home inspection contingency
• Appraisal contingency
• Financing contingency
• Home sale contingency

Home inspection contingency

Home inspection contingencies are one of the most common home buying contingencies. According to NAR, around 80% of homebuyers include a home inspection contingency in their purchase agreement. Home inspection contingencies are one of the most common home buying contingencies. Katie Collins, Homeward’s Customer Experience Manager, says she’s surprised that many people waive this important contingency. “In a hectic, fast-paced, and emotionally overwhelming market, an inspection gives the buyer peace of mind and confidence in the transaction. They can waive this contingency, but that means they're assuming more risk."

When you include a home inspection contingency in your contract, you specify that you plan to have a certified home inspector inspect the property within a certain timeframe. As the buyer, it’s your responsibility to choose a home inspector and schedule the inspection. 

According to Collins, you’ll typically add contingent language that allows you to terminate the contract if the inspection uncovers problems that the seller isn’t willing to negotiate or repair. If your inspector finds issues, you’ll request the seller to make repairs or lower the price of the property. Your contingency clause would specify how much time they have to respond. If the seller is unwilling to do either, then you have the choice of allowing the contingency to expire  or terminating the contract and recovering your earnest money deposit. 

When you use a Homeward Cash Offer to buy your new home, your home inspection will occur during the Homeward Purchase. Once the inspection is complete, you’ll work with your Homeward CX Manager and your agent to decide whether you’d like to move forward with the purchase and what repairs or price reductions you’ll request. 

Appraisal contingency

An appraisal contingency dictates that your purchase contract is conditional upon the property being appraised to confirm its value for your mortgage lender. Before finalizing your mortgage, your lender will want to ensure that the purchase price you pay is in line with the home’s fair market value. Lenders typically use three things to determine appraisal values:

• Comparable, recent home sales (commonly known as ‘comps’)
• Tax records 
• An in-person evaluation of the property by a third-party appraiser

If the appraisal comes back in line with the purchase price of the property, the sale will move forward. But if the appraisal comes in lower than the purchase price, you should connect with your loan officer to discuss your options. You might be able to restructure your loan to make the purchase work. If you’re unable to meet your lender’s requirements, your appraisal contingency allows you to rescind your offer without losing your earnest money.

A Homeward Cash Offer allows you to eliminate the appraisal contingency altogether. We’ll conduct a Preliminary Appraisal during the option period/due diligence of the Homeward Purchase, when we purchase the property on your behalf. When you’re ready to buy the property back from us — what we call the Customer Purchase — your lender will conduct a Final Appraisal. 

“If you want to make a very aggressive offer and you are willing and able to waive the appraisal contingency, making a Homeward Cash Offer is the lowest risk and most flexible way to do that,” explains Brian Gubernick, our Chief Real Estate Officer. “It's low risk because your clients can see this Preliminary Appraisal during due diligence and use that to make a go/no-go decision. It's flexible because they can still move forward, even if that Preliminary Appraisal comes in lower than their purchase price.”

Financing contingency

A financing contingency (also sometimes called a mortgage contingency) protects you by ensuring you’ll be able to secure sufficient financing for your home purchase. 

In the traditional homebuying process, most people get preapproved for a mortgage before they make an offer. You’ll include your preapproval letter within your offer to give the seller assurance that you can afford to pay for the property. But getting preapproved for a mortgage is different than having final approval, and that means that snags and delays can happen. 

Your mortgage contingency is a clause that specifies that you can back out of the purchase if you’re unable to secure financing within a specific timeframe. You’ll typically include details about your loan (type, amount, maximum interest rate, and points limit) and the contingency timeframe. 

If for any reason you’re unable to secure the necessary financing by the deadline, you’ll be able to cancel the transaction, recoup your earnest money, and walk away. The seller will then be free to re-list the home for other buyers. 

Making a Homeward Cash Offer enables you to skip the mortgage contingency. You’ll be preapproved to shop for a home for up to a certain amount. Sellers prefer cash and cash-backed offers because they are more certain to close without any hiccups. That makes your offer more attractive than contingent offers. 

“I tried winning bidding wars for a year with a regular mortgage company before coming to Homeward,” says Kyle of Georgia, who made — and lost — nine offers in nine months. “I won an offer as soon as I put in my offer with Homeward!”

Home sale contingency

It’s a classic dilemma: If you already own a home and you’re looking to buy a new one, do you sell your existing home first or try to buy a new one first? Figuring out the timing is tough.

You don’t want two mortgage payments. And if you’re like most Americans, a large percentage of your net worth is probably tied up in your existing home and you can’t unlock that until you sell your existing home first. This common situation is the reason home sale contingencies exist.

A home sale contingency gives you a specific amount of time to sell your existing home. If you’re unable to sell your home in that period, you’re free to withdraw your offer and recoup your earnest money deposit. 

Homeward’s Buy before you sell solution was created to solve this challenge. We’ll purchase the home you want with cash before you sell your old home and allow you to move in as soon as we close on it so you don’t have to live in the old house while it’s on the market. As soon as you finalize your mortgage, you buy back the new home from us. And in the meantime, you  have up to six months to sell your old home (and if you can’t, we’ll buy it from you for an agreed-upon price). 

“I think this is the way to buy homes of the future,” says Nathan, a Homeward customer. “We were able to put in a cash offer with no contingencies, and then get the best possible price on our old home. It lowered our stress, made our purchase more competitive, and allowed us to get the best deal on our sale.”

Don’t let contingencies get in the way

Contingencies are an important safety mechanism for homebuyers, but leaning on them too heavily can result in a less attractive offer. As a homebuyer, you need to make the most competitive offer possible. So now that you know all about contingencies, here are some bonus tips on how to remove them from your offer. In the end, the best way to remove common contingencies is to make a Homeward Cash Offer. 

If you're a homebuyer interested in learning more about becoming a cash buyer, schedule an appointment with a Homeward Advisor here. 

If you're an agent interested in turning contingent clients into cash buyers, schedule an appointment with a Homeward Advisor here.

What is an option period?

An option period is a short window of time after your offer is accepted during which you take a closer look at your new home. If you find red flags or major issues during the option period, you can terminate the purchase and get your earnest money deposit (EMD) back from the seller. In fact, during the option period you can terminate the contract for any reason.

If you’re not from Texas, you may have never heard of an option period. That’s because option periods are called different things in different places. Across the United States, due diligence is probably the most common name for an option period, but you may also hear it referred to as the inspection period or contingency period. Whichever name is used, know that it’s referring to the same thing: a finite period of time designed to give you peace of mind as a homebuyer.

You (the buyer) and the seller agree on the length of the option period as one of the terms in your contract. For example, some complex properties with lots of systems (septic, a well, a pool, etc.) require longer option periods. While this period can last anywhere from a few days to a few weeks, Redfin reports that a typical option period is between one and two weeks long. 

Sellers expect to see an option period in a residential real estate contract, but — generally speaking— the longer the option period is, the less competitive your offers is. To get the privilege of having an option period as a homebuyer, you’ll pay an option fee to the seller. (Option fees typically range from $100-$500. By paying this fee, you’re purchasing the right to back out of the purchase for any reason during the option period. If for some reason you need to extend the option period, you’ll pay an additional fee. You may dread the idea of an additional fee, but it’s worth it. Here’s why:

• Without an option period: If you end up terminating your purchase for a legitimate reason—like serious structural problems and a bad septic system the seller refuses to fix —you’ll forfeit your EMD, which is typically 1-3% of the purchase price of the home. On a $350,000 home, that means you could lose anywhere from $3,500 - $10,500. 
• With an option period: say you pay a $500 option fee for a seven-day option period. If you decide you want to walk away on day six, you can do so without issue. You’ll lose the $500 option fee, but you’ll recoup your significantly larger EMD. 

What happens during the option period?

Option periods are baked into residential real estate contracts in Texas for a number of reasons. The three most common things that happen during this period include:

Home inspections

A home inspection is a thorough examination of a home by a licensed home inspector. After the inspection, your home inspector will issue a detailed report on the condition of your new home. They’ll help you understand any concerns or necessary repairs so you can address them with the seller before finalizing your purchase contract. 

Buying a home is a huge investment and your home inspector is an invaluable member of your team. As an experienced professional, they’ll use their knowledge to help you avoid any major missteps. 

Home appraisals 

Home appraisals are typically ordered by your mortgage lender. During the appraisal process, an appraiser—an independent and unbiased professional—will assess the fair market value of your potential home. Your lender will use the results of the appraisal to determine how much money they’re willing to lend you for the property. 

Today there is an appraiser shortage so most homebuyers aren’t able to get an appraisal during the option period. When you use our Buy with cash or Buy Before you sell solutions, you’ll benefit from our Dual Appraisal Advantage. It works the same way with either program: 

1. You place a cash offer on your new home (using Homeward’s cash).
2. Once the offer is accepted, Homeward conducts a Preliminary Appraisal during the option period. This takes up to five days (so your option period can be as short as five days, making your offer more attractive to the seller). 
3. Homeward buys the home and you move in.
4. You buy back the home from Homeward once your new mortgage is ready. During this period, your lender conducts a Final Appraisal. If the Final Appraisal comes in lower than our Preliminary Appraisal, you can adjust your loan as necessary or terminate the contract and keep your EMD. 

Traditionally, homebuyers have had to choose between moving quickly and having peace of mind. But when you make a Homeward Cash Offer, you can have both. You’re able to make a more competitive offer with confidence. 

How should buyers think about option periods?

“The chief benefit of the option period is it allows the homebuyer time to determine if they want to move forward with the purchase. If not, they'll face little to no penalty,” says Katie Collins, Customer Experience Manager at Homeward. “In a hectic, fast-paced, and emotionally overwhelming market, this time gives the buyer space to breathe and evaluate both the condition of the home and the costs of moving forward.” In a perfect world, the information you gather in the option period makes you more confident about moving forward.

That said, it’s important to recognize that while paying the option fee and including an option period provides more reassurance, asking for too much time may make your offer less competitive. 

In general, the shorter your option period, the more attractive your offer is to the seller. You’ll want to strike a balance by making sure you have enough time to get the information you need, while also finalizing the deal as soon as possible to give the seller the certainty they crave. There are several things you can do to help achieve this:

• Always get mortgage preapproval ahead of time. While preapproval may not equal final mortgage approval, it dramatically speeds up the process and allows you to move much faster. If you’re making a Homeward Cash Offer, get approved before you start house hunting. That way, you’re ready to make a cash offer as soon as the home you love hits the market.
• Choose an inspector. Research and choose a home inspection company before you even make an offer. Reach out to them to check their availability and see how much notice they require to perform an inspection. You can also check with the seller’s agent to confirm the utilities are on so you avoid delays.
• Use our Buy with cash or Buy before you sell solution. "In today’s market, any contingency can make your offer less attractive to sellers,” explains Brian Gubernick, Homeward’s Chief Real Estate Officer. Many real estate markets are highly competitive right now, but even in a cooler market using a cash offer can set you apart and help you save a lot of money. Your Homeward Cash Offer includes an option period, so you’ll have the time you need to do your due diligence before finalizing the deal.

How do sellers feel about option periods?

We’ve hinted at it above, but let’s be clear: Sellers often have a very different view of option periods than buyers do. For a seller, the goal is usually to lock in the best offer on their property as soon as possible. Option periods delay sellers from achieving that goal, so a seller is typically motivated to shorten the length of the option period (or eliminate it altogether).

“While including an option period is a common practice in Texas real estate, it’s not a mandatory requirement,” explains Collins. Sellers are free to reject offers that include option periods or to make counter offers without option periods. The inclusion of the option fee often makes the idea of an option period more palatable to a seller — they’ll lose a few days if you walk away, but they’ll keep your option fee—but it’s still a small amount of money compared to actually selling the property.

Bring your best offer to the table

As a buyer, you need to make sure you make the most competitive offer you can, while still ensuring you’re making a great investment. 

If you're a homebuyer interested in learning more about becoming a cash buyer, schedule an appointment with a Homeward Advisor here.

If you're an agent interested in turning contingent clients into cash buyers, schedule an appointment with a Homeward Advisor here.

Forty percent of Americans say buying a home is the most stressful life event according to a 2018 HousingWire survey. But do you know what’s even harder? Buying a new home while you’re selling your old one. Especially lately. 

“The competition is through the roof,” says Brian Gubernick, Homeward's Chief Real Estate Officer. “That is the greatest challenge for homebuyers to deal with right now. You’ll have to be able to move quickly when you find the home you want to buy.”

"Buying a home should be fun and exciting, but many of my buyers were anxious," says Tim Heyl, who was a nationally recognized real estate agent before starting Homeward.

According to the Realtors Confidence Index from the National Association of Realtors, the average number of offers received on “most recent sale” was 3.7 in January 2022. This competitive market is largely the result of overwhelming demand, low inventory, and historically low-interest rates. 

So how do you win? “Sellers are being inundated with offers. You can make yourself stand out by being ready to make a competitive bid,” says said Brett Bivenour, Chief Technology Officer at Nationwide Mortgage Bankers. “Have your financing ready while others find themselves knee-deep in the loan application process.” 

Get your financial ducks in a row now by familiarizing yourself with all of your options, and considering the pros and cons of each.

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Sell your old home, then buy a new one

This is the traditional list-buy transaction. Your agent lists, markets, and sells your old home and then you buy the new one. 

Pros

• This is definitely the safest choice. There are fewer financial risks when you wait to buy. 
• You don’t have to include a home sale contingency when you make an offer on your new home.
• You’ll know exactly how much equity you have and what your budget is. 

Cons

• You’ll be living in the home while it’s on the market. That means keeping it clean and vacating it for open housings and showings — often on short notice. 
• If you can’t find a new home right away, you’ll have to rent from the seller or put your stuff in storage while you live in temporary housing. The latter would also mean paying for two moves: from the old house to storage, and then from storage to the new home. 
• You may have to rush to find a new home as soon as you sell the old one. “You also risk missing out on your dream home if it comes on the market before your old home sells,” says Sarah Lopez, vice president of Homeward Mortgage. “You can, of course, make an offer before your old home sells, but you’ll have to include a home sale contingency, which makes it less likely to win.” 

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Sell to an iBuyer

Instant buyers or iBuyers use technology and algorithms to quickly buy and flip houses. The national market share of home purchases by instant buyers or iBuyers hit an all-time high of 1.3 percent -- around 70,000 houses -- in 2021. But in some metros, that number was as high as 6%.

Pros

• iBuyers optimize for speed — the process will be fast. 
• You don’t have to fix up and stage your house to put it on the market. The iBuyer will take care of any issues they find when they do an inspection. (That said, iBuyers will deduct the necessary repairs and updates from the offer price.)
• You often get to choose the close date, which allows you to continue to live there while you shop for your new home. Then, when you’re ready, you can quickly make an offer without a home sale contingency because you can choose to have the iBuyer close on the old home right before you close on the new home.

Cons

• You’re leaving equity on the table when you use an iBuyer. A 2019 Marketwatch study found that once fees and other costs are included, people who sold to iBuyers netted 11% less than people who sold their home on the open market.
• iBuyers aren’t great for neighborhoods either. iBuyers grab inventory before it hits the market, make superficial updates to the home, and then put these homes back on the market at a higher price.
• Selling a home can be an emotional experience. Many people lean on their agents during the process. But iBuyers rely on tech, not trusted real estate professionals, so you’ll navigate the journey without a guide.

Use a bridge loan

A bridge loan acts as a link between the purchase of one property and the sale of another. These are a short-term solution that leverages the equity in your home as collateral. “If you’re selling your home but haven’t finished the process before you agree to buy a new one, a bridge loan could be right for you,” says Bivenour. 

Pros

• Bridge loans give you access to funds quickly and let you buy a new home before you sell your old one.  
• Bridge loans give you the ability to skip temporary housing between selling and buying and help you avoid moving twice.
• Bridge loans can eliminate the need for a home sale contingency.

Cons

• Lenders charge higher interest rates for these very short-term loans. You should expect to pay more than you would for a conventional loan. 
• Lenders also typically charge higher origination fees for bridge loans. “These fees vary quite a bit,” says Lopez. “But I have seen as high as 5% in origination fees.” 
• You will need to make two mortgage payments — one for the new home and one for your old home — until the old home sells. You might even have to make bridge loan payments (essentially a third mortgage) until the old home sells. This means the lender will have much higher income requirements. 

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A new option: buy before you sell

The traditional list-buy transaction is backward according to Heyl. “Buyers can’t confidently make an offer on a new home until they sell the old one,” he explains. “But they do.” And in the process, they sometimes make very bad decisions — or miss out on a home they love. Heyl got sick of running into this same problem over and over with clients. 

So, In December of 2018,  he bought the home his clients wanted with his own money and let them move into it — before they sold their old home, creating the ability for them to buy before they sold. “That cash unlocked the home equity my clients had tied up in their house,” he explains. Then they sold their old house and got a mortgage to buy the new house back from him. Homeward’s first service, Buy before you sell, was born.  “My cash made the process easier, calmer, and more certain,”

When you buy before you sell, you can skip the open houses and showings. Your agent will put your old home on the market after you move into the new one. Avoid putting your stuff in storage, moving twice, or paying two mortgages — and spend zero days bunking with your in-laws. 

“[Buy before you sell] made the process of buying a new house stress-free,” says Chris, a Homeward customer. “We were able to make a cash offer, which was very important in this seller’s market. This allowed us to take our time getting our home ready to sell and put it on the market at a convenient time for us.” Jennifer, another Homeward customer, points out a few other advantages: “Because we used Homeward, we were able to spare our children the many disruptions inherent in listing our house while still living there. And we were able to complete renovations and get top dollar for our old house.”

You will pay a convenience fee for the ability to become a cash buyer and buy before you sell. You’ll also pay carrying costs between the time Homeward buys the home and you buy it back. But according to a recent article on Realtor.com, “The cost of obtaining a cash-backed offer or cash offers is not much higher than the 3.7% to 4.4% average percent above the list price that buyers have already been offering to sweeten their offer.” 

Wondering which finance option is best for you? Ready to buy a new home with cash before you sell the old one? Schedule a call with a Homeward Advisor or get started now.

Imagine you’ve just found your dream home. There’s an open house scheduled for tomorrow.

You scramble to find a babysitter for your kids and rush to get there on time. Turning onto the block, you’re shocked to see every parking spot on the street is taken. There’s a small crowd of people standing on the front steps of your dream home. You’re normally a nice person, but these people have just gone from being random strangers to your competition.

This scenario might sound far-fetched, but countless people have found themselves in this exact situation over the past few years. What are you supposed to do? How can you stand out from the crowd?

Use a cash offer.

Bringing a cash offer to a seller is the strongest way to separate yourself from the pack in a seller’s market and the best way to give yourself more negotiating power in any market. But not all cash offers aren’t created equal so it’s important to do your research ahead of time.

Here are 10 questions you should ask to understand how cash offers work before you choose a cash offer program.
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In this article:

Cash offers sound straightforward. Pay with cash, right?

At the broadest level, cash offers are pretty simple to define. A cash offer is when a homebuyer offers a home seller the complete cost of the house without any kind of mortgage or financing contingency involved.

While that might seem pretty simple, making a cash offer is a bit more involved than simply handing a bag of cash to the seller. And since the details of every cash offer program differ, it’s important to understand the big picture of how cash offer programs work.

At a high level, most cash offer programs involve several steps:

1. Pre-approval. You get approved for a specific loan amount and start shopping for a home.
2. Offer. You work with your agent agent to make a cash offer with the cash offer company as the buyer.
3. Closing. The offer gets accepted and the company finalizes their purchase of your new home.
4. Buyback. Once your mortgage is finalized, you buy your home back from the company.

How much do cash offers cost?

Fees for cash offer programs vary widely.

The fee for this service is usually based on a percentage of the purchase price of your new home. These fees normally range from 1-5%. According to a recent article on Realtor.com, “The cost of obtaining a cash-backed offer or cash offers is not much higher than the 3.7% to 4.4% average percent above the list price that buyers have already been offering to sweeten their offer.”

On top of this fee, additional fees, credits, and discounts may apply. For instance:

• You may get a credit at closing when you use the company’s preferred mortgage provider.
• You may pay rent for the period of time between when the company buys the home for you and when you buy it back.

If there’s a moral to this story, it’s that you should always do your research before choosing a cash offer company to work with.

A great first step is looking at the company’s pricing. Easy-to-find, transparent pricing should give you more confidence that you won’t be in for any unhappy surprises further down the road.

If a company's fees are hard to understand from their website, do your due diligence before moving forward.

Can I still work with my own real estate agent?

Every cash offer company approaches real estate agents differently. Some allow you to work with any real estate agent you’d like and others omit the agent altogether. But most dictate that you choose an agent from their list of preferred partners.

Buying a home is one of the biggest purchases you’ll make in your life. And, according to a 2018 survey by Homes.com, 40% of Americans say buying a new home is one of the most stressful life events in modern life.

“Working with a local agent that you've built a relationship with means you control who will shepherd you through what can be a stressful process,” explains Julie Youngblood, a Homeward partner lead and nationally recognized real estate coach. “If you have an existing relationship with an agent and you want to work with them, make sure you choose a cash offer program that gives you that freedom.”

How soon can I move in after using a cash offer?

When you’re excited about a new house, you don’t want to wait 30+ days to move in. The good news is that some cash offer companies allow you to move in as soon as they purchase the home on your behalf.

You won’t technically own the home yet — the company will — and they’ll typically charge you rent, so it’s important to ask a few questions about how that works:

• Do they mark up rent?
• Is the rent prorated?
• Is there a security deposit?
• When does rent begin? When does it end?
• Do you need renter’s insurance?

Being able to move in right away is especially helpful if you also have a home you need to sell. Selling a home while living in it is a major pain. You’re always trying to keep the place spotless, and you’re constantly forced to leave so prospective buyers can check it out. When you use cash to buy before you sell, you can move out before you list your old home and skip the showings.

“We were able to spare our children the many disruptions inherent in listing our house while still living there,” explains Jennifer, a homebuyer who used a cash offer to buy a new home before she sold her old one.  “We were able to complete renovations [after we moved out] and get top dollar for our old house.”
This all sounds too good to be true. Is it?

This all sounds too good to be true. Is it?

Nope. Cash offer programs are a welcome evolution of the traditional real estate transaction and they are very real. In fact, in 2021 nearly one-third (30%) of homes were purchased with cash. Of course, some of these cash offers came from truly wealthy individuals and investors with very deep pockets. But because of  historically low inventory, competitive interest rates, and a housing shortage, many of the other cash buyers were people like you who leveraged cash offer programs to make their offer stand out in a competitive market.

“Honestly, [we] thought it was too good to be true,” says Katherine of Texas. “We were moving from Midland to the Bastrop Area. The builder we wanted to buy from refused our contingency sale offer so we went to Homeward. They helped us buy the house we wanted. We would not have the amazing house we have now without them. It was an amazing experience.”

That said, a little skepticism is healthy. Check out the Google Reviews for any company you’re considering working with. As far as the seller is concerned, they’ll get a “proof of funds” letter with the offer. This is the company’s way of proving  that they have the cash to make good on the offer.

Will you buy my old home, too?

“We buy your house with cash!” You’ve probably seen signs like these on the side of the road, claiming to offer top dollar for your old home. While they’re common, the businesses that post these signs aren’t the type of cash offer we’re talking about — they’re wholesalers. They buy homes at a discount and then sell them to investors.

Instant buyers or iBuyers also buy homes directly from consumers. These companies use technology and data to make an offer on your home in minutes. But iBuyers optimize for speed, not equity. So when you sell to an iBuyer, you’re leaving money on the table.

While cash offer programs don’t buy your old home instantly, some of them will promise to buy your old home if it doesn’t sell after a certain amount of time. Think of this feature as an insurance policy. You have a guaranteed buyer if you need it, but you get to try selling your old home for top dollar on the open market first.

Real estate agents like Britni Davison appreciate this because they’ve watched too many clients rush the list-buy process. “As a Realtor, I love the Homeward product as a solution for clients who need to buy before they sell in order to keep their lives moving forward during a move,” she explains.

Do I have to use a specific mortgage company?

Some cash offer companies require you to use a specific mortgage company when you work with them. With other cash offer companies — including ours— using the preferred lender is optional (and may include some incentives).

If the cash offer program you’re considering requires you to work with a certain lender, do your research. Make sure they offer the loan type and terms you want and that the rates and fees are competitive. “Don’t focus solely on rate,” says Sarah Lopez, vice president of mortgage at Homeward. “Look at the cost at a given rate. For instance, 2.875% with $5,000 in points isn't necessarily better than 3.000% with no points. Ask your lender to see rate options and compare the costs at the same rate across lenders.”

If using an affiliated lender is optional, investigate the incentives. “Does the company offer you a seller’s credit during the buyback?” asks Lopez. “Is the process quicker? Will you work with a loan officer who will help you understand your options?”

Does this cash offer work with the mortgage I need?

There are four common types of mortgage:

• Conventional loans - mortgages that are not backed by a government entity. This is the most common type of home mortgage in the United States.‍
• VA home loans - mortgages from the Department of Veterans Affairs, designed for active-duty military personnel, veterans, and surviving spouses. ‍
• FHA loans - mortgages insured by the Federal Housing Administration. FHA loans typically enable buyers with lower credit scores to make lower down payments. ‍
• Jumbo loans - jumbo loans exceed the underwriting guidelines of conventional loans, typically because they’re for more money than the loan limits for an area.

Very few cash offer programs work with all of these different types of loans. So make sure you can get the loan type you need before you waste too much time and energy.

Will I need to make a bigger earnest money deposit (EMD) for a cash offer?

Earnest money is the deposit you put down to show the seller you’re serious about buying a home. While you offer EMD upfront, it’s not an extra fee. Your earnest money deposit gets applied as a credit to the purchase price when you close on your new home.

EMD usually ranges from 1% - 5% of a home’s purchase price. When you’re working with a cash offer program, you can typically expect to put down a similar amount of earnest money.

Why do sellers prefer cash?

When it comes to buying a new home, cash is king and queen. There are two big reasons sellers prefer cash offers:

1. Cash offers are less risky for the seller. When you buy a home with a traditional offer, there are a lot of dependencies attached. Your offer might be contingent upon you getting a loan, selling your original home, or the appraisal. Each contingency increases the risk of the sale not closing successfully, which puts the seller in a tough position.
2. Cash offers close faster. Most sellers want to sell quickly. They don’t want to deal with never-ending showings or open houses. And most importantly, they want to get their equity out of the home as soon as possible.

This explains why cash offers are four times more likely to beat financed bids. “Sellers can be confident that [a cash sale] is going to close without hiccups or surprises,” explains Tim Heyl, our Founder and CEO.

More >> Making a cash offer on a home: everything you need to know

How do I become a cash buyer?

The approval process for becoming a cash buyer works much the same way as getting approved for a mortgage does. The process can take anywhere from a few days to a few weeks, depending on the company you use. It’s a good idea to get approved to buy when you start looking for a new home. That way, you’re ready to make an offer as soon as the home you love comes on the market.

If you're a homebuyer interested in learning more about becoming a cash buyer, schedule an appointment with a Homeward Advisor here.

If you're an agent interested in turning contingent clients into cash buyers, schedule an appointment with a Homeward Advisor here.

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It's hard to miss the headlines. More and more people are buying homes with cash. In fact, In July 2021, the share of homes bought with cash hit 30%. In the past, cash offers were only an option for wealthy buyers who didn't need financing. Today, that's no longer the case. And homebuyers aren't just using cash in competitive markets, they're using it in any scenario where they need more negotiating power.

Our founder and CEO, Tim Heyl, explains: "In the multiple-offer situations we've seen over the last year or so, cash's number-one advantage is that it can beat traditional offers." In fact, cash offers are four times more likely to beat financed bids. "But in less competitive markets, sellers still prefer cash. Why? Because it's a contingency-free offer, which means sellers can be confident that it's going to close without hiccups or surprises."

But "Making a cash offer on a home is the cleanest, most attractive offer possible and benefits both the buyer and the seller," explains Brian Gubernick, our chief real estate officer. Here's why:

Cash offers are less risky

The biggest reason cash offers are more likely to get you what you want is that they carry less risk for the seller. Compared to  traditional offers — which are dependent (or contingent) upon mortgage financing, the sale of an existing home, or an appraisal — cash offers are more certain (To learn more about eliminating contingencies from your offer, read this article.)

According to the November 2021 Confidence Index from the National Association of REALTORS® (NAR), 6% of all purchase agreements fell apart before closing. "Six percent doesn't sound like much," explains Gubernick, "but when you're the seller, it's more risk than you want to tolerate. When you make a cash offer, you're essentially signaling to the seller that the deal is solid. You're not going to back out because you can't get a mortgage, sell your old home fast enough, or tolerate a low appraisal. You're not going to be in that 6%." And that, Gubernick says, is what every seller wants to hear.

Cash offers close faster

Sellers are highly motivated to sell quickly. They want to maximize their equity as soon as possible and minimize the number of open houses and showings. (Of course, those who know better use our Buy before you sell solution so they can move into their new home before they list the old one.)

So put yourself in the seller's shoes. Which offer would you choose: The financed offer that typically takes 30-45 days to close or the cash offer, which can close in as little as two weeks. NAR's November 2021 Confidence Index also found that 24% of real estate contracts had a delayed settlement. "No one wants to hear that closing is delayed," says Gubernick. "And cash makes that less likely to happen."

Cash offers give you negotiating power

The vast majority of offers a seller receives include contingencies. So when you eliminate those contingencies by buying with cash, your offer stands out from the rest, giving you more power. Because buying with cash eliminates those contingencies, cash puts you in control.

"In some markets, that may mean you can buy the same home for less money," explains Gubernick. "In other markets, it gives you more leverage so you can get all of the appliances to convey, command seller credits at closing, or be in a better position to bargain for whatever it is you want."

Where to get your cash

Now that you understand how you (and the seller) benefit from a cash offer, you may be asking where you can get the cash. Until now, making a cash offer was out of reach for most people. Either they didn't have the money, or it wasn't liquid, and taking money out of investments and retirement accounts to buy a home is rarely the right decision.

We offer a better solution. When you work with us, you get to use your agent and our funds to build the best offer. We buy the home you want with our cash. Then you can go ahead and move in. And then, once you finalize your mortgage, you buy back the home from us. "Buying with cash is a win for the buyer and the seller," says Gubernick.

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When it comes to helping your client make an offer, bigger isn’t always better. “The listing agent and seller aren’t just looking for the highest offer,” explains Blake Outlaw, one of our Partner Leads. “They’re looking for the offer that is most likely to close and to close without hassles or hiccups." In other words, listing agents want a contingency-free offer.

Many clients think of a contingency as an escape hatch in the contract. And while contingencies do make transactions “safer” for the buyer, they make it riskier for the seller. That means your client’s contingent offer is a less competitive offer.

The Homeward Cash Offer empowers you to turn your contingent shoppers into cash buyers by removing or reducing the top three contingencies: home sale, finance, and appraisal. That makes your client more likely to win in a competitive market and positions them to command better terms in less competitive situations. Let’s take a closer look at each of these contingencies.

1. Home sale contingency

The Problem:

Until now, buyers who already own a home usually had to include a home sale contingency in their offer. It's a cautious choice. But like many agents, you’ve probably seen clients get stuck moving into temporary housing, moving twice or paying two mortgages. And those who can't afford to do that end up missing out on a home they love.

The Solution:

Tim Heyl, Homeward’s Founder and CEO, started this company because of the home sale contingency. “I kept running into the same problem,” explains Heyl, who led a real estate team that became a four-time Inc 5000 company. “Buyers couldn’t make an offer on a new home until they sold their old home.” So one day Heyl tried something radical: he bought the home his client wanted with his own cash. Then, once the client sold his old home, he bought the new home back from Heyl. That experiment became Homeward’s first solution: Buy before you sell.

Buy before you sell enables your clients to purchase their new home with cash before they sell their old home, eliminating the home sale contingency.

The Result:

For homebuyer Casey Shea, Buy before you sell was less risky than a contingent offer. “It saved me from having to move twice and overpaying for my [new] home,” he explains.

Russell Yurack, another Buy before you sell customer, appreciated that eliminating the home sale contingency allowed him to list his old home and then move when the time was right for him. “Being able to buy first and then sell our old home was much nicer than having a time limit to sell and move,” says Yurack. ‍

2. Financing Contingency

The Problem:

In the past, buyers have used mortgage preauthorization and preapproval letters to make financing contingencies seem less risky. But in many markets, these letters aren't enough to make your offer stand out.

The Solution:

Our approval turnaround time — the time it takes us to underwrite your client and make them a cash buyer — is usually two days. And cash offers are more than four times more likely to win a bidding war.. “Sellers prefer cash offers because they are much more certain to close,” explains Heyl. So two years after introducing Buy before you sell, we introduced Buy with cash, a second cash offer, designed for clients who don't have the home equity to leverage.  

And what makes the Homeward Cash Offer different from other cash offers? You — the agent. “Most cash offer programs minimize or replace the agent,” explains Heyl. “But Homeward was created by agents, and we built this for agents.” We want every agent to be able to make every buyer a cash buyer. So working with us doesn’t change your agent-client relationship or affect your commission.

The Results:

Homebuyer Mike Galloway believes making a Homeward Cash Offer made all the difference with his recent home purchase. “We were able to make an all-cash offer on a home in an extremely competitive area,” he explains. “If this had been a typical financed and contingent offer, [the seller wouldn't have considered it]."

Ana Syler, another homebuyer, had a similar experience. “We had been putting in offers and knew we were at the bottom of the pile with our conventional loan and first-time homebuyer’s down payment," she says. "Being able to put in a cash offer with Homeward totally changed the game for us.”

3. Appraisal Contingency

The Problem:

‍The appraisal contingency is designed to prevent your client from overpaying for a loan and to protect the lender who is financing the purchase. But there are several issues with using an appraisal contingency. First, it slows down the homebuying process. Scheduling an appraiser and getting them out to the house takes time. Second, appraisals are based on historic data, meaning they don’t always reflect current market conditions. And appealing an inaccurate appraisal takes even more time.

The Solution:

We work with an appraisal management company to conduct a desktop appraisal within days of your offer being accepted. And we get that appraised value back during the option period/due diligence. “This is the lowest risk and most flexible way to waive the appraisal contingency,” explains Brian Gubernick, our Chief Real Estate Officer. And remember, just because you do a desktop appraisal doesn't mean the sale depends on the appraisal. In many cases, we can work with you even if the appraisal comes in low.

The Result:

The Homeward Cash Offer wins because it's the most competitive offer — not just because it's cash. That’s certainly what real estate broker Danielle Dolan of HomeSmart Greenwood Village in Colorado, recently discovered. “Before working with Homeward, we were losing out to cash offers even when we bid more,” she explains. “The ability to waive the appraisal contingency on a Homeward Cash Offer in the competitive Denver market made all the difference for my clients.”

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If you're a homebuyer interested in learning more about becoming a cash buyer, schedule an appointment with a Homeward Advisor here.

If you're an agent interested in turning contingent clients into cash buyers, schedule an appointment with a Homeward Advisor here.

‍Blake Outlaw, a Homeward Partner Lead, studied real estate finance at the University of Texas. Since then he’s had a number of industry jobs, from leading  a home building operation to starting his own real estate brokerage,  Outlaw Realty. As an agent, he helped more than 1,300 families buy homes. He even helped start a San Antonio-based title office. Blake stumbled upon Homeward in 2019, and after helping four clients win with a Homeward Cash Offer, he fell in love with our solutions and joined our team. Today, we’re sitting down with Blake to learn more about title and closing, and why he recommends using Homeward Title when you make a Homeward Cash Offer. 
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Let’s start with the basics. What is title?

Home title, contrary to what a lot of people think, is not a single document. It’s actually supported by several documents. It’s the concept that gives property owners their ownership rights. The title to a property changes hands with each new owner. And the property is transferred with a deed. Before that can happen, however, the title has to be verified to ensure the deed is effective.

Title also includes a physical description of the property and shows whether there are any liens or claims against the property from a creditor. Once you buy a home, for example, your mortgage will show up on the title as a lien. 

Title companies  and title insurance are hard to explain. How do you explain what a title company does?

Title companies manage the closing on your home. They make the purchase official. It’s really pretty exciting: the moment you become a homeowner is at closing. The words closing and settlement are often used interchangeably. That’s fine: they mean the same thing. 

So, what specifically do title companies do for homebuyers?

Title companies provide a few services to the buyer. First, they collect the money and fees associated with buying a home and hold them in escrow — a special kind of holding account — and then they distribute the funds at closing. So they make  sure everyone gets paid the right amount, right on time. They also ensure that you have a clear title — that no one else has a claim on the property you’re purchasing. And they provide title insurance, which protects you and your lender from any future claims against your ownership of the property. By the way, when a title isn’t clear, we refer to it as “cloudy.”‍

How often is a title cloudy?

Not often. But, mortgage companies require title insurance, so if you’re going to have a mortgage, you’re going to need title insurance to protect yourself and your lender. 

What does the title company do for the seller?

The title company makes sure the seller and the seller’s lender receive the funds they’re owed as part of the transaction.  The title company also coordinates the payment of fees to any vendors who provided services as part of the closing and payment of commissions to the agents.

There are a lot of closing companies out there. Why did Homeward create its own?

When you buy a house with our Buy with cash or Buy before you sell services, there are two closings instead of one. First, Homeward buys the home with cash. We call this the Homeward Purchase. Then, you buy it back from Homeward when you close on your mortgage. We call this the Customer Purchase. So there are two contracts and two closings. Traditional title companies aren’t designed to handle double closings efficiently, and that can lead to confusion and closing delays. Ultimately, that’s a bad customer experience.

We created Homeward Title so you can work with one integrated team, which means you’ll have a better, more seamless experience. Closing the purchase of a new home costs money, but states regulate most of the fees associated with closings so prices don’t vary much — if at all. In Texas, for instance, the Texas Department of Insurance regulates title premiums and endorsements, so these costs are the same regardless of where you close.

But when you settle both closings with Homeward Title, you won’t pay for two policies?

If you close a Buy with cash or Buy before you sell transaction with another title company, you will probably be required to obtain a new title policy and that additional policy could cost you near 1% of the home price. There’s one more major advantage to closing both transactions with Homeward Title. They get an underwriting exception, which means you won’t have to wait around for the deed to record for the Homeward Purchase before the underwriter can issue a new one for the buyback as part of the Customer Purchase. That means you’ll finalize your buyback sooner. When the Homeward Purchase closes at another title company, they can’t guarantee that.

You mentioned that these types of transactions involve two contracts and two closings. Does that mean double the fees?

No. When the seller and buyer both use Homeward Title— when Homeward Title closes both the Homeward Purchase and the Customer Purchase — we cover nearly all redundant fees.

How did the COVID-19 pandemic change the way you do closings at Homeward Title?

Homeward Title was already on the forefront of offering fully digital closings, but COVID accelerated that. Homeward Title now uses a cloud-based platform that makes it easier to communicate with the team, upload documents, and track the progress of the closing. It’s great.

Homeward Title also offers our clients a virtual settlement review. It’s basically a Zoom meeting. They review all the documentation and answer any questions.

And, finally, Homeward Title sends a mobile notary to you when you’re ready to make everything official. And they usually do this a few days before the scheduled closing date. They don’t like leaving things to the last minute. It’s really a concierge closing experience.

If anyone reading this has more questions about closing at Homeward Title, what should they do?

They should visit the Homeward Title website or  reach out to our fabulous title team. They can email them at team@homewardtitle.co or reach them by phone at (512) 598-6282.

Homeward Title LLC and Homeward Mortgage LLC are wholly owned subsidiaries of Homeward, Inc., either directly or through one or more subsidiaries.  Because of these relationships, the referral of a customer by any of these companies to one of these other companies may provide the referring company, its affiliates, or any of its employees with a financial or other benefit.  To view our Affiliated Business Arrangement Disclosure, please click here.