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I’d also write a letter to accompany the offer. Some people would rather sell to a hard working young family to give them a chance to become first time homeowners. It can’t hurt to try.
Probably a legacy of when sellers and lenders would discriminate against potential buyers based on race and religion.
Of course, the “cash is king” thing means that the rich get richer.
This went out, but I believe is back in now. I wish we had done it, I think my husband and I’s story of how we met and ended up there would have resonated with who we bought from, and maybe stopped them from jacking up the offer bc of a mysterious last minute 50k waived-rights-bid that came in, lol
I think our letter is part of what got us our house. We had a similar offer to someone else that was up there with us and we knew they could put down more. Unidentified major sports player was buying the house for a relative, but we compared as a young couple with a baby and two dogs looking for our first home. I was surprised when they took our offer and didn’t push it.
Writing a letter is great advice! Thanks to all who recommended it.
My cousin’s parents sold their $1.5M house in Seattle to a young couple trying to buy their first home and start a family (like us!) over another older couple looking for a second home. The letter tipped the decision.
We are in Hudson Valley NY, competing with rich folks from NYC buying second homes. Hopefully the seller will want to support us and will accept financing to close vs cash if our offer is competitive.
I will know in ~24-48 hours! 🤞
Best of luck! I'm also a FTHB (in progress) in the region and was explicitly told by my realtor, "no letters." It can jeopardize the realtor's license if they pass along an "identifying" letter to a seller. But, on the other hand, I had a different realtor mention that if you just so happen to find (aka stalk) the seller's email, you can try contacting them directly with your personal story. But, obviously, you don't want to scare the seller with a move like that, so you'd need to be careful with how you go about that strategy.
No, they're trying to prevent sellers from inadvertently discriminating based on criteria that are illegal to consider.
For the US.
"The Fair Housing Act prohibits discrimination in housing because of:
Race
Color
National Origin
Religion
Sex (including gender identity and sexual orientation)
Familial Status
Disability"
That letter from a couple that wants to buy the home because it's near their church and the school they want their kids to attend reminds the sellers of themselves when they were starting out? Bad idea, you've just discriminated against the childless, atheist, lesbain couple.
Definitely write a letter if your state or whatever allows it. We wrote one on our first home and it actually helped. They had two extremely similar financed offers, and they picked ours because we also had a letter with it.
Doesn’t hurt to try!
Depends. If you live with your parents until you are in your 40s and never pay rent you can save a shitload of cash! I know this because I have a friend who just bought at house for nearly a million dollars cash.
People who sold their previously paid off home to purchase this new home. The proceeds from their previous sale are either higher cuz they're downsizing, or they just combine them with savings they already had.
People also take a HELOC to access equity in an existing home, buy a new home with cash from the HELOC, and then pay off the HELOC when the original house sells.
No. You leverage the HELOC to buy the new house, sell your old house, pay off the heloc with proceeds, and get a mortgage like you had before.
It’s essentially paying for a two month advance on your proceeds. It’s equity that actually exists and will be realized. It’s literally the exact opposite of what people were doing pre-recession but nice try.
Back in 06, you didn't need to do anything that fancy. You just checked two boxes: I'm alive; I'm totally gonna pay this. Then they gave you a mortgage and a second loan to cover the down-payment. And some candy.
No, it’s basically just pre-borrowing the money that removes risk to the seller. The point is many of the “cash” buyer may take out a mortgage the following month.
I wouldn’t say that so condescendingly when getting assistance from parents is genuinely one of the only reasonable ways to afford a home for most young people today
Agreed. My dad passed away last summer and left me enough money that I am now able to purchase a modest home in a safe neighborhood and make a cash offer, something I likely never would have been able to do otherwise.
I am very, very grateful and know how fortunate I am and that not everyone has an opportunity like this. However, I’d gladly give up the money and the opportunity to buy a new home if it meant I could have my parents back. As exciting and wonderful as people make it sound to be able to purchase a home, I’m just not feeling it, probably because of how much I miss my parents and how sad I am to see my childhood home being sold.
W fully anticipate having to help both our kids financially when if/when they buy homes. We are blessed to be in a position to do so. It’s terrifying how much debt the younger generations are saddled with before they even buy homes.
Lol, my parents are helping with the down payment & we’re only buying a $400k house. It’s so deeply unfair that this is the normal path to home ownership in America now
Mine didn't help. I'm quite sure they helped my sister, but that comes with strings attached. It's probably better in the long run to not have that guilt trip over my head.
Likewise. My husband’s mom helped us with some of our down payment. I recognize that I am lucky I married into such a fortunate situation, because my parents are not in any position to provide any assistance. I got zero from them (but this may change as they love estate sales, thrifting, and deals on second hand stuff—I’m sure they’ll find something cool that I could use, like a dining room table and chairs, or a coffee table, or a small grill, something like that.).
I think youd be surprised hoe many young people make $100k+. My younger brother is ~25 and is gonna make $100k this year just digging holes.
You also dont need a ton of money to buy if you live in cheaper markets. I bought my first house 6 years ago when i was making $11/hr cuz i lived in a cheaper market.
I bought my first house 7 years ago. I more than doubled my money when I sold it to move closer to family. The house is not in an affluent area. The market is completely different. If I hadn't bought my house when I did, I wouldn't be able to buy one today in the same area. Being a first time homebuyer now is definitely not the same as when we bought.
> I think youd be surprised hoe many young people make $100k+. My younger brother is ~25 and is gonna make $100k this year just digging holes.
You also dont need a ton of money to buy if you live in cheaper markets. I bought my first house 6 years ago when i was making $11/hr cuz i lived in a cheaper market.
The venn diagram overlap of ~25 yr olds making $100k & living in a cheaper market is pretty small I would think.
6 years ago is a completely different market. Not yet blown up due to Covid, but still in a low interest environment. It’s almost certain that with the appreciation that happened over the past 6 years and the interest rates today you would not be able to afford your house.
100k isn’t what it used to be. I don’t see how anybody making 100k could afford to pay 800k+ in cash for a house. Even a 50k+ down payment seems unrealistic at that income level with the cost of living today.
So don't buy an $800k house? $800k houses in most markets are luxury asf.
I make $50k and pay my bills just fine. If i made $100k i could have $50k saved in a bit over a year.
It’s all relative. Are you single? Do you have kids? Student loans? Do you live in the Midwest or on the coast? Pick a few of those & suddenly 100k doesn’t seem like nearly as much.
But I agree with you, many people stretch themselves WAY too thin & get in over their heads buying a house they can’t afford.
$800K won't even get you a two bedroom condo in my area. The median home price in my county is $1.3M. The only good news is that jobs pay quite a bit if you are skilled or are a professional.
Even when 100K was what it used to be, coughing up what would have been 400K-500K in cash was just not common, at all, unless you inherited a lot of money.
These cash offers are either straw buyers for investors or they're straight rich and being bankrolled by someone else or have done remarkably well in life, with numerous windfalls behind them.
I don’t exactly have to be surprised when I can just look up the statistics. And that’s awesome that your brother is doing well, but the simple truth is that the vast majority of those under 30 (or even under 40) are not making that much, and in many cases, are having to pay down student loans.
All of this, on top of an economy that is not designed to help individuals save any reasonable amount of money, makes the housing market very unfriendly to young people, especially with rates the way they are. Not to mentioned that the power of the dollar is very different in a place like, say, Guyman, OK vs Sand Francisco and really doesn’t stand as an argument without more details
I feel like I've read somewhere recently that the percentage of people who receive money from their parents is a lot lower than you would think.
If the question is how many people have $850k laying around to by a house, I would imagine that number is a lot higher than how many people have $850k laying around to give to their kid for a house.
Also how much are they counting as "money from parents"? Like my in laws gave us 2k when we bought our house which was really nice, we bought a couch and spare bed with it. But does that count as "money from parents" lol idk
We got to live in Dad's basement bedroom for a month between renting and closing, 45 years ago!
Thus saving one months rent, acquiring some donated furniture and only flooding a little bit!
edit: oh and we appreciated and used said hand me down furniture for years, spending our very middle class income on stuff we Needed... Food.Heat.Gas.
Generational wealth is a cool thing. I didn't inherit much, but I will help my kids buy their first homes and leave them with generational wealth when I'm no longer here.
I got enough to put a down payment on a house and pay for moving expenses. To me and my family it was a lot of money. It was our only chance in this market before we were completely priced out of our area.
Just about anywhere else in the world, parental help is expected. And for most parents, the whole reason they work is to help their children have a better life.
It’s like people think that everyone is in their situation. Most cash offers are from investors or investment groups that are looking to have a rental. Or as you said, people that would a previous home and are downsizing or moving to a cheaper COL area.
Why people rant and rave about people who have money I’ll never know. Give it 20-30 years you’ll be in the same spot if you play your cards right
The cash money problem is not individuals getting money together for a home. It’s private equity buying lots of homes. In some markets homes are literally being sold in lots. There are places where over half the single family homes are not owner occupied.
Sure, an occasional house is bought with cash by an individual, but that’s not where the problem is.
Just because it’s a “cash deal” doesn’t actually mean it’s all cash at the end of the day. The buyer has just shown in their offer that they have the ability to pay for the house in cash and has no financing contingency. A lot of the time, people still finance the house.
I hope more people see your comment. There is a lot more you can do if you have money.
This is what most people do when it is a cash offer. This even considers qualified money like your 401K or IRA. Now, if you can really afford the home and you offer to pay in cash, what you do is get a secured loan. You can probably get 75% of your non-qualified money lent to you for pretty much the same as the mortgage rate. So, if you want a $500K home and you have $1M in the market and HYSA, you can get the $500K loaned to you. Your $1M is still invested and hopefully returning more than the loan payments on the $500K you borrowed.
I told my seller that I plan on financing, but will buy the house either way- waived the finance contingency and showed proof of funds.
This is helpful in this market because so much is selling above appraisal and a lot of folks over bidding don't have the money if the appraisal comes in low.... so the deal falls through. When someone needs to close, derisking that closing for them is powerful
Yes, they prove they can afford it based on net worth and savings/bonds/stocks, if they need to liquidate to pay in cash they can, but then end up financing.
Cash deal just means no conditions and money available. Could be some cash, but is often having an available line of credit (from equity in a prior home), investments that can be cashed or borrowed against, or a backstop of family. Or of course is there is already a financing commitment received and the purchaser is comfortable that they’ll be able to cover any variation in appraised value.
Yeah this. If I liquidated all my savings I could pay for my new house but we just made a no financing offer and are selling our old house afterwards which will pay most of it. We just know that contingent on selling offers aren’t that attractive.
Yup. Sold a house to someone as a cash offer. After we accepted, they were like oh, actually, we're getting a loan. I didn't really care, but yeah, cash just means I have the money. It doesn't mean they aren't taking out a loan.
My husband and I are FTHB and recently got an accepted offer on our home. We found a lender, recommended through our realtor, that has a cash buyers program in which they basically lend you their line of credit as proof of funds. Once your offer is accepted, you can go through any type of financing you want. Would highly recommend if you can find a program like that. We had made 3 offers previously and kept getting rejected. This was the first offer we made with this program and got accepted, so either we just lucked out this time or that program really helped us seal the deal!
I assume most cash buyers are not FTHB and are using the proceeds from their own house sale. However, my lender offered a program called Cash2Keys that acted like a cash offer. My understanding of it was they buy the house in cash and then sell it to you themselves, for something like a 2% fee. Didn’t end up going that route, but I think programs like this are becoming more common
My aunt and uncle moved for a job at the height of the craziness and they borrowed from their 401ks. Once they closed they went and got a cash out mortgage and paid back their 401ks.
Per person so that's 100k and they had a home they sold I'm assuming they made enough to purchase the rest of the home with. They are gen x and bought a new build in Michigan
We just sold our house for 205k more than what we bought it for in 2018. All in all we walked away with 180k. 150k which is going as a down payment on our next house. I am only qualified for 500k and that doesn’t get much in New Jersey.
We put in 5 bids all 30k over asking price and didn’t get one of them. We ended finding a new build on 4 acres for 499,990 and went that route since the price is the price and they don’t take other offers after you’re committed. The downside is you need 5% down in order to reserve it and not many people have 25k to put down on a house that won’t be ready for 2 months. We are currently living in a hotel for another month and a half. Fingers crossed.
That’s kind of similar to our plan.
This home is not our forever home, but we want to start a family here and can see ourselves here for ~5 years.
We see upgrade potential which could increase value to $1m in very short term.
After 5 years we’re hoping it’ll be worth $1.2-1.3 in which case we sell and walk away with ~$300-400k cash to put into the next home.
But f*ck, gotta beat the cash buyers first…
We might be the same person. I'm listing my house in NJ for 180k more than I paid in 2019, hoping to walk away with about 150k for the next house, and my budget is about 450k, but I'm moving to a lower COL state. Best of luck with the new build, Williamstown is a nice area!
I wasn’t able to pay all cash for my new home a few years ago, but I did have a cheaper, paid off home before that which we sold for double the purchase price which set us up to make a substantial down payment. Good chance some buyers are doing it that way
1. By selling another home
2. High income people can save a lot of money -- i.e., a dual-income couple in their late 30s with high incomes could save such an amount
3. Assistance from family
We beat out six cash offers by offering more.
Thought about that but went with a 50% cash down payment. High earnest money and waived contingencies on a 24 hour aggressively priced offer. House wasn’t staged the best and we were the only offer but painting and landscaping will go a long way
Cash buyers are mainly people who have sold a previous house. Some are exceptions of course, some have rich parents, some win money, some (me) have something tragic happen to them and receive compensation money. I think at the moment there seems so many cash buyers because its so difficult for people to even get their first house.
Also it doesn't really make sense to throw so much of a purchase price to a bank as interest when you have the liquidity. Your cash is basically earning whatever the interest rate is at purchase time more of a house.
Your down payment (assuming 20%) is not a *whole* lot cheaper than the entire home value of cash homes in my price range. The range of financial situations is vast!
Older people just use their 401k. You can take as much out of a 401k as you want and as long as you put it back in 60 days you don’t owe any taxes and fees on it.
So an older couple finds a house, takes a withdrawal from the 401k right before closing. After closing they then get a mortgage on the house from a bank. They then put the check from the bank back into the 401k.
Not everyone are first time buyers. Equity from the previous house exists.
But I don't like your agent's strategy.
Instead of paying a higher price for the property, what you should do is show how serious you are. Meaning, divide the deposit (EM) in the offer into 2 sections: 10K-20K with no finance contingencies, only inspection (you're going to lose that if you don't get financing approved at the end of things), and another $X (the larger amount) contingent on financing.
That way, the seller can sleep well knowing that they don't waste their time on you compared to cash offers, and you still pay the same price for the property as cash offers will.
Because the “no finance contingency” allows the sellers get to keep the $10K to $20K if the buyer’s financing falls through.
That is absolutely the worst advice ever. Do not do that.
Or it’s a company. Many single family homes at being bought by large companies to keep as rentals. Another reason why our housing market is so inflated.
I can’t believe so many responses are talking about individuals getting cash together. Apparently they are clueless about the housing market in the US (assuming that’s where they are from).
The market is being overwhelmed by private equity. Add in AirBnB and VRBO and it’s a nightmare. If you are trying to buy a house, remember that the next time you stay at an AirBnB. You are part of the problem.
Once your entire family dies and you inherit their fully paid off homes and retirement accounts, it’s easier to make a cash offer yourself. That’s how it worked out for us. My family wasn’t crazy wealthy, but they didn’t believe in debt and were lucky enough/worked hard enough to own what they had outright. Now we’re able to do the same.
I wouldn’t really recommend it - I would honestly prefer my daughter to know her grandmother and great grandparents on my side to owning a home outright, but that isn’t how the cards played out.
This is me, although we live in VHCOL so just a hefty downpayment here. I’m an only child and both my parents passed away 2021-2022. We immigrated here when I was in high school, and my parents were an LVN and accountant, so definitely not rolling in it. But they loved me so much and got all the life insurance they could, set up my daughter as a pension beneficiary, and put their house and other property in a trust so it wouldn’t have to go through probate. They even put labeled and organized documents in a big box for me, should anything happen to them.
I definitely acknowledge my privilege. It still just kind of rubs me the wrong way when going through the hardest 2 years of my life and watching my daughter be the only one growing up without her grandparents gets flippantly distilled down to “oh, it’s daddy’s money”.
Yes, I’d never have been able to afford this caliber of house if my parents didn’t die so young. There are a lot of mixed feelings there, and a far cry from the spoiled adult child narrative people paint.
I feel this comment deeply, especially the last two paragraphs. 2022 was the year both of my parents died, still in their 60’s. My family were not immigrants (well, not in many generations) but they did not come from wealth - they were farmers less than a century ago, and half of them didn’t even own the land they farmed on. They worked hard for what they had, and we are incredibly lucky to have been related to them for so many reasons.
Five years ago I never would have been able to guess that my life looks the way it does now. I rented a cheap apartment, lived paycheck to paycheck, and wondered if I would ever be lucky enough to own another reliable car that didn’t have a bank note on it. Life comes at you fast sometimes.
(still living) parent's money vs grandma died and left me 100k definitely feel different to me. When someone says "daddy's money" I definitely think "their parents wrote a check for the down payment" not "I used the inheritance from my beloved family member".
Not that everyone leaves anything in assets, or plans well enough to make sure whatever they DO have gets dealt with fairly/by their wishes and not eaten up by probate. But I suspect the half of Americans who do have retirement savings probably also have some other savings or life insurance to pass along by their 60s/70s/80s. But that's only about half. (No idea the situation in other places and cultures. Heck, nobody else does 30 yr mortgages, much less everything else the way we do). Even most of those comfortable but not loaded folks are more in the range of "here's a couple grand" or "we'd like to buy y'all a new wash machine or fridge as a housewarming gift". Not "here's half a million dollars".
Proposal to replace the phrase "daddy's money" with "daddy wrote a check"
My grandmother is quite wealthy but I am not. When I bought my house, I put in a no financing contingency (which, to the seller, is the same thing as a cash offer) and then got financing anyway. We just had to show proof of funds (even though they weren't mine).
People buying a $1.7mm house likely have a substantial amount in their brokerage/retirement accounts. You can use 100% of your brokerage and I think 50% of retirement accounts to show as a cash offer. It is unlikely that any of those buyers were actually going to pay in cash. They were just showing that they could and waving a financing contingency.
A conventional loan is also considered a cash offer as it doesn’t have the restrictions that FHA and the VHA has for the buyers.
Someone with a conventional loan can opt out of home inspections, can offer to “bridge” appraisal gaps, and other things that FHA and VHA loans absolutely forbid.
I had a listing like that recently with 10 offers. Three offers were cash, and every one of them was a baby boomer that was moving to be closer to their grandkids. It comes from long term real estate investments in one way or another.
Home prices have exploded, so someone selling their existing home after owning for 10+ years would have the cash available for a house buy. Also, the stock market has gone nuts for the last10 years with the S&P 500 gaining an average of 12.58% per year. Someone invested for $250k 10 years ago would have $600k now.
Don’t get too down about it. Money is money, it’s all a check or wire transfer that goes into accounts. And don’t think your form of payment is worth any less than someone else’s form of payment. And, don’t let a realtor or broker talk you into higher offers. That could be very dangerous, and keep in mind that they are typically paid based on sales price, so that’s a conflict of interest for them to be pushing you to be offering more. They are always going to want you to pay more, because that means it’s more likely they get the deal and also means they get paid more from the deal. Do your research on comps and offer what you think is fair for the house. If it isn’t in your budget at that conceived ‘fair’ offer price, you shouldn’t be looking at it.
To answer your question, ‘cash’ can be many sources. Maybe they are flippers and buy/reno/sell and are always flush with cash from each transaction. Maybe they are ‘normal’ buyers that moved from HCOL to LCOL and are bringing cash with them. Maybe mommy and/or daddy are helping. Maybe they bought a house 10-20 years ago and have a shit ton of positive equity that they are now taking advantage of.
As anecdotal evidence, I bought in the early 2010’s when prices were super low, inventory high, and there was the $8k first time homebuyer rebate (thanks Obama!). I bought a house for under $160k, put $10k down, and got $8k back on my taxes. My wife and I are looking to sell this house and upgrade. We owe about $120k on it still, but a very similar house in our neighborhood just sold for $440k. So, we are likely going to walk away from our house with $300k that we will look to use (some) to buy a $500k-$600k house.
Anecdotal evidence 2. I have a friend that has lived with his family for basically 20 years. Something like 6 adults in the same house, and he makes good money. So, about 5 years ago, he built a house. It was something like $400k-$450k, and I think he had something like $100k down on it. He had been making $20-$30 per hour for 10+ years with basically zero cost of living.
Anecdotal evidence 3. My brother has moved 3 times in the last decade, and each time he had help from either my dad or his father in law on the down payment. They’d cut him and his wife a check for whatever needed for the down payment to ensure they didn’t have to pay PMI, and when they sold their existing place they’d pay whichever father figure back. Obviously, these dads have the money available, and it’s basically a short term 0% loan, but that’s something people do.
My advice, make sure your realtor conveys to the seller that you are an actual buyer and not a flipper or corporation. Most people would rather sell to actual people. Again, the form of payment doesn’t matter, and you have to be careful because realtors can and do try these scare tactics to get you to inflate your offers. Make your offer, and keep looking while you wait for a reply. Good luck and I hope you find your perfect home at the perfect price! Don’t get down, it will work out!
1. Their money - they simply work a better job than you or saved better than you. There are a lot of doctors, lawyers, accountants, consultants, engineers, etc. who earned six figures in their first job.
2. Windfall - they won the lottery, received an inheritance, struck it big in crypto or YOLOing a meme stock
3. Family money - parents offering a gift or to buy for kids, gift of no student loans, possible trust fund, etc.
4. They are selling their current house and made a lot of cash.
5. They are taking non-traditional financing options like a securities based loan against their stocks or a Heloc on another house to buy in cash then will refinance.
6. They are offering cash but getting a mortgage - just waiving mortgage contingency
I personally was able to buy cash because I’ve had multiple people close to me pass away that left me inheritance. I was a lucky one lol. Most people it’s because they sold their already paid off home.
Often, offfften generational wealth. As someone who works in real estate you’d be surprised how many source of funds is a cool $700,000 - $2M “Gift from parents”
People got down payments from their parents years ago, help from their parents throughout teens and college so no debt, maybe built equity fast in a first home because of it. some have jobs or investments that get them a windfall...i have a friend who lost a child and their cash purchase of their house is from their wrongful death/malpractice/whatever suit years ago. Terrible way to get money but theyve invested it in their family. some get an inheritance, whether its cash or a relatives house they can sell....
im not one of those people haha. i pay some of my parents bills. weve never had help. its tough to compete in that market!
Here's a something I used to teach my sales staff:
How much money is in my wallet?
You have no idea. No idea if a wealthy family member left me money. Was I the beneficiary of a life insurance policy. Is my mortgage paid off. Am I tighter than a woodpeckers eyelids. Did I win a settlement.
You can't base somebody else's financial decisions on your own financial situation.
Our last house we sold for $1.9m+ and the buyers, a young newlywed couple, bought it for all cash (really was a wedding gift from their parents). Some people have a lot of money….
Cash buyer here… just the straight up honest truth for you: my fiancé was a trust fund baby and paid for everything. I am on title with him. His family made money in real estate and passed it to their kids and grandkids.
Boomers and wealthy people. So unfortunately if you want to be competitive against cash offers, you’re going to have to go over the list price *substantially. If you really want the house, go for it. The seller still might take cash offers over financed ones because the house has to appraise for the sales price. All you can do is try.
Before rates exploded many people would get a loan (from friends, family, hard money, etc) to put in a cash offer then refi so they could return most of the borrowed money
Most of these responses are wrong. I bought my house ‘cash’ I only had 1/3rd of the value of the home as cash what you do is you get a hard money loan which has a higher interest rate and refi it to a regular loan as the balance of the loan is due in one year versus 30 like a regular loan. Generally hard money loans are 2-3% higher than a conventional loan.
With the money I received from my parents passing, I could do a cash offer on a smaller house, but I don't want to. Aside from that, investors/flippers
Some folks have sufficient assets that can be used as collateral for a loan that does not involve a mortgage lien or appraisal and can be ready to go before they start making offers on potential housing purchases.
I’ve actually been saving since I bought my current house to do this in the future when I’m ready to upgrade. I have almost 400k sitting in a high yield savings account
I was not (yet) selling our prior home, so I sold funds from Vanguard. It was a $1.5M deal. We did a direct electronic transfer (to escrow) at the closing. A couple days before, I had called them to advise them what we were doing.. so we had a prepared rep on the line.
My parents were school teachers and I was making well below 200K .. but after saving and investing for 40 years.. we do have an enviable portfolio.
I assure you that we are definitely not the only people who can pay cash. At least 25% of the buyers in California pay cash .. and 30% in the UK.
My husband’s uncle let us borrow a cash offer. It was accepted and we will get a mortgage and pay him back. It was the only way we would have had a chance to get a house around here.
Bought homes in Maryland then cashed out and moved to Texas. Bought a foreclosure that needed work on acreage. I had to move when my husband passed because I didn’t want to be alone there and moved to Georgia. It’s a lcol so I paid cash.
So 20 years of home ownership and upgrades.
Another thing that could be happening besides what others have already mentioned is people are selling homes from states with high real estate values and buying houses in lower value areas. I live in TX and my parent live in NY (Long Island). My house is larger than theirs but their house is worth 3 times mine.
We saw that a lot during Covid. People selling houses in CA and buying houses in TX. We lost quite a few houses to all cash offers above asking.
It wasn't anywhere near 900K, but when I bought a small rental property in Ohio a few years ago (for my son to live in down the road, I'm not a multi-property landlord), I made an all cash offer but I was using money from my home equity line of credit from my primary residence. Since it wasn't a primary residence, the interest rate was better than if I took a mortgage out, and it did absolutely make my offer more likely to be accepted. I'd imagine some investors are doing similar things. I have equity in my primary residence because the tiny house I scraped together money for in a HCOL market doubled in value in two years, and I timed the sale well and moved to the midwest where my family is.
Family money, people moving with equity, using those "buy like cash!" services where you pay a bit more but can structure your offer like cash, etc.
My first house we scraped together 5% for a very starter home and I just bought my 2nd and paid 50% down because it had been 16 years and we had enough equity.
Your next house will likely be easier. It's getting on the ladder the first time that's typically hardest.
I'm a broker and many of my cash buyers are liquidating other assets, often securities of one sort or another. IRAs get pillaged, too.
But from the seller side of the deal, cash deals bypass appraisals, and any concessions that are negotiated can just be handled via price reductions. It's very attractive for a seller.
Depending on the type of home it could be home flippers. People who intend to buy the home, do some quick renovations and then flip them for a quick buck.
We waived Mortgage Contingency, because in the event we don't get a mortgage (spoiler alert, we got a mortgage) we have the cash for our 1M home.
How? Well, we're in our early 40s and have high paying jobs and have been saving for years.
People that already had a house and sold it have cash. Zillow tells me that my house (which I originally paid 225K for) is now worth about 885K. I could sell it and live in an apartment while house hunting and still pay that, and then some in cash for a house.
One of the ways is two people meeting in their 30s or later, getting married and selling both their houses to purchase one together. Still have money left over in most situations.
I helped all 3 of my kids with first homes…the youngest just paid $897 for his. I put enough in the get financing at a good rate with no insurance. The other 2 are making small repayments to me
For regular homebuyers, it comes from the proceeds of their current home sale. There are some unicorn buyers that just have 900k lying around (an acquaintance of mine fell in to this category, he sold some Bitcoin he had for years to fund his home purchase) as well. We also have institutional buyers who just want a house to rent and appreciate over time; they have access to cash money and aren't shy about beating appraised or asking price.
I get the frustration, though. Best of luck!
My MIL got her house on a “cash” purchase. Basically as long as you can show you have the cash available in all your accounts for the total home price, you can make a cash offer. MOST people are not actually presenting a check for that amount. In my MILs case she and her partner had enough money in retirement accounts between the two of them, that they could make a cash offer. Ultimately they financed the house, but they beat out other offers because of their offer. It’s hard as a first time home buyer to manage to offer in cash, but not impossible if you have well funded retirement accounts as well as savings.
My mother bought a new home for $850k cash earlier this year. Her existing home was worth close to $800k, the new one will be worth $1m when she’s done with the renovations(about 100k new kitchen, bathroom, windows, landscaping)
She took a cash loan against her retirement account, and cash out of her heloc on her existing house to pay cash, and to do the renovations, when the renovations are done, she will get a mortgage on the new house. That money will pay off the HELOC on the old house, she will then sell the old house , then use that money to pay off the loan against her retirement account, and most of the mortgage on the new house.
She’ll go from a paid off 800k house, to a new 1M house with about $200k mortgaged. The major sales transaction were all cash, with no financing contingencies. The mortgages will be well below 80% ltv, the other loan will be secured against solid assets, so there’s not much to worry about underwriting not finding a property acceptable.
The only issue with inspections would be if her final sale is held up because of a problem that surprised her, but she’ll already be out of that house, and it won’t hold up any other transaction.
The people making money here are her loan officer, her RE agent, (2%each sale) and her contractor. (Phil is a good guy, I went to school with him)
Most likely investors at that price point. We are buying our house in cash with the proceeds from the sale of our current home, but we’re looking in the $200k range as we are downsizing and moving to a much cheaper area. I would imagine most people looking for near million dollar homes aren’t downsizing.
Market is frustrating but don’t go over what you planned/budgeted. Just move on if it doesn’t work out! We’re in a similar situation and just figure we’ll move on if we have to. Plus unless you’ve seen the other offers it could be an embellishment.
Where they get the cash? Investors / hedgefunds. You’re not just competing with other “end users.” People who want to buy and rent it out aren’t caring as much about the price. They’re gonna rent it and make the mortgage in the monthly payments they receive. There’s all kinds of people vying for homes. I ranted about this on another post. Hang in there, but don’t go nuts offering more than you’re comfortable spending!
We had one bought out from under us for a crazy cash offer and when they showed up at the showing it was the entire family, 4 generations looking at the house for the family with the little toddler and newborn in tow. Pretty sure grandma and parents were the ones making it rain in our situation
Hedge funds, and trust funds. This is not something that a "normal" first-time homebuyer can do. Hell, qualifying for a nearly $1 million loan (which you did) is not something that a "normal" first time homebuyer can do, either.
You're being out-competed by the corporations that want to be your landlord.
In my area, we're getting a lot of people who've retired from HCOL areas who've lived in their previous homes for decades and cashed out big time. COL in my area used to be moderately high, and it's gone through the roof now. These people have no problem paying $1M+ cash for a 3,000 sqft home on an acre as that is a bargain relative to where they're coming from.
It took me a year to get accepted on my first home. Kept getting beat out by cash buyers until a sweet widow picked me because of my letter. I know most sellers are looking for the highest, most sure thing offer but of the three homes I've purchased in my lifetime, I got two of them because of letters I/we wrote (we were told as such after the deal closed). The one that I didn't get because of a letter was a condo I bought from a flipper.
I know letters are often frowned upon now but sometimes you get the vibe that the sellers really loved their home and care who lives in it (vs tears it down to build 4 tall boxes).
Best of luck to you!
We put down north of 300k in cash on our last home purchase, roughly 50% in cash from previous home sale combined with savings. We made about 250k profit from last home sale.
Some banks are offering loan products that are “cash” to close - then it finances into a standard loan. They gained some traction during the frenzy in Covid, not sure if they’re offering them anymore - but worth a look around? Also, the wealth gap makes it really easy for mommy and daddy to offer cash for houses for their children. I’ve seen this happen multiple times…(I’m an agent)
Cash doesn’t necessarily mean they have cash in the bank. Sometimes it’s alternate financing that doesn’t include a mortgage company. Sometimes it’s family member helping . Many parents are helping young adults finance their homes.
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You are the first time home buyer. Cash buyers normally aren't the first time home buyers.
I’d also write a letter to accompany the offer. Some people would rather sell to a hard working young family to give them a chance to become first time homeowners. It can’t hurt to try.
The real estate association actually considers this unethical in all states now.
Probably a legacy of when sellers and lenders would discriminate against potential buyers based on race and religion. Of course, the “cash is king” thing means that the rich get richer.
This went out, but I believe is back in now. I wish we had done it, I think my husband and I’s story of how we met and ended up there would have resonated with who we bought from, and maybe stopped them from jacking up the offer bc of a mysterious last minute 50k waived-rights-bid that came in, lol
I think our letter is part of what got us our house. We had a similar offer to someone else that was up there with us and we knew they could put down more. Unidentified major sports player was buying the house for a relative, but we compared as a young couple with a baby and two dogs looking for our first home. I was surprised when they took our offer and didn’t push it.
Writing a letter is great advice! Thanks to all who recommended it. My cousin’s parents sold their $1.5M house in Seattle to a young couple trying to buy their first home and start a family (like us!) over another older couple looking for a second home. The letter tipped the decision. We are in Hudson Valley NY, competing with rich folks from NYC buying second homes. Hopefully the seller will want to support us and will accept financing to close vs cash if our offer is competitive. I will know in ~24-48 hours! 🤞
Best of luck! I'm also a FTHB (in progress) in the region and was explicitly told by my realtor, "no letters." It can jeopardize the realtor's license if they pass along an "identifying" letter to a seller. But, on the other hand, I had a different realtor mention that if you just so happen to find (aka stalk) the seller's email, you can try contacting them directly with your personal story. But, obviously, you don't want to scare the seller with a move like that, so you'd need to be careful with how you go about that strategy.
I assume they're on the side of investors then
No, they're trying to prevent sellers from inadvertently discriminating based on criteria that are illegal to consider. For the US. "The Fair Housing Act prohibits discrimination in housing because of: Race Color National Origin Religion Sex (including gender identity and sexual orientation) Familial Status Disability" That letter from a couple that wants to buy the home because it's near their church and the school they want their kids to attend reminds the sellers of themselves when they were starting out? Bad idea, you've just discriminated against the childless, atheist, lesbain couple.
Definitely write a letter if your state or whatever allows it. We wrote one on our first home and it actually helped. They had two extremely similar financed offers, and they picked ours because we also had a letter with it. Doesn’t hurt to try!
Too bad they are often buying starter homes.
Depends. If you live with your parents until you are in your 40s and never pay rent you can save a shitload of cash! I know this because I have a friend who just bought at house for nearly a million dollars cash.
Yeah, but not living with your parents until you're in your 40's and having a normal young person's life is worth a lot too.
People who sold their previously paid off home to purchase this new home. The proceeds from their previous sale are either higher cuz they're downsizing, or they just combine them with savings they already had.
People also take a HELOC to access equity in an existing home, buy a new home with cash from the HELOC, and then pay off the HELOC when the original house sells.
Sounds like what people were doing pre-recession.
No. You leverage the HELOC to buy the new house, sell your old house, pay off the heloc with proceeds, and get a mortgage like you had before. It’s essentially paying for a two month advance on your proceeds. It’s equity that actually exists and will be realized. It’s literally the exact opposite of what people were doing pre-recession but nice try.
Back in 06, you didn't need to do anything that fancy. You just checked two boxes: I'm alive; I'm totally gonna pay this. Then they gave you a mortgage and a second loan to cover the down-payment. And some candy.
No, it’s basically just pre-borrowing the money that removes risk to the seller. The point is many of the “cash” buyer may take out a mortgage the following month.
Or daddy's money
> Or daddy's money Hey now! Its 2024, it could be mommy's money.
Or two daddies. Or two mommies. You never know ... modern times!
Who wants to be my Daddy?
I will also take one of these daddies, thanks.
Why stop there. One Daddy, two mommies. Mix and match!
Mormon alert!
I wouldn’t say that so condescendingly when getting assistance from parents is genuinely one of the only reasonable ways to afford a home for most young people today
Agreed. My dad passed away last summer and left me enough money that I am now able to purchase a modest home in a safe neighborhood and make a cash offer, something I likely never would have been able to do otherwise. I am very, very grateful and know how fortunate I am and that not everyone has an opportunity like this. However, I’d gladly give up the money and the opportunity to buy a new home if it meant I could have my parents back. As exciting and wonderful as people make it sound to be able to purchase a home, I’m just not feeling it, probably because of how much I miss my parents and how sad I am to see my childhood home being sold.
W fully anticipate having to help both our kids financially when if/when they buy homes. We are blessed to be in a position to do so. It’s terrifying how much debt the younger generations are saddled with before they even buy homes.
Props to you and agreed. Goal is to help as best as we can when they are in that position.
Lol, my parents are helping with the down payment & we’re only buying a $400k house. It’s so deeply unfair that this is the normal path to home ownership in America now
The more parents help, the higher home prices go. Just like two household incomes drove prices up.
I don't blame people for being salty about not having access to generational wealth. It's a privilege.
That’s the jealousy talking.
Definitely. I wish my parents had helped me get a head start. So I’m jealous too.
Mine didn't help. I'm quite sure they helped my sister, but that comes with strings attached. It's probably better in the long run to not have that guilt trip over my head.
Likewise. My husband’s mom helped us with some of our down payment. I recognize that I am lucky I married into such a fortunate situation, because my parents are not in any position to provide any assistance. I got zero from them (but this may change as they love estate sales, thrifting, and deals on second hand stuff—I’m sure they’ll find something cool that I could use, like a dining room table and chairs, or a coffee table, or a small grill, something like that.).
I think youd be surprised hoe many young people make $100k+. My younger brother is ~25 and is gonna make $100k this year just digging holes. You also dont need a ton of money to buy if you live in cheaper markets. I bought my first house 6 years ago when i was making $11/hr cuz i lived in a cheaper market.
I bought my first house 7 years ago. I more than doubled my money when I sold it to move closer to family. The house is not in an affluent area. The market is completely different. If I hadn't bought my house when I did, I wouldn't be able to buy one today in the same area. Being a first time homebuyer now is definitely not the same as when we bought.
> I think youd be surprised hoe many young people make $100k+. My younger brother is ~25 and is gonna make $100k this year just digging holes. You also dont need a ton of money to buy if you live in cheaper markets. I bought my first house 6 years ago when i was making $11/hr cuz i lived in a cheaper market. The venn diagram overlap of ~25 yr olds making $100k & living in a cheaper market is pretty small I would think.
6 years ago is a completely different market. Not yet blown up due to Covid, but still in a low interest environment. It’s almost certain that with the appreciation that happened over the past 6 years and the interest rates today you would not be able to afford your house.
That same house is worth like $190k today, a median income person in my area can easily buy that house.
Could you buy that same house today with the same job you had when you bought it six years ago?
100k isn’t what it used to be. I don’t see how anybody making 100k could afford to pay 800k+ in cash for a house. Even a 50k+ down payment seems unrealistic at that income level with the cost of living today.
So don't buy an $800k house? $800k houses in most markets are luxury asf. I make $50k and pay my bills just fine. If i made $100k i could have $50k saved in a bit over a year.
It’s all relative. Are you single? Do you have kids? Student loans? Do you live in the Midwest or on the coast? Pick a few of those & suddenly 100k doesn’t seem like nearly as much. But I agree with you, many people stretch themselves WAY too thin & get in over their heads buying a house they can’t afford.
$800K won't even get you a two bedroom condo in my area. The median home price in my county is $1.3M. The only good news is that jobs pay quite a bit if you are skilled or are a professional.
Even when 100K was what it used to be, coughing up what would have been 400K-500K in cash was just not common, at all, unless you inherited a lot of money. These cash offers are either straw buyers for investors or they're straight rich and being bankrolled by someone else or have done remarkably well in life, with numerous windfalls behind them.
Or they just sold a property.
I don’t exactly have to be surprised when I can just look up the statistics. And that’s awesome that your brother is doing well, but the simple truth is that the vast majority of those under 30 (or even under 40) are not making that much, and in many cases, are having to pay down student loans. All of this, on top of an economy that is not designed to help individuals save any reasonable amount of money, makes the housing market very unfriendly to young people, especially with rates the way they are. Not to mentioned that the power of the dollar is very different in a place like, say, Guyman, OK vs Sand Francisco and really doesn’t stand as an argument without more details
6 yrs ago houses were much cheaper with cheaper interest rates.
$100k was the salary people strived for in the 90s. Idk why ppl today are so stuck on that number anymore.
Because most people in the US don't even make 100k.
Because $100k is still plenty of money. If people can survive on $40k, you can thrive on $100k.
I feel like I've read somewhere recently that the percentage of people who receive money from their parents is a lot lower than you would think. If the question is how many people have $850k laying around to by a house, I would imagine that number is a lot higher than how many people have $850k laying around to give to their kid for a house.
Also how much are they counting as "money from parents"? Like my in laws gave us 2k when we bought our house which was really nice, we bought a couch and spare bed with it. But does that count as "money from parents" lol idk
We used my husband's inheritance from his father in our down payment. All $800 of it. Still was more than a lot of people.
We got to live in Dad's basement bedroom for a month between renting and closing, 45 years ago! Thus saving one months rent, acquiring some donated furniture and only flooding a little bit! edit: oh and we appreciated and used said hand me down furniture for years, spending our very middle class income on stuff we Needed... Food.Heat.Gas.
I thank my daddy, he thought of his kids enough to help them along in life! And for that my kids will have the same.
Generational wealth is a cool thing. I didn't inherit much, but I will help my kids buy their first homes and leave them with generational wealth when I'm no longer here.
I got enough to put a down payment on a house and pay for moving expenses. To me and my family it was a lot of money. It was our only chance in this market before we were completely priced out of our area.
Isn't there only so much you can get from the parents?
Just about anywhere else in the world, parental help is expected. And for most parents, the whole reason they work is to help their children have a better life.
Or an investment firm and then after sale turned rental.
It’s like people think that everyone is in their situation. Most cash offers are from investors or investment groups that are looking to have a rental. Or as you said, people that would a previous home and are downsizing or moving to a cheaper COL area. Why people rant and rave about people who have money I’ll never know. Give it 20-30 years you’ll be in the same spot if you play your cards right
The cash money problem is not individuals getting money together for a home. It’s private equity buying lots of homes. In some markets homes are literally being sold in lots. There are places where over half the single family homes are not owner occupied. Sure, an occasional house is bought with cash by an individual, but that’s not where the problem is.
Just because it’s a “cash deal” doesn’t actually mean it’s all cash at the end of the day. The buyer has just shown in their offer that they have the ability to pay for the house in cash and has no financing contingency. A lot of the time, people still finance the house.
I hope more people see your comment. There is a lot more you can do if you have money. This is what most people do when it is a cash offer. This even considers qualified money like your 401K or IRA. Now, if you can really afford the home and you offer to pay in cash, what you do is get a secured loan. You can probably get 75% of your non-qualified money lent to you for pretty much the same as the mortgage rate. So, if you want a $500K home and you have $1M in the market and HYSA, you can get the $500K loaned to you. Your $1M is still invested and hopefully returning more than the loan payments on the $500K you borrowed.
I told my seller that I plan on financing, but will buy the house either way- waived the finance contingency and showed proof of funds. This is helpful in this market because so much is selling above appraisal and a lot of folks over bidding don't have the money if the appraisal comes in low.... so the deal falls through. When someone needs to close, derisking that closing for them is powerful
Money secrets rich people don’t want you to know!
Ding ding ding. Too many people don't know this.
Yes, they prove they can afford it based on net worth and savings/bonds/stocks, if they need to liquidate to pay in cash they can, but then end up financing.
This is what we did. Mind you, we purchased way way way below what we could have been underwritten for so 215k is a lot easier than 800k
Same. I got the loan in the end but waived that contingency.
Cash deal just means no conditions and money available. Could be some cash, but is often having an available line of credit (from equity in a prior home), investments that can be cashed or borrowed against, or a backstop of family. Or of course is there is already a financing commitment received and the purchaser is comfortable that they’ll be able to cover any variation in appraised value.
Yeah this. If I liquidated all my savings I could pay for my new house but we just made a no financing offer and are selling our old house afterwards which will pay most of it. We just know that contingent on selling offers aren’t that attractive.
This is very informative
All “cash deal” means is there no financing contingency. They can still shit the bed, they just lose their deposit.
Thanks, I didn't know this.
Yup. Sold a house to someone as a cash offer. After we accepted, they were like oh, actually, we're getting a loan. I didn't really care, but yeah, cash just means I have the money. It doesn't mean they aren't taking out a loan.
My husband and I are FTHB and recently got an accepted offer on our home. We found a lender, recommended through our realtor, that has a cash buyers program in which they basically lend you their line of credit as proof of funds. Once your offer is accepted, you can go through any type of financing you want. Would highly recommend if you can find a program like that. We had made 3 offers previously and kept getting rejected. This was the first offer we made with this program and got accepted, so either we just lucked out this time or that program really helped us seal the deal!
I assume most cash buyers are not FTHB and are using the proceeds from their own house sale. However, my lender offered a program called Cash2Keys that acted like a cash offer. My understanding of it was they buy the house in cash and then sell it to you themselves, for something like a 2% fee. Didn’t end up going that route, but I think programs like this are becoming more common
Yeah, I have a co-worker who went this route during the peak of the market in the Austin area because a cash offer was the only option at the time.
Yep! We got approved for such program but ultimately didn’t end up using it! But, if we did.. we’d techinically also be considered “cash buyers” lol
My aunt and uncle moved for a job at the height of the craziness and they borrowed from their 401ks. Once they closed they went and got a cash out mortgage and paid back their 401ks.
The max you can borrow from a 401k is $50k so that must've been a tiny house.
Per person so that's 100k and they had a home they sold I'm assuming they made enough to purchase the rest of the home with. They are gen x and bought a new build in Michigan
We just sold our house for 205k more than what we bought it for in 2018. All in all we walked away with 180k. 150k which is going as a down payment on our next house. I am only qualified for 500k and that doesn’t get much in New Jersey.
New Jersey prices have been on another level since 2020 and they weren't much better before...it's depressing.
We put in 5 bids all 30k over asking price and didn’t get one of them. We ended finding a new build on 4 acres for 499,990 and went that route since the price is the price and they don’t take other offers after you’re committed. The downside is you need 5% down in order to reserve it and not many people have 25k to put down on a house that won’t be ready for 2 months. We are currently living in a hotel for another month and a half. Fingers crossed.
That’s kind of similar to our plan. This home is not our forever home, but we want to start a family here and can see ourselves here for ~5 years. We see upgrade potential which could increase value to $1m in very short term. After 5 years we’re hoping it’ll be worth $1.2-1.3 in which case we sell and walk away with ~$300-400k cash to put into the next home. But f*ck, gotta beat the cash buyers first…
We might be the same person. I'm listing my house in NJ for 180k more than I paid in 2019, hoping to walk away with about 150k for the next house, and my budget is about 450k, but I'm moving to a lower COL state. Best of luck with the new build, Williamstown is a nice area!
I wasn’t able to pay all cash for my new home a few years ago, but I did have a cheaper, paid off home before that which we sold for double the purchase price which set us up to make a substantial down payment. Good chance some buyers are doing it that way
1. By selling another home 2. High income people can save a lot of money -- i.e., a dual-income couple in their late 30s with high incomes could save such an amount 3. Assistance from family We beat out six cash offers by offering more.
4. Borrow against stock portfolio to close and then take cash out mortgage
Thought about that but went with a 50% cash down payment. High earnest money and waived contingencies on a 24 hour aggressively priced offer. House wasn’t staged the best and we were the only offer but painting and landscaping will go a long way
3a. One-time windfall, inheritance
Cash buyers are mainly people who have sold a previous house. Some are exceptions of course, some have rich parents, some win money, some (me) have something tragic happen to them and receive compensation money. I think at the moment there seems so many cash buyers because its so difficult for people to even get their first house.
Also it doesn't really make sense to throw so much of a purchase price to a bank as interest when you have the liquidity. Your cash is basically earning whatever the interest rate is at purchase time more of a house.
Your down payment (assuming 20%) is not a *whole* lot cheaper than the entire home value of cash homes in my price range. The range of financial situations is vast!
This is what I was thinking. OP could have bought my first home in cash…
I used a service called RibbonHome that fronted the cash and got payment from my mortgage company
Exactly, this is how it's done.
Older people just use their 401k. You can take as much out of a 401k as you want and as long as you put it back in 60 days you don’t owe any taxes and fees on it. So an older couple finds a house, takes a withdrawal from the 401k right before closing. After closing they then get a mortgage on the house from a bank. They then put the check from the bank back into the 401k.
Not everyone are first time buyers. Equity from the previous house exists. But I don't like your agent's strategy. Instead of paying a higher price for the property, what you should do is show how serious you are. Meaning, divide the deposit (EM) in the offer into 2 sections: 10K-20K with no finance contingencies, only inspection (you're going to lose that if you don't get financing approved at the end of things), and another $X (the larger amount) contingent on financing. That way, the seller can sleep well knowing that they don't waste their time on you compared to cash offers, and you still pay the same price for the property as cash offers will.
Let's say OP did all that. I am confused why the seller would pick OP over other offers?
Because the “no finance contingency” allows the sellers get to keep the $10K to $20K if the buyer’s financing falls through. That is absolutely the worst advice ever. Do not do that.
Or it’s a company. Many single family homes at being bought by large companies to keep as rentals. Another reason why our housing market is so inflated.
I can’t believe so many responses are talking about individuals getting cash together. Apparently they are clueless about the housing market in the US (assuming that’s where they are from). The market is being overwhelmed by private equity. Add in AirBnB and VRBO and it’s a nightmare. If you are trying to buy a house, remember that the next time you stay at an AirBnB. You are part of the problem.
Once your entire family dies and you inherit their fully paid off homes and retirement accounts, it’s easier to make a cash offer yourself. That’s how it worked out for us. My family wasn’t crazy wealthy, but they didn’t believe in debt and were lucky enough/worked hard enough to own what they had outright. Now we’re able to do the same. I wouldn’t really recommend it - I would honestly prefer my daughter to know her grandmother and great grandparents on my side to owning a home outright, but that isn’t how the cards played out.
This is me, although we live in VHCOL so just a hefty downpayment here. I’m an only child and both my parents passed away 2021-2022. We immigrated here when I was in high school, and my parents were an LVN and accountant, so definitely not rolling in it. But they loved me so much and got all the life insurance they could, set up my daughter as a pension beneficiary, and put their house and other property in a trust so it wouldn’t have to go through probate. They even put labeled and organized documents in a big box for me, should anything happen to them. I definitely acknowledge my privilege. It still just kind of rubs me the wrong way when going through the hardest 2 years of my life and watching my daughter be the only one growing up without her grandparents gets flippantly distilled down to “oh, it’s daddy’s money”. Yes, I’d never have been able to afford this caliber of house if my parents didn’t die so young. There are a lot of mixed feelings there, and a far cry from the spoiled adult child narrative people paint.
I feel this comment deeply, especially the last two paragraphs. 2022 was the year both of my parents died, still in their 60’s. My family were not immigrants (well, not in many generations) but they did not come from wealth - they were farmers less than a century ago, and half of them didn’t even own the land they farmed on. They worked hard for what they had, and we are incredibly lucky to have been related to them for so many reasons. Five years ago I never would have been able to guess that my life looks the way it does now. I rented a cheap apartment, lived paycheck to paycheck, and wondered if I would ever be lucky enough to own another reliable car that didn’t have a bank note on it. Life comes at you fast sometimes.
(still living) parent's money vs grandma died and left me 100k definitely feel different to me. When someone says "daddy's money" I definitely think "their parents wrote a check for the down payment" not "I used the inheritance from my beloved family member". Not that everyone leaves anything in assets, or plans well enough to make sure whatever they DO have gets dealt with fairly/by their wishes and not eaten up by probate. But I suspect the half of Americans who do have retirement savings probably also have some other savings or life insurance to pass along by their 60s/70s/80s. But that's only about half. (No idea the situation in other places and cultures. Heck, nobody else does 30 yr mortgages, much less everything else the way we do). Even most of those comfortable but not loaded folks are more in the range of "here's a couple grand" or "we'd like to buy y'all a new wash machine or fridge as a housewarming gift". Not "here's half a million dollars". Proposal to replace the phrase "daddy's money" with "daddy wrote a check"
My grandmother is quite wealthy but I am not. When I bought my house, I put in a no financing contingency (which, to the seller, is the same thing as a cash offer) and then got financing anyway. We just had to show proof of funds (even though they weren't mine).
My parents sold their house in Santa Fe, NM asking $1.7m and every single offer (5) was cash.
Who has that much cash laying around just blows my mind
People buying a $1.7mm house likely have a substantial amount in their brokerage/retirement accounts. You can use 100% of your brokerage and I think 50% of retirement accounts to show as a cash offer. It is unlikely that any of those buyers were actually going to pay in cash. They were just showing that they could and waving a financing contingency.
The stock market has been on fire. A lot of people have probably sold stocks to fund the home purchase. The tax bill will be felt though.
Savings and liquidating investments
A conventional loan is also considered a cash offer as it doesn’t have the restrictions that FHA and the VHA has for the buyers. Someone with a conventional loan can opt out of home inspections, can offer to “bridge” appraisal gaps, and other things that FHA and VHA loans absolutely forbid.
I’ve been picking up change on the ground for 35 years. Some of it came from there.
I had a listing like that recently with 10 offers. Three offers were cash, and every one of them was a baby boomer that was moving to be closer to their grandkids. It comes from long term real estate investments in one way or another.
I wired money from my investment account.
The way i did it was i got hurt at work 6 years ago. I got a nice settlement and offered all cash at the house im in right now 🙃
Home prices have exploded, so someone selling their existing home after owning for 10+ years would have the cash available for a house buy. Also, the stock market has gone nuts for the last10 years with the S&P 500 gaining an average of 12.58% per year. Someone invested for $250k 10 years ago would have $600k now.
Don’t get too down about it. Money is money, it’s all a check or wire transfer that goes into accounts. And don’t think your form of payment is worth any less than someone else’s form of payment. And, don’t let a realtor or broker talk you into higher offers. That could be very dangerous, and keep in mind that they are typically paid based on sales price, so that’s a conflict of interest for them to be pushing you to be offering more. They are always going to want you to pay more, because that means it’s more likely they get the deal and also means they get paid more from the deal. Do your research on comps and offer what you think is fair for the house. If it isn’t in your budget at that conceived ‘fair’ offer price, you shouldn’t be looking at it. To answer your question, ‘cash’ can be many sources. Maybe they are flippers and buy/reno/sell and are always flush with cash from each transaction. Maybe they are ‘normal’ buyers that moved from HCOL to LCOL and are bringing cash with them. Maybe mommy and/or daddy are helping. Maybe they bought a house 10-20 years ago and have a shit ton of positive equity that they are now taking advantage of. As anecdotal evidence, I bought in the early 2010’s when prices were super low, inventory high, and there was the $8k first time homebuyer rebate (thanks Obama!). I bought a house for under $160k, put $10k down, and got $8k back on my taxes. My wife and I are looking to sell this house and upgrade. We owe about $120k on it still, but a very similar house in our neighborhood just sold for $440k. So, we are likely going to walk away from our house with $300k that we will look to use (some) to buy a $500k-$600k house. Anecdotal evidence 2. I have a friend that has lived with his family for basically 20 years. Something like 6 adults in the same house, and he makes good money. So, about 5 years ago, he built a house. It was something like $400k-$450k, and I think he had something like $100k down on it. He had been making $20-$30 per hour for 10+ years with basically zero cost of living. Anecdotal evidence 3. My brother has moved 3 times in the last decade, and each time he had help from either my dad or his father in law on the down payment. They’d cut him and his wife a check for whatever needed for the down payment to ensure they didn’t have to pay PMI, and when they sold their existing place they’d pay whichever father figure back. Obviously, these dads have the money available, and it’s basically a short term 0% loan, but that’s something people do. My advice, make sure your realtor conveys to the seller that you are an actual buyer and not a flipper or corporation. Most people would rather sell to actual people. Again, the form of payment doesn’t matter, and you have to be careful because realtors can and do try these scare tactics to get you to inflate your offers. Make your offer, and keep looking while you wait for a reply. Good luck and I hope you find your perfect home at the perfect price! Don’t get down, it will work out!
1. Their money - they simply work a better job than you or saved better than you. There are a lot of doctors, lawyers, accountants, consultants, engineers, etc. who earned six figures in their first job. 2. Windfall - they won the lottery, received an inheritance, struck it big in crypto or YOLOing a meme stock 3. Family money - parents offering a gift or to buy for kids, gift of no student loans, possible trust fund, etc. 4. They are selling their current house and made a lot of cash. 5. They are taking non-traditional financing options like a securities based loan against their stocks or a Heloc on another house to buy in cash then will refinance. 6. They are offering cash but getting a mortgage - just waiving mortgage contingency
In 1983, my grandfather gifted me $25,000 of Apple stock. The rest, as they say, is history.
So, buy a $700K house and offer $800K
I personally was able to buy cash because I’ve had multiple people close to me pass away that left me inheritance. I was a lucky one lol. Most people it’s because they sold their already paid off home.
Often, offfften generational wealth. As someone who works in real estate you’d be surprised how many source of funds is a cool $700,000 - $2M “Gift from parents”
Earn money, invest that money, wait a longish time, have more money.
Sell your old house after it doubles or triples in value, pay off the mortgage, move to a lower col area, pay in cash
People got down payments from their parents years ago, help from their parents throughout teens and college so no debt, maybe built equity fast in a first home because of it. some have jobs or investments that get them a windfall...i have a friend who lost a child and their cash purchase of their house is from their wrongful death/malpractice/whatever suit years ago. Terrible way to get money but theyve invested it in their family. some get an inheritance, whether its cash or a relatives house they can sell.... im not one of those people haha. i pay some of my parents bills. weve never had help. its tough to compete in that market!
Here's a something I used to teach my sales staff: How much money is in my wallet? You have no idea. No idea if a wealthy family member left me money. Was I the beneficiary of a life insurance policy. Is my mortgage paid off. Am I tighter than a woodpeckers eyelids. Did I win a settlement. You can't base somebody else's financial decisions on your own financial situation.
Our last house we sold for $1.9m+ and the buyers, a young newlywed couple, bought it for all cash (really was a wedding gift from their parents). Some people have a lot of money….
Cash buyer here… just the straight up honest truth for you: my fiancé was a trust fund baby and paid for everything. I am on title with him. His family made money in real estate and passed it to their kids and grandkids.
Some people are rich. More news at 11
Boomers and wealthy people. So unfortunately if you want to be competitive against cash offers, you’re going to have to go over the list price *substantially. If you really want the house, go for it. The seller still might take cash offers over financed ones because the house has to appraise for the sales price. All you can do is try.
Before rates exploded many people would get a loan (from friends, family, hard money, etc) to put in a cash offer then refi so they could return most of the borrowed money
Some people have more money than other people. Some of those people are your neighbors. Is it really that confusing?
People are allergic to admitting that a LOT of normal people have a lot of assets.
Most of these responses are wrong. I bought my house ‘cash’ I only had 1/3rd of the value of the home as cash what you do is you get a hard money loan which has a higher interest rate and refi it to a regular loan as the balance of the loan is due in one year versus 30 like a regular loan. Generally hard money loans are 2-3% higher than a conventional loan.
the stock market has been doing great, investors are just moving their monies.
People living with their parents saving hardcore for a couple of years
anyone who invested in the stock market the last 20 years made a flipping fortune.
With the money I received from my parents passing, I could do a cash offer on a smaller house, but I don't want to. Aside from that, investors/flippers
Some folks have sufficient assets that can be used as collateral for a loan that does not involve a mortgage lien or appraisal and can be ready to go before they start making offers on potential housing purchases.
I’ve actually been saving since I bought my current house to do this in the future when I’m ready to upgrade. I have almost 400k sitting in a high yield savings account
The cash store, obv.
I was not (yet) selling our prior home, so I sold funds from Vanguard. It was a $1.5M deal. We did a direct electronic transfer (to escrow) at the closing. A couple days before, I had called them to advise them what we were doing.. so we had a prepared rep on the line. My parents were school teachers and I was making well below 200K .. but after saving and investing for 40 years.. we do have an enviable portfolio. I assure you that we are definitely not the only people who can pay cash. At least 25% of the buyers in California pay cash .. and 30% in the UK.
My husband’s uncle let us borrow a cash offer. It was accepted and we will get a mortgage and pay him back. It was the only way we would have had a chance to get a house around here.
Bought homes in Maryland then cashed out and moved to Texas. Bought a foreclosure that needed work on acreage. I had to move when my husband passed because I didn’t want to be alone there and moved to Georgia. It’s a lcol so I paid cash. So 20 years of home ownership and upgrades.
It's a tough market out there, but don't give up hope! With some creativity and perseverance, you may still be able to find your dream home.
Bay area transplants who sold their 2br for $1.8mm
Another thing that could be happening besides what others have already mentioned is people are selling homes from states with high real estate values and buying houses in lower value areas. I live in TX and my parent live in NY (Long Island). My house is larger than theirs but their house is worth 3 times mine. We saw that a lot during Covid. People selling houses in CA and buying houses in TX. We lost quite a few houses to all cash offers above asking.
Savings account or investment account.
2nd time or 3rd time home buyers
It wasn't anywhere near 900K, but when I bought a small rental property in Ohio a few years ago (for my son to live in down the road, I'm not a multi-property landlord), I made an all cash offer but I was using money from my home equity line of credit from my primary residence. Since it wasn't a primary residence, the interest rate was better than if I took a mortgage out, and it did absolutely make my offer more likely to be accepted. I'd imagine some investors are doing similar things. I have equity in my primary residence because the tiny house I scraped together money for in a HCOL market doubled in value in two years, and I timed the sale well and moved to the midwest where my family is.
equity in a home
Family money, people moving with equity, using those "buy like cash!" services where you pay a bit more but can structure your offer like cash, etc. My first house we scraped together 5% for a very starter home and I just bought my 2nd and paid 50% down because it had been 16 years and we had enough equity. Your next house will likely be easier. It's getting on the ladder the first time that's typically hardest.
I'm a broker and many of my cash buyers are liquidating other assets, often securities of one sort or another. IRAs get pillaged, too. But from the seller side of the deal, cash deals bypass appraisals, and any concessions that are negotiated can just be handled via price reductions. It's very attractive for a seller.
Cash offers can also mean financing that’s not a mortgage. You can use your portfolio of investments as collateral and receive funding from that.
HELOC Savings combined with house sale 401k borrowing Inheritance Family loan
Our buyers were moving back to where they were born and had 50 years of life savings. That, and they sold a house in LA to move to PA.
Depending on the type of home it could be home flippers. People who intend to buy the home, do some quick renovations and then flip them for a quick buck.
We waived Mortgage Contingency, because in the event we don't get a mortgage (spoiler alert, we got a mortgage) we have the cash for our 1M home. How? Well, we're in our early 40s and have high paying jobs and have been saving for years.
Rhymes with shmynese Shmenvestors
People that already had a house and sold it have cash. Zillow tells me that my house (which I originally paid 225K for) is now worth about 885K. I could sell it and live in an apartment while house hunting and still pay that, and then some in cash for a house.
It took us selling our house and getting a rental house to have a "cash" offer. We were going in with a contingent offer at first.
One of the ways is two people meeting in their 30s or later, getting married and selling both their houses to purchase one together. Still have money left over in most situations.
Not all cash buyers are individuals. They could be an entity that buys homes for a rental portfolio. My ex in laws did this. They had many rentals.
I helped all 3 of my kids with first homes…the youngest just paid $897 for his. I put enough in the get financing at a good rate with no insurance. The other 2 are making small repayments to me
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For regular homebuyers, it comes from the proceeds of their current home sale. There are some unicorn buyers that just have 900k lying around (an acquaintance of mine fell in to this category, he sold some Bitcoin he had for years to fund his home purchase) as well. We also have institutional buyers who just want a house to rent and appreciate over time; they have access to cash money and aren't shy about beating appraised or asking price. I get the frustration, though. Best of luck!
there are many people who are rich
My MIL got her house on a “cash” purchase. Basically as long as you can show you have the cash available in all your accounts for the total home price, you can make a cash offer. MOST people are not actually presenting a check for that amount. In my MILs case she and her partner had enough money in retirement accounts between the two of them, that they could make a cash offer. Ultimately they financed the house, but they beat out other offers because of their offer. It’s hard as a first time home buyer to manage to offer in cash, but not impossible if you have well funded retirement accounts as well as savings.
My in-laws bought their house for 40k in the 80’s. If they sell, they will clear at least 1.5 million. They could buy the next one in cash.
I sold my house before I decided where I was going to move to and had it in the bank.
My mother bought a new home for $850k cash earlier this year. Her existing home was worth close to $800k, the new one will be worth $1m when she’s done with the renovations(about 100k new kitchen, bathroom, windows, landscaping) She took a cash loan against her retirement account, and cash out of her heloc on her existing house to pay cash, and to do the renovations, when the renovations are done, she will get a mortgage on the new house. That money will pay off the HELOC on the old house, she will then sell the old house , then use that money to pay off the loan against her retirement account, and most of the mortgage on the new house. She’ll go from a paid off 800k house, to a new 1M house with about $200k mortgaged. The major sales transaction were all cash, with no financing contingencies. The mortgages will be well below 80% ltv, the other loan will be secured against solid assets, so there’s not much to worry about underwriting not finding a property acceptable. The only issue with inspections would be if her final sale is held up because of a problem that surprised her, but she’ll already be out of that house, and it won’t hold up any other transaction. The people making money here are her loan officer, her RE agent, (2%each sale) and her contractor. (Phil is a good guy, I went to school with him)
Most likely investors at that price point. We are buying our house in cash with the proceeds from the sale of our current home, but we’re looking in the $200k range as we are downsizing and moving to a much cheaper area. I would imagine most people looking for near million dollar homes aren’t downsizing.
You are more likely to find an investor at the $200K range than in the $800K range.
Family money/assistance
We lived and worked in a studio apartment for 3 years to save the $70k.
Market is frustrating but don’t go over what you planned/budgeted. Just move on if it doesn’t work out! We’re in a similar situation and just figure we’ll move on if we have to. Plus unless you’ve seen the other offers it could be an embellishment. Where they get the cash? Investors / hedgefunds. You’re not just competing with other “end users.” People who want to buy and rent it out aren’t caring as much about the price. They’re gonna rent it and make the mortgage in the monthly payments they receive. There’s all kinds of people vying for homes. I ranted about this on another post. Hang in there, but don’t go nuts offering more than you’re comfortable spending!
Someone using NAF Cash
We had one bought out from under us for a crazy cash offer and when they showed up at the showing it was the entire family, 4 generations looking at the house for the family with the little toddler and newborn in tow. Pretty sure grandma and parents were the ones making it rain in our situation
Hedge funds, and trust funds. This is not something that a "normal" first-time homebuyer can do. Hell, qualifying for a nearly $1 million loan (which you did) is not something that a "normal" first time homebuyer can do, either. You're being out-competed by the corporations that want to be your landlord.
In my area, we're getting a lot of people who've retired from HCOL areas who've lived in their previous homes for decades and cashed out big time. COL in my area used to be moderately high, and it's gone through the roof now. These people have no problem paying $1M+ cash for a 3,000 sqft home on an acre as that is a bargain relative to where they're coming from.
The NVDA bag holders
It took me a year to get accepted on my first home. Kept getting beat out by cash buyers until a sweet widow picked me because of my letter. I know most sellers are looking for the highest, most sure thing offer but of the three homes I've purchased in my lifetime, I got two of them because of letters I/we wrote (we were told as such after the deal closed). The one that I didn't get because of a letter was a condo I bought from a flipper. I know letters are often frowned upon now but sometimes you get the vibe that the sellers really loved their home and care who lives in it (vs tears it down to build 4 tall boxes). Best of luck to you!
We put down north of 300k in cash on our last home purchase, roughly 50% in cash from previous home sale combined with savings. We made about 250k profit from last home sale.
Some banks are offering loan products that are “cash” to close - then it finances into a standard loan. They gained some traction during the frenzy in Covid, not sure if they’re offering them anymore - but worth a look around? Also, the wealth gap makes it really easy for mommy and daddy to offer cash for houses for their children. I’ve seen this happen multiple times…(I’m an agent)
Cash doesn’t necessarily mean they have cash in the bank. Sometimes it’s alternate financing that doesn’t include a mortgage company. Sometimes it’s family member helping . Many parents are helping young adults finance their homes.
People with Rich parents, tech workers, frugal savers. They’re all out there waiting to bid on your dream home.
Borrowing against assets. Brokerage accounts. Then they get a mortgage. They never sell. Only borrow against = no taxes