A seller's market: How Metro Detroit homebuyers are making all-cash offers without any cash
(CBS DETROIT) - Peak real estate season is right around the corner, and in a hot housing market, cash is king for many reasons.
With all-cash offers, there's less chance of a sale falling through and usually a faster closing.
It's still a seller's market in Michigan, as demand is high and inventory is low.
While some say 2023 could bring a significant cooldown, we're coming off three years that many would describe as chaotic.
"In 21 years of selling real estate, I've never seen anything as superheated as this market," said Michael Perna, CEO of The Perna Team.
If you or someone you know have been looking for a new home since 2020, the process has likely come with headaches, frustration and maybe even a few tears.
Often the winning bids are coming from buyers who have offered all cash.
You may have assumed your dream home was snatched up by a lender, or someone with hundreds of thousands of dollars sitting in their savings, but not necessarily.
"We allow buyers to make an offer even if they're not really positioned to do so - with cash," said Jim Lesinski of Opendoor.
Opendoor is one of many companies helping average U.S. homebuyers make all those impressive cash offers.
"The ability to have a cash offer at your disposal is an incredible opportunity for buyers today," Lesinski said.
Opendoor, Divvy, Homeward and Ribbon Home have been assisting homebuyers in markets across the country. But in Michigan, Knock is the first to come knocking.
"Knock will back a buyer with a cash guarantee that they're going to go to the seller with cash at closing and then after the closing, issue the mortgage," Perna said.
These companies front the money, so almost anyone can make a strong cash offer.
So what's in it for them?
Knock charges a nearly $1,500 loan fee and then a 1.25% convenience fee on the purchase price.
"As a cash offer, a lot of times you're going to make that up by getting a better offer accepted," Perna said.
In Ferndale, Perna says a young couple and first-time homebuyers used Knock after submitting 14 offers and losing all of them.
"We made a cash offer – did not get the first one accepted, but did get the second one accepted," Perna says.
While this is just the beginning in Michigan, in other big cities, it's almost the "norm."
"It is really fantastic. We do see the customer stories, and some of them are just incredible," Lesinski said.
While this is something that certainly can help buyers in a competitive market, it does come with added costs.
For some, it's worth it, because it's all the difference between getting a house or not.