Should You Pay Up to Pay Cash?

Some firms help home buyers make all-cash offers on homes. Weigh the fees before you sign on.

- EMMA PATCH

If you're buying a home in a competitive market-like this one-making a cash offer gives you a major advantage. Home buyers who made an all-cash offer in 2021 were four times more likely to win a bidding war, according to a recent report by Redfin, the real estate brokerage.

Buyers have gotten the message. Amid intense competition due to superlow inventories of homes for sale, the number of all-cash offers has grown. In December 2021, nearly one-fourth of existing home sales involved an all-cash offer, according to data from the National Association of Realtors. In some states, including Florida, cash offers account for about half of the homes sold. All-cash sales have also become common in Arizona, Nevada and West Virginia, according to Realtor.com.

Real estate investors and high-net-worth individuals make up a large percentage of cash buyers. But first-time buyers, or trade-up buyers who have to pay off a mortgage on the house they're selling, often don't have nearly enough cash to buy a home outright.

A silent partner. Enter new services that have sprung up in the past few years to allow buyers to make cash offers when they bid on homes. All the deals executed with these companies back up buyers' offers with cash and guarantee a closing within a certain time frame typically in 30 days or less and sometimes as little as eight days. You are able to waive the financing and appraisal contingencies (but not necessarily the inspection contingency) in your offer.

Fees vary from service to service and are often dependent on whether you use an in-house mortgage lender or a third-party lender. If you don't complete your own financing before settlement, the company may purchase your home with the expectation that you repurchase it when your loan comes through.