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3 min read

Anyone that has spent time recently trying to buy a home has most likely come up against the dreaded competitor – the ‘all-cash’ buyer. It is a situation that is becoming more and more common. In some markets, unless the offer is all cash, the buyer doesn’t stand a chance. But isn’t it curious as to why this is becoming more commonplace?

Well, come to find out, there is an interesting reason as to why this is happening more and more frequently. Just like in other aspects of life, necessity is the mother of invention. Apparently, home buying is no different. If cash offers are what buyers need, then here comes innovation to the rescue.

The startup community has increasingly begun to disrupt the home buying experience by helping homeowners become ‘all-cash’ buyers. This phenomenon was recently highlighted in an article in the Wall Street Journal that stated, “In today’s frenetic housing market, buyers who take out mortgages are struggling to compete with those putting up all cash. Now, a number of startups are offering programs to help level the playing field. Some of these companies front buyers the cash to buy their homes outright, while others buy houses directly on a buyer’s behalf and then sell them to the buyer.”[1]

Home sellers value a cash offer over an offer that requires a mortgage because deals can be closed more quickly. Additionally, with mortgage financing, there is always the risk that the financing will fall through, leaving the seller to have to go through the sale process again. The certainty of a deal and being able to get the deal done quickly have become even more important to sellers in this environment.

Given the red-hot nature of the residential housing market, mortgage providers are experiencing higher levels of deal activity. This heightened activity has led to longer delays in new mortgages, as well as home refinances. The all-cash offer innovation is helping consumers work around delays in the mortgage financing process.

The service is proving to be very popular with would-be homeowners in this hyper-competitive market. As such, competition is increasing in the space. From the article, “Startups with cash-offer programs are expanding quickly. Companies like Ribbon, HomeLight Inc. and Orchard announced new funding rounds this month. Knock said this spring it is exploring plans to go public. Opendoor Technologies Inc., a house-flipping company that went public in late 2020, launched a cash-offer program in March. Real-estate brokerage Redfin Corp. is piloting a cash-offer program in some markets, a spokeswoman said.”1

As we have discussed in the past, there is currently a near-historical low in new and used housing inventory. Therefore, homes that do hit the market for sale continue to experience high demand, multiple offers, and bidding wars. In this environment, having an all-cash offer can make the difference between winning and losing a bid. From the article, “Homes sold in July received an average of 4.5 offers each, according to the National Association of Realtors, up from 2.9 offers a year earlier. About 23% of existing homes sold in July were purchased in cash, according to NAR, up from 16% a year earlier.”1

Some of the hyper-competition in the market has cooled a bit heading into fall. However, the increasing demand for new housing from millennials, the migration from cities to suburbs, remote working arrangements, on top of the low inventory of homes nationally all point to a continuation of a competitive housing market. Expect the allure of all-cash offers to persist.

However, don’t count large banks, mortgage financing firms and real estate brokers out just yet. Home mortgage financing is a lucrative business. As detailed in the article, “Cash-offer companies are paid through commissions, fees or both. In some cases, the companies act as the buyer’s real-estate agent or mortgage lender and are paid through sales commissions or origination fees.”1

These firms are not likely to sit idly by and lose business to other financing arrangements. Most likely, the future will see some type of all-cash service added to the major real estate financing companies in a bid to keep this business. Either way, home buyers should most likely expect to see all-cash offers a more prevalent force in the marketplace going forward.


[1] “Startup Firms Help Home Buyers Win Bidding Wars With All-Cash Offers” by Nicole Friedman, Wall Street Journal, 9.21.2021




Steve Sapourn
Steve Sapourn

Steve Sapourn is an active real estate investor, Aloha Capital’s co-founder, and portfolio manager. At Aloha, Steve has overseen more than 1300 real estate investor loans in 35 states. He has managed alternative investments in a variety of asset classes for over 25 years. He has deep experience in designing low-risk portfolios that reliably outperform benchmarks. Over his career, Steve has served as portfolio manager for a Fund of Funds, where he analyzed hundreds of alternative investment strategies. In addition, he has developed and implemented quantitative trading strategies in the futures, stock, and volatility markets. Steve’s long and diverse career benefits Aloha’s investors.