It’s become common among hopeful Utah homebuyers to spend months looking for the perfect home only to have offers rejected time after time. With an extremely limited supply of homes available for sale first-time buyers, young families, and people without ample cash savings have been forced to compete with large investors and wealthy out-of-state buyers. But it might not be that way for long.
Utah real estate company, Homie wants to help buyers compete in a market that seems dominated by cash offers. Homie’s power buying programs, Homie Cash and Buy Before You Sell, remove contingencies from offers, significantly improving the attractiveness of the deal.
“Homie cash is a program that allows buyers to make all-cash offers, which drastically increases their chance of winning the perfect home,” says VP of Homie Loans, Josh Brizendine. “Homie cash levels the playing field by allowing buyers that just don’t have hundreds of thousands of dollars in the bank to become cash buyers.”
Erika Wiggins, a real estate agent in Salt Lake City, spoke with KUER in March 2022 about the conditions buyers are facing in the market today. According to her, one client offered $70,000+ above the home’s appraisal value, as well as a $20,000 non-refundable deposit. Despite taking these great lengths, the offer was rejected.
Brizendine explains why so many offers are rejected in this market, “Traditional mortgages with loan contingencies are just not as strong as a cash offer that will close quickly with no obstacles. So with a traditional mortgage offer, you find yourself putting in offers on several homes that rarely get accepted.”
The Buy Before You Sell Program removes potential contingencies from a buyer’s offer. When a buyer depends on cash from the sale of their own home to afford their next home, the offer they submit can be less attractive to sellers who don’t know how long it will take for the buyer’s home to sell.
In highly competitive markets, like the one in Utah currently, offers with this type of contingency are frequently rejected. This leaves buyers urgently looking to move because of a job change, a growing family, or any other change in life circumstances with few options.
“With the Buy Before You Sell program, the buyer can choose a new home. They then submit a cash offer. And if accepted, they move in before selling their current home,” says Brizendine. “So you move without worrying about buying and selling at the same time. Once the buyer’s current home sells, the buyer can complete the purchase of their new home with traditional financing through [Homie].”
Cash offers on homes in Utah are the new norm
According to Redfin data, buyers paying in cash in 2021 were more than four times as likely to win a bidding war compared to buyers using traditional financing. And that same trend has held up in Utah.
In July 2021, the Salt Lake Tribune reported that “Cash buyers make up the largest share of home total purchases since 2010, according to new research, accounting for as many as 18.5 percent of all transactions, according to new research, up from 12 percent a year ago.”
Johnny Hanna, co-founder and CEO of Homie says, “I’ve watched too many of our customers, from first-time homebuyers to empty nesters, lose out on the home they really want because of investors or cash buyers. We saw the need, so we started Homie Cash to give buyers a leg up on the competition.”
The rise in cash buyers in Utah has combined with rapidly rising home values and increasing interest rates to create a perfect storm for prospective Utah buyers. Although some buyers may choose to delay homeownership or home upgrades until they can afford it, the delays could have long-term impacts on their financial stability.
While Utah’s home values rose 22 percent in 2021, prices are forecasted to continue increasing at a similar rate throughout 2022. While price increases may slow in 2023 and beyond, values are expected to remain high.
Buyers delaying homeownership are stuck with rents rising nearly as quickly as home values. Salt Lake City saw a 17.7 percent increase in the price of rent in 2021, with statewide increases not far behind. Although homebuyers who get an offer accepted in Utah may currently be stuck with large mortgages, homeownership can stabilize housing expenses. Renters, on the other hand, must deal with a steadily increasing cost of living.
“Rising rates make homes more expensive for [potential] homebuyers and take a portion of buyers out of the market. But the way that we look at it is that rising rates should not be something to affect your decision of buying your dream home,” Brizendine says. “Historically speaking, rates are still very low and often cheaper than renting. So the point I’d like to highlight is that interest rates remain near historic lows, which forecasts well for buyers in this market.”
Brizendine believes the power buying programs available today, that weren’t available during previous housing crises, can offer relief to buyers.
“I’ve been in this industry since 2002 and I can definitely tell you I’ve seen the worst of the worst and the best of the best,” Brizendine says. “What we didn’t have during the last crisis was products like these power buying programs that we offer here, that really provide a strong offer and it provides you the opportunity—when housing volume is low and inventory is low—for you to step in and have a very favorable offer in your hand.”
Brizendine continues, “When you compare the advantages of potential for using cash, then there’s a far higher opportunity for your offer, not only to be accepted but for it to be the first offer considered in a competitive market, which has really helped our buyers get into homes and really get the home they want in this market.”
While Utah residents wait for solutions to the affordable housing crisis, in the meantime, Homie’s power buying programs create opportunities for buyers that otherwise wouldn’t exist.
According to Hanna, “We’re putting power back into the hands of buyers who have been disadvantaged in this intensely competitive market.”