Will every mortgage lender soon have a cash offer product?
Prior to the pandemic, when not every new listing appeared to spark a bidding war, Evergreen Home Loans was on the verge of launching a cash offer program in Washington state.
Bellevue-based Evergreen is a regional independent mortgage lender licensed in 10 western states that prides itself on providing real estate agent services – 70 percent of the company’s loans are purchase loans.
Founder and President Don Burton is a former real estate agent who founded Evergreen in 1987 with the aim of avoiding long lending delays and last minute surprises that can cause closings to fail.
the CashUp from Evergreen Program – where Evergreen pays homes in cash on behalf of homebuyers and then provides permanent funding when ownership is transferred – was Burton’s idea, said Tamra Rieger, Evergreen’s chief operating officer.
Burton âis actively involved in the business every day, and that was his idea,â said Rieger. “He was a real estate agent before starting the mortgage company, and Evergreen’s focus has always been on ‘How can we help brokers and add value to brokers?’ â
Rieger headed a special product team at Evergreen that developed the CashUp program over a period of six months. The team was preparing to launch the cash offer program in March 2020 when the pandemic struck.
“The risk in the regular credit environment was so great that we had to go through the CashUp program,” remembers Rieger. But âa year faster, and we’re going through COVID and managing the risks pretty well. So we started with a pilot start in February. “
A handful of Evergreen’s top loan officers – roughly 10 out of 260 total – were dedicated to rolling out the CashUp program in Washington state, she said.
After homebuyers are pre-approved, the CashUp program allows them to make a cash offer with no funding or valuation contingency. If the offer is accepted, Evergreen will buy the house and hand it over to the buyer once the permanent financing is completed.
“The exciting thing for the broker is that it is a guaranteed cash close,” says Rieger. âThere is nothing that could derail the closure. I kept the deadline every time. “
Since Evergreen is a mortgage lender, not only does it have the means to buy houses with cash, but it also has permanent finance to provide the home buyer. That means it can be completed faster than cash programs that outsource funding, Rieger said.
“We have our own funds and control the mortgage process,” said Rieger. We fully approve the homebuyer in advance for the cash offer and can close in just 10 days. “
The homebuyers mortgage is taken out after Evergreen purchases a home on their behalf. Because they have been pre-approved, permanent funding can be completed quickly.
“About a week after I close with cash, I close the customer’s financing” to buy Evergreen’s house, Rieger said.
Some large real estate brokerage firms cannot meet this turnaround time because they are relying on a different lender to pay off their cash purchase, Rieger said.
“I spoke to a real estate company that was running a cash offer program that asked us for help,” said Rieger. âSince they have no control over the mortgage process, it takes 30 days from the time they close with their cash to complete their client’s loan. It is too long.”
Expansion into new markets
Evergreen, that Partner with real estate agents To make the CashUp program more accessible to homebuyers, the program said it was a success, which resulted in the program expanding beyond Washington state to Arizona and Idaho. A pilot program is running in Nevada, and Rieger hopes to start in California in October.
When Evergreen launched the program, âThe nice thing is that I was able to speak to everyone involved, including the buyer and the broker. Especially at the beginning they wanted to talk to me to make sure it was real, âsaid Rieger.
âI’ve had great feedback from agents that this is a real cash offer. The only option I have is the inspection and I will accept the seller’s inspection “if Evergreen can confirm that it was not made by a related party.
Not every customer starts with the CashUp program, said Rieger. But once a buyer has made several traditional offers on different homes, “you get a little discouraged if you don’t win the home.”
To help the CashUp program gain traction, Evergreen has tried to keep costs down, she said. Evergreen charges a 1 percent lending fee when the homebuyer loan is completed, and other costs like trusteeship, ownership, and enrollment fees typically come in around $ 1,400, Rieger said.
The CashUp program requires homebuyers to use Evergreen for their permanent home finance. Evergreen’s goal is to help home buyers approve their listing and then provide permanent funding – not make money on fees.
“Many programs charge higher fees – I saw 2, 3 percent,” said Rieger. âWe do this to help our buyers win the house. We really tried to keep CashUp attractive to the customer so that the costs don’t prevent them from using it. “
When deciding which market to launch the CashUp program in next, property transfer taxes are a consideration.
âIf I close with cash, I own the house and the seller pays the real estate transfer tax. In the second section, I am the seller and, technically speaking, I transfer the ownership of Evergreen to the borrower, âsaid Rieger.
The easiest countries in which a cash offer program can be started are those that have no excise tax, said Rieger. Then she looks for states that have lower transaction fees, like Arizona, Idaho, and Montana.
While closing costs in Washington state can be higher than other states, Evergreen introduced CashUp there because the company is headquartered there and “because probably 50 or 60 percent of our transactions are in Washington,” Rieger said.
The long-term goal is to make CashUp available in every state where Evergreen is licensed. Right now there are 10 states: Arizona, California, Colorado, Idaho, Montana, Nevada, Oregon, Texas, Washington and Wyoming
But Colorado, Texas and Montana are recent additions to Evergreen, which is also looking to expand into other western states, Rieger said.
“We have a certain philosophy of knowing your market and entering states near your business location instead of traveling across the country to Florida,” said Rieger. “We’re to the west and we’re moving east” as we continue to add branches within Evergreen’s existing presence.
Will Every Lender Have a Cash Offering Product?
If a regional mortgage lender that is licensed in 10 states can offer a cash offer product, does that mean that each lender will eventually bring their own offer to market?
âI don’t know whether it will be mainstream or whether all lenders can,â said Rieger. âIt may sound simple, but there is a lot of work behind it. I have a good training process and disclosures. But for a lender to build such a product, I think it takes a good 6 months to develop it, 3 months to test it, and it takes a lot of resources to do it. “
Rieger said any lenders who are not already working on introducing a cash offering product could miss the boat.
âThere is a time for this product. It is very popular at the moment and I am glad that we are positioned where we are, âsaid Rieger. “I think there is a window, and as more houses come on the market and more inventory is online, there will likely be less demand for such a program.”
Currently, stocks are still tight in many markets, she said.
“We are still seeing bar offers above the list price, several offers and escalations,” said Rieger. âI think Evergreen was in a good position because we started in February. If you are a mortgage company trying to get this product to market now, you may be missing out on your window. “
Email Matt Carter