DENVER (KDVR) – A local mortgage company is helping home buyers become more competitive by making cash offers on their behalf.
“You can think about it as sort of like a rich aunt or rich uncle that fronts cash to buyers that allows them to compete and get the best price on the open market,” said Nick Friedman, the chief operating officer of Accept.inc.
The Denver company approves a buyer for a mortgage, purchases the home on behalf that buyer, and then, the company sells it back to the buyer at the same price, using competitive mortgage rates.
“We really want to try to create a universal cash offer,” said Friedman. “That’s the reason we came to Denver because you can see a really wide range of homes here.”
How Accept.Inc started
Friedman, a 24-year-old who loves beat-boxing, said he helped develop the concept for Accept.Inc with co-founders Adam Pollack and Ian Perrex in 2016, after he left Williams College during his sophomore year.
“We sort of asked ourselves, ‘If we could do real estate all over again, how would it be done?'” he said. “Sort of the follow up to that was, ‘What’s the simplest transaction in real estate today, and how do we give that to everybody?’ And it didn’t take long to realize that’s a cash offer.”
Friedman said the entrepreneurs spent a few years trying figure out the best way to make their concept work, failing many times, with hundreds of ideas that didn’t quite work.
“We realized, ‘Hey, the best way is to bring the cash ourselves and to be the cash buyer,'” he said.
The group took their concept to YCombinator, a program that provides seed funding to startup businesses.
“They helped fund it, and then we raised some money from traditional venture capitalists as well,” said Friedman.
Getting the Accept.Inc concept off the ground, however, was initially met with some pushback from potential buyers.
“It’s such a different type of transaction, but once we got our first few and continued to gain reputation in the marketplace, then we saw it sort of take-off from there,” he said.
“Whenever you’re trying to change something or do something different, there’s always going to be some sort of pushback, and we took that a little as a positive… We wouldn’t be getting the pushback if weren’t doing something truly unique and truly different,” he said.
What’s it like to use Accept.Inc
“My first thought was that it was a scam, to be honest,” said Hunter Wilson, an Accept.Inc client who closed on his current home just three weeks before his son was born.
Wilson had made close to 11 offers on homes before he learned about Accept.Inc.
His realtor, Brian Kovar, also wasn’t quite sure what to expect when he first learned about the company.
“I was skeptical as an agent. How do they make their money, right? How does this work?” Kovar said.
Their skepticism faded after each did some additional research and Kovar asked several questions of the company during a Zoom call.
“How are you going to make your money? What’s hidden? This sounds too good to be true kind of thing,” he said. “And once they reassured us that there’s no hidden tricks or fees or costs or things like that, then we took it to our clientele base…I was comfortable that they’re making their money on the second market, and they’re not going to charge my client, at the closing table, some fee or some additional percentage or something like that.”
“We learned a lot through the process, and we recommended it to everyone else,” said Wilson.
He said the company was more willing to look at his family’s unique credit profile and that the company approved him for a significantly higher loan amount than elsewhere.
“It can’t really describe it,” said Wilson, of finally purchasing a home. “It felt good. Obviously, it felt good. It felt like it was all worth it, I guess.”
How Accept.Inc works and makes its money
Jennifer Shapiro, a spokesperson for Accept.Inc, said the company sells off all of its loans to the secondary market, “Similar to other mortgage companies,” she said.
“We generate revenue exclusively from the loan like any other lender. There’s no need to be greedy – we don’t believe in charging a higher convenience fee on this because we don’t see it as a privilege – it’s the way it should be. People should not be beat out of a home they can afford just because they don’t have all cash,” Shapiro said in an email.
She told the Problem Solvers there are no upfront fees to “set-up” the mortgage. A client will be expected to bring 3%-5% as an earnest money deposit.
A home sale can close in as little as 72 hours the company says.
“My version of success for the company is just helping as many buyers as we possibly can,” said Friedman.
People who cannot otherwise afford a mortgage would not qualify to work with Accept.Inc, according to Friedman.
An economics expert weighs in
“I think it’s making the market a little more efficient in a way because now, because of the fact that things are so tight, you’ve got to come in with cash or else you’re not even going to be considered,” said Jeff Engelstad, professor of the practice at the University of Denver, Daniels College of Business.
“That means everyone has to come in with cash. Not everyone can come in with cash, and so there, again, opportunity for another company to come in and say, ‘Oh. I’ll be your cash source.'”
Engelstad said it is important for buyers to find out exactly how the terms would compare with other mortgage services.
According to data analyzed by the Problem Solvers, 17% of homes recently listed in the Multiple Listing Service in the Denver metro sold for cash.
Friedman, who does not currently own a Denver home, told the Problem Solvers he eventually hopes to use his own company’s service.
“As I grow and get older and start a family, that’s an important thing to me – to basically have a place to call home, and you know, I’m excited to do that. I’m excited to use my own service. Hopefully it’s good,” he laughed. “That’s sort of my goal, probably within the next few years here, to actually go out and buy a home.”
He said the Denver-based company is considering expansion to other cities like Minneapolis, locations in North Carolina, and Charleston, South Carolina.