Back before the pandemic, when every new listing didn’t seemingly start a bidding war, Evergreen Home Loans was on the verge of launching a cash offer program in Washington state.
A regional independent mortgage bank that’s licensed in 10 western states, Bellevue-based Evergreen prides itself on the level of service it provides to real estate agents — 70 percent of the company’s originations are purchase loans.
Founder and president Don Burton is a former real estate agent who started Evergreen in 1987, with a goal of eliminating long delays and last-minute surprises in lending that can derail closings.
The CashUp by Evergreen program — in which Evergreen pays cash for homes on behalf of homebuyers, and then provides permanent financing when it transfers ownership to them — was Burton’s idea, said Tamra Rieger, Evergreen’s chief operating officer.
Tamra Rieger
Burton “is actively involved in the business every day, and this was his brainchild,” Rieger said. “He was a real estate agent before starting the mortgage company, and Evergreen’s focus has always been, ‘How can we help agents and add value to agents?’ ”
Rieger oversaw a special product team at Evergreen that developed the CashUp program over six months. The team was preparing to launch the cash offer program in March 2020 when the pandemic struck.
“There was so much risk in the regular lending environment, we had to pull up on the CashUp program,” Rieger recalled. But, “fast forward a year, and we’re getting through COVID, and managing risks pretty well. So we started with a pilot launch in February.”
A handful of Evergreen’s top loan officers — about 10 out of a total of 260 — dedicated themselves to rolling out the CashUp program in Washington state, she said.
After homebuyers have been preapproved, the CashUp program allows them to submit a cash offer with no financing or appraisal contingency. If the offer is accepted, Evergreen buys the home and transfers it to the buyer once their permanent financing is finalized.
“The exciting thing for the agent is this is a guaranteed cash close,” Rieger says. “There’s nothing that’s going to derail the closing. I’ve met the closing date every single time.”
Because Evergreen is a mortgage bank, it’s got the funds to not only purchase homes with cash, but provide permanent financing directly to the homebuyer. That means it can close faster than cash offer programs that outsource financing, Rieger said.
“We have our own funds, and we control the mortgage process,” Rieger said. We are fully approving the homebuyer up front for the cash offer, and can close in as little as 10 days.”
The homebuyer’s mortgage is finalized after Evergreen buys a home on their behalf. Because they’ve already been preapproved, permanent financing closes quickly.
“About a week after I close with cash, I’m closing the customer’s financing” to buy the home from Evergreen, Rieger said.
Some large real estate brokerage firms can’t match that turnaround time, because they’re relying on another lender to get their cash purchase paid off, Rieger said.
“I’ve talked to a real estate company doing a cash offer program that reached out for our help,” Rieger said. “Because they don’t control the mortgage process, it’s taking them 30 days from the time they close with their cash for their client’s loan to close. It’s too long.”
Expanding into new markets
Evergreen, which partners with real estate agents to make the CashUp program available to more homebuyers, says the program has been a hit, leading it to expand the program beyond Washington state to Arizona and Idaho. A pilot program is up and running in Nevada, and Rieger is hoping to launch in California in October.
As Evergreen has rolled the program out, “The nice thing is I’ve been able to talk to everyone involved, including the buyer’s agent and the listing agent. Especially in the beginning they wanted to talk to me to make sure it was real,” Rieger said.
“I’ve received great feedback from agents that this is a true cash offer. The only contingency I have is on the inspection, and I will accept the seller’s inspection” if Evergreen can verify it was not produced by a related party.
Not every customer starts out with the CashUp program, Rieger said. But once a buyer has made several traditional offers on different houses, “you do get a little discouraged when you’re not winning the home.”
To help the CashUp program get traction, Evergreen has tried to keep costs down, she said. Evergreen charges a 1 percent loan origination fee when the homebuyer’s loan closes, and other costs like escrow, title and recording fees typically total around $1,400, Rieger said.
The CashUp program requires homebuyers to use Evergreen for their permanent home financing. Evergreen’s goal is to help homebuyers get their offer approved, and then provide permanent financing — not make money on fees.
“A lot of programs charge higher fees — I’ve seen 2, 3 percent,” Rieger said. “We’re doing this to help our buyers win the home. We’ve really tried to keep CashUp attractive for the customer, so the cost doesn’t keep them from using it.”
When deciding which market to roll out the CashUp program in next, one consideration is property transfer taxes.
“When I close with cash, I own that home, and the seller pays the property transfer tax. In the second leg, then I’m the seller, and I’m technically transferring ownership from Evergreen to the borrower,” generating another property transfer or excise tax, Rieger said.
So the easiest states to launch a cash offer program in are those that have no excise tax, Rieger said. Then she looks for states where transaction fees are lower, like Arizona, Idaho and Montana.
Although closing costs in Washington state can be higher than other states, Evergreen launched CashUp there because that’s where the company is headquartered, 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. At the moment, that’s 10 states: Arizona, California, Colorado, Idaho, Montana, Nevada, Oregon, Texas, Washington and Wyoming
But Colorado, Texas and Montana are recent additions for Evergreen, which is also eyeing expanding into additional Western states, Rieger said.
“We do have a bit of a philosophy of knowing your market, and entering states near where you’re already doing business, rather than hopscotching across the country to somewhere like Florida,” Rieger said. “We’re in the West, and we’re moving East,” while continuing to add branches within Evergreen’s existing footprint.
Will every lender have a cash offer product?
If a regional mortgage lender that’s licensed in 10 states can offer a cash offer product, does that mean every lender will eventually launch its own offering?
“I don’t know if it will be mainstream, or if all lenders are going to be able to do this,” Rieger said. “It might sound easy, but there is a lot of work that goes into it. I have a good training process and disclosures. But for a lender to build a product like this, I think it takes a good 6 months to build it, 3 months to pilot, and you need a lot of resources to do it.”
Rieger said that any lenders who aren’t already working on launching a cash offer product may miss the boat.
“There is a time for this product. Right now it’s very popular, and I’m glad we’re positioned where we are,” Rieger said. “I do think there’s a window, and as more homes hit the market and more inventory comes on line, it’s likely there will be less demand for a program like this.”
For the moment, inventories are still scarce in many markets, she said.
“We’re still seeing cash offers above list price, multiple offers and escalation,” Rieger said. “I think Evergreen was in a good position because we launched in February. If you’re a mortgage company trying to launch this product now, you might miss your window.”