Skip to content

Five Key Things To Know About Power Buyers In 2022

The UpEquity Team Feb 11, 2022
what is a power buyer?

The way people buy and sell homes is evolving, with new business models gaining traction in the marketplace. As a result, demand for homeownership has hit historic highs across the country, leading to the emergence of new players, the so-called “Power Buyers”.

Buying a home can be painfully complex. However, Power Buyers present a more convenient and certain real estate transaction experience for investors and first-time buyers alike. Knowledge is power if you are thinking of partnering with a Power Buyer.

In this article, we'll cover five key things to know about Power Buyers, the industry's hottest new service benefiting homebuyers, sellers, and Realtors alike:

  1. What is a Power Buyer?
  2. How do Buyers and Realtors benefit from Power Buyers?
  3. Who are the key players in the Power Buyer industry?
  4. What Things should a Buyer or Realtor Look Out for When Evaluating a Power Buyer?
  5. How are Power Buyers Different from iBuyers?

In our constantly evolving industry, whether you're a homebuyer, Realtor, Broker, or seller, it's crucial to understand how the evolution of this new kind of company can impact you. So let's dive in.

1. What is a Power Buyer in Real Estate?

A Power Buyer is a home buying service that allows the buyer to make what effectively amounts to a cash offer, usually with no financing contingency. Sometimes, Power Buyers leverage their balance sheets to make all-cash offers on behalf of their customers or as a part of a trade-in program.

Generally speaking, a Power Buyer can refer to an individual or company with pockets deep enough to empower home buyers with services like cash offers and bridging finance. But really, what Power Buyers bring to the table is a business model that increases a consumer’s buying power, which enables them to present more attractive offers to home sellers.

2. How do Buyers and Realtors Benefit from Power Buyers?

Power Buyers give home buyers the edge needed to win in a competitive housing market. During the last two years, the housing market has been characterized by high demand and low inventory. As a result, home prices are at an all-time high, and it is increasingly difficult for buyers to stand out, especially when they cannot make an all-cash offer.

In most cases, a cash offer is a more robust offer that is more likely to win out in the case of multiple bids. For this reason, cash offers provide buyers with an advantage at the negotiating table, which can mean more favorable closing terms. Additionally, buyers do not have to deal with the mortgage process’s time, effort, and uncertainty when they opt for cash offers backed by Power Buyers.

What is more, cash offers are not the only financial service that Power Buyers provide. You can also opt for the trade-in or buy-before-you-sell model. For example, if you already own a home, the trade-in model allows you to buy a new home and move in before selling your old one. It is an entirely different way of buying and selling that helps you circumvent the uncertainty of the traditional home selling process.

In this case, the Power Buyer offers to buy your new home and resells it to you with no financing contingency. They will then list your old home on the market. If your “old” house does not sell within the stipulated time, the Power Buyer will buy your old home from you.

3. Who are the Key Power Buyers in the Industry?

Real estate companies like Zillow are looking to develop a presence on both the buy and sell-side of the transaction. Other companies taking on the role of Power Buyers in real estate include:

UpEquity

Our mission at UpEquity is simple: we want to democratize homebuying and give every person the chance to get into the home they want. We understand that many first-time buyers do not have the liquid cash to win a bidding war against all-cash offers, and that just shouldn't be the way homebuying works. As such, our Cash Offer program fronts home buyers with the funds they need to stand out, buy fast, and simplify the home buying process. 

Knock

Knock enables home buyers to make cash-backed offers that are not contingent on financing.

Orchard

Orchard operates a buy-before-you-sell program, similar to the one we, UpEquity, offer. The program aims to eliminate the stress and uncertainty involved with selling a home and buying a new one. In essence, you find your dream home; a company like UpEquity or Orchard buys it for you in cash and then sells your old house on your behalf.

 

4. What Things should a Buyer or Realtor Look Out for When Evaluating a Power Buyer?

With various Power Buyers in the game, it is crucial to evaluate their terms to determine the best choice.

Let us discuss some of the things you should look out for.

Cost of the Program

When buying a home, it is essential to look at two things: How much you are paying for the house overall and your monthly mortgage payments. So, when evaluating Power Buyers, check how much you will be paying in the long-term and choose a program that will save you money.

Speed-to-Close

Usually, the biggest delay in a real estate transaction is the loan. So, you risk losing your dream home to another buyer if you run into delays during loan processing. But closing does not have to take forever with the right Power Buyer.

Competitive Rates

Power Buyers charge service fees to access their products and services, and the costs can range from 0% to 3%, depending on the firm and services they provide. Some programs charge higher fees because the front-end process is more complicated. However, companies like UpEquity have automated underwriting and origination processes, allowing them to offer more competitive rates and even some zero-cost programs.

State Licensing

Make sure the company you are working with is licensed to work in the state you are in. This will help you narrow down your list and allow you to choose a Power Buyer you are compatible with.

Realtor Fees

Some companies charge additional fees if you do not go through their realtors — but others, like UpEquity, do not.

5. How are Power Buyers Different from iBuyers?

iBuyers, or instant buyers, are real estate companies that offer a simpler, more convenient alternative to a traditional home sale. They use home assessment tools to determine what your home is worth before making you an instant cash offer. Therefore, they work to eliminate the stress and inconvenience of the home buying process.

However, unlike Power Buyers, iBuyers work on behalf of sellers. Some iBuyers allow sellers to trade in their homes. They may also integrate services like title insurance and repairs to make selling a home more efficient.


Still have questions? Need a rate quote?

Get in Touch