In 2019, Flyhomes Cash Offer clients won the home they love 77% more than expected. But what does that really mean? We’ll break it down.
First, what is a cash offer?
A cash offer is an offer to buy a home without a mortgage. Sellers love cash offers … learn why in our Beginner’s Guide to Why Cash Offers are Awesome.
So what’s a Flyhomes Cash Offer?
The Flyhomes Cash Offer program enables homebuyers to make a cash offer even if they don’t have the liquid equity. We buy the home with the company’s funds. Later, we transfer ownership to our client for the same price.
Let’s talk about winning.
A cash offer can help you win, meaning your offer is chosen by the seller in a competitive situation and you get to buy the home. By “competitive,” we mean when there are two or more offers on the same home.
Now, let’s talk about winning more.
There are three parts.
Part one: expected win rate
When we talk about winning more than expected, we start with the “expected” part.
Given that there is more than one offer on a home, we expect to win one time out of the total number or offers.
For example, if there are five offers, we’d expect to win one time (1 in 5, or 20%). This is because we don’t know what the other four offers are … so we don’t know if our offer is the strongest. On average, each offer has one chance to be the strongest.
Part two: winning more than expected
In reality, our Cash Offer clients win more than the expected 20% of the time when there are five offers on a home (which was the median number of offers on a home with competition in 2019). Winning more shows the power of a cash offer.
How much more? Instead of the expected 20%, in 2019, our Cash Offer clients won 53.3% of the time when there were five offers.
Part three: outperformance
Now that we know about winning more than expected, we’re only one step away from understanding the data that Flyhomes Cash Offer clients win 77% more.
The final step has to do with outperformance.
Here’s a straightforward example: If you expect to win 25% of the time and you actually win 50% of the time, you’ve outperformed expectation by 100%.
Instead of winning one in four, you’d win two in four. Two is 100% more than one.
The calculation goes like this: 50% / 25% – 1 = 100% outperformance.
Using the median case of a home with five offers, our clients outperformed by 167.7%. Remember, the expected win rate was 20%. The actual rate was 53.3% (53.3% / 20% – 1 =167.7%).
Bringing it all together
So far, we’ve talked about the median case of a competitive home with 5 offers as an example.
When we go beyond that to include all of the competitive situations in which Flyhomes Cash Offer clients won a home in 2019, the expected win rate is 22%. The actual win rate is 39%. So the outperformance is 77.7% (39% / 22% – 1 = 77.7%).
In other words, overall our Cash Offer clients win (slightly more than) 77% more than expected … and now you know exactly what that means.
Let’s win together!