Realtors’ tip: If you really want that house, come with cash.
And the deals are piling up
In South Florida’s supercharged real estate market, cash gives buyers a leg up — and those offers are rising faster than the newest condo buildings in Brickell.
For one Peruvian couple — like so many others — there was never even a second thought about how they would do their deal. They came with cash and bought a $4.85 million condo unit at the Miami Beach condo hotel 1 Hotel & Homes South Beach in June, according to the buyer’s representative, Romina Grinberg, a Realtor Associate at Brown Harris Stevens.
“In this market, they [sellers] are expecting cash buyers,” she said. “It’s important that your buyer is as aggressive as possible. Cash is always better because its not contingent on a buyer getting a loan and getting approved.”
Cash buyers comprised 41% of all deals in June in MiamiDade County, compared with 26% in the same month last year, according to the Miami Association of Realtors. In Broward County, cash buyers made up 48% of all transactions in June versus 27% in
June 2020.
The volume of cash buyers exceeded the national average of 23%, according to data from the National Association of Realtors.
With an influx of new arrivals from across the country, Realtors told the Miami Herald that buyers are striving to beat the competition in the intensely competitive market by appealing to sellers with the faster, fewer hassles and more certain process that comes with cash.
“Sellers dictate this to some degree,” said Ron Shuffield, CEO of Berkshire Hathaway HomeServices EWM Realty. “Buyers want to remove as many obstacles as possible to the seller.”
Some Realtors and experts are predicting that the number of cash deals is only going to increase in the months and years ahead.
While cash buyers may sometimes have the edge over purchasers with traditional financing like a mortgage, they are now finding that their main competition is, in fact, other cash buyers.
One of Compass Realtor Ivan Chorney’s clients competed against two other prospective buyers for a single-family home on the Venetian Islands that had been on the market for only 24 hours. Chorney’s client offered $16.7 million cash.
“Unfortunately, we lost that one,” recalled Chorney. The seller opted for $17.1 million in cash.
“Often is the case,” he said, “that people need to experience a little bit of pain to put their best foot forward at the next opportunity.”
Wesley Ulloa, a Realtor, sold her Coral Gables residence of 11 years in July. She scrambled to find a new house for her, her husband and a baby on the way. After losing out multiple times, Ulloa found that just the
offer to pay in cash gave her an edge.
For her fifth bid on a home — a two-story Spanish-style house in Coral Gables — Ulloa signed a contract saying she didn’t need financing, an indication to the seller that she’d pay in cash. However, she secured a loan commitment ahead of her scheduled closing at the end of September and got the place.
“The opportunity is that you’re going to get the property and you could still get the loan,” she said.
It’s not only people from other states who are coming to Southern Florida armed with cash, it’s also buyers from abroad, said Gay Cororaton, senior economist and director of housing and commercial research at the National Association of Realtors.
“[Domestic] boomers are retiring with significant equity,” Cororaton told the Herald. “We know Florida is the No. 1 destination for foreign buyers. Half of those buyers will go to Miami. In Miami, about 23% of the market is foreign buyers, [nearly] 10 times the rate nationally of 3%.”
Grinberg said she saw an uptick in foreign cash buyers begin a few months ago. At the start of the year, most of her buyers came from New York and California. Now, most are from Argentina, Mexico and Peru.
Miltiadis Kastanis, a Realtor Associate for Douglas Elliman, who has six prospective clients looking to buy in Miami from Austria, Germany and the United Kingdom, said foreigners go with cash for a good reason.
“They are likely to buy in cash because it’s easier for Europeans to close a deal in cash,” Kastanis said. “It’s not easy for them to get lending in the U.S.”
Miami remains a hot spot for Europeans, Kastanis said, since,
THE NUMBER OF PURCHASES WITHOUT TRADITIONAL FINANCING IS EXPECTED TO CONTINUE TO SOAR, DRIVEN PARTLY BY FOREIGNERS.
“culturally, they like our international flare. It’s a familiar yet different setting for them. Europeans are drawn to the culture and climate of Miami.”
Cash-only deals offer several benefits, including speeding up the closing process, which can be attractive to some sellers looking for quick action, as well as reducing the likelihood that a deal could fall through if a potential buyer doesn’t get the financing they were seeking.
“If you go to someone that is going with a mortgage versus cash, you’d go with cash, because, if they [the financed buyer] can’t get a mortgage, you’d have to go back to the market again,” Shuffield said. “You don’t know for sure if someone would qualify for a loan.”
“The opportunities for the buyer is that they can prioritize their offer over other offers,” said Florida Atlantic University professor and real estate economist Ken H. Johnson. “Cash offers have fewer inspection periods; less due diligence will be requested by the buyer.”
Some cash buyers, eager to seal the deal, may have to live with common issues that can reduce the value of a home, including a roof in need of repair, damaged air conditioning system, or plumbing problems.
“For most cash buyers, they are buying as is,” Johnson added. “Other buyers [with a mortgage] would have either moved onto another property or offered less.”
Sellers in cash-only deals should proceed with caution, he advised.
“The sellers have people lining up for their home,” he said. “During the negotiation process, you want to verify that the people have the cash on hand.”
If possible, sellers and their brokers may want to check where the funds are coming from since there exists some risk of money laundering, said Andrew
Ittleman, founder and partner of the downtown Miami-based law firm Fuerst Ittleman David & Joseph.
“If we are talking about someone coming to a closing with a big briefcase with money, that’s a red flag,” Ittleman said. “[But] if we are talking about John Smith and he’s going to make a wire transfer from his [U.S.] bank account to the closing agent, we can have a level of confidence that his bank has done some vetting on him. They know he has some legitimate source of income to support that purchase.”