Photo from www.worldnewsupdate.wordpress.com
I have been amazed by the high volume of cash deals when it comes to purchasing a first home, vacation home or investment property in South Florida. Over the past few months, I have been working with a young professional from New York interested in purchasing a one-bedroom condo at Icon South Beach, a family living in a Bal Habour house purchasing a Downtown Miami condo as an investment and willing to rent it out yearly, a young professional from Morocco looking for a vacation place in South Beach, a Russian couple in their mid-50s planning to move to Miami where their children live and looking to buy a two-bedroom condo in Sunny Isles.
Buyers in markets around the U.S. are buying homes in all-cash deals, betting that prices are at or near bottom and bringing life into some of the nation’s most hardly hit housing markets.
Cash buyers represented more than half of all transactions in the Miami-Fort Lauderdale area last year, according to an analysis from real-estate portal Zillow.com. In the fourth quarter of 2006, they represented just 13% of deals. Meanwhile, downtown Miami prices rose 15% in 2010 from a year earlier, according to the Miami Downtown Development Authority. Nationally, 28% of sales were all-cash transactions last year, according to the National Association of Realtors. The rate was 14% in October 2008, when the trade group began tracking the measure.
The jump in real-estate purchases made with cash is a sign of the growing revival of the U.S. economy and the hardest an area or state has been hit by the housing market crash, the higher the amount of cash deals in the same area. Residential real estate has been slower to bounce back than stocks, but the presence of apparent bargains is attracting newly confident buyers.
I recently met with a retired sales executive from the Northeast, who had recently paid cash for two condominiums in Canyon Ranch in Miami Beach, and is planning on closing on one more in the coming days. He said he loves the gorgeous ocean views of the condo, four swimming pools and activities such as yoga and Pilates. But what also motivated the purchase, said the man, was that “the prices were just irresistible.” To pay the $1.8 million, $1.2 million and $1 million prices on the condos, he and his wife, Jane, cashed out of some financial investments and sold a couple of high-value paintings. He could have taken out mortgages, but decided to pay cash.
As a professional real estate agent, I know that I will be able to negotiate even more, at least from 5% to 10% more off the asking price than when dealing with a potential buyer using a mortgage. Sellers prefer cash deals since they close more quickly and avoid risks such as a buyer’s job loss or a bank’s changing its mind. I even have started to see bidding wars and slightly increasing prices.
Since mid-October, Canyon Ranch in Miami Beach, the development the retired sales executive I spoke to, has sold 35 units, with a third of the buyers from overseas and many others retiring from the Northeast.
