Cash remains king in buying housing
By Marilyn Bowden
Although there has been some loosening of the purse strings among lenders, active brokers in the county's residential market say cash is still king.
"We're seeing both cash and non-cash buyers," said Tere Shelton Bernace, broker and co-owner of Shelton & Stewart in South Miami, who works primarily in the $1.5 million-plus category.
"A recent phenomenon is that buyers who would otherwise pay cash are deciding to finance 40% to 50% because the terms are so attractive."
The international buyers who have dominated in the post-recession market, she said, are in general accustomed to paying all cash or a large percentage of cash, though financing for foreign nationals is loosening up, especially for those who already have some kind of banking relationship or assets in the US.
And in multicultural Miami, the definition of an international buyer can be somewhat hazy.
"It's split down the middle between those who are gradually moving to the US but still have a home in their own country, and those who have been here for years," Ms. Bernace said. "We also see local buyers, of course.
"While banks are there for a good-credit candidate, the higher the price of the home, the more likely it's all cash or a higher percentage of cash."
For buyers not in the market for luxury homes, financing can still be tricky, said Iliana Abella, owner of Greater Miami Investments in Coral Gables and treasurer of Miami Brokers Forum, a network of top-producing real estate professionals.
"Unless you have a really, really good credit score and all the ducks are in order," she said, "you can't count on being approved by a lender. A lot of people would prefer not to go through the hassle if they don't have to, and are paying cash if they can. Even most REO [bank-owned real estate] transaction are cash now."
For many foreign buyers, Ms. Abella said, paying cash is the point. "They need to park their money somewhere," she said, "and have a legal reason to take money out of their countries.
"In my opinion, this is going to last for a while, because with everything that is happening in some of their countries, they're thinking they need to make plans to stay here permanently."
Pat Klock Parker, a broker-salesperson with the Klock Parker Group at Coldwell Banker in Coral Gables, said even if a buyer can qualify for a loan, in today's low-inventory market many sellers are now entertaining multiple offers, and a cash offer is generally going to win.
"The market is very strong," she said, "and all-cash buyers win because the seller would prefer not to have a contingency on the appraisals. So in multiple offers, all-cash comes out of the woodwork. It's a tool used mostly in multiple-offer situations."
A second scenario where all-cash transactions make sense, Ms. Parker said, is when the property is not financeable because it's in poor condition or has too many violations.
"With some condos," she said, "all cash may be a requirement because if [the building is] more than 35% rented, then you can't get financing."
"Seventy percent of all sales are cash," said Carlos Garcia, vice president and broker at Keyes Co. Realtors. "If a seller whose property is appraised at $230,000 has two offers, one to be financed by an FHA loan for $260,000 and one cash offer for $250,000, the cash is a slam-dunk."
First-time homebuyers, typically active in the under-$350,000 price range, he said, may now be able to afford a down payment because rates are so low, but they're being shut out by cash buyers.
"There's a lot of investors in that space," Mr. Garcia said, "because because rents are so high and interest rates are so low that the under-$350,000 market makes sense.
"When the market picks up, they can see and show a profit. That has become a problem for first-time buyers."
While there's plenty of inventory in the $4 million-plus ultra-luxury market, he said, in the luxury range between $1.5 million and $4 million "it's definitely a buyers' market. A lot of the buyers are foreign nationals, coming from all over — the Caribbean, Venezuela, Brazil, Spain, Canada, Russia, China — and they tend to pay cash."
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