Real Estate Trends: Buying Homes With Cold, Hard Cash

Aug 22, 2016

An unconventional trend is taking hold in the real estate industry: more and more buyers are making all-cash offers for homes they want to buy. Cash purchases have comprised about a quarter of home sales in the past, but recently they’ve shot up to 40 percent — and most of that percentage is individuals, not investors. So, what’s up? Who are these cash buyers and what do they want? More importantly, what’s the advantage of plunking a huge chunk of change on the table instead of getting a loan or a mortgage?
happy senior couple hugging over house backgroundThe “who” isn’t necessarily obvious, but it’s also not surprising: most of the people putting down cash for homes are wealthy retirees or foreign buyers. Retirees have spent a lifetime saving and thus have funds readily available to buy with cash; it also spares them the hassle of a mortgage at a time when they want to fully enjoy the fruits of their lifelong labor. If they don’t have all the cash on hand, they leverage their assets to make up the difference, which also technically counts as a cash transaction. Elderly cash buyers tend to buy second homes or condos, or even starter homes for their children. Wealthy foreign buyers, on the other hand, are attracted to making all-cash offers because they are, well, wealthy and they can. However, they also might not have the credit history needed to secure a mortgage in a country where they’ve never lived in before. Buying with cash easily circumvents that major inconvenience, especially for those who wish to move quickly due to political or civil unrest in their home countries.

This odd yet growing trend is ultimately good for the housing market in Florida, and is essential to keeping it healthy. A shortage of first-time homebuyers has long been the bane of the industry: people coming into traditional home-buying age are struggling to follow their Baby Boomer parents’ path of buying a starter home. Wealthy, all-cash buyers are picking up the slack and keeping the market alive, snapping up non-distressed properties in stable areas that big, institutional investors aren’t necessarily interested in.

So what does this mean for you? Here are some useful takeaways, even if you’re not aiming to throw around cash for a lavish second home in the Hamptons in New York.

-Making an all-cash offer on a property makes life much simpler for you: no loans to pay off and no mortgage to deal with.

-All-cash offers can also finesse sellers, even if the offer is lower than others. A cash offer from you means no worry about your loan or mortgage qualification for them.

-You can start saving now to buy with cash when you retire. Imagine retiring and not having to worry about paying off a home again — ever!

Making cash offers for homes isn’t for everyone, and it’s a bold move. But it’s clearly gaining popularity, and is working very well for almost half of homebuyers in the real estate market today. Contact your real estate agent and discuss whether this unusual but effective negotiation tactic can work for you.