Wood Floors Make (Another) Comeback

Wood Floors Make (Another) Comeback

3 Tips for First-Time Home Buyers

3 Tips for First-Time Home Buyers

Important Terms to Understand Homebuying

Important Terms to Understand Homebuying

Homebuyers Should Understand Private Mortgage Insurance

Homebuyers Should Understand Private Mortgage Insurance

FSBO Sellers Regret Not Having an Agent

FSBO Sellers Regret Not Having an Agent

FHFA: 2024 Conforming Loan Limits Rise by $40K

FHFA: 2024 Conforming Loan Limits Rise by $40K

Note to Seniors: The Kids Don’t Want Your House

Note to Seniors: The Kids Don’t Want Your House

Gov. Signs My Safe Florida Home and Other Bills

Gov. Signs My Safe Florida Home and Other Bills

Miami Luxury Prices Soar as Billionaires Move In -Makes Sanibel and Captiva seem very affordable!

Miami Luxury Prices Soar as Billionaires Move In: RE investors are building more $50M-plus condos in S. Fla. as demand grows from an uptick of rich Americans who are relocating to be close to other rich Americans.

Important FIRPTA Update for non-US citizens planning to sell real estate

Important FIRPTA Update The IRS has revised the rules for the interview process when applying for an ITIN! When a Non-U.S. resident sells U.S. real estate, they are required to have an Individual Tax ID Number (ITIN). This is done by completing form W-7, and having your passports and identity verified by a Certified Acceptance Agent (CAA). Typically, the CAA verifies the applicant’s passport in person with a face-to-face interview. However, sometimes applicants cannot travel to the U.S. because they are elderly, sick, have problems with VISAs, etc.  In these situations, the IRS has allowed a Skype interview with the CAA if the applicant sends their original passport or a certified copy of their passport to their CAA for review. While it does take some extra time and cost, this method has still helped many applicants successfully obtain their ITIN when selling their U.S. property. IRS updates have now changed this! On April 17, 2017, the IRS sent out notification to all CAAs stating that “U.S. based CAAs can only assist applicants who reside abroad through face-to-face interviews when they are temporarily in the country.” We immediately responded, asking for clarification on conducting Skype interviews as we have in the past. The IRS responded confirming that U.S. based CAAs will no longer be able to conduct interviews with foreign clients via video-conferencing. It is clear that the interview must be held with the U.S. based CAA in a face to face interview in our office while the foreign applicant is visiting here in the states. As if the IRS doesn’t make our foreign friends jump through enough hoops already when selling U.S. real estate, this throws another hurdle in it! If the non-U.S. resident is applying for an ITIN and cannot be in the U.S. to interview with a CAA, they will now need to either find a CAA in their home country to conduct the interview, visit a Taxpayer Assistance Center in their country, or mail a completed W-7 form with their required identification directly to the IRS. How can I help my foreign sellers prepare so their transaction is successful? Preparation is key. As soon as you start working with a foreign seller, find out if they have an ITIN. If they don’t, you’ll want to set them up with someone who can help them apply for one. Even if they don’t have a contract on their sale, they can still have their passport verified by a CAA if they are in town. This way any issues are avoided when applying for the ITIN if they should go back to their home country later. If they will not be in the U.S. any time during the listing or contract period, they will need to find a CAA in their home country. The sooner the foreign seller is aware, the more time they will have to locate a CAA in their country and make an appointment with them. One of things you do not want to do is trying to switch, or quit claim, the deed from one foreign person to another or to a corporation, LLC or trust prior to the sale, as this will trigger the FIRPTA tax on the flip, and potentially putting the foreigner in a real bind with the IRS. As a Realtor, one of the best things you can do for your customers is educate them. Make them aware of this process, and let them know you work with a great firm that can help them with all the steps required to apply for their ITIN!

Royal Shell Real Estate Wins Awards

December 12 2016
ROYAL SHELL REAL ESTATE WINS AWARD
FORT MYERS, Fla. — The Lee Building Industry Association has named Royal Shell Real
Estate as the Residential Brokerage Firm of the Year for 2016. The nonprofit
organization’s Industry Achievement Pinnacle Award honors Royal Shell for its
management capabilities, customer relations, ethical behavior, community involvement
and excellence in the residential building industry.
Royal Shell Real Estate, the largest and No. 1 independent brokerage in Southwest
Florida, recorded more than $1.2 billion in listings and sales in the first 10 months of
2016. It also was involved in 60 percent of the top-five home sales in Lee County in
2015.
“Achieving a prestigious Pinnacle award is a testament to our agents and staff’s
diligence every day in exceeding clients’ expectations while raising the bar for
excellence,” said Michael Polly, Vice President of Real Estate Operations.
Another honor came this summer when Royal Shell Real Estate was named Best Real
Estate Agency in the residential category in Gulfshore Business Magazine’s 2016 Best of
Business Readers’ Poll.
The brokerage also opened its first Cape Coral office in November, which is the
company’s 15th in Southwest Florida. Royal Shell also has an office in Ocala and four in
western North Carolina, bringing the total number of offices to 20.
Royal Shell Real Estate handles properties of all types, including primary and secondary
residences, seasonal homes and investment properties, while its rental department
focuses on leveraging owners’ investments for maximum return.
Royal Shell Real Estate began primarily as a Sanibel and Captiva island-based company,
and over the years has opened multiple offices in Lee, Collier and Marion counties. The
business differs from other real estate companies in that they hand-select only the
area’s top Realtors® to join the team.

A Case of Cognitive Dissonance?

Keeping you updated on the market for the week of September 22, 2014

MARKET RECAP A Case of Cognitive Dissonance? Home builders are feeling as perky as they have in nearly a decade. Indeed, the National Home Builders Sentiment Index posted at 59 this month. That's a number last seen in 2005 when the housing market was in full-bore mode. Of course, real estate markets are local markets, and some home builders are feeling more perky than others. Home builders in the South, Mid-West, and West are more optimistic than the national 59 reading would lead you to believe, while builders in the Northeast are feeling less optimistic, if not dour. (The Northeast reading posted at 44.) Home builders when aggregated are obviously anticipating a brighter future, even if the immediate past offers scant reason to break out the bubbly. Housing starts drooped 14.4% in August to an annualized rate of 956, 000 units. The consensus estimate was for 1.03 million units. The mitigating takeaway was that most of the droop was seen in the volatile multifamily component, which fell 31.7% month over month. The more important single-family component was down a more modest 2.4%, which follows an 11.1% surge in July. When we step back to view the big picture, we see housing starts are up 8% year over year. And if we step back even further and remove volatility by looking at the five-month moving average, we see a strong uptrend and significant improvement over the past five years. The long-term trend in housing starts is good news for the economy in full. So many ancillary businesses are dependent on starts – home improvement companies, finance providers, commodity producers, retail merchants, and on and on. The uptrend in starts is nothing but a positive that is worth highlighting because of its importance to overall economic health. Now, we'd like to see an uptrend established in mortgage purchase activity. CoreLogic reports that cash sales have dropped to 33% of total home sales, down from 36.3% a year ago. To be sure, a large percentage of the drop is the result of fewer REO sales and short sales – many of which were cash transactions. Prior to the bursting of the housing bubble, 25% of sales were cash transactions. So, we expect a further reduction in cash transactions in the future. Therefore, to keep sales volume growing, mortgage financing will need to play a bigger role. On that front, the Mortgage Bankers Association purchase index rose 5% last week. Could this be the beginning of a positive financing trend? We hope so, but we're not holding our breath. We've been disappointed too many times in the past to do that.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Exiting Home Sales (August)	Mon., Sept. 22, 10:00 am, ET	5.22 Million (Annualized)	Important. Given recent positive pricing and supply trends, an upward trend in sales appears sustainable.
Mortgage Applications	Wed., Sept. 24, 7:00 am, ET	None	Important. Purchase activity is showing some life, but the trend toward more activity remains elusive.
New Home Sales (August)	Wed., Sept. 24, 10:00 am, ET	435,000 (Annualized)	Important. Rising home builder optimism points to rising new-home sales.
Gross Domestic Product (2nd quarter 2014 revised)	Fri., Sept. 26, 8:30 am, ET	4.7% (Annualized Growth)	Important. GDP growth is expected to be revised higher, which points to stronger economic growth through 2014.

 

The Fed Speaks, Everyone Listens On Wednesday, the Federal Reserve released the long-awaited minutes of the latest meeting of the Fed governors. The minutes revealed what we expected they would reveal: The Fed will wrap up quantitative easing next month, so it will cease new purchases of Treasury notes and bonds and mortgage-backed securities (MBS). (The Fed will maintain its existing policy of reinvesting principal payments in MBS and rolling over existing Treasury debt.) The minutes also revealed that the Fed intends to wait "a considerable time" before raising the influential federal funds rate (the rate banks lend to each other). The idea is that the Fed wants interest rates to remain low until “structural” issues related to the job market are rectified. In other words, the Fed would like to see more job growth in better-paying jobs before raising the federal funds rate. If maintaining the low rates that materialized in the past month is what the Fed wanted, that's not what it got. After we learned the federal funds rates (which is at zero) is unlikely to rise until next year, the rate on the influential 10-year Treasury note rose nearly 10 basis points. Mortgage rates, unsurprisingly, also moved higher. In short, rates on the longer end of the yield curve rose. We doubt this is what the Fed was anticipating. We're not predicting a steady rise in long-term interest rates – including mortgage rates. But it's worth keeping in mind that even if the Fed wants something, there is no guarantee it will get it. Markets are powerful and unpredictable forces. Mortgage rates might hang low for another six months, or even another year, but there are no guarantees.

Article Courtesy of Patti Wilson, American Momentum Bank

Mortgage News from Sanibel Florida

Keeping you updated on the market! For the week of August 12, 2013

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MARKET RECAP More of the Same, But for How Long? For now, the cavalcade continues; that is, the cavalcade of home-price increases that began nearly two years ago. CoreLogic's Home Price Index shows prices increased 1.9% in June compared to May, which marks the 16 th consecutive monthly increase. This latest increase lifts the index's year-over-year gain to 11.9%. For 2013, home prices are already up nearly 10%. But not all indicators suggest the trend will continue unabated. Trulia's data show asking prices dropped 0.3% in July compared to June, which marks the first monthly decrease since this past November. A slowdown in home-price gains wouldn't necessarily be bad. We've argued in the recent past, that double-digit yearly price increases are unsustainable. A lower rate of annual increase would be a more sustainable rate, and one more attuned to historical norms. The last thing any of us wants is another bubble market followed by a bubble burst. We've also a seen a slowdown in the rise in the price of mortgage funding over the past month. Rates, though higher than they were six months ago, have stabilized. What's more, it appears consumers are becoming acclimated to the new higher-rate reality. A recent survey by Fannie Mae finds that 60% of respondents believe interest rates will increase over the next 12 months. At the same time, three out of four of these respondents believe now is a good time to buy a home. The prospect of buying an appreciating asset appears to trump the higher cost of financing that asset. But are the respondents expectations properly calibrated? After the latest employment report, we are less sure of interest rates rising. The employment report, issued the past Friday, points to sluggish job growth. In July, businesses increased payrolls by only 162,000, roughly 20,000 below most economists' expectations. To be sure, the unemployment rate dropped to 7.4% from 7.6%, but this was attributed to a lower labor-participation rate, which fell to a 35-year low. The current trend in labor participation runs counter to recent history. After a recession, the labor force usually grows. But this post-recession period has been an anomaly. We are four years into a recovery, yet labor-force growth, as well as job growth, remains stubbornly stagnant. Many economists believe disappointing job numbers won't dissuade the Federal Reserve from throttling back on quantitative easing. In fact, a few economists speculate the Fed could throttle back as soon as next month. At a minimum, that means mortgages won't drop any further. We're not convinced, and we don't think most market participants are either. Mortgage rates have held steady for the past six weeks, as has the yield on the benchmark 10-year U.S. Treasury note. Given stubborn economic weakness, we expect quantitative easing to continue through the remainder of 2013. Moreover, quantitative could even extend deep into 2014, depending on who takes the reigns of the Federal Reserve next year after Chairman Ben Bernanke steps down. Of the frontrunners, one in particular, Janet Yellen, appears keen to keep the Fed's current monetary policies going for a while longer.

 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Mortgage Applications	Wed., Aug. 14, 7:00 am, ET	None	Important. Purchase activity is picking up as consumers become acclimated to higher lending rates.
Consumer Price Index (July)	Thurs., Aug. 15, 8:30 am, ET	All Goods: 0.2% (Increase) Core: 0.2% (Increase)	Important. Consumer-price inflation remains below the Federal Reserve's target rate and will have little impact on interest rates.
Home Builder's Index (August)	Thurs., Aug. 15, 10:00 am, ET	55 Index	Important. Builders remain confident, but optimism appears to be plateauing.
Housing Starts (July)	Fri., Aug. 16, 8:30 am, ET	895,000 Units (Annualized)	Important. Starts are expected to return to their upward trajectory after June's disappointing pullback.

 

The End of the 30-Year Fixed-Rate Loan?  President Obama caused a stir this week when he said he'd like to see the private sector take over as the primary driver behind the mortgage market. The president went as far as to say he'd like to see Fannie Mae and Freddie Mac dismantled. It's a worthwhile idea, but there are a few obstacles. For one, the government, through Fannie Mae, Freddie Mac, the FHA, and the Department of Veterans Affairs, backs 90% of all newly originated mortgages. For the most part, there really is no private mortgage market. At the same time, the president said he'd insist on keeping the 30-year fixed-rate mortgage affordable at today's low rates. Unfortunately, the goal of the prevailing rate on the 30-year fixed-rate mortgage is incongruous with the goal of privatizing the mortgage market. We say that because private money won't lend for 30 years at today's rates without government backing. So does this mean the end of the 30-year fixed-rate mortgage? That's unlikely. At the same time, it's also unlikely we'll see a mortgage market dominated by the private sector. In other words, it looks like business as usual into the relevant future. Article Courtesy of Patti Wilson of W. J. Bradley.

Keeping you updated on the market! For the week of February 6

MARKET RECAP
Some weeks we feel like Sisyphus: We push the boulder up the hill only to have it roll back down again.
This is one of those weeks. Home prices, which were pushed higher through the first nine months of 2011, began rolling back in the fourth quarter of 2011. Unfortunately, it appears they are not finished rolling.
The latest price data from CoreLogic certainly isn't encouraging on that front. CoreLogic's home price index shows that home prices fell 4.7 percent in 2011, thus marking the fifth-consecutive yearly drop. The positive takeaway is that when distressed properties are excluded, home prices only dropped 0.9 percent. The unfortunate takeaway is that CoreLogic sees distressed properties exerting their negative influence through 2012.
S&P/Case-Shiller's home price data was equally frustrating. According to Case-Shiller, home prices were down 3.7 percent year-over-year in November, with 18 of the 20 markets its follows posting loses. We can take some solace in knowing that the aggregate data were skewed by an 11.8 percent drop in Atlanta and a 9.1 percent drop in Las Vegas. Remove Atlanta and Las Vegas, and the data suggest a more price-stable market.
It's easy to get discouraged when you think markets have turned for the better, only to discover they continue to back track. We refused to get discouraged, though, because there is always good news to found.
Consider homebuilders. Their sentiment and activity have improved palpably over the past few months. Residential construction spending, in particular, has been on the mend. In fact, the latest data from the Census Bureau show spending increased a robust 3.8 percent month-over-month in December, which helped lift the year-over-year rate into positive territory at 0.7 percent.
Another bit of good news for housing, and for all businesses for that matter, is that the economy continues to produce jobs. Automated Data Processing estimates that 170,000 new jobs were created in January. Over the past few months, payrolls have been growing at a monthly six-digit clip. More people earning a paycheck means more people spending and investing.
More people earning a paycheck also means more people who can qualify for a mortgage. And mortgages have never been cheaper. Rates fell again this past week after the Federal Reserve announced it will hold interest rates low through 2014. If you consider rates on an after-tax basis, you're looking at effective rates as low as 2.75% on a 30-year, fixed-rate loan. That's less than the rate of inflation.
We would argue that for most people it's more remunerative to finance a home at these low rates and then invest the money elsewhere than it is to use the cash to buy a home outright. Even though home prices have eased in the past couple months, we still think leveraging real estate is a smart move for buyers and investors with a long-term outlook.

Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Consumer Credit(December)
Tues., Feb. 7,3:00 pm , et
$10 Billion (Increase)
Important. Consumer willingness to take on more debt points to improved confidence and greater spending.
Mortgage Applications
Wed., Feb. 8,7:00 am , et
None
Important. Extended HARP will likely produce a surge in refinance activity in coming months.
Wholesale Trade(December)
Thurs., Feb. 9,8:30 am , et
No Change
Moderately Important. A rising sales-to-inventory ratio points to improving 1 st-quarter economic growth.
International Trade(December)
Fri., Feb. 10,8:30 am , et
$48.7 Billion (Deficit)
Moderately Important. The deficit has been rising on a stronger dollar.

Time for a New Game Plan
The latest news on falling home prices is frustrating because it appears to be a self-fulling prophesy that is difficult to escape: Falling prices generally spur demand, unless more potential buyers expect that prices will continue to fall, then prices keep falling. Unfortunately, more people believe home prices will continue to fall these days.
Falling mortgage prices, specifically rates, are also a negative, in our opinion. First, the prospect of even lower rates impedes potential borrowers and buyers from acting. If there is a good prospect of getting a better rate tomorrow, why act today? Rising rates, or at least the prospect of rising rates, as we've often argued, would get people moving again.
Ultra-low mortgage rates have also homologated the market, meaning everything fits a specific template because most everything is sold to Fannie Mae and Freddie Mac. Private investors simply can't compete with the government-subsidized loans that dominate the market today. This limits the amount of tailoring that can be done to make each mortgage product best fit the borrower's need.
We understand that mortgage rates are an important variable in home affordability, but affordability isn't as important as clarity on the outlook of the economy. If you are secure in you outlook, half a percentage point won't make much of a difference in your buying or financing decision.
Article courtesy of Patti Wilson, Senior Loan officer, Mutual of Omaha Bank.

Market Recap November 14, 2011

Keeping you updated on the market! For the week of November 14, 2011
MARKET RECAP
If we were to survey the landscape to see if people rate the decline in housing prices as either a curse or a blessing, we are sure most would say curse. After all, most homeowners have suffered a loss of equity over the past five years.
However, there is an upside to the decline in home prices, particularly for first-time homebuyers and owners looking to trade up, and that's affordability. According to financial data provider Fiserv, the monthly mortgage payment for a median-priced single-family home is 40 percent cheaper than it was five years ago, falling to $700 from $1,140.
Lower prices are really the only way to remedy a supply glut. Watching an asset's price fall is unpleasant, to be sure, but prices fall only so far and the glut clears, and then prices generally rise.
For example, Miami was one of the most overbuilt metropolitan regions and suffered serious price deflation. But the glut in Miami appears to have cleared, thanks to lower prices stimulating more demand. In the third quarter of 2011, Miami home sales jumped 51 percent from a year ago. What's more, prices are again on the rise: the average sales price in Miami for a single-family home has risen 19 percent year-over-year.
It is more informative to focus on local numbers than it is to focus on national numbers. The National Association of Realtors reports that the national median single-family home price slipped 4.7 percent year-over-year to $169,500 in the third quarter. That said, the NAR's national median price really doesn't mean much to any specific local market.
The bottom line for us is that we've seen enough evidence of markets clearing to suggest more markets will resemble Miami in 2012. Fiserv, though expecting some price weakness over the next few months, expects most major markets to post significant price gains in the second half of 2012.
What will financing rates look like in 2012? We thought mortgage rates would be higher this year than in 2010; that hasn't been the case. The Federal Reserve has plainly stated that it is buying long-term securities in order to hold long-term borrowing rates low. It can be silly to fight the Fed.
Then again, markets can be potent forces. Consider this past week: news that another Mediterranean country, Italy , is close to insolvency did little to move interest rates or mortgage rates. In other words, investors weren't rushing into U.S. Treasury securities. In fact, Treasury rates and mortgage rates held steady for the week.
When the Greek crisis occurred, Treasury rates and mortgage rates dropped perceptibly. The fact mortgage rates hardly moved with the latest crisis suggests markets might be less willing to accept ultra-low rates in exchange for a haven from risk.


Economic Indicator
Release Date and Time
Consensus Estimate
Analysis
Producer Price Index(October)
Tues., Nov. 15,8:30 am, et
All Goods: 0.2% (Decrease)Core: No Change
Important. Underlying producer price inflation is easing but remains at elevated levels.
Retail Sales(October)
Tues., Nov. 15, 8:30 am , et
No Change
Important. The long-term sales trend suggests consumers are more optimistic than confidence measures state.
Mortgage Applications
Wed., Nov. 16,7:00 am, et
None
Important. Purchase activity continues to post steady (and encouraging) gains.
Consumer Price Index(October)
Wed., Nov. 16,8:30 am, et
All Goods: 0.1% (Decrease)Core: No Change
Important. A decrease in CPI will relieve pressure for interest rates to rise.
Home Builder Index(November)
Wed., Nov. 16,10:00 am, et
18 Index
Important. Gains in homebuilder stocks point to growing builder confidence.
Housing Starts(October)
Thurs., Nov 17,8:30 am, et
605,000 (Annualized)
Important. More regions are experiencing a rising level of starts.

Learn from the Past, But Focus on the Future
This is advice we try to pass onto our clients. It's important to learn from the past, but it's just as important to focus on the future.
What we've learned from the past is to avoid an asset whose short-term growth rate has far exceeded its historical average annual growth rate. That's not what we have today with housing. We have an asset class – residential real estate – that has reverted to historical norms and is priced to appreciate going forward.
This is a difficult concept for many people to accept. We naturally anchor to the recent past, but doing so can mislead. In 2006, many people thought home prices could only go up; in 2011, many people think home prices can only go down. What we can learn from the past is that trends don't last forever. Buying assets people are selling, and selling assets people are buying, can be very profitable.
We've been saying for the past year that residential real estate is priced to be profitable. Our belief hasn't changed, which is why we continue to say real estate financed with a mortgage loan will be one of the better performing assets over the next decade.
Courtesy of Patti Wilson, Mutual of Omaha Bank. (239) 357-0739

Cash Deals Dominate Some Luxury Markets

Cash Deals Dominate Some Luxury Markets

Cash is king in high-end real estate this year, serving to stabilize the market as tight credit conditions and depreciated home values continue to plague the embattled real estate sector.
At least 30 percent of all purchases were financed with cash between mid-April and mid-May, according to the May 2011 Realtors Confidence Index by the National Realtors Association, and the numbers are even more robust for the luxury property market.
In the Fort Lauderdale, Florida area, 57 percent of all single-family homes purchased and priced over $1 million were cash buys between Jan.1 and May 31 of this year, says Vickie Arcuri, an agent with EWM Realtors. In the million-dollar plus condo market, 42 out of the 47 units sold during the same time period were cash purchases.
The south Florida market is particularly hot for out-of-state and foreign investors, who often find it more difficult to secure financing.
“Tight credit and lending criteria are some of the reasons why cash is so popular and it significantly affects the upper-end of the market,” says Arcuri. Jumbo loans — those too big for underwriting by Fannie Mae and Freddie Mac — typically have higher interest rates than government-backed mortgages. The loan amount that falls into jumbo loan territory varies from one local real estate market to another. In the Fort Lauderdale area, a jumbo loan is anything above $620,000.
When you wave cash around, you can lower the purchase price and dictate the terms of the deal so much more effectively” said Ross Levine, a partner in the law firm of Schwartz, Levine and Kaplan. He recently represented a seller looking to offload a $4.5 million Manhattan property — a smooth deal made easy because of cash.
“The sellers said they would have never gotten the deal done if they had … (used) … a bank because the jumbo loan market makes it difficult to get a loan. Beginning on October 1, the government will dial back on the size of mortgages it guarantees in high-cost areas like San Francisco, New York and Washington.
Arizona is also benefiting from a cash spending spree — it’s a hot market for snowbirds, retirees, and those looking to purchase second homes. In 2005, only 11 percent of sales were cash, compared to 30 percent in 2009 and 43 percent in 2011, says Lynn Murtagh, branch manager of Coldwell Banker Residential in Scottsdale, Arizona.
In the north Scottsdale area, 45 percent of all sales were cash purchases for the month of May. In the high-end market — homes priced at $850,000 or more — 66 percent were purchased with cash, says Murtagh.
Even some of the top metropolitan markets around the country are seeing cash purchases on the rise. In Las Vegas, 49 percent of purchases were cash in the second quarter of this year, according to data from the popular real estate site Zillow. In Los Angeles, 33 percent of second-quarter buys were financed with cash compared to 17 percent in the same quarter of 2009. In San Fransisco, 24 percent were cash buys for the same time period versus 16 percent in the second quarter of 2009.
Cash buyers are propping up the market, increasing the number of properties sold, decreasing the level of inventory and flushing distressed properties through the system, says Jim Gillespie, CEO of Coldwell Banker Real Estate.
“If cash buyers evaporated tomorrow, real estate would be in a lot more difficult position. They are stabilizing the market even though they’re purchasing 10 to 15 percent below value,” he says.
For the seller, cash buys mean no appraisal or mortgage contingencies and faster closing dates, while the buyer enjoys the piece of mind knowing they don’t have a mortgage payment, can tap their home equity if needed, and can negotiate some extra perks in their favor.
Levine is currently representing a 23-year-old cash buyer looking to purchase a $2.5 million ground-level Manhattan property. Concerned about privacy in the all-glass building, she was able to negotiate renovations with the developer.
“She wanted to tint the windows but arguably that would permanently alter the structure and we needed the board’s consent. So I carved that language in the contract, which requires the board to approve the tinting before closing. There is no way if she had a bank with 80 percent financing that they would have ever entered into this kind of deal,” Levine says.
While a cash buy may be the sexier option at the moment, here are a few things to keep in mind for buyers and sellers.
Get educated on valueAn appraisal contingency — a condition that the purchase price of the property must be appraised at an agreed upon amount or the purchase can be canceled without penalty — is not required for a cash sale. But it may be a good idea to put an appraisal clause in your agreement to ensure you’re not overpaying. If you don’t want to go the appraisal route, be sure to solicit a market analysis from a real estate agent.
“Realtors have the tools to do an in-depth market analysis, giving the buyer a ball-park figure. They can show a buyer exactly what’s been sold in that area because we have access to a lot of data and information,” says Ingrid Carlos, branch manager of Coldwell Banker Residential in Hollywood, Florida.
Don’t make a low-ball offer. A common misconception among cash buyers is that you can deeply discount the purchase price. But with so many cash offers flooding the market, competition is steeper than you may think. Often times, the property will go to someone more well-informed on the local market.
“Typically in the luxury market, we don’t have a lot of distressed properties and distressed sellers. Owners of these properties are very secure financially and can hold onto the property for an extended period of time without accepting a low-ball offer because they’re desperate,” Arcuri says.
Don’t get swayed by the overall weakness of the real estate market. “Buyers will see the market has come down a certain percentage, and they will go in with an offer price that is discounted the same percentage on the listing price instead of realizing the news is trying to tell them that the market has come down that percentage over a number of years,” Carlos warns.

Make sure the buyer has the cash. If selling a luxury property, you want to be sure the potentially buyer can pony up seven figures when the bill comes due. A letter from the buyer’s financial institution stating the funds to finance the purchase price are available is a must. An account statement will also work, providing the funds will come from that account.
“Anyone can put an offer in writing, but if you don’t have the proof to back it up than it’s just writing on a paper and not a legitimate offer unless there are proof of funds,” Carlos says. “Sometimes buyers are reluctant to give that information and then they lose out on the potential transaction because a seller won’t even look at their offer.”
Sandy Schwartz, another partner in Levine’s firm, says if a cash buyer presents a seller with an offer it’s important to have a clause in the agreement prohibiting the buyer from seeking a mortgage at a later point in negotiations. “I represented a buyer once who lead me to believe it was an all-cash deal on a multi-million-dollar property. After he spoke to his financial adviser, and after we were already in the contract, he said he wanted to get a mortgage. There was no prohibition in the contract from obtaining the mortgage and the closing was 30-45 days later than what the seller had anticipated,” Schwartz says.
That may have inconvenienced the seller, but it worked out well for the buyer — he was left with all that cash, ready to wave at the next big deal down the road.
Courtesy Reuters Wealth June 29, 2011.