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Why are cash real estate purchases popular in South Florida?

On Behalf of | May 23, 2019 | Residential Real Estate |

In addition to its year-round sun and beautiful beaches, South Florida lures new homebuyers with its tax-friendly laws. Many buy their homes outright, with no financing. In fact, over a third of all real estate closings in Miami-Dade from last November through this March was in cash. In Broward County, the percentage was even higher — between 38% and 41%. Close to half of closings in Palm Beach were in cash. Those numbers are considerably higher than the national average, which is 20%,

The number of cash real estate purchases in South Florida has not gone unnoticed by the federal government. Their concern is that foreign buyers are using cash real estate purchases to launder money. Last year, the U.S. Treasury began requiring title companies to disclose information on people making cash real estate purchases of at least $300,000.

If shell company owners were frightened away from the South Florida real estate market, many regular homebuyers not trying to hide illegal activity haven’t been. As one real estate brokerage executive says, “That is good, clean money buying real estate in Florida because the state is a tax haven. These are legitimate people who are not hiding anything and are okay with piercing the veil. Although, I think they would rather not have to.”

One real estate broker notes, “We have a lot more wealth in Miami than other cities so we will have higher cash deal ratios. The assumption was that more than half of cash buyers in Miami were criminals. That is not the case. They are people who have legitimate money and are not afraid to disclose anything.”

One reason that many legitimate buyers pay cash is that, as the real estate brokerage executive says, it’s difficult to qualify for a mortgage on a luxury condo. He says, “In most cases, you need to put down 20% to be considered for financing. It is more likely for a buyer to use cash to get the deal done and maybe refinance it later.”

Whether you’re paying cash for a Florida home or financing it, our state’s real estate laws can be confusing. An experienced attorney can answer your questions and provide valuable guidance.