Miami Beach Real Estate Market Awash in Foreign Cash Buyers
"A cash buyer may be someone who is borrowing from somewhere on their own, they may have the money in the bank, they may own the bank, but their purchase is not contingent on a finance deal," Esther Percal, senior vice president of Esslinger Wooten Maxwell in Miami Beach, told HousingWatch.
Percal says that 60 percent of the cash buyers she deals with hail from Europe and several South American countries. Her most recent were an Argentinian family with an unfortunate family incident that has prompted them to make a move to the States, and they chose Miami Beach for putting down roots. There's also the Brazilian businessman who does business in Tampa and Jacksonville, and visits so often that he decided to buy here. "For him, a $2-million purchase was a no-brainer and a $6-million one was a serious consideration," she said. There are also Venezuelan cash buyers, but not at these price ranges.
Europeans are the most prevalent cash buyers, and they're buying with a purpose. Many of them have been wanting to build credit here and when they plan to do business in the United States they want to establish a line of credit, perhaps even attain a visa. They've got the cash and their own way of conducting business which often is not contingent on financing.
One prime example of such a buyer is a French businessman who Percal recently closed a deal for. Although he had the cash for his purchase, he still sought financing from the bank. He was financing through HSBC, known as the world's local bank, and was astounded at how lax the business practices are in the U.S. He had a personal deadline to meet, but with the deal taking a total of two weeks, that did not fit his schedule. He was surprised at how long the surveys took and could not comprehend why the appraisals could not be done jointly. His frustration was so great that he called in a personal friend, the bank's president, and asked him to lean on the folks to speed up the process.
"He personally complained to me and commented that his transaction's lengthy process was probably why U.S. banks are all in trouble, because they are slow and disorganized," Percal said.
This situation is actually very common in this market, in which banks are being overly cautious. They are purposely appraising homes below value for example, a $1 million home is being appraised at $500,000, so non-cash buyers actually need much more of a down payment. In the luxury market, 10 to 20 percent for a down payment just doesn't cut it.
Percal says, "Cash is king. It has been a long time since most of us in luxury real estate have had to deal with financing and, frankly, cash buying relieves stress and alleviates red tape. This has been the case for the past two years."
There's optimism, though, that the market will bounce back, and brokers still say -- not surprisingly -- that real estate is still the most sound investment.
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