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Why Cash Home Offers Are So Popular in Florida
By Aly J. Yale MONEY RESEARCH COLLECTIVE
Cash offers on homes have surged in the last few years. With sky-high demand and incredibly low housing supply, home buyers have had to pull out bold moves to get noticed. And offering a fast, hassle-free, all-cash deal has been a frequent strategy, especially in Florida.
According to real estate brokerage Redfin, a whopping 30% of all home sales were paid for with all cash this year — the highest share since 2014. In some Florida markets, cash sales were even higher.
In West Palm Beach and Naples, for example, all-cash deals accounted for more than 52% of all transactions. North Port, Port St. Lucie, Palm Bay, Cape Coral and Jacksonville all saw 40% cash shares or higher.
“We have a very, very high cash market,” says Ana Bozovic, owner of Analytics.Miami and a member of the board of governors for the Miami Association of Realtors. “And the higher you go up in price, the higher the cash share.”
She’s right: Last quarter, an astounding 64% of all $1 million-plus transactions in Palm Beach, Miami-Dade and Broward counties were paid for in all cash. Under the $1 million mark, it was 46%.
Still, those are high shares any way you cut it — particularly compared to national numbers. What’s driving this cash-heavy trend in the Florida housing market, and what will it mean if you hope to buy a home? Here’s what the pros say.
Florida’s popularity is encouraging cash sales
One of the biggest reasons for Florida’s high share of cash offers is domestic migration — when Americans move in from other states. According to the U.S. Census Bureau, Florida claimed the biggest influx of domestic migrants from April 2020 to July 2021 (220,000 people total).
Many of these buyers came from higher-cost markets, like New York City and San Francisco, where home prices (and salaries) are generally much higher. For example, in San Francisco the median home price is $1.3 million; in Miami, it’s less than half of that at $550,000.
This has allowed movers to sell their old homes and produce enough cash to cover their Florida home purchases in full — and, in many cases, have funds to spare.
“When they see our prices in South Florida, they’re not very intimidated,” says Craig Studnicky, CEO of Aventura-based real estate firms ISG World and RelatedISG. “Compared to California and New York, South Florida prices are still a bargain.”
The drive behind this increased migration is multi-faceted. Real estate agents say many have come for lower taxes or better weather, while others wanted more space during the pandemic.
“During COVID, we saw an acceleration of a shift that’s been happening for years, but it was on steroids,” says Mike Pappas, CEO of The Keyes Company, which operates more than 50 real estate offices across Florida. “If people were planning to move three or four years from now, they made the decision during COVID to move because they wanted space. They wanted to be able to move, and they didn’t want to be cooped up in a cold, northern, closed environment.”
There’s also a business boom going on in major Florida markets. In recent years, dozens of corporations have made the move to Miami, Boca Raton and West Palm Beach, bringing hundreds of workers — including high-paid executives — with them. Goldman Sachs, Citadel, Blackstone and Colony Capital are just of few of the big names to enter the state recently.
“There are bout 70 companies throughout the Americas — North and South — that have moved offices in the last two years to South Florida,” Studnicky says. “The big picture is that companies are moving here, individuals are moving here, and when they relocate, they sell their principal residences, which means they’re coming here with money.”
Homebuyers in Florida have cash (and prefer it)
It’s also important to consider the types of buyers that Florida attracts. The state has long been popular with seniors — many who are cash-flush, either from selling their nest eggs or due to large retirement savings. The bulk of this cohort typically pays cash, agents say.
“The Baby Boomers in their ‘60s and ‘70s have a significant amount of money because they’ve worked all their life, and most of them are headed towards retirement,” Studnicky says.
There are also many wealthy buyers and vacation home buyers in the Sunshine State — both of which are more likely to pay cash. According to an analysis of Multiple Listing Service data from the last six months, 90% of homes above the $10 million mark were cash deals. In the $3 million to $10 million range, it was 80%.
“The luxury and ultra-luxury markets have seen the highest concentration of cash buyers,” says Sebastian Vallejo, managing director of real estate brokerage Brown Harris Stevens Miami. “As prices go up, availability goes down, and finding a home becomes even more competitive, driving up the percentage of homes bought with cash.”
Finally, Florida (and Miami in particular) is in high demand with Latin American and international buyers. From April 2020 to March 2021, Florida was the top state for international home purchases, accounting for 21% of all sales. It’s snagged the top spot for 13 years running.
Some of these international purchases are from investors, those looking to put funds in more stable assets than their home countries offer. Others are simply looking for permanent or second homes. Either way, most prefer cash.
“There is a cultural difference,” Studnicky says. “Americans are always in debt, while Latin Americans do not like debt — which is why they come with cash.”
A red-hot market is driving cash offers
Another factor is the high-stakes real estate market the country has seen recently. For the last few years, the for-sale housing supply hasn’t been able to keep up with demand — particularly when mortgage rates were at record lows. This has forced more buyers to up the ante, offering all-cash deals with no contingencies or appraisal requirements to win bidding wars.
“With low inventory and a strong demand, we’ve had what we call a seller’s market for the past 20 months or so,” Vallejo says. “This means there are more active buyers than available properties, giving sellers the privilege to be more demanding on the conditions of the sale.”
Often that means sellers want cash. According to pros, cash deals are simply safer. There’s less risk the buyer will back out or hit some kind of snag.
“Many local buyers have strategically turned to cash offers to make their offers more appealing,” says Claudia Cobreiro, a real estate attorney at Cobreiro Law in Miami. “Cash offers are usually king. They assure the seller that the buyer is motivated and able to close. A buyer who isn’t using cash could have a loan denied and have the deal fall through.”
All-cash offers are easier to come by these days, too. Thanks to emerging cash-offer programs — like those offered by Ribbon and Accept.inc — even buyers who aren’t cash-flush can make one. These essentially purchase the property on the buyer’s behalf (so it’s cash on paper), and the buyer finances it later on, after closing the deal.
Jenna Nunez, real estate partner at Bella Trae Realty in Tampa, called Ribbon a “lifesaver” for recent first-time home buyer clients. “With this new option, our everyday, local buyers can write a cash offer.”
Why do sellers prefer cash buyers?
Cash offers give home sellers more confidence that the deal will go through, but that’s not the only reason they choose them over financed offers. They also make the homebuying process faster.
“A cash offer comes with fewer contingencies and paves the way for a faster closing — usually within 15 days,” Vallejo says.
The process is also easier and comes with fewer hoops to jump through. This can be ideal for a seller who’s also purchasing another home on the back-end.
“Sellers typically choose cash offers over non-cash offers because it’s generally an easier transaction without having to worry about bank approval, appraisals, unforeseen obstacles — all that’s associated with a loan,” says Jay Phillip Parker, CEO of Douglas Elliman Florida. “If a seller already bought a new home and is looking to sell their old home and close the transaction quickly, a cash offer is generally more appealing to them.”
Finally — and possibly most important — a cash purchase ensures there won’t be appraisal problems down the line.
When buyers purchase a house with a mortgage loan, the lender will have a home appraisal to ensure the home value is worth what they’re loaning out. If it’s not, the buyer is responsible for covering the difference between the appraised value and their offer.
This can pose a big problem in an environment where bidding wars are common and buyers regularly offer more than the listing price and market value. It could even cause buyers to back out of the deal weeks into the process. In fact, according to the National Association of Realtors, 15% of contracts that fell through in April were due to appraisal issues. Appraisals also accounted for 26% of closing delays.
“With a cash offer, there is no appraisal to worry about,” Nunez says. “The seller will most likely get the contract price — as well as be able to close faster.”
