Cash Talks in Hawaii Real Estate
Across the nation, the number of buyers paying cash for real estate is increasing. According to the National Association of Realtors, 28 percent of home sales were all-cash transactions in 2010 compared with 14 percent in 2008. And, according to Zillow.com, the housing markets hit hardest by the economic downturn had the highest percentages of cash transactions: More than half of all home sales in the Miami-Fort Lauderdale area last year were cash transactions; about 42 percent of buyers paid cash in Phoenix in 2010. In Hawaii, the numbers are lower, with approximately 12 percent of buyers paying cash for single-family homes last year; about 33 percent of condo sales were sold for cash; and 70 percent of vacant land sales were cash transactions.
This trend could indicate that the economy is finally on the road to recovery; however, it could also be the result of stricter lending requirements, where buyers with good credit and substantial down payments are being turned down for financing. Additionally, banks are loathe to finance purchases of vacant land and condotels, which represent a sizeable portion of the Waikiki housing market.
For those who can swing it, there are several advantages to paying cash. Buyers can negotiate lower prices, often as much as five to 10 percent off the asking price. Cash sales close faster and they eliminate any chance of the bank backing out at the last minute. “Buyers like to pay cash because it’s a quick close,” says Choi International president and principal broker Patricia Choi, who has had 10 cash sales in the last six months. “There’s less paperwork involved and, therefore, it takes less time. More importantly, buyers can negotiate the purchase price more when it is cash. At the level of $3-million-plus, the adjustment in price for cash can be substantial.”
In fact, seven of the 10 most-expensive single-family home sales in 2010 were paid for in cash, including the largest sale, a $22-million Kahala home. Hawaii’s high-end cash buyers are often foreign investors, especially those from Japan, China and Korea, taking advantage of favorable exchange rates. “Cash always talks better than financing,” says Coldwell Banker Pacific Properties broker Marti Hazzard, whose two cash sales last year included a $7-million home in Paiko Lagoon that was purchased by Japanese buyers. “When you want a property, especially if there are other offers or hints of possible offers, [cash] locks the deal in!”