Cash for deeds on the rise
National trend lagging behind in area

By KEN MERRILL - Daily News

April 8, 2016

Remember the old saying “cash on the barrelhead”?

No credit. Just pay cash when you buy.

More and more home buyers are doing just that.

Cash deals across the country made up about 38 percent of all home sales in November, according to the most recent data from the online real estate firm CoreLogic.

The share of all-cash sales reached a peak of 46.6 percent in January 2011, according to CoreLogic, which cited new documentation and disclosure rules for mortgages that took effect in October as motivating factors.

In Washington County, real estate professionals say the percentage is increasing, but it’s nowhere near that national mark.

“I would have to go in and look at MLS numbers, but I don’t think it’s a huge number,” said Tom Sykora, an agent with the Coldwell Banker office in West Bend and a board member of the Greater Milwaukee Association of Realtors. “My best guess would be probably under 5 percent.

“We have been seeing more cash offers this year than what we saw last year,” Sykora said. “I do think we’re starting to see that trend up a little bit.”

Sykora said in some cases, cash buyers are couples who have sold a home and are downsizing.

“I had a cash closing on Friday,” he said. “The people were coming up from Illinois, they were downsizing and they wanted to be mortgage-free. They sold their house in Illinois, downsized and paid cash.”

According to RealtyTrac, an online seller of foreclosed and defaulted properties, cash buyers are motivated by two main factors: strict lending standards that make it difficult to get a mortgage and intense buyer competition.

Foreclosed homes typically sell below market value.

A factor in some markets is purchases by foreign buyers. More than half of foreign home buyers pay in cash, according to the National Association of Realtors. In Miami, the No. 1 market for foreign purchases in the United States, cash purchases are nearly 60 percent of all sales.

That has prompted an investigation by the U.S. Treasury Department, which has ordered title insurance companies to report the identities of people paying cash for high-end properties in Miami and Manhattan.

Officials wonder if people who pay cash for real estate in some markets are trying to hide ill-gotten gains through the drug trade or other illicit activities.

That seems less likely here, though.

Sue Jonas, sales director at Shorewest Realty in West Bend, said cash transactions were “probably a strong 10 percent” of sales here.

“I wouldn’t say it’s common, but I’m seeing more and more of it in all price ranges,” Jonas said.

Jonas agreed with Sykora’s observations.

“Some (buyers) have already closed on the property, thus giving them the cash,” she said. “Your lake homes are a little bit of a different animal because that’s usually a second home.”

Sykora added the volatility of financial markets could be a contributing factor.

With wild swings in the stock market over the past several years, some people may be hoarding cash, then investing in real estate when an opportunity presents itself.

“Real estate has always been a fairly stable investment,” Sykora said. “Obviously we had the market turn a couple of years ago, which was unusual, but, typically, real estate is a steady investment over time.”

Email news editor Ken Merrill at kmerrill@conleynet.com.