Cashing in on all-cash deals

Editor's note: This article, reposted with permission by The Real Deal, highlights policies and proposals floated to get New York City's real estate market back on track. Click here to view the original article.

By C.J. HUGHES

NEW YORK -- Everyone loves cash. Nothing new there. But in this market, cash deals are even sweeter. In some cases, a one-time payment could even be the only way to close a sale, according to brokers, attorneys and developers. And discounts often await all-cash buyers.

There are other benefits: less paperwork and fewer delays in getting deals done. No long waits for banks to pore over buyers' financial records, only to reject them on the eve of closing.

"Cash used to be king, but now it's the emperor," said Luigi Rosabianca, a real estate attorney who says 50 percent of his clients have paid cash so far this year versus 20 percent in 2007 at the market's peak.

The exact number of cash deals is difficult to determine; property records on file with the city's Department of Finance don't specify how apartments are paid for. And the sheer number of cash deals doesn't seem to be increasing, as the volume of all deals remains depressed.

But cash transactions are an increasing share of overall sales, according to real estate analysts. Indeed, real estate brokers interviewed said they have made up between 40 and 100 percent of their sales in the last few months.

Sellers nervous about deals being scuttled at the last minute are driving the trend, Rosabianca said. They're offering to lop 5 percent off their prices -- which are already down between 20 and 30 percent because of the downturn -- and to pick up transfer taxes if buyers pay with cash.

Those cash closings can sometimes occur within a lighting-quick 10 days, versus two months if buyers need to secure a mortgage, he said.

The trend is prevalent on the high end (note the all-cash purchase at Superior Ink in the West Village for $25 million in October), according to Jonathan Miller, president of Miller Samuel, the appraisal firm.

But brokers say small-business owners, government workers and other middle-income buyers are also emptying their pockets to take advantage of depressed prices.

This fall, a schoolteacher plopped down $725,000 in cash for a one-bedroom co-op on the Upper East Side. She sold her apartment for $600,000 and tapped her savings for the difference after paying off the mortgage, said Lawrence Rich, a vice president with Prudential Douglas Elliman.

The all-cash deal put her ahead of comparable bids, even if it didn't garner a big discount. This is typical, Rich said, particularly for resales.

While it may seem counterintuitive, some buyers actually have more cash on hand despite the economic freefall. ...CONTINUED

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