Earlier this month disclosure requirements pertaining to all-cash residential sales were implemented in only two markets nationally, one of them being Miami-Dade County.
The primary reason Miami was singled-out, more than half of all residential sales in the market are cash sales.
- More than half of all existing homes sales in Miami are all-cash deals.
- Buying activity among foreigners and home-flippers is the primary reason for the high volume of cash deals.
- New disclosure requirements may be extended after August 27.
Earlier this month, disclosure requirements pertaining to all-cash residential sales were implemented in only two markets nationally — one of them being Miami-Dade County.
The primary reason Miami was singled out? More than half of all residential sales in the market are cash sales.
Looking at last year, cash transactions were said to account for more than 57 percent of all single-family home and condo deals.
The market’s high percentage of cash sales reflects its ability to attract international home buyers, who tend to purchase properties in this fashion.
Roughly half of these buyers are from either Venezuela, Brazil, Argentina or Columbia, according to Miami Association of Realtors. Attractive residential submarkets for these buyers include Brickell Avenue, Miami Beach, downtown Miami and Doral.
Investor activity within the home flipping sector is another reason for the market’s high percentage of cash deals. RealtyTrac recently pointed to the Miami metro as having the most flipped homes (10,658) of any market nationwide last year.
The effects of disclosure
As of March 1, the Financial Crimes Enforcement Network (FinCEN) requires certain U.S. title insurance companies to identify the natural persons behind a legal entity that pays all cash for residential real estate valued at more than $1 million in Miami-Dade County and Manhattan.
This requirement is intended to combat money laundering, but isn’t expected to impact residential sales volume within Miami.
According to a panel of real estate professionals assembled by the Miami Herald, these regulations are having minimal effect because most cash transactions are accomplished via wire transfers, which are already traceable.
The disclosure requirements will expire on August 27 of this year, a 180-day implementation period; however the panelists stated the requirements may be extended after that time.
“FinCEN is concerned that all-cash purchases may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures,” the network previously stated.