Why cash offers win out in a hot Miami real estate market
Miami’s famous for its steady sunshine, beautiful beachfronts, and vibrant nightlife. Lately, the entire South Florida region has gained attention for another reason: its sizzling and hyper-competitive housing market.
Real estate agents across the country face serious challenges in the current market — challenges especially difficult for agents working in the greater Miami metro area. Low supply and skyrocketing demand combine with Miami’s attractive locale to make the area especially difficult for agents assisting local home buyers.
And so Miami agents are faced with a dilemma: they can make serious money from soaring housing prices — but only if they can close sales amidst fierce competition. Agents must retain a competitive edge to win in the Miami real estate market — and a cash offer is sure to sweeten the pot.
The Miami real estate market is growing hotter — and real estate agents are getting burned
You’d be hard-pressed to find a region where the housing market isn’t hot, but Miami’s is especially difficult for anyone looking to buy a home. Median home prices leapt 17.4% since April 2021 to $430,299. This isn’t an issue that just impacts luxury homes on the beach, either. Prices have jumped across the board, as the median price of even a one-bedroom home in Miami-Dade County rose more than 27% between April 2021 and April 2022.
Several factors have contributed to this surge in Miami-area housing prices and created a headache for local real estate agents and their customers.
A low supply and an increasingly crowded market
Mortgage rates climbed to start the year, but only after a decade of staying consistently low. This long run of attractive interest rates helped fuel the current demand for homes in the Miami area. Now demand far exceeds supply. Miami-Dade saw a 10% decrease in available homes just between March and April of 2022.
Increased demand and high housing prices may at first appear like a windfall to agents, but the limited supply of available houses puts them in a difficult position. Dozens of offers on homes stream in as soon as a home is listed, and most of the offers come well above the asking price. An agent in Boca Raton hosted an impromptu open house just one day after listing the property and received a whopping 40 offers. Each was a contingency-free cash offer that was significantly above the asking price.
And it’s not just your average buyer that Miami agents compete against. Hedge funds and investment firms use their considerable resources to snap up homes and sell them for a tidy profit. These organizations have more flexibility in how much they can offer and often make cash offers to make their bids more attractive. Their maneuvering leaves locals in the lurch too often, driving prices sky-high and out of the range of the typical Miamian.
Customers expect their real estate agents to produce results
An agent’s customers may be understanding of a rejected offer or five. Most people understand the competitive nature of the housing market in 2022. However, this goodwill won’t last as rejections continue to stream in. Hot market or not, eventually, customers tend to blame their agent for repeated rejections.
And there’s no shortage of alternatives for customers dissatisfied with their agents. Housing availability may have decreased over the course of the pandemic, but the number of real estate agents in the country has exploded over the last few years. Over 156,000 people became real estate agents over the last two years, and the National Association of Realtors now counts more than 1.5 million agents as members.
This places enormous pressure on Miami agents to use whatever means they can to close deals — which is why the most successful agents have turned to cash offers.
Cash offers get real estate agents a seat at the table
Homebuyers have historically used cash offers as a way to strengthen their bid. Cash offers are four times more likely to beat out non-cash offers, which explains why 23% of all home sales in the US were cash (as of July 2021). This ability to differentiate an offer from others is vital in a market like Miami’s. Homeward’s own Chief Real Estate Officer Brian Gubernick sums it up:
“In March alone, 64% of properties in Miami received multiple offers. Sellers aren’t just looking for the highest offer — they’re looking for the strongest offer that they can rely on not to fall through.”
Last year in Palm Beach County alone, an incredible 40% of home sales involved cash offers. The involvement of investment firms and hedge funds and their formidable cash flow has only emphasized the importance of cash in transactions. The increased likelihood of a listing receiving multiple cash offers means cash is no longer just a competitive advantage. If a listing receives 30 offers and yours is the only one that’s not cash, you’re not likely to have the seller seriously consider your offer. Make a cash offer to earn a seat at the bargaining table.
However, an agent’s average client doesn’t have hundreds of thousands of dollars tucked away to make cash offers. Homeowners often need to sell their current home to come up with the funds to purchase a new one. This lack of available cash and inability to move quickly on a listing hinders agents’ ability to close for their clients.
Homeward gives agents (and homebuyers) a path to cash offers
A few short years ago, a lack of cash on hand would have sunk deals in such a competitive market. Luckily, Homeward empowers real estate agents and their clients through our innovative cash offer solutions: Buy with cash and Buy before you sell. Homeward can help, whether your client doesn’t have the cash upfront to make an offer or needs to sell their current house first.
Homeward takes a traditional real estate transaction and breaks it into two separate parts. First, we buy the home for cash. Then, your clients buy the home back from us. This simple process allows us to turn conventional offers into cash offers for agents and their clients. Here’s how it works:
Buy with cash
Imagine your customer has found their dream listing, and they want to make the strongest possible offer. They’re willing to forego contingencies, but they don’t have the liquid assets to make a cash offer.
This is where Homeward’s Buy with cash comes to the rescue. You fill out an application on behalf of your clients. Once we accept it and approve them to make a Homeward Cash Offer, we’ll work with you to make a cash offer on the property. We’ll purchase the house if your offer wins, and your client can move in the day after the title is ready. They pay rent until their mortgage is set, and then they buy the home back from us with the money from the bank.
Homeward is founded and largely staffed by real estate agents, so we’ve built Homeward to keep real estate agents at the center of the transaction. Our focus on helping agents extends to our fees, as well: agents get to keep every penny of their hard-earned commission.
Buy before you sell
Imagine this: Your client purchases their new home now before its sell price climbs any higher. In the meantime, they hold onto their existing home a bit longer, wait for it to appreciate further, and sell it for a higher rate. You’ve just used Homeward to make your customer more money on their move than you could have in a traditional transaction.
Homeward’s Buy before you sell takes the cash offer to the next level. We approve your clients for a set amount of money. You work with us to make a cash offer on a listing, we purchase the home, and your client moves in ASAP. Meanwhile, your clients list and sell their former residence and pay rent to us until the house sells and their new mortgage is finalized.
The ability to make a cash offer before you’ve even sold your home eliminates roadblocks that too often slow down the homebuying process. New Miami listings often receive countless offers, making the ability to make a cash offer without needing to sell your current home first critical to winning for your clients. In most cases, we can also purchase your home after six months if it doesn’t sell, so you’re not stuck with two houses indefinitely. However, it’s unlikely you’ll find difficulty selling your house in Miami anytime soon.
Use Homeward’s cash solutions to win for your clients in Miami
The increasing level of competition in the Miami housing market only confirms the desirability of selling in the region. Everyone from local agents to foreign investors knows there are buckets of money to be made for those who can close — and everyone who can close knows to use cash offers.
Success in South Florida starts with giving your clients every possible means of making a strong offer. Add the Homeward Cash Offer to your existing toolset and carve out your niche in this hot Miami market.