For Second Home Purchases, Cash Is Now King

In popular vacation destinations, investors increasingly are snapping up properties with cash. Cash purchases rose to 60 percent of investor transactions in 2010 from 48 percent in 2009. Experts say cash dominates these days because the median investment property price has dropped for three consecutive years at the same time that second mortgages are nearly impossible to obtain. The number of second mortgages handed out by lenders has plunged 73 percent since 2005, says CoreLogic. Bill Yahn of the Corcoran Group in Palm Beach, Fla., says high-end sellers expect cash-only deals, and Florida real estate consultant Jack McCabe says cash buyers have the upper hand in negotiations given that the transaction will not be delayed by the need to obtain financing. While cash buyers benefit from the absence of a mortgage payment and increased rental income, some experts say low borrowing costs and liquidity issues make mortgages a more sensible option than parting with a lump sum of cash. | Read More