Taking out a mortgage in order to purchase a residential property is no longer the default choice for Cook County buyers, who along with the rest of the country are making more and more cash purchases.
Last year, 46.5 percent of residential purchases in Cook County were made with cash, more than three times the amount in 2005, according to a recent article published by DePaul University’s Institute for Housing Studies.
The IHS analyzed data only from cash purchases of non-distressed properties so as not to include sales influenced by foreclosure.
In a story explaining the IHS findings, Chicago Magazine reported that Englewood, the Loop and the Near North Side represented the highest concentrations of cash purchases in Cook County. The inclusion of the latter neighborhood as a hot spot for cash purchases aligns with data Chicago Agent magazine published last year from Leap Real Estate Systems, which estimated the amount of 2012 neighborhood cash purchases to be highest in the Near North Side.
Paul Lazarre, CEO and founder of LeapRE, a real estate data company dedicated to improving agent efficiency and effectiveness through online software, said he isn’t surprised by the rising amount of cash purchases. In addition to wealthy people feeling more comfortable paying with cash in an improving economy and corporations buying properties for business purposes—two factors reportedly at play in the Near North Side and Englewood, respectively—Lazarre said the ever-increasing complexity of taking out a mortgage could be resulting in more cash purchases.
“When you didn’t have so much demand in the market for people searching, it was just you, and the seller was happy to work with you to figure out how to get the loan, and if it closed later or took longer that was ok,” Lazarre said. “Now you’re competing with three to seven people, and I think the sellers are not as tolerant to taking out a loan.”
Lazarre said cash purchases ultimately come down to the buyer and what sort of state they’re in financially.
As far as the high amount of cash purchases in the Loop, Chicago magazine reported that a majority of sales came from condos at 200 N. Dearborn, which provides a 10 percent discount as an incentive for cash buyers.
Though it helps to have incentives, Lazarre said the current competitive market frankly lends itself to people with the best assets.
“The amount of multiple offers that are coming in to reasonably priced homes is actually allowing the person with the strongest financial position to win.”