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Most people know that the coveted “all-cash” offer is increasingly preferable to buyers. But why? Honestly, it’s because the buyer knows the deal won’t fail to go through because of financing concerns. 

What are All-Cash Real Estate Deals?

An all-cash offer doesn’t mean that the buyer will show up to closing with a suitcase of actual cash. It means that the buyer isn’t reliant on borrowing money from a bank to close on the purchase, so there is no financing contingency that must be met that could cancel the sale. 

All-cash offers are a strong way to win a bidding war, so in this hottest real estate market in recent history, we’re seeing an increasing number of all-cash deals happening. And this has caught the attention of regulators who want to scrutinize all-cash real estate transactions to be sure no money laundering or corruption is taking place.  

Why Is the Government Interested?

The Treasury Department recently posted a notice seeking public comment for a potential regulation that would address what it says is a vulnerability in the real estate market, hoping to enhance the transparency of the domestic market and “protect the U.S. real estate market from exploitation by criminals and corrupt officials.”

While most all-cash sales are likely legitimate, this also comes on the heels of the release of recent documents — the “Pandora Papers” — showing how shell companies set up by current and former world leaders were used to purchase real estate, like mansions beachfront property, and other assets, like yachts, in the U.S. and elsewhere around the world.

This focus on real estate is part of the government’s broader effort to combat money laundering and corruption, not necessarily as a response to the notable names in the Pandora report. It is believed that expanding reporting requirements on all-cash real estate deals could help to stop illicit activities and bad actors from using the U.S. market to conduct these acts. 

Why Focus on All-Cash Real Estate Deals?

Most real estate deals rely on mortgages, and these are already scrutinized by the banks involved. But All-Cash Real Estate Deals, increasingly popular, are actually subject to many fewer rules. 

In fact, title insurance companies in only a dozen cities are required to file reports identifying people who make all-cash purchases of residential real estate — and this is only if the transaction exceeds $300,000. Those cities are: Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle.

What is the Proposed New Rule?

New regulations could make all-cash real estate transactions comply with many of the same rules as those financial institutions face for mortgages, including imposing controls and reporting requirements. 

While this adds some steps for those making all-cash offers, it also increases transparency in the real estate sector, stops corrupt buyers from taking advantage of the U.S. real estate market, and could even improve national security. 

Whether you’re a cash buyer or a buyer looking to secure a mortgage, LIST WITH ELIZABETH® stays up to date on the rules and regulations that might impact you. Contact us to help you find your ideal new property and work with our trusted partners to finalize your real estate deal in Springfield, Burke, or nearby today!