Cash sales, mortgage payment

75 percent of residential units in Puerto Rico are occupied.

Despite the fact that Puerto Rico has been in an economic crisis for 15 years and with a high unemployment rate, there is demand in the housing market for the purchase of residential units both through financing and in cash transactions, according to representatives of the mortgage sector consulted by THE WEEKLY JOURNAL.

According to census data provided by the Bank Association, 75 percent of residential units in Puerto Rico are occupied, for a total of 1,170,982, of which only 24 percent or a total of 381,725 homes are mortgaged.

The census reflects that 25 percent of the homes are vacant —equivalent to 388,523 units, a percent that exceeds twice the number of vacant housing units in the U.S. mainland, which is 12 percent. Therefore, 88 percent of housing units in the United States are occupied.

Industry leaders consulted by THE WEEKLY JOURNAL stated that the acquisition through financing responds to low mortgage interests, while the purchase through cash transactions is the result of inheritance, the sale of other properties or money from unknown sources. In these cases, it is more convenient for buyers to buy in cash and not have to bear the interest on a long-term mortgage.

María Judith Oquendo, advisor and real estate broker, said that there is “a lot of cash sales and the origin of the money is not being seen. This is unlike the bank, in which a mortgage is obliged to establish its origin when it’s made. With this type of transaction, there is no control of the number of sales that there are because this is done through a lawyer, who presents the sale in the property registry.”

There are also other reasons for these transactions to be carried out in cash, as indicated. Among them, that the owners want to sell the property based on the appraised price, and when managing with cash, the property valuation is not required to complete the sale. Meanwhile, in order to buy through refinancing, the property appraisal is mandatory.

Buyers of All Ages

“Many say they are paying with the money from a previous sale, but we do not know if that is the case or when that sale took place. I see young people buying cash and older people. Others say they received money from insurance, but there is no such certainty either. They are buying expensive houses,” assured Oquendo, who is a member of the Board of Brokers, Sellers and Real Estate Companies of the State Department.

Real estate broker Odette Chiesa, of G&M Realty Group, said she has had clients interested in buying residential units who are looking to acquire them without a mortgage loan.

“I have seen cases of people who have received pension money from their work when they retire, people over 60 and young investors in their 30s, who have businesses in the United States and come to Puerto Rico to buy cash properties,” Chisa stated.

Moreover, Pedro “Peter” Torres, president of the Mortgage Banking Association explained that this behavior is largely due to the fact that in Puerto Rico there are a large number of houses that are sold out for resale to acquire other homes, so the list of financed homes does not increase when this type of transaction occurs.

“According to the latest census, in Puerto Rico, there are about 1,559,505 housing units and an estimated 350,000 are informal; that is, they do not have a title or are on invaded land. If these homes are subtracted, there are about 1,100,000 left and according to the statistics of the OCIF (Office of the Commissioner of Financial Institutions), there are over 381,000 active mortgages. So, there are over 700,000 properties left, you don’t have to cancel a mortgage to the bank when they are sold. Many sell these houses, which they should not, to buy another one,” the banker explained.

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