Florida Short Sales

Do You Want to attempt to purchase a Short sale?

 

Short sales comprise about 21% of the homes on the market these days. Here is an article from Realty Trac that goes into detail.  If you live in areas such as Florida, California, Nevada, Arizona they will comprise a larger percentage of the home for sale versus areas that have maintained home values steadier for the past 6 years.

When making an offer on a short sale it is important to keep in mind that the entire offer process is going to be different than say a foreclosure property or a regular property owned by a homeowner that has equity. The offer process with a short sale is going to be much longer and must frustrating. This is the price you pay for potentially getting a deal. A savings that might not be as good as you think.

Lets say for example you make an offer on a short sale property and the listing agent accepts your offer. Once this is done the listing side must begin the process of approaching the bank holding the paper on this property and convince them as to why they should accept a negotiated payoff on this home and lose money.

In order for the listing agent side to succeed in persuading the bank they must demonstrate the current owners inability to pay the mortgage in much the same way a mortgage modification is accomplished. They must also demonstrate factors such as a loss of job, loss of income,illness,job relocation or some other major factor that will prevent the current owner from paying this loan going forward.

Many so called "experts" claim that you cannot short sale if the home for sale is not currently late on the mortgage. This may or may not be true. I think in a case of illness or other life changing events the lender will make a judgement call on the future prospects of collecting payments on that property.

For example, I recall a client who had "Lou Gehrigs disease". He had been making payments all along but knew that his ability to earn a living and make a payment would eventually go away and on top of that he was entering into a sticky divorced. The bank spoke with this man eventhough he was current on his payment. He eventually became late on the mortgage , got divorced and sold his home. This process took about 9 months.

When making an offer expect a delay of 60 to 180 days before the listing side comes back with a response. From what I have been told two-thirds of short sale offers end in a decline. This is something to keep in mind when making these offers. This process will take longer than a regular purchase offer and it will be more frustrating. On the plus side you will get a property that may be a keeper. Many realtors will not work with short sale clients but other s specialize in it.

If you are in need of a great title company that can handle the short sale process for you, please contact Richard Greenberg over at

Other factors to keep in mind are the state of the property itself. If the previous owner decided to stop paying or planned to leave over time, they probably started to fall short on the neccesary up keep to the property. Maintainance on the roof or the A/C or the water purification system might have begun to fall short. When purchasing a short sale double and triple check the information you receive from your home inspection and your appraisal. You may be purchasing a home that is 10%-20% less than market value but you also may be inheriting a bunch of problems from the previous owner. 

 

2-18-2011- Entry from my blog that is worth noting:

This past week I came across an interesting guideline that I am not quite sure if it was a mistake by the underwriter or something new that we should pay attention to. Fortunately in my case it was not a deal breaker.

The condition on my approval was a limit on what could be paid as a seller concession if I am doing an FHA loan. This was an FHA file that I was doing but the condition read that seller concessions were limited to 1% if the previous loan was an FHA loan. On my deal we needed 3% for the borrower to have enough money to close so potentially this could have been a deal breaker.

Going forward I will remember to go on line and verify the previous mortgages before we go ahead and make a short sale offer.

Most short sales take 2-3 months to get accepted and then a loan takes a few weeks to get underwritten, so by checking this one little rule, we might just save an awful lot of time.

Also recently I have come across some short sale companies that ultimately negotiate the short payoff with the bank. These companies take ownership of the property and tell the bank that they will never ever receive another payment again. This companies in turn beat up the bank to get the lowerst payoff possible , then they pay the bank in cash. With this scenario there is no waiting around for a potential buyer so if you have gone 18 months to 2 years without making a payment, this may be an option for you. Placing the lome in the name of a company is quite often referred to as a land contract.   

 Below is an article written by Marc Jablon of Remax 561-213-6139 

www.jablonteam.com

Short Sales in South Florida. Marc focuses on homes in the Boca Raton , Boynton Beach and Delray Beach and Fort Lauderdale.

Short Sales in Florida Are Anything but Short

Words like “short sale” make people think there’s a less expensive home in their South Florida future, the word “future” is the really the operative word in these transactions. If you’ve ever made an offer on a so-called short sale home in South Florida,  you”ve probably come up with a new definition for the word, “frustration.” That’s because so-called “short sales” in South Florida and other parts of the country usually take a long time.

The real estate term, “short sale”  is used to describe a property whose owners are short on the cash needed to cover the expenses of the mortgage and they are also upside down on the value of the property.  They have ceased paying their mortgage or are behind on the mortgage, but the property has not yet gone into foreclosure. Many people still use the term “quick sale” when referring to a property that’s in short sale, but the process is anything but quick. 

A short sale may not be as big a saving as you think.

Buyers searching for homes in South Florida  may also be unpleasantly surprised about the saving money aspect of a short sale purchase. People who plan to purchase short sale properties in South Florida do so on the premise that they will saving a huge amount of money. Their reasoning is that the short sale property’s asking price may be from 10-25% less than that of a house where the owner is still in control of payments.

But, consider this, purchasing a short sale: while a short sale property may save you money on the purchase price, there are often other costs to consider.  If the former owners are not able to pay any of their bills, they probably moved out. So the house may have been abandoned and neglected for quite some time.

In this kind of circumstance, the owners probably shut off the electricity. In the sunny but humid climate of South Florida, that means the air conditioning was not running. A lack of air conditioning usually leads to an abundance of mold and mildew. If the short sale takes place up north where it’s cold, and the electricity was turned off, lack of heat leads to frozen and burst pipes. Problems, problems, problems

Be prepared to wait.

When you sign a short sale contract, there is an additional form known as a short sale addendum, that goes along with it.  This addendum informs you that you’re going to wait at least 45 to 60 business days for the lender’s decision.

Sometimes, you will wait even longer -  from 90  to 180 days or more –  before you even get a response to your offer. And that response, is “no,” two thirds of the time. Considering the state of the housing market, it  seems hard to believe that banks struggling with so much excess housing inventory  need extra time to make such an obvious decision but they do.

Now, add that waiting period to the time the house has already been abandoned. Then, add the costs of repairing that property to the price of your short sale. If the numbers still make sense to you, and it still seems worth it then let's write it up!

If you’re not in any rush to purchase a new home, then it may be worth thinking about buying a short sale. You may be one of those fortunate buyers who locates a real bargain. But before you make a final decision, be sure to get a qualified inspector go through every inch of that property very carefully. Otherwise, that short sale may leave you short of cash, too.

 

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