What is a short sale?
A short sale is when a lender accepts less than the value of a loan as payment in full to avoid foreclosing on an insolvent homeowner. Most lenders will not disclose any information regarding what price they will consider until they receive an offer on a specific property. Timelines for approval are completely different for each bank. The short sale approval process within a bank can get especially complicated when outside investors need to be consulted.
Pros to buying a short sale
~ Contrary to popular opinion, lenders do NOT want to foreclose on homeowners therefore they may be willing to negotiate below market value sale prices. This creates an opportunity for buyers to obtain instant equity in their purchase.
~ Buyers can benefit from negotiating with lenders because the lack of emotional involvement in the property.
~ Short sales are normally in better condition than foreclosures because the sellers are still living in the home and maintaining it
~ Because of the high number of short sales in the local real estate market, including short sales in home searches will increase the number of results exponentially.
~ Although there is an opportunity for a deeper discount with foreclosures, there will probably be less competition when buying a short sale.
Cons to buying a short sale
~ Because the sale requires lender approval, short sales can often take longer to close than normal sales. Although approval times vary, buyers should expect to wait from 30 to 90 days for lender approval.
~ Each lender has an internal process for approving offers which will often be invisible to the other parties in the transaction. Short sale buyers should go into the transaction expecting to know very little about the status of the file.
~ Many listing agents drop listing prices drastically below current market values and instigate multiple offers on certain short sale properties. The multiple offers can inspire lenders to hold out for higher offers and leave various buyers hanging out on a limb.
What to expect if you decide to put an offer on a Tello Team short sale:
~ You WILL receive a contract with seller signatures. Said contract will include a short sale addendum and disclosure so that all parties in the transactions are clear on the approval process. When we have a contract waiting for bank approval, subsequent offers will considered backup offers only.
~ You will have peace of mind knowing a team is working on getting the transaction closed. The Tello Team works hand in hand with The Processing Specialists, Inc. to negotiate with banks and get short sales sold. What do we do to make it happen?
- Stay in regular communication with the lender
- Provide any and all paperwork they request promptly
- Negotiate firmly and paint as clear and as accurate a picture of current local market conditions as possible
- Request elevation if and when necessary
What is a foreclosure?
A situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract. Foreclosures are generally governed by state laws and rules vary from state to state. Check out Florida Statutes regarding foreclosure here
There are several points in the foreclosure process during which a property can be purchased:
~PREFORECLOSURE See short sale purchasing information outlined above
~PUBLIC AUCTION This auction takes place on the courthouse steps and is normally handled by the county clerk. Buying on the courthouse steps usually requires a cash offer or special hard equity financing because the buyer only has until the end of the day to pay for the property. Also, a 5% deposit is due at bidding time. It will still be 10 days before the clerk issues a certificate of sale to the winning bidder. In declining markets like the one South Florida is currently experiencing, banks typically end up bidding on their own properties to avoid low sales prices. Buying a home at this poing of the foreclosure process often offers challenges with possible outstanding liens and not knowing very much about the property's condition.
~REO PROPERTIES When a property does not sell at auction, it becomes a "real estate owned" property. Because lenders are not in the business of owning homes, they are motivated to sell their REO properties. Although discounted, lenders will still try to minimize their losses by keeping in line with current market values for these properties. The risks involved in buying a home at auction can sometimes be avoided and you are able to inspect the property before buying. When buying REO properties, be on the look out for lender addendums and contracts. These bank contracts almost always supersede any other contracts signed and lean heavily towards lender protection. Please make sure that you have read over lender contracts/addendums before signing them and be sure to consult a real estate attorney if you have any doubts about the paperwork.
~Sometimes banks choose to send their REO properties to auction again after they have been an asset for some time. These auctions are not handled by the county cleark but ARE open to the public. This second auction presents some of the same challenges to buyers as buying on the courthouse steps. It is tempting to let a property you have had your eye on go to auction in the hopes that you get the lowest price possible. Remember, if you have your eye on it, someone else probably has too!
We keep an eye out for great deals on foreclosures in Miami-Dade and Broward counties. Visit our Featured Properties and sort for foreclosure in the ALL TYPES field to see some great deals we have found.
- NUMBER1EXPERTS™ 
