Miami Real Estate by Land and Sea

If you are in the market to purchase real estate in Miami, Fl, chances are you have looked at some properties that are Short Sales.  A sale is "short" when the market value of the property no longer covers the loan the owner has on the property AND the owner has a bona fide financial hardship which will not allow him/her to bring the difference betweeen the sale price and the mortgage balance to the closing table.  The lender(s) must agree to the sale. 

For the lender to agree to the sale, they must analyze both the value of the property (in today's market) and the situation of the owner.  They must be convinced that it is better financially for them to allow the property to sell for less (causing them to take a loss) rather than foreclose on the home and trying to sell it themselves after taking possession.  They rely on third party neutral real estate professionals to provide a BPO (broker price opinion) in order to make their decision.

IF they feel the price is a fair one, or if they have been able to negotiate a price with the buyer that works for them, they STILL must be convinced that the seller does not have the funds to make up the difference.  For example, if the morgage on the home is $400,000 and the market value is $350,000, the lender may "net" $325,000 after all taxes, fees, commission etc. are paid - resulting in a net loss of $75,000.  The seller must prove that he/she does not have the $75,000 via a "short sale package".  The package is lenghty and includes past taxes, bank statements, budgets, pay stubs, etc. 

The process of determining an acceptable value and proving the financial hardship can take anywhere from 2-5 months and can be very very frustrating for a buyer.  They don't know if their offer is going to be accepted or if someone will outbid them while they wait.

This is where the "Approved Short Sale" comes in... the seller, listing realtor and lender have already completed the leg-work. (This is normally due to an offer that was submitted, triggered the analysis process and fell through - ie the buyer became impatient, wouldn't come up to the lender's price, etc. but stil allowed the listing agent to know what the lender would release the property for).  The price is APPROVED ther seller is APPROVED and the sale (at the APPROVED price) can go through as if it were a normal sale.  If a buyer makes an offer on an approved short sale for the APPROVED amount, they have a very good chance of going right to contract, and closing.  No long wait for approvals, no chance of being over-bid (assuming their offer is the one accepted) and a quick close.  For buyers who don't have patience or time, this is especially valuable.

NOTE:  Since the sale is approved at that amount, if the buyer offers any less, the waiting process may start all over while the new offer is analyzed. 

if you are looking to buy real estate in Miami or if you may have a property you need to sell which you believe requires short sale approval, do not hesitate to conact me at 786-252-4970 or janie@janiecoffey.com

Janie

Many (most) buyers today are really looking for a "deal" and often equate the term "short sale" with "deal". This may be the case, but then again, it may not. If you are a buyer anticipate making an offer to purchase a property that will be a short sale, the best way to do so is with eyes wide open as to what you may expect. Here are a few things to consider before going forward with an offer on a short sale....

1. Short sales take notoriously long, easily several weeks to several months depending on the bank that holds the mortgage, the listing agent and the particular circumstances. You may not hear anything for weeks at a time, which can be quite frustrating as you may start to feel like your life is on hold while waiting to see if your offer is accepted.

2. Unlike a normal purchase and sale, multiple offers can be submitted to the bank so even if you were one of the first offers in, another stronger offer might come in and the bank may decide to go with that offer and never even counter back to you. Many deals we are seeing have multiple offers, one recently had 25!!! This means you need to go in with your highest and best offer from the start, not expecting wiggle room in counter-offer negotiations.

3. Much of your fate will depend on the follow-up and competency of the listing agent. You will neither know, nor control either of these. Short sales are exceedingly frustrating for listing agents who have to work much harder and for often lower commissions than normal sales. If they are not diligent, follow up repeatedly, have their documents in order, etc. your chances of your offer being accepted may be hindered.

4. Surprises have a tendancy to pop up at the last minute that may kill the deal. Unlike normal sales where the seller is normally walking away with some cash, the sellers in short sales have no cash and therefore cannot throw money to settle something, even something small. The banks are often also not willing to kick in the extra dough. Minor liens on the property and other issues and judgements might not surface until late in the process with no lifesaver to remove them, keeping you from getting a property with clear title.

5. There are very good banks to deal with processing short sales that are organized, informed and well staffed. There are also some really horrible banks that are understaffed, bounce you around, loose documents and worse. As in item #3 above, you will neither be able to know nor control this and it may also be very frustrating.

Rememer, a short sale is determined by how the selling price compares to what the seller OWES, not to market value. A "deal" is how the salling price compares to MARKET VALUE! You can have a short sale that is in no way a "deal" and you can have a non-short sale that is a great deal.

A deal is all in relation to the current market value; not what the seller bought it for, not what the seller owes, nor what other properties are LISTED for on the market. A deal is how the property compares to recently SOLD similar properites and if you use that as your guide, with a short sale or with a "normal" sale, you will do well. Remember to work with a knowledgeable and informed Realtor to help you find and negotiate your purchase!

Janie Coffey, Broker, GRI, TRC

Papillon Real Estate, LLC

786-252-4970

janie@janiecoffey.com

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