People always ask me certain things. 1) How do I find/can I get a good deal in a foreclosure? 2) This house (that is a short sale) is such a good deal. Why and how low of an offer can I make? 3) What's the differences between a foreclosure and a short sale? Let's take them one at a time. 1) You can get a great deal on a foreclosure. Just remember a couple of things. First, the bank isn't stupid and they aren't going to give a good property away. The bank has priced the property at the list price for a reason. If the price seems too good to be true, there's a reason. The great majority of foreclosures and other REOs are listed with real estate agents. Prices on real estate on the average have dropped (in Lee and Collier Counties) about 65% fro the peak. In that respect everything is a great deal. The bank is going to have at least one, maybe two valuations done on the property before they put it on the market. That means they know what the property is worth in today's market and they aren't going to lose any more money than they already have. The price is going to be at market. With homes (especially those under $250,000) selling so well ( on the average almost 4% over list price in Lee County) the banks don't have to discount a foreclosure in order to move it. Still, you can get amazing properties in today's market. I just saw a house for $90,000. It has over 2300 Square Feet, 1/2 acre lot, well landscaped, clean and nice inside. I am also closing a property in the SW quadrant of Cape Coral Monday that has been renovated, with pool listed for $99,900. The deals are there. 2) There are lots of short sales available in SW Florida. Just so no one isn't confused, SW Florida would include such cities as Naples, Marco Island, Vanderbilt Beach areas, Bonita Springs, Estero, Fort Myers, Fort Myers Beach, North Fort Myers, Cape Coral, etc. This isn't the Miami area. A short sale is where the owner of the house is selling it for less than what he/she owes on it. The owner has to be at least thirty days late on the mortgage and is not allowed to make any money off the property. So, the owner doesn't care what the contract price is as long as the bank agrees to take the deal. The listing agent sets the price and will reduce it until he/she gets an offer. The problem with the short sale is the bank. Simply put, the bigger the bank, the more mortgages on a property, the longer and more torturous the process will be. If you are going to buy a short sale you need three things: A huge amount of patience, no time constraints and cash or really solid credit. Sometimes you can actually get a better deal on a short sale than a foreclosure. However, it is rarely worth it for primary or second home buyers. Now, starting in April, there is a new ruling out that will force some banks to give an answer in 10 days. If it works, that will be amazing. I have seen some banks take almost a year to respond to a short sale contract. I have heard of worse. This new ruling has limitations, though. For instance, it will only apply to those banks that took TARP money. Many of the big banks like BofA/Countrywide/Taylor Bean and Chase/WAMU will be included. Still you won't be able to depend on it. Especially if there is two loans on the property. As far as offers go, most banks will not accept an offer for less then 10% under market price. Most of the time they want it even closer. Short sales generally sell about 3-5% under list. 3) The differences between a short sale and a foreclosure is not so much in the pricing, it's in the closing of the contract. While you don't usually get in a bidding war like you do with a good foreclosure property, getting a short sale contract to close can be exceptionally difficult. If you get an acceptance on a foreclosure, it is generally within 3-14 days and you will probably be able to close as fast as you want/can. There are sometimes picky bank addendum with a foreclosure, but there are short sale addendum as well. While there are rare exceptions, a short sale will take at least 3-4 months just to get an answer. Then the bank will often try to force a quick close date. Because the Seller isn't one person or entity, there are other factors in a short sale. HOA/management companies often will stop or try to stop a sale until any delinquent dues are paid. Sometimes the bank will pay part, but most of the time they will not pay them off and then either the buyer or the seller has to bring the rest of the amount due to the closing table. If there is a second mortgage on the property sometimes the bank won't release the Seller from liability. If the Seller is going to be on the hook for the amount of the second, they often will not go through with the sale. Sometimes the second has made a claim with the PMI company and the PMI company won't sign off on the sale until they get paid off. Assessments from government entities can be a problem. All sorts of things come up in a short sale. A foreclosure, once you actually succeed in getting an accepted offer, is generally simple and goes to closing much like a regular transaction. If you have any more questions you can contact me through this website.
