ABC's of Buying Florida Real Estate




Considering Buying a Home via a "Short Sale"

  For starters, let's be clear about what a SHORT SALE is. A short sale is the sale of real estate property in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot afford to make the mortgage payments, so the mortgage holder decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale because it allows them both to avoid foreclosure which involves hefty fees for the bank and poorer credit rating for the borrowers. It may allow allow the mortgage holder to get the property off its books without incurring large on-going costs of maintaining the property until the lengthy foreclosure process can be completed. A short sale does not, however, necessarily release the borrower from the obligation to pay the remaining balance of the loan at some point.

  A well-known ex-Realtor and real estate website designer, BerStan Web Creations says, "Short sales are very different from a more normal real estate transaction in a number of ways. One of those ways is that you are not dealing with just the seller of the property; you're going to be dealing with the mortgage holder on that property as well and their goals may be much different form yours."

  So, think carefully before you decide to go looking for a "short sale" for your home purchase. This type of purchase transaction is neither quick no simple. Frequently, the mortgage holder will stall for months before accepting or even countering a short sale offer. Short sales generally take at least 90 days to close, sometimes much longer than that. Many times they never do close and the mortgage holder bypasses the short sale path and goes right to a foreclosure.

  When you see a short sale listing on the market it will normally have a very attractive price. Short sales are priced low for a reason. many people know the hassles of short sales and generally shy away from them. Knowing this, the listing agent and seller price the home at a sometimes unbelievably low price. This low price has generally not been approved in advance by the mortgage holder, and instead is usually a “teaser price” in order to garner multiple offers. The mortgage holder will wait a period of time and will usually start countering any offers received, including those at the full listed price, at a number much closer to the amount of the mortgage balance actually due. As mentioned above, even offering the full asking price or slightly more than the price you and/or your realtor saw in the MLS will not guarantee that the mortgage holder will accept the offer.

  Some short sales are better than others. There are indicators of how likely you are to be successful

  • Is the seller qualified to perform a short sale? Only a person facing financial pressure is allowed to pursue a short sale. - usually a job loss, prolonged sickness or disability or other significant financial exposure. mortgage holders will not allow a short sale just because an investor bought a property that has lost value. They look for genuine hardship to consider working with the seller at all.
  • What is the seller's situation? You need to understand that if the home is still occupied by the owner, they have little interest in taking proper care of the property. They have no reason to care what condition the home is in. In general, unoccupied properties are preferable short sale targets. At least you know there's no one living in the home who may choose to trash (or at least not take proper care of) the property between now and when the mortgage holder may decide to accept your offer.
  • Has the listing agent contacted the bank and obtained a short sale package? The bank will let it be known quite early if they are willing to proceed with a short sale. Ask the listing Realtor to show you evidence that the mortgage holder is willing to facilitate such a sale before going further.
  • How many mortgages are there on the property? Find out if there is just one or multiple mortgages. A property with one mortgage has a much better chance at closing than one with multiple mortgages where the mortgage holders have all got to agree on how to divide up the proceeds This frequently is the reason a short sale falls through... the first mortgage holder refuses to share any of the proceeds with a second holder

  With all the caveats of short sales, only buyers who are very patient with no firm time line on purchasing a home should probably pursue a short sale. If you need a home within the next few months or need to coordinate the purchase of the short sale home with the sale of an existing home the short sale route to buying a home is not likely to be your best option..

  A Florida Realtor who specializes in short sales can help you make the right decisions in buying a Florida home via a short sale.


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