Clealry, Florida has a lot of short sales. Buying short sales in Florida can be very tempting to potential real estate buyers as they are listed far lower than other homes, but the process of buying one can be quite complicated. A short sale occurs when the owner of the home is attempting to sell it for less than he owes on his mortgage. The owner hopes that the bank will be okay with this and either wave the remaining amount of the mortgage or work out some kind of deal to help the owner repay the remaining mortgage. Either way the final decision does rest with the bank, not the owner. The owner is essentially the middleman between the buyer and the owner's bank.
Sadly, thanks the huge backlog that the banks are currently faced with, it can take several months before the bank replies to an offer. And, what's important to understand, is that during this period the buyer and seller are actually under contract...even though the bank has not even approved the offer. The primary reason why it takes such a long time to hear back from the bank is because of 2nd mortgages. These 2nd mortgages usually are home equity loans. When the market was booming and people's homes were rising in worth people were creating equity in their home and owners could easily secure 2nd mortgages based on that equity. Well, even though the bank that holds the 1st mortgage is willing to accept the short sale offer and a loss does not mean that the bank that has the 2nd mortgage is willing to do the same. It is these 2nd mortgage loans that are the main challenge in many short sales.
So what's a buyer to do?
Well, if you are determined to buy short sales in Florida, there are a handful of steps you can take as the buyer to make your life a lot easier.
1. First thing you need to do is figure out just how many loans the owner has on the home. This isn't a secret. Simply ask the listing real estate agent for the details. In a nutshell: the more loans the owner has on the house the more challenging it's going to be to buy that home.
2. Figure out who is negotiating with the seller's bank. Once again, ask the listing real estate agent for this information. Working with the bank is usually a long and aggravating process. It takes quite a bit of time getting in touch with the bank, being put on hold, being transferred from one person to another, day after day after day. Negotiating with the bank is a time-consuming process to say the least. So preferably, the sellers have hired an attorney who is an expert in short sales to do the negotiating. However, if it is listing real estate agent that is responsible for the negotiating then make certain to question their rate of success.
3. As it is often the 2nd mortgage that holds up most short sales in Florida, it is advisable for the buyer to have some extra funds to help pay this off. For example, if the 2nd mortgage is $15,000 and the bank is not willing to let the owner out of their obligation to pay on that mortgage then the buyer does not have much choice. The seller is already out of cash so he isn't going to be coming up with the money, so if the buyer truly would like the house then it is the buyer who will have to pay off that 2nd mortgage. Therefore, it's a good idea to have some money put aside should this problem occur.
4. In some cases whether a short sale is approved or not may come down to just a few thousand dollars. Once again the owner is already broke so if the buyer is not willing to make up the difference the only other choice is to look to the real estate agents. If you have a real estate agent who is prepared to lower their fee it may make up the difference. For example, in a conventional real estate transaction the seller normally will pay their Realtor 6% of the closing sale price with 3% of that going to buyer's Realtor. In a short sale situation, it's the bank that normally pays the commission. Therefore, if the real estate agents are willing to take a cut in their commission, the bank can save several thousand dollars.
Certainly buying short sales in Florida is not for everyone. Having said that, if you are successful you may be able to find a fantastic deal on a Florida home. By following the steps previously mentioned you will increase your likelihood of a successful short sale purchase while at the same time lessen the amount of stress that occurs with buying one.
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