subject: Want To Buy Short Sales In Florida? [print this page] With Florida being hit so hard when the real estate bubble burst, it is no wonder that the state has so many short sales. Buying short sales in Florida can be very tempting to potential real estate buyers as they are priced much lower than other homes, but the process of buying one can be quite unclear. A short sale occurs when the owner of the home is hoping to sell it for less than he owes on his mortgage. The owner hopes that the bank is going to be okay with this and either wave the remaining amount of the mortgage or figure out some type 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 basically the middleman between the buyer and the owner's bank.
Unfortunately, thanks the massive backlog that the banks are currently faced with, it can take several months before the bank responds 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 hasn't yet approved the offer. The primary reason why it takes such a long time to hear back from the bank has to do with 2nd mortgages. These 2nd mortgages typically come in the form of home equity loans. When the real estate market was thriving and people's homes were increasing in worth these people were building equity in their home and owners could quickly secure 2nd mortgages based on this equity. Well, even though the bank that holds the 1st mortgage accepts the short sale offer and a loss on the home does not mean that the bank that has the second 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 serious about buying short sales in Florida, there are few steps you can take as the buyer to make your situation a lot less complicated.
1. The very first thing you need to do is find out exactly how many mortgages the owner has on the home. This isn't a secret. Just ask the listing agent for the information. In a nutshell: the more mortgages the owner has on the property the more difficult it will be to purchase that home.
2. Learn who is doing the negotiating with the seller's bank. Just as before, ask the listing agent for this information. Dealing with the bank is usually a lengthy and frustrating process. It will require a considerable amount of time contacting the bank, being put on hold, being transferred from one person to another, day after day after day. So ideally, the sellers have hired a lawyer who specializes in short sales to do the negotiating. However, if it is listing agent that is in charge of the negotiating then make certain to ask about their success rate.
3. As it is usually the 2nd mortgage that holds up the majority of 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 responsibility to pay on that loan then the buyer doesn't have much choice. The seller is already out of cash so he isn't going to be coming up with the cash, so if the buyer really wants the house then it is the buyer who must pay off that second loan. Therefore, it's recommended that you have some cash reserved should this situation arise.
4. Occasionally 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 option is to look towards the Realtors. If you have a Realtor who is willing to lower their percentage it may make up the difference. For example, in a traditional real estate deal the seller typically pays their agent 6% of the closing sale price with 3% of that going to buyer's agent. In a short sale scenario, it's the bank that typically pays the commission. Therefore, if the Realtors will take a cut in their commission, the bank can save several thousand dollars.
Clearly buying short sales in Florida isn't for everyone. Yet, if you are successful you may be able to get a terrific deal on a Florida home. By following the strategies previously mentioned you'll increase your odds of a successful short sale purchase while at the same time cut down the amount of frustration that comes along with buying one.
