Short sales are becoming more and more common in South Florida’s real estate market. Lenders are beginning to accept low ball offers that are as much as 20% below the original loan amount, according to an article in the Miami Herald.
In years past, the normally accepted discount for short sales was 10%.
This shows what we all know: banks are increasingly willing to dump properties short of the loan amount to avoid the costly foreclosure process and the ultimate outcome of having overpriced real estate in their portfolio.
For example, a property that was bought at the high point of the market for $500,000 with a 10% deposit of $50,000 is now theoretically available to a buyer for $360,000 – which is $90,000 less than the previous loan amount.
The foreclosure process can cost as much as $40,000 to litigate, according to the article in the Herald.
For buyers in today’s market, this presents an opportunity to capitalize during the downturn. The one drawback is the amount of patience necessary to complete a transaction. Dealing with a bank often takes months. For instance, I submitted an offer of 85% of the loan on a short sale listing for one of my clients, and I was told that we would not have an answer for as many as 90 days. That is 3 months! My client does not have the patience necessary and has since moved on. Lenders will market a property and collect offers for as many as 60 days before they determine their strategy. Patience is a huge requirement in today’s market.
The interesting thing is that sometimes sellers are willing to accept even less than a lender. These sellers do not necessarily have a loan on their property, and their strategy is to get what they can and get out fast. These people are in desperate times. Buyers who can move quickly are in luck. DDevelopers, builders, and home owners alike are selling property for as much as a 30%, or even a 40% discount. The trick is finding a knowledgeable firm that has experience in negotiating those types of discounts – to make sure you are getting a true discount and to facilitate the transaction. The good news for you is that if you are reading this article, you have found that firm, eThree Realty.
