The Florida real estate market has been booming the past couple of years, and that growth is expected to continue into the new year. New residents and business relocations from high-tax urban areas are driving the demand. While an increasing equity scenario creates a low inventory of short sales, they will still always have a presence in any market conditions. For those looking to either relocate or purchase an investment property in Florida, buying a short sale home can be a unique opportunity.
What is a Short Sale?
Simply stated, a short sale is the sale of your home for less than what you owe on your mortgage. So, if you need to sell your home because you can no longer afford it, you might be able to enter into an agreement with your lender to sell your home to pay off your mortgage even if the sale price is less than the mortgage balance.
You might be wondering why a lender would allow for a short sale transaction. Although they are not traditional in nature, short sales can actually be beneficial to all parties involved:
- For the lender, a short sale means recovering as much as possible from the property’s sale towards the loan, while saving time and resources. Through a short sale, foreclosure is avoided which can be timely and costly in Florida, a judicial foreclosure state.
- For the distressed homeowner who can no longer afford their mortgage payments, a short sale allows them to get out of the home quickly, ease their financial burdens, and avoids the embarrassment and loss associated with a foreclosure.
- For the real estate buyer/investor, you benefit from purchasing a home that is below market value.
How to Buy a Short Sale Home
Buying a short sale home is similar to buying a traditional home sale. The process does have its own set of unique challenges, so here are some steps and tips to get you started:
- Get pre-approved for financing. Unless you intend to pay with cash, getting pre-approved for a mortgage is a must. Without financing in place, a bank/lender is likely to dismiss your offer on the spot.
- Find a home. Given the risk and complexities associated with a short sale, it is recommended to partner with a real estate agent especially if you have no prior experience. A good agent will give you access to all the short sale listings available, will identify and help you overcome any roadblocks associated with properties, and will attempt to negotiate the best deal for you.
- Making an offer. Once you find a home, you’ll want to make a competitive, realistic offer. Many buyers make the mistake of launching low-ball offers given the selling circumstances, but it usually backfires. A good offer package will include information on recent sales prices, or comps, to prove your proposed offer is realistic. Banks mean business.
- Negotiate the short sale and contingencies. It is important to prepare a list of contingencies, or conditions that need to be met before the home sale will go through. For example, you might make your offer contingent on the length of time you’re willing to wait for short sale approval, the amount you will pay in closing costs, or the results of a home inspection. Although short sales homes are usually sold “as is,” an inspection can uncover deal breaker issues for the buyer.
Although it is not mandatory to hire an attorney to negotiate a short sale, it is highly advisable due to the untraditional nature of the process. The other side of the transaction is a lender or bank; they are experienced and they mean business. You will want to make sure your offer includes the appropriate contingencies and protects you throughout the sales process.
The Law Office of Donna Hearne-Gousse has years of experience and success regarding mortgage modifications and short sales. We serve the South Florida market, most notably Palm Beach County. We welcome you to contact us to discuss your situation and negotiate on your behalf.
The Law Office of Donna Hearne-Gousse
Royal Palm Beach, FL