4 Tips for Buying Short Sales in Florida



Posted: Sunday, January 16, 2011

by Adam Waxler
uKeepCommission Real Estate

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 priced far lower than other homes, but the process of purchasing one can be quite confusing. A short sale takes place when the owner of the house is trying to sell it for less than he owes on his mortgage. The owner hopes that the bank is going to be alright with this and either wave the remaining amount of the mortgage or work out some type of deal to help the owner pay off the remaining loan. Either way the ultimate decision does rest with the bank, not the owner. The owner is essentially the intermediary between the buyer and the owner’s bank.

Sadly, thanks the massive backlog which the banks are still confronted with, it can take several months before the bank responds to an offer. And, what’s critical to understand, is that during this period the buyer and seller are in fact under contract...even though the bank has not yet accepted the offer. The primary reason why it can take so long to hear back from the bank is because of second mortgages. These 2nd mortgages typically are home equity loans. When the Florida real estate makret was thriving and people’s homes were increasing in worth people were creating equity in their home and owners could very easily secure second mortgages based on this equity. Well, even though the bank that has the first mortgage accepts the short sale offer and a loss on the home doesn't mean that the bank holding the 2nd mortgage is willing to do the same. It is these second mortgage loans that are the main obstacle in most short sales.

So what’s a buyer to do?

Well, if you are serious about buying short sales in Florida, there are a handful of things you can do to make your situation a whole lot easier.

1. The very first thing you must do is find out just how many loans the owner has on the house. This isn't a secret. Merely ask the listing agent for the details. Bottom line: the more loans the owner has on the property the more difficult it will be to purchase that house.

2. Find out who is talking with the seller's bank. Once again, ask the listing real estate agent for this information. Working with the bank may be a long and frustrating process. It will require a substantial amount of time contacting the bank, being put on hold, being transferred from one person to another, every single day. Negotiating with the bank is a time-consuming process to say the least. So ideally, the sellers have hired a lawyer who specializes in short sales to do the negotiating. On the other hand, if it is listing agent that is responsible for the negotiating then make certain to inquire about their rate of success.

3. As it is usually the second mortgage that holds up the majority of short sales in Florida, it is wise for the buyer to have additional funds to help pay this off. For instance, if the 2nd mortgage is $15,000 and the bank is unwilling to let the owner out of their requirement to pay on that loan then the buyer doesn't have many options. The owner is already broke so he isn't going to be coming up with the cash, so if the buyer genuinely wants the house then it is the buyer who must pay off that second mortgage. For that reason, it's recommended that you have some cash put aside should this situation 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 out of cash so if the buyer is unable to make up the difference the only other option is to look towards the real estate agents. If you have a Realtor who is able to lower their commission it may make up the difference. For example, in a conventional real estate purchase the seller typically will pay their agent 6% of the closing selling price with 3% of that going to buyer's Realtor. In a short sale scenario, it's the bank that typically pays the commission. Therefore, if the Realtors are willing to take a cut in their commission, the bank can save thousands of dollars.

Certainly buying short sales in Florida isn't for everyone. Having said that, if you are successful you might be able to get a great deal on a Florida home. By following the strategies previously mentioned you'll increase your likelihood of a successful short sale purchase while at the same time lessen the amount of stress that comes along with buying one.

If you're interested in Sarasota homes for sale and need additional information on buying short sales in Florida, contact Tanya Waxler, Florida Licensed Broker and Owner of uKeepCommission Real Estate at 941-465-9207.
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