Home Buying in 33179>Question Details

Tom, Home Buyer in Miami, FL

How to buy a short sale and foreclosed home?

Asked by Tom, Miami, FL Wed Jan 4, 2012

Looking at California club 33179

Help the community by answering this question:


Your question of how to buy, first get a Realtor, then if you are financing get pre-approved by a lender and have a pre-approval letter in hand, if purchasing with cash have a letter of funds available from your financial institution available. One of these two letters will need to be submitted right along with your offer paperwork on any short sale and/or foreclosure property.

If you have time to wait out a short sale (I have closed them in as little as 3 weeks and as long as 8 months) then don't rule out the short sales, just find a Realtor who does not have a problem doing them, if you are more in a hurry to close 30 to 45 day then go the foreclosure route.

What it really amounts to is finding the right property for you, then determining if you want to wait the required amount of time if it is a short sale or not.

Best of Luck, there are some good buys out there!
Web Reference: http://www.TheBeachLady.com
2 votes Thank Flag Link Thu Jan 5, 2012
Foreclosures (bank owned properties that have already been foreclosed on by the lenders)

In this scenario, the lender has already foreclosed on the house and taken it back and put it back on the market. The foreclosed on house will be vacant and possibly in need or repair work such as new appliances. It might also need new fixtures and may even have been vandalized. This eliminates a certain number of buyers due to the conditions the property they are buying must be in for a bank to loan on it.

Foreclosures are often sold at a greater discount than short sales and you normally receive an answer quickly (even in a day or two).

Pre-Foreclosure (often a short sale)

In this scenario the seller still owns the house but owes is behind on their mortgage and the lender has begun foreclosure action. Normally for most pre-foreclosure in Miam-Dade the owner owes more to the lender than a buyer is willing to pay for it so they have to have a short sale approved. It is a "short sale" because the lender would have to agree to accept less than what is owed in order for the sale to close. In most, cases due to the pending foreclosure judgment, there is a time factor as they race the lender who is likely working on foreclosing on the house even though the seller is trying to sell it.

Often the owner is still living in the property, which for some buyers, can make it a bit uncomfortable. They may feel as if they are profiting off of someones misfortune. I have shown and represented many short sales and please put your mind at ease, most sellers just want to sell by this point and want to get on with their lives. They see the buyers as "saving" them from foreclosure, not taking something from them.

Since the owners are often still in the home, it is likely to be better maintained than a true foreclosure, possibly needing little repair work.

The inventory is low now, my advise is find a great realtor and focus on the areas and price range and just place an offer regardless of foreclosre or shortsale. You must work with an agent that has experience in both area. Good luck.

1 vote Thank Flag Link Wed Jan 25, 2012
Buying a Short Sale

Buying a short sale is not like buying a property in a traditional way. A short sale may have some risk but it also can be very rewarding. When you are searching for a short sale you will want to make sure you are prepared. Here are some things you will need to consider.

First of all, you need to make sure that you have enough time. It takes anywhere from 30 days to 6 months or even more to get an answer on a short sale. It really depends on many factors. It requires a proof of funds letter if paying cash or a pre-approval letter from a lender if obtaining a mortgage. The seller must approve the purchase offer before it gets submitted to the bank. The bank may come back with a counteroffer or reject your offer completely. In some instances you may not even hear back from the bank at all.

Short sales take a long time because the bank has to review it and they are back logged with many short sales and don't have enough coverage to complete them in a timely manner. The bank typically is willing to work with the seller and buyer on short sales to help avoid foreclosure. The bank can ask the buyer to pay some of the liens or HOA fees. Some lenders will only pay up to a certain dollar amount and ask the buyer to pay the remainder or there is no deal.

One of the benefits of buying a short sale is that the bank is typically willing to accept less money for the property because of the time and risk involved. So you generally are getting the home at below market value.

If you have the time to wait, a short sale is a good way to go. One thing to be sure to ask when purchasing a short sale is, "who is handling it?" Is the Realtor an experienced short sale expert? Or is the listing agent using a Short Sale company that strictly focuses on short sales? By having someone with knowledge and expertise in short sales, it will make the process go much smoother and faster.

Tammy Hayes, Realtor, Green Lion Realty, Port Charlotte, FL tammyhayesre@gmail.com
1 vote Thank Flag Link Thu Jan 5, 2012
Buying a REO/Bank Owned Property

Buying a foreclosed property can differ in many ways than other more standard transactions. All offers are contingent on financing and must be accompanied by a pre-approval letter. Some banks require a pre-approval letter from a certain lender, so be sure to read guidelines before submitting an offer. All cash offers require proof of funds with the letterhead of where the funds are being held and the buyers name listed. Actual account numbers can be blackened out, as long as buyers name is easily visible. Write your offer as seller chooses the title company as they have already started preliminary title work on these properties.

All offers must be written offers, on an As-Is contract only Some banks supply addendums in advance, and if that is the case it will be in the MLS as an attachment and should be signed and dated and submitted along with your offer. In most cases, however, the bank addendums are provided only after buyer and seller come to agreement. At that time, the bank will send their bank addendums/counter offer for buyer's signatures. Please note at this point, the bank has still not signed anything, and most likely will not sign until ALL forms have been signed by the buyer. Your offer is considered a pending contract until it is returned from the bank/seller with their final approval. In the interim, all offers that come in must be presented. When signing and initialing a bank addendum, do not alter it in any way or it will be rejected.

The usual time frame for a response to your offer is 3-5 business days, although sometimes a little sooner and occasionally a bit longer. Allow plenty of time for acceptance, and for closing the deal, 30-45 days in most cases.

If you are requesting seller concessions for buyers closing cots, pre-paids, or repairs, make sure those are requested in the written offer, as adding these things at a later date can be very difficult and most times impossible. If you are writing an offer for an FHA or VA purchase, please make sure the property will meet the standards for this type of financing. The majority of the time, repairs are not permitted prior to closing. Ask the lender if they allow the buyer to escrow their own funds for repairs.

Once you have a fully executed contract, time is of the essence. All inspections must be done in a timely manner according to the contract. Should the buyer not be accepting the conditions, written notice must be obtained prior to end of inspection period along with a signed cancellation and release form. Some banks will make earnest money non-refundable after the end of the inspection period. Read your addendums carefully.

Please note that bank owned properties closings are considered mail-aways, because the title companies that are used to close the transactions are usually located out of our general area. Some will send a mobile notary to the buyers agents office to close the transaction and then all documents are overnighted to the title company, but it is not considered officially closed until all original documents and funds are received.

A lot of foreclosures are going into multiple offer situations. Most buyers think that if they have the highest purchase price, they're going to get the property. Often this is not always the case. One of the big things they look at is the timeframe for the inspection. This is a contingency on the contract and the banks want it satisfied ASAP. Instead of the usual inspection period of 15 days
1 vote Thank Flag Link Thu Jan 5, 2012
Okay, so there are currently three units for sale in California Club.

830 NE 199 ST - $52.5K, 2 beds/2 baths Approved Short Sale, looks livable, but needs serious updating. Requiring Cash sale, Maintenance $375/mo.

905 NE 199 ST - $58K 2 beds/2 baths, unapproved, again photos imply livable but needs updating. Cash sale, listing agent requiring $1500 non-negotiable fee, Maintenance $375.

And just for humor value: 1024 NE 204 TE, $250 K, unapproved short sale, better photos, 3 beds, 2 baths.

The first price is again an APPROVED short sale.... and it's been on the market since November. Because the price is approved, it should not take the 6-9 months typical of an UNAPPROVED short sale. Their FHA approval expired and they probably can't get recertified, hence the bargain basement prices.

Send me an e-mail, and I'd be happy to get you the details, and we can schedule a time to go take a look.
1 vote Thank Flag Link Wed Jan 4, 2012
Also the asking price on a Short Sale is pure fiction until/if a lender approves the Seller and the price.

Go for a true bargain at the courthouse if you're willing to take the risk and have ALL CASH.

Otherwise don't frustrate yourself with Short Sales that may never close and also plan on all of the appliances, light fixtures and window treatments to be gone. And if the property is in an HOA or Condo you may be required to pay some of the back due fees as well. If you want to take a chance on a short sale also be careful about putting up earnest money because unless the Seller releases the deposit back to you you may have to file a court action. I've seen a seller coerce a buyer into giving up half the deposit on a short sale--even though the buyer had the legal right to cancel after 4 months.

Also another pitfall with Short Sales is the seller may move out and rent to destructive tenants with pets that may cause damage to the property. You see on a Short Sale some sellers don't really care what you want and even if the contract says they'll include the appliances, if they're gone you don't really have any leverage. At least with a bank owned property you know what you're getting upfront and normally can close within 30 days.

Good luck!
All the best,
Alma Rose Kee PA
Future Home Relty
1 vote Thank Flag Link Wed Jan 4, 2012
We advise our buyer clients to avoid short sales (pre-foreclosure), and the lengthy buying process is only one reason. Buyers negotiation leverage is reduced in these transactions and we would rather see you look at bank owned properties (post-foreclosure).
1 vote Thank Flag Link Wed Jan 4, 2012
Best way to buy is with cash or through Homepath foreclosures program financing.
Condos are not easily financeable, California Club included.

Pick a good real estate agent, get pre-approved for a Homepath financing, so you are ready.

Short sales may or may not happen.
Short sales lenders have to approve both the seller and the property.
They want to make sure that they "forgive" the seller because the seller is in deep hardship.
And - that the property is not sold below about 95% of market value.
So, when a buyer makes an offer, besides waiting for months, a lot of things can happen.
Your offer could become too low (property values go higher), the seller can find a job and become solvent (not broke any longer), the seller can choose a loan modification etc...

Foreclosures are usually a more sure way of buying.
However, when buying a condo, condo associations could have their unresolved maintenance fees argument with the foreclosure lender, which could slow down or kill the deal.
Make sure to check the property for mold and other serious issues.
Too many to handle - don't buy!

Hope this helps,

Irina Karan
Beachfront Realty, Inc.
0 votes Thank Flag Link Wed May 28, 2014

You may find this article informative as to buying short sales and foreclosures:
The 4 Forecloure Related Real Estate Opportunities

0 votes Thank Flag Link Thu Jan 5, 2012
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