Foreclosure in Miami>Question Details

Mike, Home Buyer in Miami, FL

What kind of hits are banks taking now in the Miami area?

Asked by Mike, Miami, FL Fri Jun 6, 2008

I am in the market to buy right now, and I see tons of foreclosures and bank owned properties. I have found one that is bank owned and going to be auctioned soon. Nobody has put in an offer so far, and I've already done my inspection, and have decided to proceed with buying this home. It needs work... probably a good $50k. I found out what the bank owns it for, by talking with the neighbors, and I'm wondering now what type of offer to make. Are banks taking hits on properties they own that are greater than say... 25%.. on average? Based on anyone's experience in the industry, as a buyer, or a realtor, or a seller, on average, what kind of percentages would you say the banks are losing on properties today? And...what kind of percentages do you think they will lose tomorrow?

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Hi Mike, there may be no other offers now but there may be some soon especially if it's priced competitiveley. If it is the bank will likeley get multiple offers, and if they see offers coming in they will not be as flexible. Prices have come down and are likeley depreciating further, BUT... if you are planning on being in the home for a long time, say 5-10 years, you'll likeley own through the "bottom" and eventual rebound. If it's the house for you make your best offer! Since you're buying now as opposed to a year ago, you've already saved a lot! Congrats! it's a great time to buy!
2 votes Thank Flag Link Thu Jun 12, 2008
Mike ,
What ever they are losing now will pale by comparison to what they will be losing in several months when the real estate market becomes truly flooded with foreclosures. These foreclosures will create the direction for pricing.
If your timeline is now....use this information to negotiate a better deal.......or wait a little while, for the banks to see the light.

Good luck
2 votes Thank Flag Link Sat Jun 7, 2008
Hi Mike,
It really depends on the bank. Some have literally gone out of business, others, ones with lots of resources and financial stabilitiy, are healthy and are absorbing the business the lesser lenders have left behind.
Banks that have a large inventory of foreclosures are moving a surprising amount of them by pricing them competitively. In Homestead, for example, many of the low-priced foreclosure listings are flying off the market as fast as they come on.
So don't be duped into thinking you can sit back and wait forever--the key is to identify the TYPE of property you want, what you want it for, and then do some good comparison shopping.
Many buyers I have spoken with are sitting back until "prices come down further"--and they might, but in the interim two things can happen 1) the dream home that really fits their needs goes under contract to someone else, and 2) interest rates come back up, and they lose whatever discount they thought they were getting on the home in their now higher mortgage.
2 votes Thank Flag Link Sat Jun 7, 2008
Mike - depends on the area, the price difference with the market......I wish there was a sure formula and a percentage, but that's not the case. It has to do with their loss and how long it's been on the market. Make an offer......if it's too low and someone else comes in, be willing to loose the property.

The lower you come, the stronger the other terms in your offer have to be - financing, closing date, escrow amounts, etc.
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2 votes Thank Flag Link Fri Jun 6, 2008
The previous answers are pretty clear. It depends on the unique situation. The sale often comes down to supply and demand. If you are working with an agent and are going to submit an offer before it goes to auctions I have a suggestion that I find helps. Have the agent do a complete CMA on the property and submit that along with your offer. Make sure the agents include as much data about the current available listings in the area as these are often the lowest figures. Do not assume that the bank / seller is aware of the market conditions in the neighborhood. Show them. Make them understand the rational for your offer. I do this with all my short sale and foreclosure offers. I find it makes a big difference. In fact, just yesterday Eastern Financial called to discuss the sale of one of my short sale listings in North Miami Beach and told me how important is to submit a CMA with my offer.

Good luck with your purchase.

The Willard Realty Team.
1 vote Thank Flag Link Thu Jun 26, 2008
Depending on the area and he property I've seen some as high as 60% off the original loan value..

Banks took a calculated risk when they accepted all these subprime loans and inflated appraisals, now they will settle for less after having made zillions of dollars in interest and write off their paper loses.
1 vote Thank Flag Link Thu Jun 19, 2008
Banks are taking big losses, 25%-45% less than the mortgage balances. Lenders are getting more stringent with short-sale proceedures. Eventually lenders and appraisers will have a better grip on a realistic market value and things will stabilize.
1 vote Thank Flag Link Thu Jun 19, 2008
Hi Mike,
I work the condo market in Aventura florida and accross the east coast, and I'm seeing anything from 20% as high as 50-60%. It all depends on the bank and how large it is. The smaller the bank the smaller the hit they can take, at least with the ones I have worked with. The market at the moment is unbelievable, and as you say that property may go into auction soon. The way I see it is you don't lose anything in taking at stab at it now and if for whatever reason it doesn't work make a 2nd offer and then if it goes to auction you have another chance at it if you really want it that bad. I don't see many people going for 1 property all out since there are so many others in the market just depends how patient you are.

Good luck
0 votes Thank Flag Link Sat Jun 28, 2008
Mike, can you share the outcome? Have you placed your offer? If not, why not? If you have, how did it go?

This market is great. Buyers and even some investors are able to pick homes and take their time doing the kind of research you're doing. This is great training ground for anyone looking to buy investment property or a primary residence.

Just a few years ago, one might have lost this deal. Now, with inventories high, buyers can take their time to cherry pick. It is great you've made the decision to buy and that you are doing the due dilligence. However, to ensure you don't loose a deal, make sure to include certain people in your team.

Typically, you will need a title company or attorney, a lender, a numbers person (accountant/CPA), and a Realtor who are savyy with investment property and who can advice you on every aspect of the purchase quickly.

There is a number of ways to get involved in this type of transaction, one of which is to participate in several auctions to test the waters. However, if you have your sights on this property, have done your due dilligence and feel comfortable with the numbers, go for it.

My word of warning is to make sure you stick to your numbers. Do not let emotion take over during the auction and then attempt to justify a higher offer price at the expense of buffers or profits. Those types of emotional offers during an auction have a tendency to backfire later.

It is nearly impossible to know a bank's bottom line. But if they say "yes" to your first offer, you probably offered too much.

Hope all is going (or went) well. Your feedback would be greatly appreciated.

Meanwhile, consider that I'm a professional Realtor and a Certified Distressed Property Expert available to assist you with your next investment transaction, anytime.

Wenceslao Fernandez Jr, BS, Realtor, CDPE
Keller Williams Realty
0 votes Thank Flag Link Thu Jun 26, 2008
What exactly do you mean by hits? I have seen the banks take very little off, and I have seen them do a large discount.
Debi Quade
Carson Realty Group
0 votes Thank Flag Link Sat Jun 7, 2008
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