Every buyer wants a "deal" right now and I don't blame them! If you are buying in this wildly crazy market in Miami-Dade, you need to feel comfortable about your purchase. Deals can most definitely be had, often in the form of a short sale purchase or a true foreclosure.
Here is Miami-Dade County we have a four year supply of houses (compared to a 5-6 month "normal" supply) and at least 1/3 of them are "distressed sales" (foreclosure, pre-foreclosure, etc.). The properties that are actually closing however, are 2 to 1 distressed vs "normal sale conditions". This means most buyers are going for the blue light specials.
Buying a pre-foreclosure or a foreclosure can be very different, both from "normal" sale and from each other. Let's take a quick look how each one could be from the eyes of the buyer...
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.
Lenders are often letting short sale homes go from 10-20% less than their CURRENT market value. They do not base their decision on the original purchase price of the home or on the balance of the loan(s), but on what they would be able to sell the home for should they foreclose on it. It is a business decision for them if they want to take a loss by letting the seller sell it for less or if they want to foreclose and try and sell it themselves.
The downside as many know to buying a short sales take a long time to negotiate. A typical time-frame would be 4-8 weeks from the offer's submission before you hear back from the bank and another 4-8 weeks to negotiate back and forth with the bank and then another 4-8 weeks to close. So a short sale could easily take 3-6 months from start to finish. 2 months would be really really fast!
Short sales are great for people who have patience, do not get too emotionally tied up in the deal and might not want to deal with repair work in their new property. Short sales are often best for new owner-occupants as you normally won't be able to get as steep of a discount as you might need if you are an investor.
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).
Foreclosures are great for people with larger down payments so the condition of the home is less important to the new buyer's lender and for people who have the funds to make the needed repairs. They are also better for people who have little time or patience. They are also ideal for investors due to the better discounts. Since there is no owner involved in the sale other than the bank that owns it, there is no "owner pride" involved in the deal either, it's just straight business.
Of course every property, seller and buyer is different but this might help as a quick guide as to what type of discounted property is most likely going to work for you.
Buying and selling real estate in Miami-Dade, especially pre-foreclosure, short sale and foreclosure properties, has it's challenges but can be very rewarding. If you are planning to buy or sell a property anytime soon, give us a call and we'll see what the best solution for you will be. If you know someone who needs to sell a short sale, we'd love to hear from them as well! Janie 786-252-4970