Foreclosures and short sales are two different options that exist for buying real estate in today's market.
See below for a brief explanation on their differences:
Foreclosures:
Since you have been searching for foreclosures in Miami Beach, I don't need to tell you nowadays buying a bank owned property (also known as REO,
which stands for real estate owned) provides many great opportunities for buyers. You might finally be getting the deal you've been waiting for.
There are however a few differences between buying a bank owned property and buying from a regular seller:
a) With bank owned properties there is no "live" seller that you can ask any questions, so doing your due diligence
before submitting an offer is vital.
b) Banks are non emotional sellers, which means that unfortunately they do not care about the buyer's motivation or need.
There are only two things they care about, which are purchase price and conditions on your offer.
Often times a slightly lower purchase price might actually win over a higher one if the conditions are favorable
(e.g. buyer#1 offers 200k with 70% financing and 15 day inspection period, buyer #2 offers 195k all cash and no inspections,
guess who will get the property ? More than likely it will be buyer #2)
c) The contractual obligations (addendums) that the banks require a buyer to sign in order to purchase a condominium, can be very complex.
Fortunately there is no need to get intimidated, as the banks are not out to get you. As long as you stick to your contractual obligations, you have
nothing to worry about.
I do however highly recommend to get a real estate attorney involved to make sure you understand what you are signing. If you don't have one,
we can recommend several in Miami / Miami Beach.
If done properly, buying an REO or foreclosure property is a great way to buy a Miami Beach or South Beach condo. A qualified realtor will
help and guide you through this complex transaction.
Short Sales:
What is a short sale ? It is a transaction where the bank agrees to let the seller sell their property for less than the outstanding loan amount,
which means, that the bank will actually settle for a lower payoff, therefore taking a loss.
The benefit of buying short sale property is that you will potentially be able to buy a great Miami Beach condo for a great price.
There are however several disadvantages of short sale transactions:
a) Prices advertised are often not achievable. This happens because the listing agent sets an arbitrary, low price for the property in order to
attract offers and hopes to convince the bank to accept one of the offers. The bank however might have an entirely different price requirement
and therefore reject all offers.
Can this scenario be avoided ? Yes, by only working with short sales that have been pre-approved by the lender
b) The process can be slow and frustrating. It is not unheard of that banks will take 3-6 months to give ANY answer on your submitted offer,
in other words, you might submit an offer and wait several months, just to find out that is has been rejected.
Because of these issues, I do not recommend short sales for anybody that is either in a rush or has "fallen in love" with a property and "need" to have it.
Conclusion:
While there are occasions where making an offer on a short sale property is desirable of even necessary, I recommend finding a bank owned condominium instead.
This will lead to a much quicker, more transparent and less frustrating transaction. Either way though, by considering these two options, you are well on your
way to finally get a great deal on a Miami Beach or South Beach condo. As your realtor, I will of course be happy to help you with either one of these options.
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