Tag Archives: Short sales

What documents are needed to short sell my Miami Beach condo ?

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A little addition to my last post about short sales vs foreclosures

I want to give you more details on what is required from the seller’s side when trying to conduct a short sale transaction.

As indicated in the previous post, there needs to be a reason (i.e. “hardship”) that caused your situation to change in a manner that no longer allows you to pay your mortgage. Examples for hardship situations are loss of employment, loss of an income earner in the family, etc.

On top of that you need to be able to document your financial situation. I have put together a package of forms that I require all sellers in short sale situations require to fill out before listing any of their miami beach condos. If you are interested in more details, you can see the short sale forms here

Foreclosure vs Short Sale from a seller’s perspective…

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Here’s a little post about conducting a short sale from a seller’s perspective.

Owners of distressed South Beach condos ask me all the time why they should be conducting short sales instead of just letting their troubled asset (or should we call it liability) go into foreclosure ?

First of all, I want to make it very clear, that I am in no way trying to encourage people from walking away from an “investment gone bad” even though they can afford to keep paying their mortgage. As a matter of fact, I believe that people simply changing their mind about owning Miami Beach condos and thus walking away, are a large contributor to the current real estate downturn.

Assuming you are somebody that is in legitimate trouble and really can not afford to keep paying your mortgage on your Miami Beach condo, a short sale is an definitely worth some consideration.

Yes there are other options (e.g. forbearance, loan modifications, etc.) however I am only talking about the difference between short sales and foreclosures.

Simply put, both options have negative impact on your credit rating, etc., however short sales tend to have a much less negative impact than foreclosures.

Click here for a chart, showing the ramifications of a foreclosure vs a short sale (provided by CDPE).

As you can see, a short sale is what I call the “lesser evil”, therefore if you are experiencing some kind of hardship and are thinking of just walking away from your Miami Beach condo, please consider all your options and if you decide that foreclosure is the only one, talk to a qualified Realtor about the possibility of short selling your unit.

Please keep checking my blog for further details on what you need to know about short selling your Miami Beach condo.

Why short sales might be your best option…

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I wanted to add one thought to yesterday’s blog about short sales.

Even though it seems like there are a lot of negative factors that need to be considered when getting into a short sale transaction, I do believe that they might be your BEST OPTION when trying to score a great deal on a South Beach condo.

You might think I’m out of my mind to tell you this, after stating that the short sale process is generally long, requires a lot of patience and after all is said and done, there is no guarantee that your offer will actually go through.

Well, while that is all true, there is one big advantage in that truth. Many buyers (as well as their agents), do not want to deal with short sales for these exact reasons. That means that there are plenty of potentially great deals out there, that few people are considering. NO or LITTLE COMPETITION is your big advantage here. Something that can’t be said for well priced foreclosures.

If you need a place to start your search your Miami Beach condos, you can use the property search on my website.

De-mystifying short sales and foreclosures

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List of Miami Beach foreclosures

By now you’ve definitely heard a lot about so called “short sales” and “foreclosures”. In my market area, which is Miami Beach, Florida,roughly 25% of all Miami Beach condos that are being sold are either short sales or foreclosures. In some other markets, this number could be as high as 75-80%.

In either case, the percentage is high enough that these forms of “non-traditional” transactions are certainly worth a closer look if you are in the marketto buy (or possibly even sell) a property anywhere in the US.

What is the difference between a short sale and a foreclosure ?

Simply put, a property that has been foreclosed upon, has been taken away from the previous owner  via a judicial process and is then owned by the financial institution that initiated the process, in other words if you don’t pay your mortgage, your mortgage company will take your property and be the legal owner of it. If you own a condo and don’t pay your association fees, your condo association can also initiate foreclosure and become the legal owner of the property.

A short sale on the other hand, is a process where a homeowner is trying to sell a property that is worth less than they currently owe (I’m sure you’ve heard the term of someone’s mortgage being “under water”). Since the lender would therefore not get paid back in full, they have to approve the transaction before the sale can be completed.

I am a buyer and want to get the best deal, should I look for a short sale or a foreclosure ?

The short answer is, look for both, as well as traditional transactions, in other words, don’t worry about the technicalities, just find the deals first ! Since there are many different scenarios that can lead to you getting a great deal. An owner doesn’t necessarily have to be in distress in order to be highly motivated to sell at a price that could be a great deal for the buyer. Chances are however, that the best deals will be found amongst short sales and foreclosures. Your agent should be able to find the best deals for you and help you with the technicalities of the transactions, no matter if it is a traditional sale or a short sale or foreclosure.

What are the benefits and disadvantages of a foreclosure vs. a short sale vs. a traditional transaction ?

Let’s start with the traditional transaction, since it’s the easiest.

Buyer makes an offer, seller accepts offer (or counters it). Once an agreement is reached, you have a valid contract and closing can happen within 1-4 weeks thereafter.

Advantages: Quick, easy and straightforward transaction

Disadvantages: You have to find a motivated seller, plus the transactions can be rather emotional, especially on the seller’s side

How about foreclosures ?

Foreclosures can be great deals, however many of them are not priced as well as most buyers might think. I’ve actually seen lots of bank owned properties that were priced way higher than comparable properties in their market area.

Let’s assume you DO find a very aggressively priced bank owned condo (or house) and are certain that you want to purchase the property. You have your agent write a contract, submit it to the listing agent, who then submits it to the bank, which will then accept it and you got yourself a great deal ! Sounds easy, right ?

Well unfortunately it’s not quite that simple. There are many professional investors out there, keeping their fingers on the pulse of the market and jumping on every great deal as soon as it comes up. A well priced foreclosure might therefore receive a dozen or more offers within hours of hitting the market (or the MLS system). In order to win the bid, you would not only have to be quick, but also offer an amount that is very close to fair market value (often significantly above list price) as well have offer favorable terms to the lender.

It is very common for a cash deal to win the bid even if a competing buyer requiring financing is willing to pay a slightly higher amount for the property.  When it comes to foreclosure deals, it is definitely a seller’s market.

Advantages: Often well priced, fairly quick answer on your offer and reasonable quick closing timeframe

Disadvantages: Bidding wars are common, hard to actually place the winning bid, terms always strongly favor the seller

Now for short sales:

Short sales are almost a hybrid between the other two transactions in that you do have a seller that needs to accept and sign your offer, but then the complete offer package (involving lots of details from the seller’s side) needs to be submitted to the lender for approval. While only about 30% of all short sales close, I believe these are the 30% that are either handled by real estate agents that are well versed in the process or by capable third party negotiators. If you have an agent that has no experience handling short sales and / or – even worse – the listing agent, has no experience, but is still trying to handle it on their own….well, good luck ! Your chances of success are probably about as high as if you asked some random person to just give you their home.

If you do have an experienced agent and the time and patience to wait for 3-6 months to get an answer on your offer, short sales are however a great way to get very good deals !

Advantages: Generally a good way to score a good deal. Competition, while still possible is usually less than on a well priced foreclosure

Disadvantages: Slow process, I repeat, SLOOOOOOW process. Don’t expect to get any feedback on your offer for at least 60-120 days. List price could be unrealistic. This is another pitfall where you need an agent that is experienced and most importantly, that you trust, as they will have to figure out the fair market value of the property. Your offer needs to be at – or very close – to fair market value, to be considered since the lender will conduct an independent appraisal and reject any offer that is too far from what they consider to be the market value of the property.

Hopefully you find this quick review helpful. If you need further details or have any questions on any of the above, don’t hesitate to comment on this post or contact me directly.In the meantime, I wish you the best of luck in your hunt for a great deal on a miami beach condo or any other type of miami real estate.



More Wealthy Default on Their Mansions – The Wealth Report – WSJ

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By Robert Frank

The sub-prime crisis has turned into the super-prime crisis.

Homeowners with mortgages of more than $1 million are now defaulting at nearly three times last year’s rate, according to a Bloomberg article.

Payments on about 12% of mortgages exceeding $1 million were 90 days or more overdue in September, up from 4.7% a year ago and well over the 7.4% default rate for U.S. mortgages as a whole. There are 114,000 home loans of more than $1 million.

“The rich aren’t as rich as they used to be,” Alex Rodriguez, a Miami real estate agent, was quoted as saying. “People have reached the point where they can’t afford the carrying expenses of a $2 million home.”

Or maybe the people who got $1 million mortgages weren’t rich to begin with and shouldn’t have gotten $1 million loans. Either way, short sales of pricey homes are becoming more common as more mansions go underwater.

“You are just starting to see the tip of the iceberg with luxury short sales,” said Adrian Heyman, owner of Property Advisors, a real estate broker in Scottsdale, Arizona. “A lot of wealthy people are upside down in their mortgages, and they just can’t afford the second or third vacation home anymore.”

The statistics suggest that for all the talk of stock-market rebounds and green shoots since early summer, the rich are still facing a cash crunch. And it shows that the wealthy – or aspirational wealthy — engaged in the same kind of leveraged-up, overbuilt lifestyle as the rest of the country.

Most importantly, it means that hopes that the rich will lead the country out of the real-estate crisis may be ill-founded. The wealthy will start buying real-estate when they stop defaulting.

Why do you think the wealthy are defaulting at such a high rate? Or are they?

via More Wealthy Default on Their Mansions – The Wealth Report – WSJ.

Short sales: Playing by the new rules

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WASHINGTON – Dec. 8, 2009 – The U.S. Treasury hopes to speed transactions under its new short sale rules, but details count, and Realtors should understand the process if they hope to avoid delays. While the new rules become effective no later than April 5, 2010, lenders have been encouraged to make them official as soon as possible.

The new rules, released Nov. 30, 2009, as the Home Affordable Foreclosure Alternatives Program (HAFA), provide financial incentives to spark short sale or deed-in-lieu (DIL) closings. The change was made to grease the wheels of a short sale transaction, giving potential buyers a shorter wait time from contract signing to lender approval of the contract. It also should make a short sale more attractive to buyers by reducing the number of problems.

The rules do not necessarily simplify the amount or complexity of short sale paperwork, however. The oversight doc, Supplemental Directive 09-09, devotes four pages out of 43 to the new short sale requirements. Real estate professionals working with short sales should review the Short Sale section of the Supplemental Directive (pages 5-9) and review the forms and letters in Exhibits A and B. 

Supplemental Direction 09-09: https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf

© 2009 Florida Realtors®