Foreclosures & Short Sales

Given the present state of the economy, the current 'mortgage crisis' and the recent decline of property values in the south Florida market, many homeowners are no longer able to keep up with their mortgage payments. While this is a truly unfortunate situation, it also presents some wonderful opportunities for qualified buyers. There are now plenty of great values out there, some of which can be purchased at up to 20% under current market prices -- quite a huge swing from the over-inflated prices of two or three years ago.

Many of the listings encountered in today's market are either foreclosures or pre-foreclosures (i.e, 'short sales'). But what is the difference between the two?

A pre-foreclosure -- or short sale -- is a listing where the property's value has diminished to the point of where it is now worth less than the owner owes on his or her mortgage. The owner finds themselves in a situation where they can no longer afford their mortgage payments and must sell their property, but cannot afford to make up the difference between the expected proceeds of the sale (at market price) and what they owe their bank on the mortgage. Thus, they are trying to sell the property for less than, or short of, what they owe on their mortgage. Of course, this cannot be done without their lender's approval, and it often takes many months for a lender to actually approve the short sale.

Many potential short sales are listed by the listing agent without any guarantee from the seller's lender that they'll accept a full-price offer, much less anything below that. The listing agent lists the property for sale at a price they believe to be current market value -- typically tens of thousands of dollars (if not more) below what the seller owes their lender. Even a full-priced offer (i.e, the price the seller is asking) still has to be negotiated with, and accepted by, the seller's lender. This process often takes months, and even then there's no guarantee that the seller's lender will eventually accept an offer. As such, I try to avoid getting my buyers involved with pre-foreclosure listings, unless they have the luxury of being able to wait a long period of time before receiving a response to their offer. In other words, submitting an offer on a potential short sale may very well end up being a huge waste of time. Unless the short sale is an approved short sale -- meaning that the bank has already approved the asking price -- I do not recommend wasting your time with short sales. An approved short sale means that the negotiation with the bank has already occurred, and the bank has verbally agreed to accept an offer at a certain price (usually the asking or 'list' price). Approved short sales can typically close within 30-45 days. Always find out whether the bank has already approved the short sale when inquiring about one. 

But what happens if the seller's lender does not accept a short-sale offer, while the seller continues to be in default (i.e, no longer paying their mortgage)? Most of the time, the bank will eventually take possession of the property via foreclosure. Once the foreclosure process is complete, the bank will eventually list the foreclosed property with an agent as a foreclosure sale. A foreclosure sale means that the bank is now the seller. In most cases the bank is looking to sell as quickly as possible (because they now own the property), and will oftentimes accept the first reasonable offer.

That being said, I've recently added a new feature to my website. If you check the menu on the left-hand side of this page, you will notice tabs for foreclosure listings in some of the local areas -- These tabs will link you to the most up-to-date foreclosure listings in those areas. These are all true bank-owned foreclosure listings -- not short-sale or pre-foreclosure listings (unless input incorrectly by the listing agent). Whether you're a real estate investor, or just a home buyer looking for a great deal, these listings represent the best values in the area. Feel free to peruse the listings, and do not hesitate to contact me if you're a qualified buyer interested in scheduling a showing. And if you're interested in foreclosure properties in other areas of Palm Beach County not shown above, feel free to contact me and I will personally email you all of the foreclosure listings in your desired area. I look forward to hearing from you!

Just in case you didn't know section: Both foreclosure sales and short sales are almost always 'as is', meaning that the seller will not make any necessary repairs or improvements to the property. However, the buyer will typically have a right to inspect, meaning that they can have the property inspected by a licensed inspector, and if the estimated cost of the required repairs is excessively prohibitive, the buyer has a right to cancel the contract and receive a refund of their good-faith deposit.