If I had to take a guess as to what percentage of Miami-Dade County MLS listings are short sales and bank-owned properties I would guess 30% overall.* I think the percentage may be even higher in Homestead. There are communities in Homestead where 60 or 70% of the listings are distressed properties.
What do you, as a buyer, have to keep in mind when buying a short sale in Miami? First of all, you need time. If you’re in a rush and want to close in 30 days on a property, short sales are not for you. It can take a bank 3-4 weeks just to let you know that they have not accepted your offer and you may submit a higher one if you please, thank-you-very-much.
Another thing to keep in mind is that banks will often have the listing agents ask for “highest and best offers” from all prospective buyers whenever there are multiple offers on a property. So if you make an offer on a short sale, you may just have your agent call you and let you know that the bank wants your “highest and best offer.” No, the bank is not playing games with you to try and get more money from you. Yes, they want as much money as they can get for the property. So why don’t they just counter offer? It’s very simple…if the bank has 3 offers on the table they cannot counter-offer to all 3 because if all 3 prospective buyers were to accept the counter offer the bank would now be legally bound to sell one property to three different parties. They avoid this by just asking for everyone’s “highest and best offer.” Look deep within your heart (or your financial statement) and give your highest and best offer to begin with. I’ve seen buyers lose out on great properties over $2,000. Shame.
Keep in mind that even if you offer the listed price, you may not have your offer approved by the bank. Why is this? Because often banks will not set an “approved price” on a short sale. They will simply say to the distressed homeowner “in order for us to consider a short sale you have to bring us a contract.” Yes, this seems like a total waste of time and it can be for the poor buyer who presents the very first offer the bank has looked at. If the property is listed at $160,000 and a buyer offers the full amount only to have the bank get back to them a month later and say, “sorry, we won’t sell for less than $185,000,” I wouldn’t blame a buyer for thinking “well, why the heck didn’t you just set that price to begin with and list it as such?”
So how can you get around this? Have a knowledgeable agent on your side. Real estate agents working for buyers are usually paid by the seller, so a buyer has nothing to lose and everything to gain by using one. An agent worth her salt will inquire as to whether a list price has been approved by the bank (rare but it happens on occasion). If a list price has not been approved, she can pull comparables and come up with a number she thinks the bank may be willing to accept. There is no set formula for this. It has to do with inventory in the area, sales prices, list prices, how quickly the inventory is moving, how long the property has been listed and the list price history and more. The amount that is owed to the bank may or may not come into play but an agent can usually look up the mortgage amount and take this into consideration as well.
Another thing to keep in mind is that many agents do not want to work with short sales. The extra time involved puts a damper on things, yes, but this isn’t the reason they shy away from them. They sometimes stay away from short sales because they have no guarantee that they will even be paid for their efforts. You see, the same way that a bank has to approve the sales price, they also have to approve the commission paid to the real estate agents. Most banks know full well that there will more than likely be two real estate offices involved and have calculated the agent’s commission into the bottom line. But this isn’t always the case. I have heard of cases where agents who worked hard to bring a qualified buyer had to share a very tiny commission with the listing agent. So ask your agent up front if they are willing to work with short sales.
Remembering that the stronger your offer, the better your chances are of getting it approved, will serve you well. An offer is strong based on many factors, not just the sales price: the amount of your good-faith-deposit; the amount you are looking to finance; are you pre-approved?; how soon you are willing to close; the repair limit on your offer, if any; inspection periods; if you’re asking for seller concessions, etc. Again, an experienced and knowledgeable agent can help you structure the strongest offer possible.
Some short sales may require different contracts be used. This isn’t always the case. It’s actually the exception, not the rule. Whereas after a bank has actually acquired a property by means of a foreclosure and the sale is no longer a short sale but an REO sale (Real Estate Owned) chances are that they will require the use of certain contracts and addenda. Why does this matter? If the use of particular documents are required, your agent may not be familiar with them. I always suggest that a real estate attorney be used, but when unfamiliar documents are required, even more so.
A final word of caution, just because a property is being short-sold, doesn’t mean that the price is a bargain. Remember that the bank is short selling simply because the market value has gone down. So if they are owed $250,000 but a property is now worth only $200,000 paying a bank $200,000 is no better bargain than paying a regular seller $200,000 for a similar property. In fact, dealing with a regular seller may be best because the lender’s approval isn’t required in the mix. Having said that, I have to state that I have seen some incredible bargains on short sale homes, particularly in the Homestead area. So again, ask your agent to “pull the numbers” for you and help you determine if a list price is a good deal or not.
If you have any questions regarding short sale homes available in Miami-Dade county, please feel free to get in touch with me.
*this is only a guess on my part, based on my daily use of the MLS and the high number of distressed properties I see listed. I have not done a tally of distressed properties in the local MLS.
Leave a Reply
- Palmetto Bay
- South Miami
- Coral Gables
- The Redland
- Cutler Bay
- Southwest Dade
- For Sellers
- For Buyers
- Random Thoughts
- Pinecrest FL Real Estate
- Palmetto Bay Homes
- Miami Short Sales
- Miami Home Inspections
- Miami Home Mortgages
- Miami Printed Ribbon Favors
- My Active Rain Blog
- Central OR Blog
- Living In So Cal
- Tampa Real Estate