If you are thinking about taking advantage of today’s incredible prices in the South Florida real estate market you should know the difference between a Forelcosure & a Short Sale. A foreclosure is when a borrower has defaulted on their mortgage and the bank has taken the property back. The bank really does not want to be a property owner, they want to liquidate the property for cash. They hire realtors and appraisers to put a fair market price on the property that they feel will sell the property in 90 days or less. The best deals sell fast and usually for more money than the asking price because they are “energy” priced to generate activity. The prices listed are real, if there are no competing offers the property can be purchased at the full asking price.
A Short Sale is different. The borrower may or may not be in default with the mortgage. The “REALTOR” or “SELLER” chooses the asking price & may or may not be anywhere near fair market value. The Seller usually does not care about the price because the buyer will need to get their lender to approve the sale and forgive the borrower of the difference between the sales price & the outstanding mortgage amount. Many times the “ASKING” price is so ridiculously low that the Borrower’s Lender will never approve it. In other words, even if a Buyer offers FULL PRICE on a short sale, there is no guarantee that the Buyer will aquire the property. Another difference, the Borrower’s lender will not pay back taxes or Ossociation fees or Maintenance fees that are delinquent. That falls upon the buyer to pay those amounts or pay a higher sales price to accomodate the outstanding amounts.
What the general public sees, and what makes our jobs as realtors difficult, is the incredibly rediculous asking price that some of the Short Sales are using to generate activity on Realtor.com, Zillow.com, etc. The general public does not see that the bank counters with an offer that may be MUCH higher than the asking price & that the property actually closed at a price that may be 200% over asking price or more. I have seen homes asking $265,000 actually close at $430,000. The general public continues believing that the property sold at $265,000 when in reality, it sold at $430,000. That is difficult to explain to a buyer that wants to buy for 50 cents on the dollar. They just do not believe or understand the circumstances.
There are other differences as well but I will keep this short for today. Keep watching for additional tips.