The Central Florida REBlog

A short sale occurs when the purchase price is not high enough to pay off the mortgage(s) and cover the other costs of sale including taxes, closing fees, commission, title insurance, etc. Sometimes the purchase price isn’t even enough to pay off the first mortgage, never mind a second mortgage and all that other stuff.

Great! Sounds like a bargain. I want to buy a short sale property.

It can be a bargain, and short sales do go through to completion, but here’s the rest of the story. You’ll need lots of patience and lots of time.

How does the short sale process work?

As a home buyer, you may see the words ‘short sale’ in the property listing description. Other clues that it’s likely to be a short sale are phrases like ‘pre-foreclosure’, ‘in foreclosure’, or ‘3rd party approval required.’ So, your Realtor arranges a showing of the property, you see it, and you decide to make an offer. The Realtor will prepare the offer on a sale and purchase contract form showing you as the buyer; the sellers will be shown as the people whose names are on the deed.

The sellers will likely sign just about any offer that comes in (as long as you don’t ask for the family pet to be included in the sale). They just want to keep the word “Foreclosure” off their credit report. While the seller is technically the person or couple whose names are on the deed they don’t have the final say about the sales price and other terms of the contract. This is where that ‘3rd party approval’ thing comes in. Usually the mortgage company holding the mortgage note must approve the sale. Even if the holder of the first mortgage says ‘yes’, the holder of a second mortgage, if there is one, can put a stop to the whole thing.

The listing agent will submit the offer to the mortgage company for approval. Specifically, the offer will go to someone in the “Loss Mitigation Department” whose title is something like “asset manager” or “negotiator.” Here’s where your patience will be tried. After some indeterminate period of time (it could be weeks), they will decide if your offer is acceptable or not. If they accept your offer, there will be another indeterminate period of time (days or weeks?) before you get a signed contract back so your loan officer can start your loan processing.

OK, I’m the patient type. Let’s get going.

Some short sale properties are listed in the MLS at a price the mortgage company has already approved, and if your offer is at that price, your wait will probably be shorter (but not necessarily short). Most short sales do not fall into this category. Most of the time, the mortgage company has no idea what asking price is on the listing, and it may be nowhere near the price they will actually agree to. You may get a counter offer from the mortgage company that is above the “asking price” and nowhere near the price you are willing to pay. On the other hand the counter offer may be reasonable, or they might accept your original offer, and you’ve just scored a bargain.

It sounds like a short sale is kind of a crap shoot.

You could say that.

How to Sell Your House in a Tough Market

My last post was full of good news for buyers, but sellers may find nothing to be happy about in it.  The real news for sellers is that houses are still selling in Central Florida, but at a more "normal" pace (normal being defined as the way things were before the market went crazy 2003-2005). 

If you can see your house as a buyer would see it, you have a good chance of selling it. Since you can't change the location of your real estate, we'll ignore the three most important real estate sales influencers (location, location, and location) and focus on the things you can do something about.

1. Be realistic about pricing. Most people have a very difficult time looking at their home objectively, and will see their house as being worth more (and perhaps significantly more) than the buying public does. Never forget that you are in competition with all the other houses for sale out there when setting your asking price. Those who can say, "I'm selling my house" will have a head start on those who say, "I'm selling my home." The memories you have invested in your home are no doubt priceless, but don't expect a buyer to pay you for them.

2. Honestly evaluate the condition of you house. Every flaw in your home is something the buyers will either have to live with or spend time and money to fix. If you have the time/money/energy to fix a flaw, do it. It may not increase the sales price, but it will surely affect how quickly the house sells.  The condition of the house, and especially it's flaws, should be reflected in the price.

3. Make it available for showing.  As exhausting as it is, you pretty much have to keep your house near show-ready all the time, and you have to be willing to be inconvenienced and change your plans occasionally to accommodate home buyers.  There are lots of other houses out there for buyers to look at; don't miss an opportunity to sell them yours.

If you trust your Realtor, you should trust the advice they give you relating to the above three items.

See? Now that wasn't so bad, was it?

Should you buy a home now, or stay on the sidelines a while longer?

Let's take a look at the current real estate market here in Osceola County (which is fairly representative of the rest of Central Florida). First, a little history:  In the summer of 2005, in what was a raging seller's market, there was a 1.5 to 2 month supply of single family homes on the market. A balanced market (that is, balanced between buyers and sellers) is generally considered to have a six month supply. 

As I write this, the county has more than 4,600 single family homes on the market. In the last 30 days, around 220 homes sold.  That indicates a 20+ month supply. Put another way, if the last month is a reliable indicator, fewer than 5% of the homes on the market will likely sell in the next month. (The foregoing analysis does not include condos, townhouses, and mobile homes. If you're a condo, townhome, or villa buyer, you're REALLY going to love this:  there's a 30+ month supply.)

In 2005, sellers had all the power.  Now, buyers are firmly in charge with great, bulging muscles.

Mortgage rates are still near historic lows, and there are lots of home choices out there.

What are you waiting for?  Get out there and flex those huge biceps!

It's a fact: homes near good schools cost more than homes near not-so-good ones.  If you have children, you want them to be in the best possible schools.

What if you don't have kids in school? Should you check out the schools in the area before you buy a home? If your plan is to never sell the house, you can probably get more house for the money in an area of not-so-good schools. 

Never say never.  Since your home's resale value will be influenced by the schools, it's wise to evaluate the schools going in. 

Want to increase the value of your house?  Improve the nearby schools.