If 2012 is the year you finally decide to pull the trigger and invest in a home in a Florida retirement community and you are looking at re-sale homes, you might run into several short sales along the way.
Here’s the deal. Most homes in Florida today are worth less than they were 5 years ago. You probably already knew that. While most news outlets focus on the backlog of foreclosures in Florida today, they have neglected to effectively cover the fact that short sales are on the rise as banks are realizing that in many cases allowing a home to be sold for less than the amount owed is many times better for them than if the home goes all the way through the foreclosure process.
If the owner of a home you are considering bought before or just as real estate prices started to fall, and they financed a large percentage of the purchase, they likely owe the bank more money than they could sell the house for, resulting in a short sale.
While there are many articles on how to manage the short sale process from an owner/seller’s perspective, there aren’t many articles on how to navigate the purchasing process, especially as it relates to buying a short sale in Florida retirement communities, so I hope you appreciate and benefit from the advice I’m about to deliver. Follow this advice and you will be smiling the whole way through this process.
So you’ve found what you think is the home of your retirement dreams and you want to make an offer. Depending on the situation, you may or may not know going in whether a homeowner owes more than the home is worth less than their home is worth until after contract negotiations begin.
Once it becomes clear to you that this transaction will need to be a short sale, you’ll need to be prepared for the following things:
Short Sale Addendum and an “As-Is” Contract Addendum
The contract will have a short sale addendum basically letting you know that the sale will be contingent upon the owner getting short sale approval from their bank.
Most banks require the sale to be an “As-Is” sale, meaning they will not pay for any repairs needed to the home. The bank will already be losing money on this transaction due to the shortfall between the sales price and the amount owed on the loan, plus typical seller closing costs, and possibly real estate commissions if a broker is involved.
Also, most Florida retirement communities will have homeowners association dues that need to be paid, and if the homeowner is behind on their dues, the bank will have to fork over to catch up on these too.
Bottom-line: They ain’t paying for anything they don’t have to pay for.
Don’t Forget to Have an Inspection Done
But just because this may be an “As-Is” sale, as the buyer you still have the right to perform an inspection so that you know yourself what repairs may need to be made after you take possession. DO NOT NEGLECT TO DO THIS!
Have Patience
Patience is a virtue, and a requirement when dealing with a short sale. Short sales can take months to close, so if you are going to buy a home as a short sale make sure that you don’t have any specific time requirements for when you absolutely need to be in the home. The contract will typically have a “close by” date that is months away, which you can negotiate of course, but if you have the flexibility and don’t absolutely need to move in quick, this process will go better for you.
After the contract is signed by you and the seller, the hard work really begins for the seller as they will need to provide documentation to their lender and try to negotiate the approval of the short sale.
As the buyer, you are going to have to be very patient as this is rarely a fast process. Feel free to check periodically with your real estate agent or the closing agent to get an update on the status, but know that nobody will have any answers for the first few weeks (at least) while paperwork, bank statements, tax returns and more are being reviewed by the lender.
Watch Out for the Curve Balls
Something else that may occur is the bank says they will not allow the short sale at all, or they may not offer debt forgiveness for the seller. Depending on the seller’s financials, they may or may not be able to close the deal by paying the difference.
If they can, great. But if not, you may be asked to pay more to cover the difference. This is of course totally up to you and will depend on how badly you want this particular home.
My advice in regards to short sale is to make sure this is THE house for you, prepare yourself for a long wait and a transaction that could drag on for 30-90 days, and ask yourself the question beforehand as to whether you’d be willing to pay more to get the deal done. Make this decision before signing the contract, because once a closing date creeps up a whole lot of emotions start to weigh on your decision.
I hope this helps you if you are considering buying a short sale in Florida. I’m actually smack dab in the middle of a short sale transaction right now, so the above comes from personal experience. I’ll be sure to update this post when (hopefully) my transaction closes.
I currently live out of state but am thinking I’d like to buy a condo in FL and since so many properties seem to be sort sales, I appreciate the advice in this article. I’d like to be a “snowbird” for a while with the idea of moving to FL full time later. Especially being out of state, it is a little overwhelming tying to evaluate properties and different communities in FL.
Thanks for this advise! I just looked at a listing of a house that my wife and I liked very much. We were about to make an offer thinking that the process was a lot simpler and quicker that this.