Shopping the short sales
The home was a short sale in good condition — a three-bedroom, two-bath house in North Port. The buyer submitted an offer, which within two weeks was accepted by the bank. The parties closed soon after. Now, five months after the closing, the home is valued at 15 percent more than what the buyer paid.
Two 10th-floor units in Rivo at Ringling condominium, 1771 Ringling Blvd., Sarasota, are listed as short sales on the local MLS, priced at $ 500,000 for a two-bedroom corner unit and $ 600,000 for a three-bedroom corner unit. Staff photo / Harold Bubil; 2-5-2013.
"I would call that a pretty good deal," said Ron Suponcic, an agent with RE/MAX Alliance Group in Sarasota who specializes in short sales.
The transaction represents a new sector in the short-sale market: properties for which banks have offered financial incentives and low- or no-document requirements for homeowners to undergo the short-sale process. It's a win-win-win prospect. The bank earns credit toward court-levied settlement amounts; the seller receives a financial incentive of thousands of dollars; and the buyer gets a property for below market value-and gets it quickly.
The number of short sales and foreclosures has dropped in recent months in Sarasota and Manatee counties — distressed properties currently comprise about 12 percent of active listings — but bargains remain to be had. According to Roger Piro, president of the Sarasota Association of Realtors, the odds that a given transaction will prove successful have increased, particularly for short sales, which accounted for about a third of all sales statewide last summer.
"A couple of years ago, 'short sale' was a dirty word because of how long they took. The success rate used to be terrible," said Piro. "But it's gotten a lot easier. We've seen banks become much more receptive."
In his own realty work, Piro recently had a short-sale contract accepted by Wells Fargo in less than two weeks, and another by Financial Freedom in three weeks, both of which included appraisals before lender acceptance of the offer.
The market for distressed properties now exceeds the inventory, Piro said. "There's plenty of people out there wanting to buy these homes."
Suponcic, whose said about half his sales are distressed properties, said the competition for foreclosures is so keen that bank-owned, also known as real estate-owned (REO), properties routinely receive more than a dozen bids. He agrees with Piro that buyers are generally better off pursuing short sales than bank-owned properties.
This house at 3731 Indian Beach Place in Sarasota was the highest-priced sale of a bank-owned residence in Sarasota County in 2012. Kim Ogilvie of Michael Saunders & Co. was the listing agent and Steven Bark, of Bark & Co. of Holmes Beach, represented the buyer, who paid $ 3.2 million. The 6,073-square-foot house was developed by Peter Laughlin in 2006 and eventually marketed at $ 10,850,000, but was foreclosed upon in November 2011. It was listed at $ 4.1 million before selling for an additional 25 percent off. Ogilvie said the most ever paid for a bank-owned (REO) house was $ 3.5 million for a Casey Key house in 2010. Courtesy photo.
"There's a lot of competition from investors on REOs," Suponcic said. "Buyers are outbidding each other. Sometimes nobody winds up with a deal. With a short sale, the main difference is that the bank is dealing with only one contract at a time. The lender isn't sitting there with 50 offers."
On the other hand, some buyers prefer bank-owned properties because they're uncomfortable dealing with distressed homeowners. And, according to Suponcic, another sector of short sales is actually proving more difficult to successfully transact — one in which the banks are resorting to the practice because foreclosure is not possible because of entanglements. Negotiations for these properties can take months.
Whether the property being sought is bank-owned or a short sale, be patient.
"There's definitely not as much to choose from as there was," Suponcic said.
"Don't get discouraged if you don't get your first two or three. Eventually your work will pay off," said Piro, recalling a 2010 transaction of his that took 14 months from contract to closing. "Things are typically moving much more quickly now."
And don't anticipate reselling in a hurry, said credit and loan expert Todd Hills. He said that years ago, buyers of distressed properties "could expect to quickly flip the homes for a profit," but added that today's buyer should plan on waiting for a slower appreciation as the market continues to gain momentum. If you will not be living in the home, make sure that it can be rented.
This house at 204 Bird Key Drive is the most-expensive bank-owned, or REO, residence currently listed for sale in Sarasota. Built in 2008, it has five bedrooms and five and a half baths in 7,991 square feet of air-conditioned area. It is listed at $ 3,899,000 by Kim Ogilvie of Michael Saunders & Co. Staff photo / Harold Bubil; 2-6-2013.
In addition to patience, Hills, Suponcic and Piro offer these tips to help buyers make a decision:
-Educate yourself about the process. Rules for buying distressed properties differ from those for standard real estate transactions, so it's important to know the playing field — and to understand how quickly the parameters can shift. For example, HomePath, which lists Fannie Mae REO properties and assists home buyers with financing (see homepath.com), recently disallowed short-sale negotiation fees on the HUD settlement statement.
To be safe, said Piro, a buyer should choose an agent with broad experience in transactions involving distressed properties.
-Understand the property. Get a thorough home inspection so there are no unpleasant surprises in terms of repairs. Buying a house for $30,000 below market value doesn't mean much if you have to spend $40,000 for essential repairs. Use the home inspection to calculate how much the repairs will cost, and make certain you have the financial wherewithal to address those items, especially fixes that can't wait, such as a leaking roof or termite damage.
Your offer can be made contingent on the inspection so that if there are major defects, you can back out of the contract and get your deposit back.
-Check for liens on the property. In addition to the outstanding mortgage balance, buyers need to be aware of other liens, which can drive up the purchase price. Examples include outstanding property taxes, municipal bills or unpaid repairs and remodeling bills due to a contractor.
-Get ready to bid. Many distressed properties, especially foreclosures, involve a bidding war of some sort, so be prepared to stake your claim. Avoid buying more home than you can afford by determining the maximum price you will pay and stopping at that point as the bidding rises. Remember, too, that cash is king. If you don't have cash, make sure you have a letter from a lender that qualifies you as a buyer for that price range.
Make your offer based on the context for that particular property. On HomePath, for example, the properties are listed at their appraised value (which is why there's no appraisal requirement for HomePath mortgages). Hence, the homes often sell for more than what they list. HomePath may counter your offer, and if it's a multiple-bid situation they will ask for your final and best offer. Know what that will be.
-Enjoy the search. It's like weddings — the more you attend, the more you know what you don't want for your own. There's a house out there for you.
Source: http://realestate.heraldtribune.com/2013/02/09/buying-at-short-sale-takes-prep-work-and-patience/
/ Saturday, February 9, 2013
By CYNTHIA ANDERSON
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