There has been a surge of interest in "distressed" properties here in the keys. Many of you are asking the same questions so I thought I should clarify what a lot of you are asking about. The first thing you need to understand is that most of the "spin" or hype you see, hear and read in the media today is exactly that.... hype. It sells newspapers, gains readers and advertisers but rarely paints a true and accurate picture of anything. If you are going to invest your hard earned savings you need a true and accurate picture of what your investing in. Let's look at some facts.
Each real estate market around the country is different. The trends and pricing that are occuring in one area are not occuring everywhere. What is true in Detroit has nothing to do with Dallas. What is true in Dallas has nothing to do with Ft. Lauderdale....etc..etc..etc.
Let's try to understand some terms. There are different types of 'bank involved' sales or MLS listings. The two most common are Short Sales and Foreclosure or Bank Owned Property Sales.
Short Sale: When an ad or MLS listing reads that a property requires third party approval or bank approval, this generally means it's a short sale situation. What's happening is that the advertised price of the home is less than what is owed on the property. So while the owner is free to negotiate a contract with a buyer, the lender or mortgage holder has the right to accept or refuse any offer because the lender or mortgage holder is going to be taking a loss.
Ok....here's where the problems start to come in. If the owner and listing real estate agent have not already been in communication with the lender to approve the short sale and to set a listing price the advertised price you see could be nothing more than a pipe dream. You would not believe how many times I have seen this. The second issue you need to be aware of is time. Each Lender handles Short Sales differently and none of them handle them well. Each Lender will have a pool of asset managers to handle their short sales and foreclosures. Depending on work load it is sometimes very difficult for the real estate agent to get answers. This tends to drag out the whole process which can take weeks or more likely months to finally close. Be prepared for a long transaction.
Foreclosure or Bank owned properties, are homes that have already been foreclosed. The bank has title to the property, and has put it up for sale, typically selling the home “as-is.” And they truly mean as-is. They will NOT do repairs. Most will allow you to have a home inspection and if you see something that you can’t live with, then you can void the contract based on the results of the inspection. Please make sure your Buyers agent uses an "AS-IS" contract or adds the inspection clause to protect you ! Since the bank has control of the property and has agreed to the real estate listing, the advertised price reflects a true and accuract price. You can negotiate with them. Again, like the short sales, there are the bank's asset managers involved and some are more responsive than others, but in my personal experience they respond much faster. If you're seriously looking into purchasing foreclosures you need to remember that you're purchasing the property as-is, and there are typically addendums in the final purchase contract hold the bank harmless should there be a issues with the property after closing (termite mold etc). You need to do your homework and have a good buyers agent....like me! There are definitely good deals to be had, just proceed with caution.
