What is a Florida Short Sale?
A Florida short sale is when a borrower owes the lender more money than the property is worth. To qualify for a short sale, homeowners must demonstrate a hardship and be financially insolvent. The homeowner should be able to demonstrate inability to make the loan payment. Most importantly, homeowners must prove a willingness to cooperate with the process.
List of Acceptable Hardships for a Short Sale
- Loss Of Job
- Loss Of Income
- Death Of A Family Member
- Job Transfer
- Business Failure
- Damage To Property
- Medical Bills Military Service
- Payment Increase
- Insurance or Tax Increase
- Too Much Debt
Short Sale Advantages
One of the biggest advantages in an short sale is sellers can avoid having to go through a foreclosure process which severely impacts their credit score. In a Florida short sale, the seller and the lender work together to determine the details of the agreement, but typically sellers who complete an Orlando short sale also avoid owing the balance of the loan, which is the most important aspect of a short sale to the seller along with not impacting their credit score as severely as a foreclosure.
The biggest advantage of a short sale is to buyers who are often able to purchase a home at a discount. The discount isn’t as big as it was back in 2010 and 2011 however, there is still room to score a great deal and have immediate equity in a home.
Potential Short Sale Pitfalls
There are a few important facts that sellers need to understand when considering a short sale. First, not all lenders will offer to relieve the seller of the responsibility of paying off the balance of the loan. In that case it’s wise for the seller to hire a Florida real estate attorney who specializes in short sale. Not all attorneys know how to negotiate with banks therefore, not all lawyers have the same closing percentage. Another thing is the impact to the sellers credit score. While a foreclosure can prevent the purchase of a home for seven years, a short sale may only prevent the purchase of a home for two years. It’s important to speak with a credit specialist to see how a short sale will negatively impact your credit score.
Short Sale For Sellers
Not all sellers qualify for a short sale. Speak to an attorney to see what you need to do and if you even qualify for a short sale. One of the most important thing to remember if you are behind on your payments and considering a short sale is to continue paying the HOA fees. $1,000 is HOA fees can turn into $8,000 real fast when attorneys fees are added in. Nothing can kill a short sale deal faster than unpaid HOA fees.
Short Sale For Buyers
Buyers need to be prepared for a long and stressful process. Purchasing a short sale is nothing like buying a foreclosure. While a foreclosure can take 30 days to close, a short sale can take anywhere from 4-12 months.
If you are thinking about purchasing a short sale, it is important to work with a real estate agent who knows how the process works. Not all real estate agents deal with short sales. There are many out there that steer clear from them because of all the work and the amount of time it takes to close a short sale.
As you know by now, in a short sale the bank is agreeing to take less money than the house is worth. A lot of the time a big part of the negotiation is who will be paying unpaid liens such as; assessments and HOA fees. Be prepared to kick in some extra money to help pay these things if you really want the house.
The most important thing a buyer can do when purchasing a short sale is to MAKE A DECISION! Short sales sell fast. Depending on the price range you are ina short sale can be sold within one day of being listed. Sometimes they are sold before they are entered into the MLS. The only reason they get entered is because the banks require it. If you are wanting to buy a short sale and you find one you like it is imperative to act fast. Going home to sleep on it can cause you to lose the house.
Lenders have departments that evaluate potential short sale transactions. Every lender has their own criteria for conducting a short sale. In the end they want to get as much money for the house as possible. The first thing they will do it get a brokers price opinion (BPO) to determine the value of the property. Back in 2010-2011 a buyer could buy a house for 80% of the market value. In today’s real estate market, lenders are asking for full market value, which they are getting because of the lack of invetory. Some lender like Fannie Mae aren’t allowing BPOs to compare distressed properties to their properties which is causing the list prices to increase.
How Short Sales Are Different from Foreclosures
In a short sale the owner voluntarily gives up the property. The seller cooperates with the lender and provides all the paperwork necessary to complete the transaction. In a foreclosure the lender is taking possession of the property and removing the owner.
Short Sales & Credit
Short sales negatively impact a sellers credit however, not as severly has a foreclosure would. It is normal for a seller to be able to obtain another mortgage within two years of a short sale whereas, a foreclosure can prevent the sellers from getting a mortgage for seven years.
The most important part of the entire short sale process for the seller is to be waived from any remaining debt left on the mortgage balance. A good short sale attorney should be able to negotiate that and free you from any liability.
Negotiating Short Sales
Consider hiring a Florida short sale attorney in addition to your Orlando Realtor. Choose carefully! Most reputable lawyers do not ask for any payment up front. Instead they are paid at closing only if they successfully negotiate your short sale. Many real estate brokers and agents claim to know how to negotiate a Florida short sale, but reputable brokers will refer you to a qualified short sale attorney.
Areas We Serve
Seybold Brokers serves the Greater Orlando area, Winter Park, Tampa, St. Pete and New Smyrna Beach for short sales in which the seller is being represented by an attorney.