Last Update: 02/24/16
In a recent news article, it was reported that there is a “stigma” surrounding the Short Sale option in buying a home these days. CBSNews reported with a story entitled, “Is there a stigma with home “short sales”?”
In fact, a Fort Lauderdale area realtor was interviewed for her perception in which she stated that there is a stigma associated with short sales today – many buyers are becoming very leery and even gun-shy about even considering a short sale much less making an offer on one.
So what’s to be done about Buyers’ Avoidance of the Florida Short Sale?
Short sales historically have been good buys for Florida buyers because they get a property for less than its true market value. Sellers are relieved of the burden of an underwater house and are able to get on with their lives, and banks get the property off their books, and deal with the seller on the deficiency issue. Short sales were good things for everyone, if a deal could be reached.
Those realities haven’t changed.
What does seem different in the Summer of 2013 is that foreclosures are easier for Florida banks now. The Foreclosure Reforms enacted by the Florida Legislature in this last session have helped banks with their huge glut of foreclosure filings.
Which means that banks do not have the same incentive to agree to a short sale as they may have in the past. (And banks never have been enamored with short sales.) This means that getting a lender’s agreement on the proposed offer that is less than the mortgage balance (the “short sale”) may be more difficult in 2013 than it was in 2011 or 2012.
Florida short sale offers can set in bankers’ in-boxes for literally months. Six months isn’t a stretch here.
It’s all about money. In most instances, those same bankers don’t bother to keep up the homes, they don’t make sure repairs are done or properties are maintained after they’ve foreclosed. It’s apparently very acceptable for banks to take properties and just let them sit there rather than try and make a deal to get them sold (see our earlier post on 33% of Florida foreclosures sit vacant today).
It seem as if the argument that the foreclosure will take years but the short sale will get things done so much faster isn’t as strong of an argument now as it was a year ago.
Larry Tolchinsky’s Tip:
Right now, in Florida, the Foreclosure Reform Laws are being challenged for violation of constitutional guarantees – but there’s no guarantee that this judicial challenge will be successful.
For more on the judicial challenge to the 2013 Florida Foreclosure Reform Laws see our earlier post here.
The reality of the Florida real estate housing marketplace is that buyers are here, and many are ready to buy with cash. That’s good in any real estate negotiation, but in a short sale it’s a big advantage. Then the bank only has to consider conditions involving the seller as well as the amount of the offer itself.
In order for a Florida bank to approve any short sale, the borrower who is wanting to short sale the home must be able to prove a hardship with the appropriate documentation, to the bank’s satisfaction. The property must be appraised, as well, so that the short sale offer can be evaluated by the lender against the pending mortgage, the possible foreclosure, and the probability of a deficiency judgment against the seller/borrower.
The majority of short sale offers made to lenders are not approved by the banks — but having a Florida short sale lawyer on board and not acting independently or with a Realtor as your sole representative can be a big advantage in getting a Florida short sale deal done.
Why? This is a contract negotiation under Florida contract law as well as a real estate purchase under Florida real estate law.
Florida lawyers know Florida law — and experienced Florida real estate lawyers will likely have personal knowledge not only of various lenders’ reputations but may know the individual lenders who are making the decisions within the various banks.
Florida real estate attorneys can draft documentation with language specific to the situation, for example, that can help get that short sale offer successfully through the lender’s approval process. Drafting contract language specific to a deal is a lawyer’s job, that’s what a transactional attorney does.
Having a Florida short sale lawyer that knows who the person is to call at the bank to discuss that contract language and try and get the deal finalized can be the difference between closing and not — as well as closing within weeks instead of closing within months. Short sales are still good deals for many buyers, it’s just a matter of getting the deal done.
A good piece of advice when you and your family are purchasing or selling your family home in one of the biggest transactions of your life is to at least talk with a Florida real estate lawyer. Getting someone to review all of the paperwork including the all important promissory note, isn’t as costly as most of us think it is. And it’s always a lot cheaper than paying to fix a problem after a closing occurs. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
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