About a week ago I posted information on this gulf front Bella Vita condo. I recently reduced the unit $100,000. This is a short sale and the seller is ready to present an offer to the bank.

For more information click HERE.

The difference between a short sale and a foreclosure is that with a short sale the seller still has control of the property, whereas a foreclosure is bank owned, (and also called a REO, real estate owned).

Here are the definitions:

A short sale is a sale which the sale proceeds fall short of the balance owed on the property’s mortgage. Typically this occurs when a borrower (seller) cannot make the payments on their loan. The lender decides that selling the property at a loss is better than the cost of foreclosing, which can cost the lender upwards of $70,000-$80,000!  Both parties must consent to the short sale process. This agreement does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.

Foreclosure is the legal process by which a lender (can be the 1st or 2nd lien holder), repossess a property after the borrower (owner) has failed to comply to the terms of the mortgage. The most common violation of the mortgage is a default in the payments of the promissory note. When the process is complete, the lender can sell the property and keep the proceeds (if any) to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage”. If the promissory note was made with a recourse clause (Florida is a recourse state) and then if the (foreclosure) sale does not bring enough to pay the existing balance of principal and fees, the lender can file a claim for a deficiency judgment (against the borrower).

Other lien holders can also foreclose the owner’s right of redemption for other debts, such as for overdue taxes, unpaid contractors’ bills or overdue homeowners’ association dues or assessments.

When you purchase a property, with a mortgage, the promissory note describes the payments, interest rate and additional terms (30 year, 15 year, etc.) and is the promise to repay the money borrowed. A mortgage is security for the debt (note).

Buyer walked…..file still open with lender. YTD 2009 gross rental income approximately $120,000 and over $100,000 gross in it’s first year of 2008. Customers feedback has been very positive and lots of repeat renters. Already 7 weeks reserved for 2010…approximately $30,000! Directly across the street from the beach with fantastic gulf views. Recently completed in 3/2008 this fully furnished 4020 sq. ft. 3 story 4 BR Crystal Beach house will make either a great second home or a rental powerhouse with a sleeping capacity of over 20. The only home in the area with a fourth floor observation deck that provides extensive views for sunrises and sunsets. Outdoor features include a large pool & deck area, balconies on each floor with gulf views. Public beach access is

across the street. Construction compliant with all current codes which includes high impact windows and doors, metal seamed roof, all contributing to maximizing insurance discounts and an annual premium of only $2669.00!!!! Finishing touches include granite counters, carpet in all bedrooms, tile floors, stainless appliances and much more. A large 28 by 14 foot pool is surrounded with pavers to provide fantastic outdoor living space. The home is fully furnished with flat screens in every bedroom. This home will make the ideal second home and/or a rental powerhouse with peak summer weeks going for approx..$5800.

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RUMOR: Short sales are a great deal.
FACT: Banks are NOT giving anything away.

Everyday I have buyers telling me they want a short sale because they think it’s a “deal”. My question to them is: “Are you willing to wait 90-120 days just to get a response from the lender, with NO guarantee the lender will even accept the offer”? From the day a short sale goes under contract to the day of closing can be 4-6 months! Is it really worth waiting 6 months – to most likely be disappointed in the long run?

Tired of Waiting?

Recently, I had a buyer get frustrated and did not want to extend his contract. I encouraged him to allow at least 120 days for a response from the lender, but he would only do 90. In the end, he grew weary…said he knew it would take time but didn’t believe it would take this long; (even after I said it would be 4-6 months). At one point he believed the seller was taking his time so he could collect the rental income thru our peak rental season. Not so at all…on this transaction, Bank of America was the lender. Right there it tells us it’s going to be at least 120 days for a response.

Banks are overwhelmed. Everyday they receive thousands of new short sale files. If a negotiator spends only 15 minutes per file, that’s 4 per hour or 32 in an 8 hour day. Once they move onto the next file, yours goes to the bottom.

My experience has been that buyers grow weary and don’t want to wait, even though they say otherwise. If it’s really a “deal” you are looking for…compare today’s prices with those of a few years ago, they are no doubt a bargain.

Short sale! Seller says sell! If you are looking for a low density complex, this is it! Only 9 units in the building! Located in the heart of Seacrest Beach, just a bike ride away from Rosemary Beach and Alys Beach. Spacious 2 bed / 2 bath floor plan with the 1st bedroom located at the front. Master bedroom has a private gulf front balcony. Kitchen has spectacular views with open living area flowing to the balcony. Unit is being sold fully furnished and rental ready. Buyer to verify all information and dimensions. PROPERTY TO BE SOLD “AS IS”.

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I’ve been working on a short sale, with Countrywide, since December 3, 2008. There is a 1st and 2nd mortgage on this gulf front condo, both with Countrywide. As of yesterday, my buyer backed out of the contract…that’s just over 4 months and I still don’t have an answer. The file is yet to be submitted to the investor who actually owns the loan. What in the world is Countrywide doing?

How long do lenders expect buyers to wait? There are agents who get mad at the buyer for “walking”, but can we really? In this case, my buyer is not at fault. The closing date and extension date to close has come and gone.  Until the lender (seller) has accepted the offer, the buyer can withdraw their offer at anytime…short sale or not.

Why is it some lenders can process their files so much faster than others? In fact, as I’m typing this post, I received an email from a different lender with approval of a (different) short sale contract. That offer was submitted on February 6. Granted the price is much lower and so is the deficit to the seller, but it’s approved. We will close within 30 days. That’s about 90 days from start to finish. Not unreasonable.

Buyers don’t want to wait. The real estate market is moving quickly and the “deals” are getting bought up. My Broker has this analogy: “Like any yard sale those who show up first get the best choices and those who show up later get what was picked over.”

Check out this chart from our local MLS showing activity over the past 6 months.

As I mentioned in my previous post, Destin, Florida has Buyers.