16 Oct 08 Buyer Beware! A Case Of Bank-Owned (REO) Fraud.
Welcome back!
Three things one can do to decrease the risk of fraud when buying real estate:
1. When buying any property, always make sure to very the owners identity.
2. When a trustee is involved, always verify that the trustee is acting as seller is entitled to do so. This can be achieved via a number of official documents.
3. Whenever the selling party counters on anything other that a FAR-9 contract, seek an attorneys legal advice.
- Bryan Sereny
Tags: Bank-Owned (REO) Fraud
14 Oct 08 Short Sale in Miami Real Estate
Short Sale in Miami Real Estate
In short, a short sale occurs when the proceeds of a sale fall short of what is owed on the property. In other words, the bank permits an owner to sell for less than the loan balance due. You may ask, “why would a bank permit such a thing”? The answer is simple.
For a variety of reasons, property owners fall behind in their loan payments and head towards default and foreclosure. Banks are not in the business of owning properties. Contrary to what some believe, banks do not desire to foreclose and take possession of real estate. On the contrary, they are interested in borrowers staying in the property and continuing to make payments. If this is not possible, the next best option is the sale of said property. This is where a short sale may come into play.
Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. In fact, banks statistically incur a smaller loss via short sales. Here is why; Banks use very similar criteria when determining what price they would sell a foreclosure or short sale property. Typically this is 5% to 20% under the current appraised value. Wheras in a short sale, the bank never takes possession, in a foreclosure banks take title and start paying taxes, maintenance, legal fees, and then list with a real estate agent.
It is important to note that extenuating circumstances influence whether or not a bank will discount a loan. Nothing is written in stone and there is no guarantee that a seller will qualify for a short sale.
My advice:
For sellers looking to short sell their property:
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The most important thing you can do to achieve success is to higher a law firm that specializes in this type of litigation. There are a number of these throughout Miami. You want to be sure to ask the attorney how many short sales they have under their belt, and how many they have in process. Only work with an attorney that is currently working with multiple clients.
For buyers looking to purchase a short sale:
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the most important thing to know is how far along has the sellers file progressed with the bank. Ask the seller if “the bank has completed the appraisal or BPO.” If the answer is yes, there is a good chance you acquire the property. If the answer is no, the odds are far less.
Tags: Miami Real Estate, Short Sale
04 Oct 08 Miami Market Outlook 10-4-2008
Lately I have read many articles and comments in blogs about the Miami Real Estate market having reached bottom. I am not going to speculate when, or if, this has taken place. I believe that the majority of the decline in value have already taken place, and now there is a window of opportunity in which one can take advantage of low prices.
Historically real estate valuations are cyclical. Periods of increasing valuations are inevitably followed by a period of decline. When the decline has been fully realized, a period of recovery begins and thus the cycle continues.
Surely Warren Buffet would agree that “the bottom” should be viewed as a time period rather than an exact point in time. Although there may be additional decline, his recent investments illustrate how one should seek out “choice” opportunities when they present themselves, rather than miss opportunities by focusing on trying to guess the exact bottom.
The illustration shows in green the optimal buying period and price range. Although the Miami Market may not have reached the bottom, and further price decline may take pace, experts agree that the majority of the decline already has. Now, and into the beginning of the recovery period, is when the most desirable opportunities will present themselves. Make no mistake, once we will be in the recovery phase, the “choice” opportunities will be sold.
Undoubtedly, the $700B government bailout will accelerate the turn around. The end goal of this bailout is to stimulate the recovery of the housing market. The rate reduction by the Fed will support the recovery. Only time will tell exactly how this will affect the Miami market.
Where will the opportunities present themselves?
In Miami the real estate market can be divided into three segments.
Low - <$1,0000,000
This segment represents the majority of the market and has experienced the greatest decline. This was the first to drop in value and will be the last to recover. The largest discounts are available in this segment. For example a 2 BR unit at Blue Condo in Miami that sold in the $500 to $650k range only a few years ago, is now available in the low $300’s and can be purchased close to $300k. That is 50% off of the peak price. As financing becomes more stringent, buyers with the ability to purchase outright are in an excellent position.
Mid - $1,000,000 to $3,000,000
This segment has been affected, but only marginally. For the most part owners of such units own several vacation homes worldwide. All cash purchases are not uncommon. Given the relatively low supply of condominiums within this price range, prices have remained somewhat stable. For example, a direct ocean 2-BR unit at Continuum 1 in South Beach typically sold in the $1.8M to $2.0M range. Today, if a seller needed a quick sale, they would easily be able to get there by simply lowering the price to $1.7M. This would result in a projected sale for approximately $1.6M. That is 20% off of the peak price.
Buyer competition is very active. Those that are looking for 50% off peak price opportunities are not likely to find one in a Miami Beach oceanfront condo. Simply put, there are buyers that are willing to purchase at moderate prices.
High - >$3,000,000
This segment has barely been affected. Few of at this price range finance their purchase. Typically this person owns 4-8 houses worldwide. Keep in mind, as of today, there are only 125 condos in Miami Beach within this price range.
The Effect of Short Sales.
In 2008 Short Sales have become more prevalent in Southeast Florida. In essence a Short Sale is a pre-foreclosure sale. Short Sales present an opportunity to purchase at the best possible price because they allow a distressed seller to accept a price below what is owed. These transactions are available from the time when the borrower first defaults on their mortgage, up until the property is foreclosed on by the lender. Typically, regardless of what is owed, banks are granting 10% to 20% price reductions based on current appraised value. The Pros: great prices. The Cons: Far fewer options (in the mid and high end), uncertain outcome given the 60-90 day bank approval period.
In short, many great opportunities will be available throughout 2008 and 2009. For those that are planning on holding for 5+ years now is as good a time as any to make a real estate acquisition in Southeast Florida.
Tags: Miami Condo Market, Real Estate Chart, Real Estate Data, Short Sale
