Home sales usually fall into one of three main categories: traditional sales, short sales, and foreclosures. For buyers, each has pros and cons, though generally speaking the cheaper properties are short sales and foreclosures. But if you’re a buyer, you need to keep in mind that these properties are usually cheaper for a good reason. The best route for you depends on your financial situation and your goals, especially whether you’re buying the property live in or as an investment. Let’s take a look, then, at traditional sales vs. short sales and foreclosures in Florida.
Traditional Sales
Traditional sales, the cornerstone of the real estate market, typically involve a straightforward transaction between a willing seller and buyer. In this scenario, both parties negotiate and agree upon a price for the property, often with the assistance of real estate agents or brokers. Unlike short sales or foreclosures, where external factors such as financial distress or the involvement of lending institutions can complicate matters, traditional sales proceed smoothly when both parties are satisfied with the terms.
In traditional sales, the seller is usually motivated by personal reasons such as relocation, upgrading, or downsizing, rather than financial distress. This distinction is crucial, as it often means the property is well-maintained and can be sold at market value, providing a more stable transaction for both parties. Additionally, traditional sales typically offer more flexibility in negotiations, allowing for contingencies like home inspections, appraisals, and financing, which are less common in distressed sales. This makes traditional sales a more predictable and less risky option for both buyers and sellers in the vibrant real estate market of Florida.
Short Sales
In real estate, a short sale occurs when the proceeds from selling a property fall short of the outstanding mortgage balance and other liens against the property. This shortfall is what makes the sale “short.” To proceed with a short sale, the seller must obtain approval from their lender, as the lender agrees to accept less than the full amount owed. This process can be lengthy and complex, often requiring extensive documentation and negotiations between the seller, buyer, and lender.
One of the key benefits of a short sale is that it allows the seller to avoid foreclosure, which can have serious long-term consequences for their credit and financial well-being. While short sales can take longer to close than traditional sales due to the need for lender approval, they can also present opportunities for buyers. Buyers who are willing to wait out the process may find themselves able to purchase properties at a reduced price compared to the market value. This makes short sales an attractive option for investors and homebuyers looking for a potential bargain, despite the additional time and effort involved in the transaction.
Foreclosures
If a homeowner fails to make mortgage payments, the lender can issue a foreclosure notice, which states that the property will go into foreclosure after 90 days. If the payments aren’t brought current or payment arrangement isn’t made, the property goes to auction where individuals and companies can bid on it (usually with a set minimum bid). Often, the lender will take the property back with the intention of reselling it.
Typically, foreclosures are great for buyers looking for good deals, but the complexities of the transaction can be pretty daunting. In fact, it can get downright ugly at times because people are being forced to give up their home. Owners are sometimes forced into foreclosure sales owing to things completely out of their control like an extended illness, job loss, or divorce.
Foreclosure can be painful for the homeowner, but good news for the deal-hunting buyer. The bright spot for sellers is that they can exclude canceled debt from their income tax returns, and they no longer have to make mortgage payments. The entire process can take several months, and the house is theirs until everything is finalized.
Observations About Short Sales and Foreclosures
Short sales in Florida typically take a lot longer to close than traditional sales, requiring complex documentation and extended back-and-forth between the seller and lender. If you make an offer on a short sale, it not only has to be accepted by the seller but also has to be submitted to and approved by the lender (who is taking a loss). If your offer isn’t approved, then you’ll have to restart the whole process. As a result, short sales usually take three to six months to complete while foreclosures usually close within 30 to 45days of an offer’s being accepted.
Another important aspect to keep in mind is that short sale and foreclosure properties are often vacant for long periods and frequently in disrepair. In addition, these properties almost always must be purchased as-is. The good news here for buyers is that if you’re willing to invest a little in repairs and put in a little elbow grease, you can get a great deal on these properties.
Traditional sales vs. short sales and foreclosures in Florida – which one is right for you? Again, it depends primarily on your purpose in buying the property, what you intend to do with it. It also depends on whether you’re willing to play the waiting game and are prepared to take on a distressed property. In such a situation, it’s best to lean on the expertise of a qualified real estate professional. And we’re prepared to provide the guidance you may need. Call us today at (239) 360-3176!