Buying Real Estate in the United States, Part I: Short Sales
Buying Real Estate in the United States
A guide to buying Residential, Commercial and Industrial Real Estate in the United States
Part I: SHORT SALES
This article is meant to provide some guidance to potential buyers of real estate in the US, and in the state of Florida in particular. Due to the near collapse of the market in 2007 and the following years, many properties in the US are sold through so called “short sales”. A short sale is a transaction, where the price paid by the buyer is lower than the amount of the mortgage or deed of trust encumbering the property.
The US real estate market, and the Florida real estate market in particular.
After years of decline, the real estate market in the US in general seems to have found a level, from which prices in general do not fall further. Of course, regional factors can have a different impact on prices and demand, and while every real estate market is somewhat local, there is also a variety of different submarkets in every local market. Such submarkets can be single family homes, condos, water front properties, or commercial properties such as warehouse space, shopping centers or office buildings. Any buyer is well advised to contact a local expert, such as a broker, in the specific market where the buyer wants to purchase and get a good overview of the local market for the kind of real estate he is looking for. This law firm cooperates with a number of qualified real estate brokers in various regions of the United States.
If one is interested in single family homes in the state of Florida, this appears to be a good time to buy. After a long decline, this market is on a slight upswing, due to slightly improved lending conditions and a steady influx of foreign capital. While one can hardly predict the development of markets, it is clear that in many areas and many submarkets, pricing has dropped below reproduction value, the price that it cost to buy land and build an equivalent house on it.
The development of prices in the Florida housing market can be followed through the Florida Housing Market Index. In average, prices for Florida single family homes increased during the first half of the year 2012. This clearly indicates that finally demand begins to catch up with the over- supply.
How to get more value for your money
With the large number of properties “under water”, meaning valued at prices below the amount of the mortgage encumbering the property, sellers face a difficult time to demand a high price. There seems to be always another seller around the corner who tries to “unload” his property to get out from under the mortgage obligations. This leads to a high number of so called “short sales”.
A short sale is a form of sale often used “in lieu (or “instead”) of foreclosure”. In a short sale, the homeowner will strike a deal with the bank, where the bank will forgive a portion of the person’s debt with the sale, even if through this agreement the Bank will not receive the full amount owed on the loan secured by the real estate. This sounds at first like an opportunity to”snatch up” a valuable asset at an artificially low price. However, things are not quite that easy.
That is because Short Sales are anything but what the name may imply. The process of purchasing a short sale property is a long one, which requires much patience. It is not uncommon for the process to take more than half a year, and at the end, the deal may well not be approved by the lender and fall through. More than half a year of waiting time coupled with the uncertainty of not knowing if one actually will be able to purchase the house is a major drawback when compared to a regular home sale. A regular home sale in the United States is completed relatively quickly. Once a contract is executed, meaning signed, in average maybe one to two months go by until closing, when the transfer of title occurs. Once the inspection period is over, a buyer can be certain that he will become the owner of the real estate, if he pays the agreed price.
However, if time is not a major factor for you as a buyer, a short sale could be an interesting option.
If you are interested in finding an attractive property in Florida, be it residential, commercial or industrial, and you have the time and patience to undergo the required process, our law firm will be glad to assist you with regards to finding a suitable real estate broker, negotiating of a contract and coming to terms with a lender who holds a lien on the property.
By: Sharon Glenn, Carl Christian Thier