Florida Real Estate Owned Property Sales
In Florida’s real estate market, distressed sales, or real estate owned and short sales, comprise a high percentage of all property transactions in the state. According to CoreLogic, a data provider using data from March of this year, 22% of all real estate transactions in Florida are distressed sales. Florida falls below only Michigan, which had a 22.1% share of distressed sales. Nationally, real estate owned and short sales made up 12.1% of the total real estate transactions.
Short sales happen when a property is in the foreclosure process, but before the public auction stage of foreclosure. In a short sale, the lender sells the property for an amount less than the debt owed on the property. Short sales are often used when there is little equity in the property, and the lender would likely lose money at the foreclosure auction.
Real Estate Owned Property
Real estate owned properties, also known as bank-owned properties, are similar to short sales. But real estate owned properties are those that failed to sell at the foreclosure auction because no one bid enough to cover the amount owed on the debt. Ownership of the property then goes back to the bank, mortgage company, or lender, and the mortgage ceases to exist.
Since the lender now owns the property, it must handle issues such as other liens, taxes, homeowners’ association fees, evictions, and any repairs the bank chooses to make. The lender is free to sell the property. Often, a real estate owned property is sold for less than the balance of the debt.
The obvious benefit of purchasing a real estate owned property is the price, which is often lower than would be available for a non-distressed sale. Additionally, the sale of real estate owned property may be more convenient and simpler than a short sale would be, because the original owner of the property is no longer involved. In distressed real estate sales, the buyer makes an offer, but the deal is contingent upon the lender’s approval. In a short sale, the buyer must negotiate with the original owner, who must then negotiate with the lender. But in a real estate owned property transaction, the buyer only need negotiate with the lender, because the property is owned by the lender.
The biggest risk of purchasing a real estate owned property is that the property is sold as-is, with no warranties. Prospective purchasers should always hire a home inspector to look at the property. Damages may be expensive to repair, so it is important to know up front what those costs will be. A title search also needs to be conducted, because there may be other liens on the property, or there may be tenants, an easement, or other title issues.
Figuring out how to get the best deal possible can be difficult in distressed sales, such as sales of real estate owned properties. An experienced real estate attorney can advise you and help you avoid the common problems of such sales, while taking advantage of the benefits. If you are considering purchasing a distressed property, please contact the Law Offices of Larry E. Bray for a free initial consultation.