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:
- 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:
- 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.
