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What is a short sale in real estate?
A short sale in real estate allows a struggling homeowner to submit a proposal to their lender to sell their home for less than the remaining balance of the mortgage. During the Great Recession of 2008, short sales became popular as many homeowners went underwater in their homes.
What is a short sale in real estate?
A short sale occurs when a homeowner in financial trouble sells their home for less than they owe on the mortgage. Instead of waiting for the bank to foreclose on the home, the homeowner initiates the short sale process by submitting an application to the lender.
Short sales are a safer alternative to foreclosures for both sellers and their lenders. That is why you often can find them priced just below market value.
The lender will get all the proceeds of the sale, and then have 2 options: either forgives the difference or gets a deficiency judgment, which requires the original borrower to pay what’s left over.
When a homeowner is eligible to ask for a short sale?
For a bank to agree to a short sale, the homeowner must establish:
- They face a financial hardship that prevents them from meeting their loan obligations, AND
- They don’t have enough income and assets to pay off the loan. It can be cash, other real estate, available credit, investments, and virtually any other thing of value the homeowner can use to pay the loan.
- The property is worth less than the amount of the loan. The seller or a specialized real estate agent (SFR®) has to run an accurate Comparative Market Analysis or a Broker Price Opinion.
Advantages and differences with a foreclosure
- The short sale in real estate is a much quicker process. A foreclosure is a legal action taken by a lender to seize a seller’s property after they fall too far behind on their monthly payments.
- Fee savings: Normally, the seller bears the burden of closing costs and real estate agent commissions. In a short sale, however, the lender will pay those fees and commissions.
- Both processes can negatively impact a seller’s credit score (a short sale could knock as many as 160 points off). In a foreclosure though, you can have a far more damaging impact on a seller’s FICO®.
- Short sale is a private process (lender/seller) as a foreclosure involves the Court and is public.
Get prepared for the short sale
If you are a homeowner facing a foreclosure, it is important that you work with a knowledgeable agent who will protect your best interests. A Short Sale and Foreclosure Resource Certified Agent (SFR®) are better qualified to handle these situations b. They are also experienced to deal et negotiate with lenders and banks.
What are the closing costs in Florida?
Closing costs in Florida are the fees paid by the buyer and the seller when a home is sold. And if home buyers often budget for their down payment, they may forget about closing costs completely…
Who pay the closing costs in Florida?
Both the buyer and the seller pay for them – they are just responsible for different costs. If you’re a buyer, you pay for fees associated with your mortgage and having the home’s inspection. If you’re a seller, you’re responsible for the agents’ commission and taxes.
Seller’s closing costs in Florida
Sellers can expect to pay from 7-9% of the home’s purchase price in closing costs (this includes the commission fees of the agents)
- Title search fee
- Real estate commission (up to 6% of purchase price)
- Transfer taxes/documentary stamp
- Promissory note
- Intangible tax
- Prorated property taxes
Buyer’s costs
Closing costs for buyers are typically between 2.5% and 3.5% of the price of the home.
These are some frequent costs to consider:
- Prorated HOA charges, HOA approval fees
- Survey fee (based on land size)
- Appraisal fees ($400-$800)
- Credit report ($50-$75)
- Loan origination fees
- Home, mold and termites’ inspections ($375-$1,000)
- Recording fees ($50-$250)
TIP: Closing costs in Florida can add a significant amount of the total price, and both buyers and sellers should always anticipate before closing a deal. Of course, if you choose to rent a property rather than to buy, these costs are not applicable.
For more info about the closing costs, please click here
How to pay closing costs ?
When structuring a mortgage home loan, there are four ways to pay for the mortgage closing costs: pay cash at closing, roll the costs into the loan (not often possible), increase the interest rate, or do a combination of the three. Discuss this with your banker and your real estate agent as well.
Disclaimer: Agency One Properties and Laure Deltin Angeletti do not provide any kind of tax, legal, financial or accounting advice. This material has been prepared for informational purposes only.
Being a first-time buyer in Miami? What you must know
Being a first-time buyer in Miami may seem scary but the process is actually more standardized in South Florida than elsewhere. Whatever your reasons are for buying a house in the Magic City, here are some good advice to get ready to embark on the journey of homeownership. Follow the guide.
Financing for first time buyer in Miami, be ready
The loan, a long-term commitment
The average mortgage loan is 20 years! Of course, you don’t need to stay for that long in your house but purchasing a home is a major commitment. So how do you get ready?
Start asking yourself these questions:
- Do I have a stable income?
- Do I have enough savings to cover the payment if I lose my job?
- Do I really want to commit to his house and neighborhood for at least 5 years?
If the answer to any of the above is no, keep working, keep saving and keep looking!
Otherwise, start on the mortgage process before making offers. The mortgage loan process can take longer than usual in South Florida, especially if you plan on financing with one of the big banks headquartered in New York.
The pre-approval for the first-time buyer
A mortgage pre-approval is an official document from a lender that tells you exactly how much loan money you can get from them based on your financial information, such as your credit score, W-2s, or/and bank statements.
Why getting this pre-approval is important?
- You know exactly how much home you can afford.
- Your offer to the seller is stronger, especially if you are a first-time buyer in Miami: A pre-approval shows a seller that you have the money needed to purchase the home.
The house, 5 years or forever?
Think about your long-term needs and whether a starter home or forever home will meet them best. Online 3D home tours have become very popular with the COVID-19 pandemic. These tours let buyers virtually walk through a home at any hour and observe details that regular photos cannot catch. Open your eyes wide!
It’s critically important for you to verify the condition of the house as much as you can during the inspection period.
But this also includes the basics, like how much HOA or property taxes you will have to pay. Don’t forget to budget for homeowners association fees when shopping for condos and townhomes, or houses in planned or gated communities. Last but not least, save for closing costs!
TIP: Miami Dade county allows you to look up any property’s real estate tax bills in public records. This way, you can verify a unit’s property taxes before you even submit an offer!
Disclaimer: Agency One Properties and Laure Deltin Angeletti do not provide any kind of tax, legal, financial or accounting advice. This material has been prepared for informational purposes only.
