Lenders and developers are more aggresive than ever before to reduce inventory and real estate portfolio's. Thanks to short sales and foreclosures, the best buying market in Southwest Florida is here. And it is for that reason, 1st & 10 Properties, Corp. will take advantage of the opportunity. The days of flipping properties are temporarily over, most likely for the next 3-5 years. Longer holds are now needed not only to stabilize the markets but to assist in the appreciation process. An exception would be for a rehab or handyman special that you can get for a great price, then sell under market after the work is complete. Sarasota is leading most of the country in rebounding as prices are leveling, especially in the price range of under $300,000. Short sales and foreclosures will be our primary focus. See the example below for a short sale from the seller standpoint.

Example: Short sales require a lot of patience, but if you are willing to wait, the instant equity and profits are great. I would not however recommend a short sale if you are using a 1031 exchange. You must recognize a property in 45 days and go under contract in that time period. With the length of lender response time and competition of multiple offers, there is a good chance you will miss the window. Here is how short sales work. For a lender to consider an owner's property eligible for short sale, 3 consecutive mortgage payments should be missed.
The owner will get letters from the collections department, the loan and credit counseling division, and soon, threatening letters of foreclosure. And let us not forget the multiple daily automated phone calls. It is important to note that the property owner should not deal with the collections department since they have no negotiating power. If you have the tolerance to wait through the 3 month process, you will be dealing with the loss mitigation department who does the actual negotiating.

After pleading your case to them, they will send you a package which includes 4 options: short sale, loan restructuring,deed in lieu of foreclosure, and foreclosure. When you select short sale, you also must fill out the lengthy form breaking down income, assets and liabilities along with a hardship letter. At that time you should list your home with a Realtor for short sale. A short sale does not guarantee to stop a foreclosure if you don't get offers in a timely manner. The lender will still continue the foreclosure process. In time, you will receive a notice of Lis Pendens delivered by a process server for you to appear in court for a foreclosure hearing. It is all part of the process. Remember, there is a good chance your home would be foreclosed anyway. Hopefully, by time you receive the court order, you will have already sent the lender at least one short sale contract.
You will list your home for 25% less of what is owed on the mortgages, which will be a starting point for lender negotiations, and since the average cost of a foreclosure to the lender may run 30% of the mortgage, they will be coming out ahead at 25%. For lenders to seriously consider a short sale, they want to see multiple offers to get an idea of what buyers will pay and how much they can recoup. The lenders also know that "lowballers" or "bottom feeder's" will not get them close to what they want, hence the multiple offers. If market prices are lower than the mortgage owed, supportive material with the offers may change what the lender will accept, especially if there have been no recent comparable sales. It is best to counter the offers and try to get the best price for your home to better the chances of lender acceptance, but remember, the buyer still wants a great bargain, and bargaining power comes from surrounding market conditions.

The best thing about short sales is, at the conclusion of the transaction, the mortgage will show as a satisfaction of lien as opposed to a foreclosure, where it is possible to still owe the bank a deficiency judgement between the difference of what the home is sold for and what is owed, depending which state the property is in. Make sure however you put in the short sale contract the sale is contingent on satisfaction of mortgage by the lender or lenders. There are caveats to the short sale process however. If the lienholder's appraisal comes in higher than the mortgage amount, they will not approve the short sale. It is best to ask for the appraisal before getting the Realtor involved. According to credit reporting agencies at this time, your credit will be affected for roughly 12 months from a short sale where foreclosure could stay on for 7-10 years. And, you will have to pay the IRS taxes on the difference between the short sale price and what is owed on the mortgage if it is an investment property. As terrible as it sounds, the IRS still considers it a profit, even though it is a loss, and the proceeds go to the lender. At this time, Legislators are working on ratifying that position on investment properties. They already have for the primary residence. How much you pay depends on what tax bracket you are in.
Even if you are within a week from the closing table, it is not guaranteed the sale will go through. If there is a second mortgage on the property, which was very popular during the boom years to minimize the downpayment needed, a deficiency letter will be sent to the seller of the property. (The bank is not the seller since they have not foreclosed yet and taken possession) If the seller does not sign the judgement and agree to pay the second mortgage at closing, the deal is off. So make sure you are aware, or your Realtor informs you if the seller is willing to or has signed off on the deficiency judgement. Please go to Example page 2 for the buyer's side of the short sale.