As short sales become the exit strategy of choice for desperate sellers, industry watchers now say lenders are suddenly beginning to accept low ball offers that are as much as 20 percent below the original loan amount, according to an article in the Miami Herald .
Previously, the normally accepted discount on the original loan amount was 10 percent.
The declaration comes more than a month after the Condo Vultures® Market Intelligence Report (Here's a link to the report) pointed out the trend. The report noted that banks increasingly want to dump properties short of the loan amount in hopes of avoiding the costly foreclosure process and the ultimate outcome of owning overpriced real estate.
For buyers, this changing mentality by lenders means a property that was purchased for $400,000 with a 10 percent deposit, or $40,000, today's buyer can now theoretically buy that same place for $288,000, or $72,000 below the existing loan amount.
Lenders are increasingly willing to accept such offers in hopes of avoiding taking a property back through a long foreclosure process that normally costs about $40,000 to litigate, according to the article.
The biggest drawback for buyers going after short sales, according to Condo Vultures® Realty LLC's short sale team, is the amount of patience necessary to complete a deal. Lenders normally market a property and collect offers for about 60 days before deciding how to proceed if at all.
In the 90 days since Condo Vultures® began tracking properties under a short sale and foreclosure category, the number of troubled residences has grown rapidly, according to an Oct. 31 report by Condo Vultures®. The newest short sale report will be released next week.
Last month's report found that short sales (136 properties), foreclosures (105 properties), and short sales/foreclosures (88 properties) combined accounted for 8 percent of the 4,321 residential properties in the Vultures™ Database, and represent a combined discount of nearly $50 million, according to the report.
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Interesting information - I have been advising my clients that the "sweet spot" is 30% more or less from the high sale price. Your data confirms this advice. But I think the bottom will come in 2008 when there are sales of the units with original (not flip) prices and teaser interest rates adjust upward. Look for your 30% to move to 35% off the original sale price.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@FLORIDA-COUNSEL.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers with Short Sales
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