Central Florida Short Sales: Play Strategically. Don't Let Your Mortgage Place You In Checkmate!

Always good advice we can count on...and given with a gentle touch.

Great questions, especially number five.  If one is not going to be happy in five years, make a move now!

Sound advice, BB.  Sound advice ...

Great post. I live in a state 46th lowest for foreclosure, short sale, repossession affected sreal estate sales (FSSR) so you guys in Florida are way ahead of many of us in the "short sale shuffle".

Bryant, I could not agree with you more. It is a negoitiation to settle. Those who somehow believe one is shirking his/her duty are only looking at it from one angle. Great job and have a great holiday.

Cal

Buying a home is a business agreement. Selling your home as a short sale is also a business agreement. Nothing wrong there.

Bryant - This is sound advice and put forth in a very concise and easy to understand way.  Truly a "business decision" and more homeowners who are in this situation should view it as such.  The questions are perfect.

That is definitely one way to look at a strategic short sale.  It's hard not to think of it as evil and not paying the debt one created for oneself, but when you put some of the other reasons in clear view, it becomes less of an evil and more of a calculated decision.  

I like the way that you listed to questions that readers should consider before moving forward. Cool.

Great post Bryant.  Excellent check list for those thinking of making a strategic move.

I spoke to a short sale seller yesterday who wants to sell a rental she owns. I looked up her residence and noticed she was underwater on that, too. When I mentioned that fact to her, she was totally unaware. How can you NOT know that you owe $400,000 on a home that is worth only $200,000? And this woman is losing her job next month. She doesn't even have to do a strategic short sale. But she has to make up her own mind and she loves her underwater home. I asked her if she loves that whopping mortgage, too, or would she like to trade it for what's behind door number 2?

Bryant, and it's really, really important to talk to a lawyer for input into your decision. 

I think that the use of savings and credit cards to make mortgage payments make this less a strategic default and more of an impending financial hardship.  Strategic defaults, at least in my mind, are folks that are not going to wait for their property to come up in value.  They make a decision, even though they can afford the home, to play chicken with the bank.

Shame, shame, shame!

There is no honor in a strategic default!

To claim so is to add insult to those forced to default through no fault of their own!

Bill

Bill a strategic short sale is not the same as a strategic default.

Bryant,

That's a very fine line!

_____________________________________________________________________________________

There is a diffrence! "Strategic Default" is easer to condem. "Strategic short sales" brings up all new problems!

What about the poor buyer's waisting their time and money while you play "strategic" games?

I have no problem with a negotiated settlement as such, but a short sale requires you to involve a buyer and my guess is the buyer thinks the seller is in trouble and the bank knows it!

This may be why some disdain/disclaim fiduciary putting an unsuspecting buyer in the transaction is unconscionable.

I think we may have preverted another formarly useful word.

Bill

William. In almost 4 years I have never had a lender reject a short sale. I've had some not close (because the buyer walked or the property was foreclosed on) but not because the lender rejected it. A strategic default is walking away from your obligation. A strategic short sale is negotiating a settlement with a creditor. It is not a fine line. They are completely different.

Not all short sales are in foreclosure. This is a misunderstanding of short sales. A property being in foreclosure is something that must be disclosed to a potential buyer. If it's a strategic short sale then all we have to disclose is the fact that it's a short sale.

I don't work with buyers on my own short sale listings. Protecting them is not my concern. They have a representative.

My job is not to condem or judge. I sell real estate.

Mr. Tutas,

That's an enviable record, I doubt that it's common.

With the exception of North Las Vegas very few markets I know of have been hit as hard as yours so I don't doubt your success. BUT, you write to a national market in with there are very Bryan Tutas's!

My concern is with the unsuspecting buyer. I've done more than a few of these over the years on commercial properties, but always initiating them as a buyer's broke where every one knew what we were doing. A home buyer spends cash and putting his life on hold with out knowing the situation is unconscionable.

I will not engage the "judging" issue with a friend in a public forum.

William J Archambault Jr

Strategic short sales are sometimes the only way out. If people wait, the hardship will come, the prices seem to get lower and nobody wins. We do strategic shorts alot and I see nothing wrong with them. They are getting approved and seems to be a win-win situation for all. No guarantees, but in life there are NO GUARANTEES!

I started telling people back in about 2008 or so that if they wanted to get out from under the burden of their mortgage that now was the time to be doing it.  People should not be forced to bankrupt themselves and their family in order to help Bank of America's bottom line.  But the longer you wait to do this, the worse off you are making your situation.  The one and only short sale I did for my own properties was back in 2009 and it was because the negative cash flow was $600 per month in the red and the property was over $100,000 upside down in value.  It stinks to mess up your credit but almost 2 years later and my credit score is now 703 even with that short sale in the history.  I do a have a few private mortgages that might be slightly upside down, but I am riding those out because I am not willing to shirk my responsibilities to private individuals that loaned me money. 

Bryan, would it be possible for you to release a current market analysis for zip code 34759? I'm curious as to what type of demand is currently driving exisiting home sales for Poinciana. i.e investor, first-time home buyers, etc..

Also, what is your view on the anticipated impact the Medical Arts Facility being built across from Solivita will have the local market?

I have to admit at first I was optimistic about the construction of the facility until I spoke with the leasing/sales agent listed on the signage along Cypress Parkway. The rep had little to no knowledge about facility, floorplan specifications and no preleasing specials. Are they trying to get this thing built or what?

That chess set looks shockingly familiar. Haha

When I'm working with a buyer and we are looking at offering on a short sale the very most important thing I do is get on the phone with the listing agent and start asking questions. Such as Bill points out. If the buyers don't want to take the risk thay don't have to to. But is is a risk reward situation. You can get one sweet deal as a buyer if you're willing to wait out the short sale process. But agents need to do their homework and protect their client by being well informed.

Hi Christopher. The new hospital is going to have a huge impact on the area. I live in SoliVita myself and I'm really looking forward to it going up. They are supposed to be breaking ground later this year.

Properties in the 34759 zip code are still declining in value. Dropped about 9% lats year. However inventory is very low and houses are selling very quickly anbd with multiple offers. Close to 80% of the sales are foreclosures and short sales. Average price right now (out side SoliVita) is roughly $68,000. This will get you a 4 bedroom 2 bath homes with about 1,750 sq ft of living area.

Lots of investors are buying homes in this area for rental properties. Cash is King.

I hope this helps

Rob. I agree. I sold 2 of my properties as short sales last year. Great to be rid of the negative cash flow.

Another great post BB.  I've suggested it for a feature.  So many people listen to the so-called "experts" that claim you must have a "verifiable hardship" before proceeding with a short sale.  At the end of the day, banks care about one thing...Do they make more money foreclosing or approving a short sale.  Yes, it's that simple.

I think you are right on the mark with this post.  The banks do not get any sympathy from me.

If a law was passed that any loss or gain of principal would be equally shared by the lender and the homeowner, would you support it? If not, please explain your answer.

Bryant,

I like your way of thinking!  I tend to think of mortgage decisions as "personal"; I'd much rather think of them as "business decisions"!  Thanks for that advice!

Many, many, many people (including agents) don't understand what a Short Sale is.  Even fewer understand a Strategic Short Sale.  In fact, this is the first article which I've read that has described the process, pros and cons clearly and consisely.  Thanks again Broker Bryant. :)

It is unfortunate that in our business we still have agents who take a holier-than-thou approach to sellers who have made a BUSINESS decision to do a short payoff in a declining market.  I see the banks moving towards eventually eliminating the "hardship" requirement - does anyone REALLY think that there is an empathatic human being making a decision on whether to allow or disallow the sale based on someone's sob story?  The investors look at the bottom line - PERIOD.  If it works for the bank they will take the deal. 

Kimo. No I wouldn't. I don't support any laws that interfere with private property rights. Which is why I have no issue with strategic short sales. It's a settlement negotiator between the borrower and the lender. Both can do what they choose. It's not a legal issue.

Bryant,

Please forgive me for jumping in again.

@ Kimo #27,

You've missed the point! It's bad ilconceived laws suggested by the Politically Correct to appear they care while placing more and more control in the government that caused the problem!

If you'd bothered to check you'd find shared equity risk does exist in the comerical market. It's not common, but legal. It could be done in residential but the lenders would never go for it. Nor, would the buyers before three years ago, and all these loans were written before then.

I'm with Bryant: "I don't support any laws that interfere with private property rights."

Don't mistake our differences, they are simply the difference between being a listing agent and a buyer's agent. We may lock horns once in a while, but we stand together on all but the minutest points.

Keep Congress out of this/everything they don't even know that the consumers are the same people called Citizens in The Constitution!

Bill

Hi Bryant-

I didn't really know that there was such a thing as a strategic short sale. It's certainly not happening in many parts of San Diego----I don't want to go into the nasty things Lenders have done to some clients----- underwater and losing their jobs. But thanks for the good info.and I can always hope this will work for some.

It is really interesting to see how the thinking has changed over the last three years.  Even two years ago a discussion like this would probably not have happened because almost everyone was on the moral responsibility to the lender bandwagon.

Anyone who mentioned responsibility to anyone other than the lender, was viewed with considerable alarm.

Great post.  Thanks for posting the definition of a strategic short sale.  Our Phoenix market is much like yours. We are in the top 5 for foreclosures.  Given those circumstances, it stands to reason that a number of our property owners will pursue a strategic default.  Best of luck to you all in sunny Florida!

Bryant ... Like your advice here on whether or not to do a Strategic Short Sale.  Such sellers need to look at options carefully, talk with their accountants and probably a lawyer also. 

Bryant, an interesting post, I personally know of friends who have done strategic short sales on their homes despite the fact that they could well afford to meet the mortgage obligations. I am neither here or there with this one, but I do take an offense when they come and rub it in your face because they managed to get it approved and exploit the system. 

Thanks

Bryant, if you are financial hardship it's one thing, but completely different is you are financially able to keep your agreement as it is a binding contract.

 How would you feel if a seller came to you the day of closing and asked you to lower your commission by 50%? Your response would probably an emphatic NO, but what if the seller told you they will not sign unless you reduced your commission?

Isn't that basically the same thing??????

Deals are like people, and each has it's own personaliity!  All we can do is make suggestions.......the decisions belong to the sellers!

Bryant,

Clap, clap clap.  

You don't need anyone's permission to get a foreclosure.  I think giving the lender the option of a short sale is the more repsonsible thing to do.  It's their choice.  Why is it wrong to try to avoid foreclosure with a short sale?

These erroneous beliefs cause more foreclosures in my opinion.  People are making the decision to bail out of bad mortgages whether others approve or not.  Why try to convince them that they are doing the wrong thing by applying for a short?  Aren't shorts better for the market?

And, my experience is that banks are not turning down these files.  So, who has it wrong here? 

Tni

Great information. Many people are not aware that they can do a short sale if they owe more than the property is worth and they are current with their payments.

Ray. If a seller came to me like that and my other option was to not close at all then I would make a decision based on my finances at the time. That decsion may very well be to take the reduced commission. I may even ask the seller to pay me additional money over time by signing a note. It would depend on their situation and my situation. Just like a strategic short sale.

It is a binding contract UNLESS the parties to the contract make a decsion to alter the terms and conditions.

It's difficult for some agents to understand strategic short sales if they are not in one the hard hit areas. Owners in my market that purchased from 2004 to 2006 are upside down by as much as 4 times the current value of the property. Properties they paid $250,000 for are now worth $65,000. Even if they purchased and placed 40% down they would still owe $150,000 on a property worth $65,000. These folks can be trapped for the next 25 years OR they can settle with their lender now and move on with their lives. It's a true no brainer.

Bryant, Have we turned into a society that places no value in honor or keeping one's word? As such, I have to disagree. Call me old fashioned, but I was brought up where my word is my bond and my house is where I live and raise my family and not just an investment.

You can also look at it from a financial standpoint where all the losses incurred by the lenders have to be passed on to somewhere. That somewhere would be those of us who do the right thing and pay our obligations on time and in full. Why should or would I supplement those that have the funds but prefer to game the system.

To me it's not much different than an insurance company forced to raise their rates due to excessive fraud. Sure the perpetrator got paid and is happy, but I get stuck with a higher bill.

Please don't misunderstand; I have no love for banks or insurance companies, but I expect them to honor their agreements just as I expect everyone should honor theirs. It's simply a matter of honor as opposed to what I see as greed.

There is no honor in passing the bill to someone else when you can well afford to absorb it yourself. You certainly would not give the lender the excess if it went the other way! You took the gamble, you should take the consequences.

Bryant - what a wonderful way of giving such sound advice!

Strategic ShortSale - Just a currently available tool in the Real Estate investors bag.

This principal of Real Estate has been around forever yet not titled and publisized as it is now.

It's not a moral issue in my opinion.. Banks and major corporations do the same thing all the time with their portfolios even long before the current financial dilema.

Nice Post

Bruce Fecteau    Orange County California Realtor    http://www.Century21-OrangeCounty.com