Word is out that Miami is for sale, so every buyer I work with nowadays is looking for a "great deal". However, these deals are becoming harder and harder to find because more buyers are chasing them with every passing month. The best of these deals are Miami foreclosure condos as banks are looking to sell these properties quickly at or slightly below current market prices. Buying a foreclosure condo is not easy. There a few things that you need to know before you begin the process:

These are all cash transactions -- no financing. Due to the difficulty in closing loans in many condo buildings, banks have a strong preference to choose an all cash offer. I've bid on several properties where the bank chose an all cash offer over a higher offer that involved financing. With the majority of property buyers in Miami being international, there are no shortage of all cash offers.

Bid Aggressively

You need to bid aggressively based on what similar properties have sold for in the building. The list price of the property is irrelevant and most sell for above the list price. Most banks intentionally list their properties very low in order to attract attention and incite a bidding war. It is not uncommon for the best properties to have 20-30 all cash bidders. Not bidding aggressively enough is a common mistake that MANY buyers make -- if only they would follow the advice of their Realtor. It may be 6 months or more before another similar property is available, so why wait?

There isn't a lot of foreclosure inventory that is on the market at any given time. Banks have been slow to release properties as a result of several foreclosure moratoriums implemented by the government. The majority of bank owned condos are $150,000 or less, and there are hardly any available for $500,000 or more. They are usually off the market within 30 days. You need to work with an experienced Realtor who monitors the market every day and will alert you when any new foreclosure condos are available that meet your criteria. It's not uncommon for some of these properties to be taken off the market several days after they were made available for sale.

Most foreclosure condos need a little TLC. It's important to remember that they have been vacant for quite a while and were previously occupied by someone who was in foreclosure and had no incentive to properly maintain the property. The most important things are the building that the unit is in and the view. I would also check to see if there are any major repair items that you will be responsible for such as a broken air conditioner or missing appliances.

I hope you found this to be a useful introduction to purchasing a Miami foreclosure condo. If you have any questions or comments, please do not hesitate to contact us. We would be happy to assist you in acquiring a wonderful property in the Miami area.

Wow, that's all I can say! Fannie Mae just released a bulletin detailing a new Special Approval Designation for Florida Condominium Projects. As a result, you can now get financing in many condo buildings where cheap units were previously only available to all cash buyers.

Many existing condominium projects were previously made ineligible for Fannie Mae loans as a result of increasing delinquencies and foreclosures. As a result, prices fell precipitously in those buildings as the universe of potential buyers was drastically reduced. To illustrate, in a building like the Club at Brickell Bay in Downtown Miami / Brickell you could purchase a 1br unit for between $120,000 and $145,000, but it had to be an all cash transaction. On the flip side, to purchase a similar unit in one of the new buildings by the Related Group, you would have to pay almost double the price, but you would be able to get a loan. The quality of the Related Group's buildings is slightly better, but it doesn't justify paying two times the price. The difference is the financing.

Fannie Mae states in its bulletin that it is "committed to providing liquidity and stability to the condominium market". The Special Approval Designation will improve condo sales in those buildings that have:

• significanly weakened homeowners' association (HOA) budgets - association fees are not being paid by delinquent homeowners
• unpaid common expenses including pest control, property insurance, water, pool service, and garbage collection
• increased vacancies and REO's, exacerbated by the length of time it takes to complete the foreclosure process

Some of the notable buildings in Miami and Miami Beach where Fannie Mae financing is now available via the Special Approval Designation are:

This is unequivocally a good sign for the market. It will be interesting to see how many additional buildings are able to obtain the Special Approval Designation from Fannie Mae.

It's no surprise that every client that I work with is interested in getting a great deal on a property.  A fair amount of them are only interested in looking at bank owned properties, figuring that is where they can get the best deal.  Recently, bidding wars have been breaking out for bank owned properties as a result of high demand and low list prices.

In order to capitalize on the demand for attractively priced properties, real estate "flippers" have returned to Miami albeit in a slightly different form. Flippers purchase properties at the daily foreclosure sales held by the Miami-Dade County Clerk of the Courts and then list them for resale on the open market.  In buildings where there have been a lot of foreclosures such as the Club at Brickell Bay (1200 Brickell Bay Drive), there are several units currently attempting to be flipped by these auction investors.  This trend has not gone unnoticed by the mainstream media.  The Wall Street Journal just published an article entitled "House Flipping Makes a Comeback" on the subject.

There are no restrictions on who can purchase property at the County foreclosure auction as long as the individual has the cash available for payment. However, the foreclosure auctions are usually attended by knowledgeable individuals that are able to navigate through the potential pitfalls of purchasing a property at auction.  At auction, the properties are sold "as-is".  This means in most cases, you won't know the condition of the property interior in advance, which could be damaged. Furthermore, there could be a tenant living in the property that you might have to evict.  Also, the property may be subject to additional liens that you will be responsible for as the new owner.  For example, you could purchase a property at auction where the second mortgage holder is foreclosing, leaving you responsible for satisfying the terms on the first mortgage. If the property is a condo, you might be responsible for paying off the balance of the monthly assessments that are owed to the association.

Starting Jan 11, 2010, Miami-Dade County foreclosure sales will be conducted via an online auction system so you will be able to bid on foreclosures eBay style.  As the number of foreclosures in Florida continues to increase, the County hopes that the online system will help to push through the backlog of foreclosures faster.  The County's official website on foreclosures sales can be found here.

At Miami Condo Shop, we are committed to helping our clients find the best properties at the best prices, so we are happy to assist you in purchasing a property at a foreclosure sale.  It is not an easy task, but we will provide you with the local market knowledge and the required due diligence so that you can bid with confidence. If you are interested in purchasing a property at the deepest discount possible, the foreclosure auction is the place for you.

When talking with my clients about the condo market in Miami, one of the questions that constantly comes up is "What is a Short Sale?".  With the majority of attractively priced condo listings in Miami being short sales, it is important for a buyer to understand what a short sale is and the typical process involved in purchasing one.

In a short sale, the property owner is behind on their mortgage payment and wants to sell the property in an effort to avoid foreclosure, but can’t find a buyer willing to pay enough money for the property to cover the remaining principal on the mortgage.  The property owner then asks their lender if it is willing to accept less than what is owed on the mortgage.  Because the property owner needs the lender's approval before agreeing to the sales price, short sales can take months to complete as lenders try to figure out how big of a loss they are willing to take.  In some cases, even after months of analysis, a lender may decide it doesn’t want to do one at all.

Lenders have a department (typically called "loss mitigation") that processes potential short sale transactions.   Different lenders have varying tolerances for short sales and mitigated losses, with the majority of lenders having a pre-determined criteria for such transactions.  However, other distressed lenders may allow any reasonable offer subject to a loss mitigator's approval.

Not every property owner is eligible for a short sale on his/her property.  To be eligible for a short sale, a borrower must demonstrate an inability to repay his/her loan and convince the bank that a short sale is a better alternative than foreclosure.  As a result, a lender will usually require the borrower to submit a lot of information in the form of a "short sale package" in order for the lender in order to consider the short sale.  The information required usually includes:

• Income documentation such as W-2s and pay check stubs to verify the borrowers’ income.
• Bank statements to verify the borrowers’ assets.
• Hardship letter –  describes for the lender the reasons the borrower is in their current  financial position.  Letter is made to sound as sad as possible and is backed up with documentation such as medical bills, etc.
• Fair market value for the property – depending on the lender they may require an appraisal or may accept an opinion from a local Realtor known as a Broker's Price Opinion (BPO).
• Preliminary HUD-1 settlement statement.  This will show the proceeds of the sale of the property after the mortgage is paid off and all other closing costs and fees are paid.  This will be negative in the case of the short sale.
• Listing contract and purchase contract.

Many different individuals are involved in the short sale process such as the buyer, seller, buyers agent, listing agent, and the loss mitigator at the lender.  After the seller accepts the purchase price and the purchase contract is signed, it is the responsibility of the listing agent to work with the seller to put together the short sale package described above.  This process could be short or long depending on how competent the seller and listing agent are.  Once the short sale package is submitted to the lender, it takes several weeks for them to assign a loss mitigation officer to the transaction.

Once the loss mitigation officer is assigned, all parties now have a point of contact at the bank.  The officer will review the package and will inform the listing agent if the lender will agree to a short sale and at what price.  The entire process can take months to complete and is entirely dependent on the speed of the seller, listing agent, and the lender.

The short sale process can be frustrating to many, but don't fret, it is possible to purchase a short sale without having to wait several months.  As a buyer, if you purchase an "approved" short sale, you can significantly reduce the waiting time involved.  In an "approved" short sale, the package has already been submitted to the lender, a loss mitigation officer has been assigned, and a price has been set for the property.  For whatever reason, on the initial transaction, the buyer did not want to purchase the property at the price set by the lender and walked away from the contract.  You, as the new buyer, can accept the bank's price, or submit a lower offer to the loss mitigation officer who will approve or deny your request within a reasonable amount of time.

When attempting to buy a short sale, it is important to be reasonable with your expectations.  You might be able to get that condo property you want at a great price, but it will take time and effort from your buyer's agent.  To get a condo property at a great price without the wait, look for short sales that have already been approved by the lender.

Nowadays, many buyers are interested in purchasing "distressed" properties hoping to get a great deal.  My definition of a "distressed" property is a property where the owner has fallen behind on their payments to either their mortgage company or the homeowners association and a lien has been filed with the courts, initiating foreclosure proceedings.

Of the properties available on the market, short sales are those that are in the earliest stage of distress or "pre-foreclosure".  In a short sale, the property owner is behind on their mortgage payment and wants to sell the property, but can't find a buyer willing to pay enough money for the property to cover the remaining principal on the mortgage.  The property owner then asks their lender if it is willing to accept less than what is owed on the mortgage.Short sales can take months to complete as lenders try to figure out how big of a loss they are willing to take.  In some cases, even after months of analysis, a lender may decide it doesn't want to do one at all.

If a short sale agreement cannot be reached between buyer and seller, the property heads to a foreclosure auction.  Buying a property at a foreclosure auction can be an intimidating and confusing process.  There is no guarantee that you will be able to inspect the property prior to bidding and there are no guarantees you will have clean title to the property if you win the bid.

In today's market, it's likely that no sale will happen at auction, and the property will end up back on the books of the lender.  At this time it is called a REO (Real Estate Owned) property -- also referred to as "bank owned". When the lender takes possession of the property, the title is "cleansed," meaning any problems or claims that may hassle a buyer are removed.  You can once again inspect a property after it becomes an REO.   When a lender decides to sell a REO, they are normally priced aggressively, as the lender wants to move the property off their books quickly.

Currently in Miami Beach, the condo market is saturated with short sales from owners who were hoping to cash in on the condo boom.  As of 7/13, out of the 3,438 condos listed for sale on the MLS, 665 or 19% were short sales.  However, only 45 REO condos were listed for sale.

If you are a buyer that is deciding to purchase a REO or short sale property, it is important to remember that many short sales have been on the market for a long time, whereas REO properties are quickly scooped up by all-cash buyers.  Looking at condo sales data from 7/1/08 to 6/30/09, we see that 160 short sales were purchased compared with purchases of 251 REO condos.  If you looked at the current listings, you would expect the opposite .  To me this is clear evidence that short sales are not moving and REO's are flying out the door.

As a realtor, I try and target REO properties for my clients as they are easily accessible and represent great value.  If I'm going to look at a short sale opportunity, it's my preference to look at an approved short sale.  In an approved short sale, the months of legwork have already been completed and the bank has already indicated the price at which it is willing to part with the property.  When putting in an offer on an unapproved short sale, I tell my clients "be prepared to wait".