Distressed Pricing

During the real estate boom from early 2002 through late 2007, the concept of “distressed” pricing was foreign to homeowners and real estate practitioners alike. The question today is not whether distressed real estate should be included when considering comparable sales, but to what extent? 

There are several schools of thought in today’s distressed real estate environment. I consider the following to be relevant when pricing to either buy or sell in today’s market.

The first is the principle of substitution. If you have the ability to purchase a discounted short sale or foreclosed property, why would you pay retail? So long as there remains a pipeline of distressed homes in the market, the “new” market will continue to be the distressed properties.

The second school of thought is the lack of financing for the average buyer. Many think that once financing becomes more readily available, that the market will stabilize and pricing will return to normal.

Unfortunately, one has to also consider the creation of jobs and the positive affect that this will have on consumer confidence and spending. Therefore, once the unemployment rate begins to move downward and the credit situation improves, we will see a return to normal pricing.

So is distressed pricing here to stay in Miami? In the short term, yes, especially if you need to sell. However, in the long term, jobs will be created, the shadow inventory of distressed properties will disappear, and we will return to normal pricing.

Are you looking for a Miami or Miami Beach investment property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

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Miami Short Sales – Know the Law

A few weeks ago I wrote a brief introduction to short sales titled Short Sales 101. As a buyer in today’s Miami real estate market, it is essential that one become an expert to navigate the challenging, and at times, perilous seas of short sales.

This is an example of a typical scenario that I worked on recently, and one in which there was plenty of questionable, unethical and illegal activities. Here is a short version of what transpired:

1. After an exhaustive search for a “steal” in Coral Gables, my client, the buyer, decided that he loved a single family home that was listed as a short sale. He instructed us to make an offer at $1.8 million.
2. The seller’s agent, upon receipt of the offer, disclosed to us that the buyer had engaged a “loss mitigation” expert to handle the deal. When asked about this individual the listing agent did not know  this “expert’s” role or how they were to be compensated.
3. The following day, the contract was accepted and returned with the buyer’s name altered to that of the “loss mitigation expert” along with a limited power of attorney.
4. We contacted the “expert” to discuss our concerns over the power of attorney and questioned how they were to be compensated. He stated that ”the seller tried to handle this himself and he could not get it done with the lender,” and “he is too busy to deal with his own property,” and “there is no problem as I have the authority to legally bind the seller,” and “don’t worry about compensation, i have this worked out with the seller on the side!” Say what?
5. Following many further heated discussions to determine what is really going on the deal was exposed. The “expert” had an agreement with the seller to get paid a $15,000 “loss mitigation fee” at closing [on the HUD] and had his own purchase contract in with the lender to purchase the property at a lower price. He would then close in double escrow, pocket the difference of around $150,000 plus the loss mitigation fee.
6. You can only imagine my next conversation with the “expert,” who was essentially asking my client to pay more than what the lender was willing to accept, and swindle the new lender, existing seller and buyer all at the same time. Does this sound familiar?
7. Upon our clear objection to such a scheme, the “experts” next offer was to be paid just a straight real estate commission instead of the loss mitigation fee. 
8. As such, we immediately informed our client that he should cancel the contract and walk away from the deal. Additionally, that we were not willing to be party to the transaction. The buyer signed the release and escrow monies were returned.

This leads me to my next point. It is important to be aware and knowledgeable of the new Florida law titled Foreclosure Rescue Fraud Prevention Act, which took effect on October 1, 2008. This law protects homeowners who face the threat of foreclosure from individuals who would prey upon them, including the payment of any upfront fees to mitigate any loss.

The flood of Miami short sales has no end in sight. You need to be motivated and willing to do the work. To help navigate the way for you in buying a short sale property in Miami, please contact Ross now at info@miamiangelproperties.com or call 305.673.5300.