Short Sale Buyers Dodge Foreclosure Freeze
Finally on Friday last week, they got the word that the bank approved the latest short sale offer. The seller had to come up with $50,000 cash and the Sikes would buy the home for $110,000. "I feel so bad for the sellers, but we got a great deal," Janet Sikes said as she was unpacking in her new home.
For the Sikes this was a long, drawn out event with many bidding wars lost. She put her first offer in on a short sale two years ago that was accepted, but when the title search was done the sellers found out that their niece who was renting the property while they tried to sell it, took out a loan on the property they did not know about. That deal fell through, as did about five others as they bid on homes and lost the deal.
In Florida, sellers on short sales are using the process like an auction, accepting numerous contracts over several weeks or several months as they wait for the best offer. Buyers are caught in limbo as they wait for answers on their pending contracts.
Donna McGrath, the real estate agent for the Sikes, has been through at least four of these deals with the Sikes. She said so far she's seen no properties pulled off the market because of the foreclosure scandal, but is waiting for the axe to fall. She expects the properties may never be pulled off, but instead the waiting game for foreclosures and short sales will just get longer.
As these homes sit on the market longer and longer, the homes continue to deteriorate. The home pictured above is a home that was cited for lack of maintenance by the Association of Poinciana Homeowner's Association (APV), but Jeannette Coughenour, manager of the APV, says there is little the association can hiring someone to do the outside maintenance the association and paying for it, the association can't force action. The problem is that if the association pays for the maintenance, they may never collect on the cost.
Coughenour continues to watch as these abandoned homes drag down property values in the APV community for the last three years. Now homes that were selling at about $250,000 at the top of the market in 2007 have county assessments as low as $50,000.
She hopes the current moratorium is short-lived so the "banks can flip them and get someone into the home. This will help us to stabilize the community." She added, "Just when we thought things were bad, they just got worse" with the latest moratorium.
The APV is sitting on about $5 million in delinquencies from people who haven't paid their homeowner association fees. That's true of many homeowner's associations in Florida and likely elsewhere around the country. Many of these associations will never collect these fees unless there is enough value left when the property is finally foreclosed or sold. The first mortgage holder gets his money first and often there's nothing else left to pay junior lien holders.
Homes lingering on the market without being maintained and without paying fees to homeowner's associations leaves a double whammy for those who still own homes in the association. Not only do they have to contend with falling property values, but also a shortfall in their association budgets. Coughenour says the APV has dealt with its shortfall by being very conservative in spending and putting off some things so they don't have to raise annual association assessments for the residents. Other associations around Florida are raising fees to make up for the shortfall from non payment of fees or to build reserves for future nonpayments.
The longer the foreclosure moratorium lasts, the harder it will be on local communities and local real estate sales people. There is no doubt that this foreclosure scandal will delay the housing recovery, the only question left is how long will it take to sort out the problem. The longer it takes, the more devastation we'll see in local communities hard hit by foreclosures.
Lita Epstein has written more than 25 books including "The 250 Questions You Should Ask About Buying Foreclosures."
For more on related topics see these AOL Real Estate guides:
- How to Sell Your Home in a Short Sale
- Top Questions to Ask a Real Estate Agent
- How to Price a Home to Sell Fast
- Foreclosure Help: What a Housing Counselor Can Do
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