South Florida Foreclosures Moving Fast

However, the demand for lower priced short sales and foreclosures in south Florida – those in the under 300,000 range – is on a rampage. CNNMoney.com reported today that REO supply is dwindling because a rush of cash-rich investors are swopping down to snatch up these foreclosures in south Florida (and just about everywhere else) just as fast as they hit the market. And they’re purchased at full asking price or higher. As more and more of these south Florida foreclosures are placed in the correct price range--and brokers are convincing more sellers to do this –buyers come in ready to buy. There’s lots of money out there, despite news of impending disaster, and plenty of banks are lending to people with decent credit.

In fact, investors are so ready to buy these short sales and foreclosures in south Florida that they will outbid each other for a good house, even if it needs work. Back in March of this year. I mentioned these bidding wars on south Florida short sales and foreclosures on my Facebook site. In July, The Sun-Sentinel came out with a front page article that discussed this phenomenon.

So it’s not new. What was leading edge is now becoming commonplace. Here’s how it works: say a house in an area that typically sells for $250,000 is on the market for $170,000. Most of us would consider agree that a great buy. But what if the house needs a minimum of 80,000-100,000 worth of work? Is it still a great buy?

That’s strictly in the eye of the beholder, but there are more than enough beholders out there in the south Florida foreclosure market. I recently brought clients to see property with a price tag of $168,000. Within 3 days of listing it was sold to a cash buyer – for $210,000.

Currently I have several clients looking at a south Florida foreclosure listed around $175,000. One of these buyers is an investor who does his own labor and is able to buy materials at wholesale. So, although the house walls have been broken out by the former enraged and evicted homeowner, and even though there’s an obvious leak through a 4 foot hole in the garage ceiling, this house looks good to an investor.

Here’s the reason why. At full value and in good condition, this south Florida foreclosure would sell in today’s market for between $275000-$290,000. We determine the price in this manner: the highest asking price in the neighborhood is $325,000. At the moment, there are only three homes for sale in the neighborhood. Also, it’s in a top rated school district and the neighborhood is very well kept up.

The $325,000 home will typically discount 7-11% in today’s market (more on that in another article) so its real value is about $300,000. With that in mind, an investor with cash will buy the $175,000 south Florida foreclosure property at a discount—as is, all cash, quick close-- and fix it quickly. The fix-up that a typical homeowner would pay $80,000-$100,000 for will cost the investor no more than $50,000.

Now, the investor puts the refurbished house out on the market at 90% of actual value, fully expecting a buyer to negotiate an additional 3-5% off the asking price The investor profit comes in somewhere between $30,000-$40,000.

A day after seeing the $175,000 south Florida foreclosure, I brought a client to another bank-owned property. This one was in relatively good condition—its kitchen and baths could use an update and the house is in need of a paint job --but it could be moved into in its present condition. The bank was asking $249,000 for the property. It had been on the market 2 days and already had 4 offers, all of them at full price or slightly above. The broker told me to submit our highest and best offer if we wanted to purchase this south Florida foreclosure. Highest offer, as we all know, means more money. Best offer, in this fast moving market for south Florida foreclosures, means all cash.

Written by Marc Jablon, Realty Associates
Email: marcjablon@yahoo.com / 561-213-6139
www.marcjablonhomes.com