Florida foreclosures and short sales are a new phenomenon in the Sunshine State, which has really seen nothing like the rate of foreclosure that it has over the last year or so. Keep in mind that Florida is extremely populous and that property and home ownership speculation has gone on for years down there. Unfortunately, late 2008 saw a huge drop in the real estate market followed by increasing numbers of foreclosures.
Reasons for this sad state of affairs down in Florida are varied, of course. Like much of the country, many people were investing in short-term turnarounds where a property would be bought (and either improved or sat on for several months) and then sold for a tidy profit. In many cases, these investors were taking the property and obtaining loans on it to invest in another property, which is known as leveraging.
Much of what went on in Florida was known as flipping, which is a colloquial term for buying a property, sitting on it a short while and then trying to unload it at a nice profit. However, when the market began its deep dive many of these flippers were caught out sitting on properties that they now cannot afford for many reasons, including loss of their own income in this deep recession.
Of course, it was inevitable that these investors and even the average homeowner, who’d bought a property on a short-term adjustable rate or “interest only” mortgage with the expectation that they’d be out of the home with a profit before their payments adjusted upwards, would be caught in a vise of their own design. Their monthly payments skyrocketed in some cases, and banks began to act as banks do with poorly-performing mortgages; they foreclosed.
In order to avoid the prospect of foreclosure, though, some flippers and homeowners looked to the short sale as a way to get out of the home (and the mortgage) without resorting to the drastic step of foreclosure. Doing so would help them avoid a huge hit to their credit scores, for one, and many lenders — on the theory that it was better to get at least a below market rate rather than a hugely below market rate — agreed to allow short sales.
At its most basic, the sale — undertaken only after the lender has given its permission — allows for a homeowner or investor to test what the market will pay for the home rather than trying to sell the home to at least get what is owed on it. Currently, median home values in the Florida market have declined, in some instances, by about 40%. The bank will take what it can get and usually forgives the rest.
The rate of Florida foreclosures appear to have stabilized at the moment, though many economists believe it will still continue to climb as the broader economy continues to experience an economic slump. With many homes in the state’s home inventory in danger of foreclosure, a savvy and well-funded investor may actually be able to do something in the market, if he or she has the guts.
What to know about FL foreclosures and short sales can come in handy in these trying and fiscally-challenging times. We have got the best inside scoop on fl foreclosure properties.