Central Florida Foreclosures Frequently Asked Questions

 

People always come to me with their questions about the foreclosure process in Central Florida.  Below are most of the questions first time investor buyers ask me regarding bank owned homes.  Feel free to contact me if there is a question I haven't answered below at 321.285.9337 or jesse@smithrealtyinc.com .
What is a foreclosed home?
If a homeowner with a mortgage on their property fails to make payments on that loan, then the lender will file a law suite to take back the property for non-payment of the loan. This action is called foreclosure.

How long does this process take?
Generally, the homeowner's bank, mortgage company or lender does not file this law suite until the homeowner, the mortgagor, is three to four months behind in payments. Until that time, and even after the law suite is filed, the lender is doing their best to get the defaulted homeowner to make good on the loan. From the first filing, until the final judgment when the court orders the home to be auctioned on the courthouse steps typically takes just a few months. However, it is not unusual for complications such as bankruptcy or a death of one of the defaulted homeowners to drag this process out even longer. This is why it can sometimes be a year or more from the time you noticed a home abandoned until a Realty sign is posted on the property.

What is the auction, can I go?
Once the foreclosure court issues a final judgment in favor of the bank or mortgage company, the home is to be auctioned on the courthouse steps to satisfy that judgment. All monies received at the auction are applied and paid to the first mortgage, then any remaining monies are paid to the second mortgage or any other parties with liens on the property. Finally, if there is still any money left it would go to the homeowner that has just been foreclosed.

This auction is public and held on the courthouse steps by the clerk of the court. You can bid on the property.

What generally happens on residential property is the bank holding the first mortgage will lead the bidding. They have to bid to protect their investment; otherwise you or I could purchase the home for next to nothing. For example, Mortgage Company "A" is holding a $100,000 mortgage they have just foreclosed. They will bid the $80,000 to $100,000 owed to recapture as much of their investment as possible.

If no one bids against the mortgage company, many times they will bid as little as possible to avoid paying Florida Documentary Stamps on the Deed, or known as a deed transfer tax in other parts of the country.

How long do I have to pay for the property if I buy at the Courthouse?
Courthouse bidders are required to place a non-refundable cash deposit of 10 percent of the purchase price immediately upon being the successful bidder for the property. These funds are paid to the Clerk of the Court. They have seven calendar days to pay the full balance of the property.

Can’t I get a better deal purchasing at the Courhouse?
Sometimes, but not often. In today’s market, there are generally in excess of 100 people bidding on foreclosed properties at the courthouse steps. Auction fever is common and veteran courthouse observers often shake their head in amusement at the prices being paid for some of the properties. Furthermore, properties purchased at the courthouse steps do not have title insurance. If there are any problems with the property title it becomes the buyer’s headache and expense to clear the title.

How does the mortgage company determine their sale price?
Once the mortgage company or bank receives title to the property they will contact Smith Realty to begin marketing the property. We will give them our opinion of value for the property in its present condition as it sits, and our opinion of the value of the home if it were put back into tip top shape. Most often, the bank or mortgage company will also have the property appraised by a licensed appraiser. Nearly always, pricing is based on market value.

When the property is in poor condition does the bank know how bad this property is?
Yes, always.

First, the Smith Realty salesperson provides the bank with at least 40 to 50 pictures detailing any and all damage and the appraiser will do the same.

Second, Smith Realty will also obtain estimates for the bank or mortgage company to restore the home back into top shape. If needed we are required to obtain roof inspections, termite inspections, central heat and air conditioning inspections and estimates for repair, etc.

Does the Bank or Mortgage company repair properties?
Many do. In recent years, over half the properties we market for banks and mortgage company's are repaired and refurbished. Generally, repairs are cosmetic in nature, paint, carpet, regrouting of tile, replace a torn screen, a cracked window, or a mirror in which the silver backing is coming off, and reconditioning of appliances. If needed roofs are replaced or other major components might be replaced.

In the refurbishment process, the Seller will not put tile down where there was vinyl flooring. Nor will the bank convert a partially converted porch, but more than likely return it to a porch.

When the bank repairs a property, they will utilize only appropriately licensed contractors.

How does the bank determine whether to repair a property?
Determination is based upon their market data and the actual cost of repairs. If the bank feels that they will recapture their repair costs, or significantly reduce their time on market they may choose to refurbish the home.

Can I still buy the home AS IS?
Up until the bank orders the repairs, you can still make an as is offer. Once the repair process begins then it is too late as materials and labor have been contracted.

The key here is the value of your offer. For example, if the bank plans on selling the home for $100,000 with repair costs of $7500, they will not sell it to you for $75,000, but they might sell it at $85,000 to $90,000. In other words, they might discount the price of the home some for a quick AS IS sale, but they will not give the home away.

Doesn't the Bank or Mortgage company want to get this home off their books, after all, they are not in the real estate business?
Absolutely. However, as a rule of thumb, for every $3000 they reduce the price, they can keep the home another 30 days. Furthermore, it is our job to keep the Seller informed of current market conditions. They know it is a Seller’s market. In essence, they know that once the property is repaired, they are likely to get their price within 60 days.

Some properties are not repaired, why?
Not all banks and mortgage companies repair their foreclosed homes. Some prefer to sell them AS-IS. Sometimes, even a bank that repairs properties will choose not to repair a particular property due to other factors.

Are properties sold on a bid basis like an auction?
If the home is to be sold on a sealed bid or auction type basis, the information sheet on this web site or the MLS listing will indicate it is to be sold in this manner.

Generally, its like buying any other home in the neighborhood. You will write an offer with a Smith Realty agent or your own Realtor using the appropriate contract form and any addendums if necessary, and we will submit it to the Seller. They will negotiate only with you unless we have more than one offer on the property, what we call a multiple offer situation.

What if there is more than one offer on a property?
Multiple offers on a property are a common occurrence. When this occurs, all offerers will be requested to submit their highest and best or final offer by a certain date and time. The bank seller will take best offer and accept it, give a counter offer, or reject all offers.

If you have submitted an offer on a property along with other buyers, once you are notified of the multiple offers, submit your best offer for the property. Your best offer is the value in which at one penny more you do not want the house...but at one penny less you would have been mad at yourself for not having offered more. Frequently we hear, "I would have paid more if the Seller would have given me a counter offer." In a multiple offer situation, you may not get that counter offer because another buyer is offering more for the home.

More than likely, in a multiple offer situation, the home will sell above the Seller's asking price. In recent months, due to strong market activity, some properties have as many as seven or eight offers within 12 hours of listing, and the property will sell at $1000 to $10,000 over Seller's asking price.

Are there any Seller Defect Disclosures for the property?
None. The Seller has never lived in the property and therefore can not disclose what it does not know. There is no former occupant we can contact to obtain information about the home. Generally, unlike a corporate relocation home, the bank Seller does not obtain an inspection of the home.

In those instances where the bank Seller has performed an inspection of one or all components of the home, we will provide you copies of the bank's inspection for informational purposes only. For example, if we have been required to obtain a termite or wood destroying organism inspection we will provide you with a copy once an offer has been received and before a final contract is negotiated. If we have inspections of the roof, air conditioning, or other components of the home, we will provide those once an offer has been received but before a final contract is negotiated.

These inspection reports should not take the place of you the buyer retaining your own inspector.

Is the Seller Negotiable?
This really depends on the bank that is selling the home. In the past year, we are finding that most banks do not have to negotiate or accept an offer lower than their asking price because there are buyers ready to give them their asking price. There are situations where a home may not be receiving market attention (i.e. it is on market more than 60 days and not sold) and then the Seller is likely to be negotiable.

In the end, it is really no different than buying John and Jane Doe's house. If you want to make an offer the day they put their home on the market they are not likely to be negotiable. If you find their home after it has been on market a few months you are likely to find them negotiable.

Will the Seller pay closing costs? Can I ask for repairs to the property?
Corporate sellers are generally bottom line oriented. In other words, they are looking at the net sale to the company. For example, if you are offering $100,000 on a property and requesting $3000 in closing costs, then to the Seller it is a $97,000 offer.

Most Bank Sellers only like to perform those repairs necessary for your loan to be approved. An amount must be negotiated into the contract at the time of offer. If no repair provisions are negotiated at the time of offer, and your lender requires repairs to the property, then the sale price will have to be increased to cover the cost of those repairs. You will not be allowed to go into the home to do repairs prior to closing. Only the Seller's licensed contractors will be allowed to perform repairs to the property.

How do I make an offer ?
Once you determine you wish to make an offer you contact your Smith Realty associate or your Realtor. At the time of offer you must provide a Mortgage pre-qualification letter or pre-approval letter, it must be on the correct contract. Once we have received the correct documents, your offer is submitted to the Seller in a format the Seller has instructed us to use.

To the corporate Seller, there is not any personality to the offer. Quite frankly, they are just looking at the numbers.

Can I submit a Letter of Intent?
No. Letter’s of Intent are not given any consideration what so ever. When we receive a Letter of Intent, the Seller is notified of the Letter as we are lawfully required to “Submit all Offers.” However, that is as far as it goes, as currently all of the corporate Seller’s we represent instruct us not to present any offers that are not properly written as detailed here.

How are negotiations handled?
Once you have determined you wish to make an offer on a bank owned home, you instruct the Smith Realty agent (or your own agent) to write the offer. The offer is then presented to the Bank Seller. The Bank Seller will give us a verbal acceptance, counter offer or rejection.

In the case of an acceptance or counter offer, this is verbal from the Bank to Smith Realty and is transmitted verbally to you. All negotiations are conducted verbally until a final agreement is reached between you and the Bank seller. Once that agreement is reached either the original contract offer is amended or a new contract is prepared containing the agreed upon terms. You the Buyer will sign or initial the contract and then the copy with your original signature is sent via overnight mail to the Seller.

It will take the Seller anywhere from three (3) to seven (7) days to sign and return the fully executed contract to us.

I am an investor purchaser, why am I being told my deposit is non-refundable?
Through the years, several of our corporate clients adopted a policy towards investor purchasers, in essence removing financing and inspection contingencies. This in essence makes the investor purchaser’s deposit non-refundable. This is due to several reasons: 1. The market is so strong there are generally multiple offers. In accepting the best offer, they will be losing several other buyers if the first buyer fails to close. 2. It is a case of one or two bad apples ruining it for every one. Specifically, some investors do not take the time to see the property until their offer has been accepted. Then they want to use the inspection clause to cancel the contract. This is to eliminate offers in which the buyer has not seen the property prior to offer.

Finally, the Seller presumes that as a Real Estate investor you are more knowledgeable than say a person purchasing their first home they plan to use as their residence. As an investor, you have your financing in place, you are able to determine cost or repairs and based upon your visual inspection and can anticipate what repairs are not readily observable and plan accordingly.

When Do I finalize my loan application and begin my inspections?
Once all terms are verbally accepted by you and the Seller you must finalize your loan application and begin your inspections. Do not wait until the signed contract is returned from the Bank Seller. Also, if you are obtaining financing your mortgage company's appraisal must be completed during the inspection period defined in the contract.

Why is there a charge for a Late Closing?
In nearly every instance the corporate Seller will have a clause in their addendum that states if the sale does not close upon the agreed upon close date, buyer agrees to pay a per diem of $50 to $200 per day for each day the contract is extended. For example, if the contract close date is January 3, and you need until January 8 to close you will be charged $500 to $1000 in addition to the contract purchase price. The per diem charge generally includes weekends and Holiday’s.

The reason for the late charge is that when the bank accepts your offer price it is based upon a specific close date. If you fail to meet the close date, it costs the corporate seller to hold the house. They are passing that cost to you.

Do Cash Buyers Obtain Better Deals?
Yes and No. The close date is more important than the means the buyer is paying for the home. For example, a cash buyer that needs thirty days from contract to closing is not as desirable as a financing buyer that can close within 14 days. Furthermore, many cash buyers are really obtaining financing. They are just making an offer without a financing contingency. Remember, we are required by the corporate seller to verify the means and the buyer’s ability to pay for the home. Financing buyer’s should instruct their mortgage broker to provide the strongest letter of pre-approval.

 

 
 

 


Beware and Be Aware of "We Buy Houses"


Be wary of individuals that will offer to take over your payments.  If one of these people contact you, feel free to contact me at jesse@smithrealtyinc.com or 321.285.9337 and I will tell you if they and their offers are legit!
 

You probably have seen their billboards, "we pay cash for houses!".  Some even have websites.          

If they offer to give you nominal amount of money to take over your payments and all you have to do is sign a quit-claim deed, then you are not being released from your obligation to your mortgage company. Your mortgage company will continue to call you seeking repayment of your debt.  The mortgage company will continue to foreclose on the property

Not all of these "We pay cash for houses" buyers are scam artists.  But many are.  Some really will pay cash for your house.  But unless they or you successfully negotiate with your mortgage company for a lesser amount,  they will have to pay you a sufficient amount of money that you can pay off any and all of your liens.

If you do not receive a satisfaction of mortgage at closing, if your buyer does not want or demand title insurance, then in all probability you are dealing with a scam artist that will take possession of your home for a few dollars while your credit is still ruined.

 

 

 

 

 


REO, BPO, and Foreclosure Representation

Smith Realty, Inc. and Jesse Smith are leading sellers of Bank and Corporate owned real estate (Foreclosures). These institutions choose Smith Realty, Inc. and Jesse Smith because we provide the utmost in professional service to each and every one of our clients. My knowledge of Central Florida real estate will enable you to buy or sell with comfort and confidence.  Call me today!

Smith Realty, Inc. has represented bank, mortgage companies, and mortgage insurance companies for over 13 years.  In the past 13 years we have closed over 1200 Central Florida bank owned foreclosures.  If you would like our list of clients and/or our business references, please call me at 321.948.9486 and I will be happy to discuss our qualifications with you.  We can service and represent your REO needs with quick precision and expertise!

We take care of your REOs from the time you fax, call, or email us.  We take care of the preliminary BPO (free of charge), changing of locks, trashouts, securing any entry points, and resolving any safety hazards just to name a few things.  We are also one of the VERY few offices that will market every one of your REO to the fullest which includes the MLS, seven heavily trafficked websites, postcards to every neighbor in town, signage, and even open houses!   Now really, how many REO brokers can say THAT?

 

Testimonials:

"Jesse,
These are the best BPO’s I have seen in a long time. I’m not kidding. You have done a fantastic job! Your comments are wonderful, your market analysis, your comps are all right on the money. 
Your BPO’s will make good examples for those who don’t quite get it.  Are you this good at listing properties?

Thank you very much." - Integrated Asset Services

"You do a great job for us and I'd rather have you take care of it then searching for someone else we're not familiar with." - Old Republic.

"I don't mind you using me as a reference, I will have plenty of positive feedback for you.  You have always done a great job for us through the years." - HSBC

"Thanks Sir! Keep up the great work. I say nothing but good things about your office and staff! - Atlas REO

Jesse:  As always, you are the best! Really appreciate how you jump in and get things resolved.  Thanks a bunch! - Old Republic

 

 

Call us today to represent your assets!

Jesse Smith
Broker - Owner
Smith Realty, Inc.

"Expect Great Service"
321-285-9337 office
www.smithrealtyinc.com

 

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