Buying a Foreclosure? Read This First
– A Road Map to Success

In today’s real estate market there are several ways of getting a deal. Given market conditions, there are various ways of buying real estate under market value; one of them is buying a foreclosed property, also known as bank-owned or REO (real estate owned). There are also several other different ways to spot a deal including taking a close look at Resales and Developer Sales.

In the paragraphs below we have outlined a few tips on how to approach the foreclosures buying process, as it is considerably different than when buying a resale. The transaction itself is not so different but the approach and search is. We have also outlined other ways to find the best real estate deals in Miami.

The first thing you need to do is contact a Realtor that has closed a number of foreclosures and can guide you on what to expect. Also he must be well versed on the different areas of interest. Another important reason to contact a Realtor is that they have access to the MLS (Multiple Listing Service). This is different than what consumers can access on the internet. Consumers are able to access certain MLS feeds, most feeds get updated weekly and in buying a foreclosure that is old information. Also sites like show you information on homes that have become delinquent with their mortgage and are in risk of foreclosure and that information is very premature since the process to foreclose can take up to 18 months.

Why Are You Buying?

Primary or Secondary Homes – If you are looking to buy a home to use as your primary or secondary residence, location becomes a priority. Most neighborhoods only have a couple of foreclosures at a time and they quickly get sold. This is what you should do:

Ask your Realtor to send you a list of all REO or Foreclosed homes in the neighborhood you are searching, and see if some work. If not,
Ask your Realtor to put you on an alert on the MLS (Multiple Listing Service) since your Realtor should have access to this. Depending on the neighborhood, foreclosures get released sporadically depending on when the banks get through the foreclosure proceedings. BE PATIENT. If you don’t have time to wait, then,
Ask your Realtor to get you a list of homes that are priced well on the resale market. (and not necessarily foreclosures?)
Buying to Invest – If you are buying for investment purposes and are flexible on location you will have several more options, but it will be important to be specific about the criteria you are looking for.

What to do

Give him/her an approximate budget such as $200,000-$300,000, instead of anything under $500,000 or anywhere between $200,000- $800,000. These ranges are too large and property will vary tremendously.
Be as specific as possible with what type of property you want: are you looking for a single family home, a studio or a large luxury condo? Communicate this to your Realtor so that he can take your business objectives and use your time as effectively as possible.
Be clear, but realistic on what expenses you expect to carry and what kind of income you are expecting to return. Due to SEC regulations, Realtors are restricted to talk about ROIs, however they can get you information on carrying costs for the real estate as well as rental rates for the area.
Ask for options: If the property that you are looking for doesn’t exist in a particular neighborhood, ask your Realtor to scope similar foreclosed properties in other neighborhoods.
Cash is King

When buying a foreclosure cash is king. Although financing is possible, consult with your Realtor whether it is realistic to submit offers to foreclosed properties with a financing contingency. It will depend on the area. For example, in Miami-Dade County foreclosed properties are receiving dozens of offers within days of being listed, and banks will have to choose one out of many offers. Most of the time they will pick the highest cash offer that comes in. In most cases most offers for foreclosures are cash, so even if you submit a full price offer with financing, most likely someone else will win the bid for the property.

When writing the offer, consult with your Realtor on what he thinks of the asking price. If the price is below market value and the home is getting heavy traffic offer full price and a quick closing. Banks will pick your offer over anything under listing and will choose your contract over anybody else’s, closing in 30-45 days.

Alternatives to Buying Foreclosures

Developer Sales

If you haven’t had great luck with a foreclosure don’t give up on finding a grea investment. Ask your Realtor if the area has Developer Selling Out inventory. In Miami-Dade County for example, many developers renegotiated their loans with the banks and they were able to discount properties to up to 50% from preconstruction pricing, to compete with the foreclosure market. So many people flocked to what are called developer sales and purchased the inventory at foreclosed prices. The benefit… not only did you get a property at foreclosure price, you got a brand new unit, in a brand new building with a one year warranty.

Short Sales

Short sales are very tricky and not for everyone. It is important to know what they are and if they fit your needs. We strongly believe they should be the last resource after 1.Foreclosures 2.Developer sales, and 3.Resales.

Short sales or pre-foreclosures are when the bank has not yet formally foreclosed on the real estate. The seller decides to sell the property at less than what he owes the bank and cannot come up with the difference (deficiency). Therefore the sale needs to be approved by the bank. In most short sales the process can take over a year. In most cases the banks will start the process at the time there is an executed offer by the buyer and seller and they will give you an answer of whether they approve the sale in 6-8 months.

For a current list of available foreclosures in your neighborhood
please email Christian


Foreclosure Statistics
for Miami-Dade County as of July 26, 2011

Total number of listings in the
MLS: 16,027

Total number of foreclosures in the MLS (homes and condos): 742

Number of foreclosed Single Family Homes by Price range:

Total available foreclosed Single Family Homes
Under $100,000: 155 (40%)
$100,000-$200,000: 135 (35%)
$200,000-$300,000: 57 (15%)
$300,000-$400,000: 17 (4.5%)
$400,000-$500,000: 9 (2%)
$500,000 and up: 13 (3%)
Number of foreclosed Condos and Townhomes by Price range:

Total available foreclosed Condos and Townhomes
Under $100,000: 177 (50%)
$100,000-$200,000: 92 (25%)
$200,000-$300,000: 43 (12%)
$300,000-$400,000: 19 (5%)
$400,000-$500,000: 9 (2.5%)
$500,000 and up: 19 (5%)
As per the above data, 75% of the foreclosure market takes places in the market below $200,000. Also important to note the following trends:

In the last 90 days there have been a total of 2225 foreclosures that have closed (successfully sold) at a pace of 741 sales per month in Miami-Dade County
There are a total of 742 foreclosures available
currently, and Miami Dade County is averaging 741 sales per month

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