Real Estate in Northeast Florida and Around the World

I've written on this topic before, and amazingly, even after 3 years of our real estate market and the news "drama" shows being dominated by the terms distressed sales, short sales and foreclosure, I hear customers confused by these terms.  I thought I would provide a little clarity around these terms and processes.

The term "distressed sales" also gets used as "distressed properties" and "duress sales".  This term refers to the nature of the sale.  The property owner is unable to pay the mortgage or must sell the property at a loss.  If the property is sold at a loss, the mortgage may or may not be delinquent. The two situations can be independent or related, but one does not necessarily mean that the other situation is present.  If you are interested in seeing a property that is in a distressed state, you will most likely be looking at properties that are either a short sale, a pre-foreclosure or a foreclosure.

A "short sale" is a term used when the house cannot be sold for an amount sufficient to satisfy the liens that are attached to the property, and the lender or lienholder must agree to accept an amount that is "short" of the amount due.  This can be mortgages, real estate taxes, HOA fees, etc. The tricky part of this type of a sale is that the only thing that you can count on is that the process will take an extended period of time, so all parties need to exercise patience.  If you are a buyer and have a definite timeframe that you need to meet to be in your new home, a short sale may not be the right transaction for you.  The terms of sale, after first being approved and accepted by the seller, must be approved by the lender.  And this goes for any subsequent lenders or lienholders, if they are being asked to accept an amount less than what their books show is due.  Each lender and servicing company has a different process, and these processes take time.  Sometimes weeks, usually months.  So patience is a requirement!  The seller may not be delinquent in their payments, so it should not be assumed that the seller is in financial trouble.  The seller may need to relocate for a job or other personal reasons, leading to the need to sell a house.

A "Pre-foreclosure" is when the seller of the property has been given notice that at some point in the future if certain terms are not met, the lender will foreclose on the property.  Most lenders file this paperwork early in the process just to have that step done.  However, there is no hard and fast rule as to how long the process will take, or when they will act.  I have seen some lenders go two years with no payments made on a loan and file nothing, and I have seen some houses with the foreclosure process completed in under 6 months from the first missed payment.  A pre-foreclosure can also be a short sale.

A "foreclosure" is where the lienholder, usually the lender but it can also be the Home Owner's Association, the local taxing authority or other governmental agency, obtains a court order to sell the property to attempt to recapture the amount of debt that is owed to them.  This is typically done auction style, and while it used to be done at the courthouse, today's foreclosure process is done many times online.  The thing to remember about foreclosure sales at auction - you have to have the cash available to buy the property, usually in no more than a week or so after the winning bid is cast, sometimes even less time is required.  Usually, properties unsold at auction will be placed with a real estate agent in the area to sell.

Buyers of these properties need to keep in mind, when people are unable to pay their mortgage payments, they may have also let maintenance of the house go.  There may be properties that seem to be priced below current market values, but you may end up putting the difference back into the house to get it to your personal tastes or standards, so you cannot automatically assume that all distressed sales are bargains.  Having a professional real estate agent who is a Realtor®, will help you get through the often confusing maze of houses that fall into this category.

Distressed sales in Northeast Florida have been selling rapidly in the last few months, and it is good to see these inventories dropping.  While we still have inventory levels that are above normal, the quarterly trend over the last year has been dropping in most of our neighborhoods.  So while it is frustrating to many sellers out there to have seen their property values decline, even those that are not distressed in nature, take notice that the drops are slowing and in some neighborhoods in Northeast Florida, we are seeing slight increases.  Multiple contract offers are common on well-priced properties.  Properties that are well-maintained also see multiple contract offers.  Again, these are indicators that our market is trying to stablize and reach a "normal" environment.  It won't happen overnight, but after a 2+ year period of craziness and frenzy in buying of real estate, the healing process will take a while.

I'm glad to see my neighborhood of Johns Creek in Northeast Florida is healing as well.  It continues to be one of the best selling communities in the area, with its proximity to J. Turner Butler Blvd, the Jacksonville Beaches, The University of North Florida and high rated schools.  If you are in my neighborhood, or one of the many wonderful neighborhoods in Northeast Florida, most likely you will find me there - so give me a wave, stop me to chat and I'll give you the latest on our market!