House hunters looking to buy a foreclosure in South Florida often discover they are getting outflanked by the pros: investors wielding cash.
“If you don’t have cash, or you’re looking for financing, you can’t play in the distressed arena,’’ said Doug DeWitt, owner and broker at Concierge Real Estate Services in Miami Beach, who markets bank-owned properties for some major lenders.
When a bank-owned house in the Hammocks in West Kendall went on the market in late April, the 3-bedroom, 2-bath villa drew 29 purchase offers and 60 showings over a 10-day listing period mandated by the bank. The asking price was $159,900.
The lender narrowed the field to the all-cash buyers, who were told to make their highest and best offer, and the house is now under contract.
“It went for well above asking price. They all do,’’ said DeWitt, who is the listing agent. “I have one happy buyer and 28 people I sent on their way.’’
DeWitt said he feels sorry for the first-time buyers and other house hunters looking simply to finance the purchase of a home they plan to live in.
“The banks need to move these properties. The cash offers weren’t low, they were right in line,’’ DeWitt said. “If you can take the [uncertainties of] the appraisal and inspection out of the parameters, your chance of closing goes up substantially.’’
To be sure, homebuyers still can ferret out opportunities to purchase distressed properties. Fannie Mae, for instance, offers financing with low down payments and no mortgage-insurance requirement on select Fannie Mae-owned homes under its HomePath mortgage program.
“On some of Fannie Mae’s foreclosed properties, Fannie Mae is putting them back on the market and offering up to 97 percent financing,’’ said Ray Barkett, regional vice president and district sales manager at Keyes Realtors in Fort Lauderdale.
Another option, Fannie’s HomePath mortgage renovation program, even provides funds to fix up rundown foreclosures.
One of the top worries during the real-estate crash was that the housing market would take another nosedive when lenders dumped a slew of distressed properties on the market. So far, that simply hasn’t come true. Lenders have managed the flow of properties onto the market. Indeed, many real-estate agents are clamoring for more such inventory in South Florida, where the inventory of homes and condos for sale has plunged to its lowest level since 2005.
“There is definitely an increase in REO [bank-owned] inventory,’’ said Dewitt, “but the whole theory of shadow inventory dragging down the market has proven completely false.’’
Victor Gonzalez, a Miami real estate investor who bids on foreclosures at Miami-Dade county’s cash-only online courthouse auctions, said banks have gotten more aggressive in bidding on properties they have foreclosed on, rather than letting them go at discounts.
“It’s getting very competitive again. Prices are going up,’’ Gonzalez said.
Even in auctions where lenders don’t take back properties themselves, competition is keen from institutional buyers like hedge funds and investor groups created to snap up distressed properties, Gonzalez said.
And the process is fraught with uncertainty. Scheduled auctions of homes often get cancelled at the last minute for a host of reasons, such as a lender’s decision to go with a short sale.
Those bidding at auctions need to know how to search records for liens. Even so, they can’t be sure how much is due in homeowners’ association or condominium fees. “I research 20 or 30 properties before bidding on one,’’ Gonzalez said.