Many aspiring investors call Realtors every day declaring, “I’d like to buy some short sales and foreclosures in Miami.” The problem is that many of these “newbie” investors don’t really understand that there isn’t necessarily any more investment value in a short sale or a foreclosure versus a traditional sale, solely based on the fact that it falls into that category.
Lenders, who ultimately set the price in a short sale and often in a foreclosure, are just as likely these days to overprice a property in anticipation that there will be a frenzy of buyers and appreciating home prices, as are traditional sellers in this market. Home values and prices have been increasing in Miami-Dade County for approximately the past four years. As a result, these investors have either “missed the boat” or scramble, sending their Realtor about looking for today’s deals at yesterday’s prices, which may not be as readily available as they once were.
But what about those property owners that are not investors?
We all remember the days, circa 2009, when all you would see, hear and read about was the collapse of the market and the proverbial, financial end of the world. Among a plethora of other concerns was the question of, “What will happen to the value of my home with so many of my neighbors losing or strategically walking away from their homes?”
Fast-forward to 2015, which is just about five years past the 2010 bottom of the market, according to the 35,000-member Miami Association of Realtors. Now, many homeowners are left asking: “Where do we stand?”
Many homes are no longer under water due to countywide increases in home values. With the increase in home values, the number of foreclosure filings and bankruptcy filings have been reduced, resulting in short sales tapering off. Short sales have decreased 33 percent for single-family homes, and 52 percent for condos and townhomes from this time last year.
In 2013, we saw the passing of SB 1666/HB 87, a “Foreclosure Reform” statute passed by the Florida House and Senate, effective June 7, 2013, which had a number of intended results, some of which came to fruition and some of which did not. The measure was aimed at reduced foreclosure processing times to free up the glutton of foreclosure backlogs in the courthouse as well as reduce the amount of time a lender can pursue a homeowner, who has been foreclosed upon, for a deficiency.
For homeowners not in this situation, it means that there should be fewer vacant and rundown homes sitting on the market in your neighborhood. Much of the foreclosure inventory has already been scooped up by investors and first-time homebuyers who were priced out of the market before the crash or decided to sit on the sidelines until they were confident in the future of the Miami real estate market’s recovery. This pent-up demand and low prices have contributed to the buying frenzy of the past few years.
So what does this mean for the average Joe or Jane who owns a home in Miami?
To analyze and examine the threat of foreclosures next door to you, we must look at the known and unknown factors. One of the unknown factors is the all-too-mysterious “shadow inventory.” This was a term coined by clever marketing folks to instill fear and exacerbate the doom and gloom of the real estate crash. It refers to the quantity of homes that banks are, for reasons unknown, holding back and not placing on the market after foreclosing. The problem is that there is no real evidence or meaningful statistics to back the claims that these homes exist in a quantity large enough to impact a regional, local or neighborhood-sized market.
Another unknown: your neighbors’ inclination: Will they contact a Realtor for a short sale if they are in trouble? Or will they take the infamous “ostrich” approach: stick their heads in the sand and let the home go into foreclosure? A short sale is better for everyone for several reasons. For example, many times, the owner still occupies the property, meaning it will at least remain habitable and have a level of upkeep versus an abandoned and sometimes purposefully damaged foreclosure.
As of late, short-sale lenders have been more responsible with their processing of short sales and offering favorable results to the homeowners vs. a foreclosure. Also, in many cases, they offer the homeowner who cooperates with short-sale relocations funds. The standard award has been $3,000 plus a waiver of deficiency; however, we have gotten our clients awarded as much as $30,000. The standard award is rumored to soon be increasing to $10,000 for Home Affordable Foreclosure Alternatives (HAFA)-qualifying home sellers.
As for the known factors: No market can outsmart supply and demand. It is crucial to stay in contact with your local Realtor, not only during a purchase or sale, but to supply you with local market info. Supply and demand of inventory is the largest indicator of whether your particular neighborhood will continue to increase in value, is in balance, or is in danger of declining in value despite foreclosures or short sales next door.
Ask your Realtor to provide you with an ongoing report of how many homes are on the market versus how many homes are being sold per month as well as the average days on market. The more specific to your neighborhood, the better. But in all of Miami-Dade, there was an average of 1,117 single-family homes sold per month in the past 12 months and 6,365 homes active on the market in November. Theoretically if no new homes came on the market, it would take 5.7 months to sell that entire inventory.
As a rule of thumb: A six-month supply of inventory is a balance between buyers and sellers and the sign of a stable market. Inventory of five months or less is a sign of fewer sellers than buyers — making it a seller’s market that has an increased demand for inventory and assumably increasing prices in the near future. Seven months or more of inventory indicates more sellers than buyers, making it a buyer’s market with more homes on the market than buyers and assumably decreasing prices in the near future.
The Miami Association of Realtors arms all of its Realtor members with the tools necessary to provide all of this and much more market data. Contact a Realtor today to find out what is happening in your neighborhood.
Carlos Gutierrez is principal Realtor of Gutierrez Group Miami Real Estate at Keller Williams Miami Beach. He is 2016 president-elect of the Miami Association of Realtors-Residential Board.
Realtors may submit columns for Broker’s View of 700 words to businesseditor@MiamiHerald.com. Questions, email rclarke@MiamiHerald.com
Foreclosure filing in Miami-Dade
Foreclosures declined dramatically from 2013 to 2014. This is how many foreclosure filings there were in each month in the two years:
SOURCE: MIAMI DADE CLERK OF THE COURTS
Monthly market summary in Miami-Dade
New pending sales
Median sale price
Average sale price
Median days on market
Avg. percent of original list price received
Inventory (active listings)
Months supply of inventory
SOURCE: MIAMI ASSOCIATION OF REALTORS