ORLANDO — During the height of the national recession, which battered Florida’s economy, the Sunshine State had the sorry designation of being one of the nation’s top “foreclosure states.”
It was a difficult time, as far too many homes fell into foreclosure when the owners were unable to keep up with the monthly mortgage payments.
Today, the real estate market in Florida is once again booming, and the word “foreclosure” rarely gets mentioned. These days, buyers and sellers are far more likely to be talking about other issues — limited inventory in highly desirable locations, rising prices, and those rock-bottom low interest rates that can make a home purchase so appealing.
That doesn’t mean there are no longer foreclosed homes in Central Florida being put up for sale or action by the financial institution that claimed it — although the market has improved so significantly that foreclosures and short-sales (where a distressed owner offers to sell their property at a competitive price below what they owe on their mortgage in the hopes of quickly attracting a buyer) no longer dominate this market.
Foreclosures have long been an appealing option, particularly to investors. It’s clear to many investors, for example, that the banks and financial institutions that foreclosed on the property are eager to sell it, and prices are often below market value — or at least they were when the housing market was still falling, and less so today.
Many investors have seen the opportunity to buy a distressed home at a lowered price, fix it up, and then “flip it” — or re-sell it at a higher price for a tidy return on their investment.
Other investors may see the opportunity to buy into Orlando’s real estate market, which is clearly on the upswing, at a desirable price that will pay off in the long run.
An Flamand, the owner and broker at An Flamand-Orlando Vacation Realty, is an expert in matching foreign investors to properties in Central Florida. She cautioned those buyers that not all foreclosures offer the potential for a good return on their investment, and it takes the expertize that a Realtor like Flamand has to be able to guide buyers to the smartest choice.
As Flamand noted, there are several critical factors to consider before attempting to buy at foreclosure auctions.
“Even though foreclosures may seem like a good deal at times, always know that there are some disadvantages,” she said. “Including the surprises you may get with the purchase.”
First, Flamand notes, more than a few foreclosed homes have ended up in terrible condition by the time the banks completed the foreclosure process. Owners and tenants alike have been known to badly trash the property, sometimes taking everything they could, including toilets, sinks, and overhead fans.
For a foreign buyer, “You have not seen the inside of the home,” Flamand said. It’s important to consider the condition of the property and how much money will have to be invested in it to make it livable again.
Second, foreclosure auctions serve one purpose for the banks: to unload the property as quickly as possible. For the buyers who look only at the price but not at the home’s condition or location, this can be a major risk.
“If you buy fast, you do not have time to evaluate or think through all expenses or scenarios,” she said. Some foreclosed properties are in locations where prices are either flat or falling, and do not offer much appeal to prospective tenants or future buyers if the investors want to flip it.
In fact, foreclosed distressed homes are often in distressed locations — another reason why the bank is so eager to use an auction and low sales price to quickly get rid of it.
Another problem that investors often face, Flamand noted, is that sales can sometimes be delayed for weeks or months if there is an issue over who has the title to the home — a common problem in foreclosure sales.
Depending on the property, “You probably won’t have a clear title when buying,” she said, particularly compared to a non-distressed sale.
At this point, it becomes a legal headache for the bank and the buyer, and is placed into the hands of lawyers. Until the legal issues are solved, the sale remains in limbo.
There’s no question that some investors are been able to turn Florida’s foreclosure mess from lemons into lemonade, buying properties that are in poor condition, and then improving them to the point where a resale is profitable.
But that hasn’t been the case in all situations, Flamand noted, and some investors who didn’t do their homework have sadly discovered that their investment may never pay off.
Foreclosure auctions may sound appealing, she said, but in an improving market, there may be much smarter choices — particularly for those investors who seek out the guidance and expertise of a professional Realtor.
Michael Freeman is an Orlando journalist, playwright and author of the book “Bloody Rabbit”. Contact him at Freelineorlando@gmail.com..