Before the bank forecloses on a home, they may allow the homeowner to sell the home for less than what is currently owed to the bank. BeiBei Zhang, a real estate professional, has bought many properties at a discount because they were listed as a short sale. Even though the mortgage lender receives less money than what is owed on the property, they still receive more than if the home or building were to proceed into foreclosure.
Requirements for a short sale
It costs more for a bank to foreclose on a home than for them to agree to a short sale. Still, BeiBei Zhang explains, they want to be sure the homeowner is experiencing hardship in not meeting the mortgage payments. After all, they will be losing some profit during the short sale, even when the home sells for close to market value.
But, once a property is foreclosed on, the bank takes possession, and the home is typically auctioned off to the highest bidder. The lender must approve the final agreement with the new buyer at risk. And, if a second mortgage has been taken out on the property, then both lenders must approve the short sale terms.
A short sell can take several weeks to several months to finally close.
BeiBei Zhang is a well-established real estate professional who lives in 12427 NW 63rd St., Coral Springs, Florida. With over 15 years of experience in the field, BeiBei has honed her skills as areal estate agent, property manager, and investor.
The benefits of a short sell
If you’re a homeowner considering a short sell, there are many benefits for you! The seller’s credit score will take less of a hit when they short-sell a property versus a foreclosure. So, this is one way to protect your credit score. Not to mention the emotional burden of losing a home through foreclosure. A short sell is much less mortifying.
There is also a financial benefit here. When you consider short selling your home, remember that the bank pays the real estate commissions and other fees (which can be between 3%-to-6% of the sale price) instead of the home seller.
But remember, as the home seller, you won’t be walking away with any profit because all the proceeds from the short will go to the lenders. Still, within a few short years of rebuilding your credit score and saving for a new home down payment, the person who sold their property in a short sell, can own another home much faster.
For real estate investors, short sales are an opportunity to buy property at a reduced price from a motivated seller.
BeiBei Zhang has been a real estate professional since 2007, with years of experience of buying distressed properties and flipping them for profit. Some properties she has acquired through short sells, and has kept them as rental properties. She currently owns 2 property management companies with over 200 units under her responsibility. BeiBei Zhang is also a professional real estate consultant, helping potential investors all over the country decide on the best real estate to buy, sell, and rent.
