Hubzu displays affordable properties for buyers looking for high returns in a real estate investment. Short sales are one of the many types of listings that buyers can find in our real estate auction marketing platform. So, what are they exactly? Here’s the short and sweet breakdown.
A short sale occurs when a lender is willing to accept an offer that’s less than the total amount owed on the mortgage. Let’s say a homeowner can’t make their mortgage payments and needs to sell their home quickly — they may accept a $75,000 offer, even though they have a $100,000 mortgage balance. The sale will come up $25,000 ‘short’ of what’s owed, but the lender typically agrees to this to recoup as much of the mortgage loan as possible.
Benefits of a Short Sale
Short sales can be beneficial for all parties involved — sellers, lenders and especially buyers. Due to the seller’s urgency of selling the home quickly, buyers have the advantage of purchasing a home or investment property at a great price. Plus, these properties often qualify for financing and are usually available for showings, so the buyer can take a closer look before signing on the dotted line.
Short sales are favorable to sellers, because they can avoid foreclosure, which can cause major damage to a homeowner’s credit and lead to several financial roadblocks. Plus, buying a home in the future will be easier without having a foreclosure hit their credit. It’s also important for sellers to consider deficiency judgment. This is when the lender gets a court order to regain the money they lost in the short sale after it ends by placing a lien on the seller. However, there are states that outlaw deficiency judgment after a short sale, so sellers should remain informed to avoid future surprises.
Why would a lender agree to accept less money than what’s owed on the loan? For one, there’s no guarantee that the bank will sell the foreclosed property and recover all of the money owed on the mortgage. Plus, foreclosures can cost a pretty penny for the lender due to the costs associated with listing and selling the home. They’re also responsible for maintenance and repair costs while the home is between owners. With a short sale, the lender avoids these fees and can get back a high percentage of the remaining balance of the loan.
How to Buy a Short Sale Property
Step 1: Start your search
Create or log in to your free Hubzu account to get started. Once you’re in, filter your search by ‘Short Sale‘ to find relevant properties, and favorite the ones that catch your eye. Each auction has its own timer, so once you start receiving updates on your favorites, take note of the time the auction starts and ends.
Step 2: Evaluate the Property
Most short sales allow buyers to inspect the property, so before entering the auction we’d suggest taking a close-up look at its condition. This way, you can estimate costs for repairs, if any, and have a greater understanding of the lay of the land.
Step 3: Do your research
Find out what the property is worth and how much you will profit from purchasing. It’s also important to ask the seller about all the liens and mortgages on the home and confirm the information through a title search.
Step 4: Place Your Bid
At the beginning of the auction, place the bid deposit (a hold that is temporarily placed on your credit card to verify that you are a serious bidder intending to purchase the property). And now, it’s time to start bidding.
Step 5: Seal the Deal
If your bid is selected and approved by the seller and servicer, congratulations, you’re almost there! You and the seller will need to review and sign a purchase agreement and then the offer will be submitted for final short sale review by the servicer.
The servicer will then obtain any necessary investor or mortgage company approvals and provide a short sale approval letter, which will display the terms of the short sale for all parties to review.
The hold for your bid deposit will remain until Hubzu receives confirmation of your earnest money deposit. If the earnest money deposit is not provided within the required timeframe, the hold will be converted into a charge on your credit card.
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