As a home buyer looking for a value in the purchase of real estate you may consider a "short sale" as a viable option. However, the process of finding and buying a Portsmouth NH short sale is not the same as a typical real estate transaction to which you may be accustomed. Short sales have received a lot of press over the past two years during the contraction of the US economy, however many real estate professionals and most prospective buyers do not understand the process of buying a short sale property.
To have success, you must work with qualified professionals who understand the process completely and can advise you properly on the nuances of these transactions. It is very important for you to utilize the services of Realtors, attorneys, accountants, mortgage lenders and home inspectors as they all provide invaluable expert advice that will hopefully guide you to a successful closing.
What is a Short Sale?
Homeowners experiencing financial hardships may pursue a short sale prior to foreclosure. A short sale is the negotaiated sale of a property at a price that is less than the outstanding mortgage balance. This process may be a preferable option for the seller in order to preserve their credit and limit their debt exposure. In New Hampshire, the laws governing foreclosures provide incentives for lenders to work with homeowners that can no longer afford their homes. The foreclosure process takes time and money and may ultimately prove more costly to the lender. Under the Home Affordable Alternatives Program offered in 2010 by the Treasury Department, lenders and homeowners have additional incentives to consider a short sale.
The first step to a successful transaction requires the negotiation of an acceptable contract with the Seller- subject to lender approval - with no guarantees that your offer will be approved. In order to prevent foreclosure, the Seller is under a timeline to "sell short" and must have an offer that meets lender guidelines for lender approval. Please visit this website to obtain information about Portsmouth property. Follow these guidelines to improve your chances of your contract being accepted by the seller and lender and then successfully closing on a short sale listing:
Are You a Qualified Buyer?
As a home buyer you must provide evidence that you qualify to purchase the property. The Seller is not likely to accept your offer without a valid credit approval as the lender will not grant approval. Prior to submitting any offers you should obtain a credit approval from a reputable lender; if you are a cash buyer expect to provide proof of available funds to complete the purchase. The credit approval must not contain conditions such as selling an existing property.
Pre-Qualify the Listing
Sellers selling short typically have a time-line they must meet to avoid foreclosure. If they have not communicated with their lender(s) and started the process, there may not be sufficient time to affect a sale. Pursuing a short sale with a seller that has not yet initiated communication with their lender to that end can be a time consuming and fruitless process. As your Realtor, I can pre-qualify a listing on your behalf. Information I will obtain includes:
- Is the seller's short sale package prepared for submission to the lender?
- How many liens are on the property? If more than one, what are they? Is there a plan to satisfy all the lien-holders?
If you pursue a property that is not "short sale ready" you may be restricted from buying other properties of interest. To search for short sales and foreclosures available in Portsmouth go to this website and select Portsmouth Foreclosures under the quick search options.
Negotiating the Offer
The first step is to have your offer accepted by the Seller and you will be competing against other buyers. Some real estate agents market the property substantially below market value to entice buyers, who later find that the lender will not approve a contract at such a low price. Others price the property at the low end of fair market value. Price, terms and your qualifications will be the deciding factors for Seller acceptance. Sellers and lenders prefer offers with fewer contingencies.
- Earnest Money - Sellers may be hesitant to accept your offer with a low deposit. Buyers can easily "walk away" from a contract with low deposits.
- Home Inspection - be prepared to invest the time and money in the home inspection prior to lender approval. A seller may not want to take the risk of allowing the inspection after lender approval. If they do, they risk losing the buyer on the inspection issues and will not have time to sell the property prior to foreclosure.
- Flexible Closing Date - once the lender approves the offer, they may require a "quick" closing. You must be prepared to meet their conditions if you want to consummate the sale.
Subsequent offers - the listing agent must submit all offers to the Seller. A contract with a higher sales price may have a better chance at being approved by the lender. The lender will give the Seller direction as to submitting additional offers. Also, be prepared to lock your interest rate thru closing so that your mortgage commitment will be valid.
Lender Approval
Lenders will do their "due diligence" to substantiate the value of the property and have no set formula to determine an acceptable price for the property. However, Freddie Mac (one of the largest secondary market lenders) has a target sales price of 88% of one or more broker price opinions (BOP).
Have realistic expectations of the time-frame for approval as it may take between 30-180 days and property values can change. If the lender and the Seller are participating in the HAFA program, these timelines will be streamlined for a quicker response.
If you are interested in pursuing a Portsmouth NH short sale or other listings currently on the market, please contact Dick Cook by email at dick.cook@virtualhomes.com or at 207-206-0705.
Comments(0)