Portsmouth NH Short Sales – An Alternative to Foreclosure
As a home buyer looking for value in the purchase of real estate a Portsmouth NH short sale may be a viable option. The process of finding and buying a Portsmouth short sale is not a typical real estate transaction. To achieve your goal, hire experienced professionals that understand all aspects of the transaction. Utilize the services of Realtors, attorneys, accountants, mortgage lenders and home inspectors as they all provide expert advice.
What is a Short Sale?
Homeowners in financial distress often explore all options, including a short sale, prior to foreclosure. This process may be the best option to preserve their credit and limit their debt exposure. Prior to the current real estate recession, homeowners with financial difficulties often negotiated a “work out” or simply sold the property. Due to the dramatic decrease in values and the high volume of high ratio loans, homeowners are often “under water” on their mortgage. This term is used when the net proceeds of the sale of property is insufficient to cover existing liens on the property. Due to the higher volume of homeowners in this financial situation, short sales have become more common and lenders have determined that it may be in their best interests to consider them.
NH law often presents the lender with incentives to offer the homeowner other alternatives than foreclosing. The lender understands market conditions and the expense involved in foreclosing on property. Under the Homes Affordable Foreclosure Alternatives Program (HAFA) offered in 2010 by the Treasury Department, lenders and homeowners have additional incentives to consider a short sale. This program was designed to facilitate the process qualifying and negotiating a loan modification or short sale prior to foreclosure.
Portsmouth Short Sales – The Process
The first step in the process is to negotiate a contract with the homeowner that would be subject to lender approval. In most cases, the homeowner does not know if the lender will accept all the terms and conditions of the contract at the time they accept the offer. If the contract is not acceptable to the lender then the Seller may not have sufficient time to sell to another party and avoid foreclosure. If the homeowner and the lender are participating in the HAFA program, then the short sale may have been pre-approved. The following tips will increase your chances of negotiating a successful Portsmouth New Hampshire short sale transaction.
You Must be Credit Approved – Well Qualified Buyers Have the Advantage
As a home buyer you must provide evidence that you are financially capable to purchase the property. The Seller is unable to accept your offer without a valid credit approval as they know the lender will reject the contract. If you are attempting to purchase a Portsmouth NH short sale, get pre-approved through a reputable lender or if a cash buyer provide proof of funds. The contract must have only the standard and typical conditions of sale to obtain lender approval.
Finding Portsmouth Short Sale Listings That Qualify
Homeowners in financial distress typically have a limited amount of time to find a qualified buyer. If they have not connected with their lender(s) and started the short sale approval process, there may not be sufficient time to affect a sale. Home buyers should understand that all properties marketed as Portsmouth short sales are not a realistic options. View all listings available at Portsmouth NH homes for sale. Your real estate agent can identify properties that you may consider and should obtain the following information.
Has the homeowner compiled the necessary documents for the lender approval package?
How many liens are on the property? If more than one, what are they? Is there a plan to obtain releases from all the lien-holders?
Don’t take yourself out of the market for a property that has no chance of closing. In most cases, short sales do not close and you may have better options such as a Portsmouth foreclosure.
Offer and Acceptance by the Seller
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. Others offer the property at the bottom of fair market value. The real estate agents goal is to generate as many offers as possible, in a short period of time, so the Seller has options to consider. Price, terms and your qualifications will be the deciding factors for Seller acceptance. Sellers and lenders prefer offers with fewer contingencies.
Earnest Money Deposit- Sellers may be hesitant to accept your offer with a low deposit. Buyers can easily “walk away” from a contract with a low deposit. Offering the Seller a strong deposit indicates that you are serious about buying the property. If you are competing against other offers that have similar terms and conditions, the deposit can be the deciding factor.
Home Inspection – It is customary to conduct the home inspection prior to submitting the contract to the lender. A Seller may not want to take the risk of allowing the inspection after lender approval. The buyer can easily “walk” from the home inspection and lenders normally will not approve them.
Flexible Closing Date – Lenders often approve short sales with quick closings. You must be prepared to comply if you want to consummate the sale. Once the lender approves the short sale, they want to close and limit further financial losses.
Subsequent Offers –As a rule, real estate agents must present all offers up to closing. A contract with better terms and conditions may have a better chance of being approved by the lender. Sellers often think the lender will want to view a new and stronger contract. The lender will give the homeowner direction as to submitting additional offers and typically new offers are taken in a “back-up” position. In addition, arrange for your lender to lock your interest rate for your mortgage so that you qualify whenever the closing is required.
Lender Approval – Nothing is Guaranteed
Lenders have no set formula for determining the value of the property other than to substantiate values through due diligence. 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 approval process 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. In fact, the Lender may have approved a listing price for the property.
If you are interested in pursuing a Portsmouth NH short sale or other listings currently on the market, please contact Virtual Homes Real Estate at 800-856-2479.
