How to Buy a Short Sale in Litchfield, New Hampshire
As a home buyer looking for value in the purchase of Litchfield NH real estate you may consider a "short sale" as a viable option. The process of finding and buying a Litchfield NH short sale is not a typical real estate transaction. To achieve your goal, hire experienced professionals that understand all aspects of the transaction. Expert advice can be provided by real estate agents, attorneys, mortgage brokers or bankers and home inspectors.
A Short Sale Defined
Homeowners that have financial hardships may pursue a short sale prior to foreclosure. This process may be a preferable option 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 prove to be more costly to the lender. Under the Home Affordable Alternatives Program (HAFA) offered in 2010 by the Treasury Department, lenders and homeowners have additional incentives to consider a short sale.
The first step in the process is to negotiate a contract with the homeowner that must be approved by the lender. 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. Follow these guidelines to improve your chances of a buying and closing on a short sale listing:
Are You a Qualified Buyer?
Providing creditable evidence that you qualify to purchase the property is absolutely necessary. The Seller is not likely to accept your offer without a valid credit approval as the lender will not grant approval Get pre-approved from a reputable lender or if a cash buyer provide proof of funds. The approval must not contain conditions such as selling an existing property.
Finding Listings That Qualify
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, it may not be possible to close before foreclosure. As your real estate agent, I can identify properties that you may consider. 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?
Don't take yourself out of the market for a property that has no chance of closing.
Negotiating the Offer
The first step is to have your offer accepted by the Seller and you will be competing against other contracts. Real estate agents often list the property at a low value to encourage multiple offers. Others offer the property at the bottom of fair market value. Price, terms and your qualifications will be the deciding factors for Seller acceptance. Sellers and lenders prefer "clean" contracts without 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. If you are serious about buying the property offer the Seller a strong deposit.
- 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. The buyer can easily "walk" from the home inspection and lenders normally will not approve them.
- 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 homeowner direction as to submitting additional offers. In addition, arrange for your lender to lock your interest rate for your mortgage so that you qualify whenever the closing is required.
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.
Virtual Homes Real Estate agents can assist you with Litchfield NH short sales, foreclosures and MLS listings currently on the market. Please call us at 800-856-2479.