How to Buy New Hampshire Pre-Foreclosure and Bank Owned Real Estate
Author: Fred Doleac
Source: ezinearticles.com
New Hampshire Laws, Legal Process - The Basics
New Hampshire primarily operates as a title theory state where the property title remains in trust until payment in full occurs for the underlying loan. Foreclosure is done by various methods and the typical process is approximately 60-70 days long. NH requires a 24 day publication of the sale and there is no right of redemption and deficiency judgments are permitted.
In New Hampshire judicial foreclosure is similar to strict foreclosure in other New England states. A lender needs to file a complaint against a borrower and obtain a court ruling from the county court. If the court finds a borrower in default, it provides the borrower time to pay back the debt. If borrower does not pay within the allowable time frame, the court orders sale of the property.
A non-judicial foreclosure is conducted only when a power of sale clause exists in the deed of trust/mortgage. This clause pre-authorizes the sale of a property to pay off the balance of the loan in the incidence of a buyers default. In such cases, power is given to the lender or its representative (generally referred to as a trustee) to sell the property.
Always seek the advice of proper legal counsel or an attorney familiar with New Hampshire foreclosure laws especially if you are purchasing pre-foreclosure. The information provided in this website is not legal advice.
Bank Owned, REO (Real Estate Owned), and foreclosure are terms commonly used to describe properties that are owned by a lender (financial institution; typically a bank), after an unsuccessful sale at a foreclosure auction. Typically, the lender will then resell the property by direct sale or market through a Realtor. Buyers often benefit by purchasing these properties as lenders are motivated to dispose of the asset quickly and aggressively price them to reflect market conditions.
Purchase at Foreclosure Auction
Prior to the auction, the auctioneer will publish the requirements for bidding. For most consumers, and specifically a first-time home buyer, purchasing at a foreclosure auction is a "risky" transaction and, in most cases, it is preferable to purchase from the lender after the auction. As a consumer, you do not have adequate access to the property to determine "unknown material defects". High risk items include a home with a failed septic system, a contaminated well or a leaky roof. You must also be aware of all the liens on the property and your responsibilities if your bid is accepted at auction.
Foreclosure auction sales begin with a minimum bid that includes the loan balance, any accrued interest, attorneys fees and costs associated with the foreclosure process. In most cases the outstanding mortgage balances, liens, etc. exceed the value of the property. As a result, the first mortgage is the only bidder and the title will now revert back to this lender. These properties are referred to as REO (Real Estate Owned) or Bank Owned properties. If you are a successful bidder, you receive a property in "as in" condition and the former owner or tenant could be living at the property. There may also be other liens against the property.
REO (Bank Owned) Real Estate
After a bank (lender) takes possession of a property, they will mitigate items owed by the prior borrower, which could include property taxes, homeowner's association fees and contractor liens. The financial institution will contact the IRS to remove any tax liens against the property. If the current owners are living at the property, they are usually evicted. Repairs and maintenance are often performed to make the property more marketable to a potential buyer. However, the lender may discount the property and sell it in a "as is" condition.
Banks are not investors or property managers of foreclosed real estate and want to dispose of the asset as quickly as possible. Most lenders list their properties with local real estate agents who are experienced in marketing and managing these assets.
When a lender lists a property with a Realtor they do not like disclosure statements but understand that they must conform to federal and state laws. In most cases, they have no knowledge of the property (items on the disclosure statement) and can make no representations as they have never occupied the property. Some banks may provide incentive financing on their REOs but in most cases, this would apply only to property that was in very bad condition or difficult to finance elsewhere. Financial institutions usually sell such properties "as-is"; however buyers still have the opportunity to negotiate home inspections if they find "unknown material defects.".
If a buyer discovers issues that they did not anticipate, and which the institution will not repair, they can then cancel the transaction (given that the home inspection contingency was included as part of the offer to purchase contract). Time is money to a lender. As a Seller, they have to determine if it is in their best interests to negotiate repairs or simply discount and sell the property it is not in a buyers best interest to attempt to renegotiate a contract over trivial items that were disclosed or obvious prior to negotiation of the contract.
A bank owned property isn't always the best value for a consumer. It's an old myth that "foreclosures" are a bargain. As a buyer, you should evaluate the entire market and compare all properties in the NH MLS meeting your housing needs and price range. Investors, however, do take advantage of "distressed" properties that are discounted with the idea to "flip" or resell the property after improvements have been made.
Making an Offer
Before making an offer, have your agent contact the listing agent and ask typical questions you would ask of any seller and some additional ones such as:
Are there any inspection reports available?
Does the bank have work in progress?
Are there special forms the lender requires?
Has the bank determined a timeline for closing on the property?
How does your agent deliver the offer?Offers are usually sent to the bank via email or fax and the listing agent may request your originals. There is no formal presentation other than a discussion between the lender and the listing agent. Keep in mind: nothing happens evenings and weekends (banks are closed). The negotiating process can be very frustrating for buyers as the typical timelines do not apply.
Make sure that your offer contains your "credit" approval which demonstrates your qualifications as a buyer as they are motivated to negotiate with a qualified buyer. Understand that lenders will sell at "fair" market value and do not expect "fire-sales" that you have seen on television.
Acceptance
Once your offer has been negotiated and accepted, the typical inspection, appraisal and closing process will proceed. Title issues will often come up that will delay the closing so make sure your Realtor and other parties have the documentation they need. Prior to closing, contact the vendors providing utilities and arrange for new accounts in your name and to verify final billing to the lender. At the closing, you may not receive all the keys and garage openers or any appliance information that you would receive in a normal transaction.
Fred Doleac, Founder, CEO VirtualHomes Real Estate
Amherst, NH.
800-856-2479
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