FHA Short Sales in Massachusetts – Know the Guidelines

FHA Short Sales in Massachusetts – Know the Guidelines

I had a new Coldwell Banker agent come to me with a failed FHA sale.  FHA short sales in Massachusetts are extremely tricky. For a very good in depth overview of the FHA short sale process you can see one of my previous blog posts here.  You really need to know the guidelines of an FHA sale before going into negotiating a short sale.  I approach them in a manner opposite of a traditional sale.  Most of the homeowner information must be collected up front and the homeowner must qualify for the program really before you can even consider taking an offer.

This particular agent was not well versed in the FHA short sale process which is ok.  That’s why we are here.  I wanted to highlight two things I think are important to know when negotiating these sales, accepting offers etc.

She lost a previous buyer because she didn’t understand the second lien threshold for FHA short sales.  FHA will pay up to $1500 towards a second lien and $1000 more with the seller incentive for a total of $2500.  That means the homeowner has to understand that because they have other liens affecting title, they must give up any seller incentive they may be entitled to to clear that second lien.  If a second lien holder wants MORE than $2500, then the buyer may have to absorb those costs or potentially lose the sale.  It’s not the ideal situation, but certainly a workable remedy if the second lien holder won’t budge.

Also, it’s important to keep in mind that on FHA sales the seller credit is only available IF the buyer is an FHA buyer AND it’s only up to  1% of the purchase price.  That is all that FHA will authorize UNLESS you ask for a variance.  YOU CAN ask for 3% closing costs if you apply for a variance with the selling lender (FHA) and ONLY if your offer is above the ATP price (Authorization to participate) – This is the price set by the seller’s lender based upon the appraised value.  You won’t get a steep discount on FHA properties.  They want an offer either at or just under the appraised price.  You won’t get 3% back if you offer less than the appraised price.

These are two very important aspects of negotiating an FHA short sale in Massachusetts or New Hampshire.

Happy FHA Negotiating!
Maryann Little
~ the short sale CLOSER!

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