We received our first offer on The Hat Trick House today. After dropping the price last week, we’ve gotten a good bit of traffic through there, so I’m not surprised that we found someone interested.
The offer is actually quite interesting…
The buyer is using a special loan program call NACA, which is a non-profit agency that counsels and assists buyers with poor credit to help them purchase homes with terms that are realistic for their situation. I don’t know much about the program, but the way the contract we received was structured, the buyer is offering much higher than list price and is asking for us to pay tremendous amount towards closing costs, much of this money going towards their buying down the rate of their loan (to make the payment affordable).
In real numbers, the house is listed at $99,900. The purchase offer is for $113,500, with seller paid closing costs of $21,565. This essentially makes their offer equivalent to $91,935.
Based on all our numbers, this is actually a reasonable offer, and will net us our desired profit on this property, so we’ve accepted the offer.
The big catch is that the house needs to appraise for the purchase price ($113,500), which is no easy feat in this market, especially considering that The Red Garage House down the street had two appraisals come back over $110K, but one appraisal come back at $94K. On the bright side, the loan is being made through Bank of America, and they will be providing the buyer a list of appraisers that can be used, and the buyer can choose his own appraiser.
We’ve asked them to provide us the list, and hopefully we’ll find someone we’ve worked with in the past.
Assuming the appraisal comes back above the purchase price, I’m hopeful this will be an easy deal. Apparently, it’s difficult to qualify for the NACA program — the buyer’s agent said she has been successful getting her buyers qualified less than 25% of the time — but buyers who do get qualified generally don’t have a tough time closing the deal, with closings potentially happening within two weeks of the contract being signed.
We’ve given the buyer until next Friday (July 24) to complete all contingencies (inspections, appraisal, financing, etc). If we get through the appraisal and due diligence period, we’re scheduled to close on August 7.
This sounds like a new way to do seller funded down payment assistance! Sounds very similar to how we’ve done it in the past. Will be interested to hear if you are successful in making it work.
Cheers,
– Hakrjak
Yeah, Hak, that’s exactly what it sounds like…which is why I’m surprised it’s still being done!
It sounds like the only challenge is the appraisal, which we’re currently working on. Supposedly, if we can get that through, we should be good to go. That’s a big IF though…
What about timing? Usually these “special programs” take forever. FHA is at least 45-60 days in California. VA appraisers are all assigned randomly and it took 21 days for us to get an appraisal (again this might be California). Always nice to have offers…
Steve –
The program is front-loaded. It takes months for the buyer to get approval for the loan, but once they do, it generally only take a couple weeks to get to closing once they find a house (most of the underwriting happens BEFORE they put a house under contract).
Also, there is no seasoning like with FHA, and the buyer chooses their own appraiser, so if we can get one out there the day the contract is signed, it goes that much faster.
I still don’t know if this one will appraise or not, but if it does, we should be able to close within 2-3 weeks of the contract being signed.