Fannie Mae has provided us with Job Security!
What do I mean by that? Well, I think most people are under the assumption the real estate market is stabilizing. I do think that the rate of foreclosure is declining, however, I think that is largely due to the fact lenders are being forced to explore more loss mitigation options, before taking a property back.
The current trend on Fannie Mae properties is not sitting well with most of us that negotiate short sales. First, Fannie has already publically announced they intend to counter EVERY short sale. Now, unfortunately, many buyer agents still don’t understand that. They have their client go in with a strong offer, that suddenly gets countered by Fannie. These counters come in all shapes and sizes, but from what I’ve seen it’s a minimum $15,000 for property $150,000 or under, and I’ve seen a $100,000 counter on a $380,000 property. Also, the strong offer the buyer provided many times IS the fair market value. I’ve seen Fannie comp themselves higher than FMV on some of these offers. Does it make sense? Not yet. No, but essentially two things happen, either the buyer comes up and pays above fair market value, or says NO and we end up wasting time, relisting the property and trying to get a higher offer. SOMETIMES we get one, and MOST times we waste another three months until a new BPO/or appraisal can be ordered.
So what do I mean by, they are providing me with Job Security? If you look at the trend of properties that didn’t sell at auction or short sale, Fannie will then relist these properties so far above the market value they won’t appraise for most buyers. Buyers have their lenders all lined up, but when their appraisal is done, the appraisal is too low, so they lose their financing. This is because the property is OVERPRICED. Now in most cases, a buyer just loses the property, time, money, etc., but in the case of a Homepath property (which is Fannie’s REO site), a buyer CAN buy the property with HOMEPATH financing if it doesn’t appraise. Do you see where I’m going with this?
Essentially Fannie is controlling the value and the market instead of the appraisal, and comps controlling the value.
I’ve had a conversation with a Fannie Mae supervisor and when I told him one of the properties we were working on definitely did NOT come in anywhere near what the value that they were looking for was, his answer was quite simple. “Value is only ONE factor we use when determining whether or not we plan on foreclosing.” Of course, none of us are privy to the other factors, or even the appraisal/BPO they use in making that determination.
I’m not saying this to deter you from buying a Fannie property, but a Fannie short sale will NOT be a good deal. If you want the property, you have to be prepared to work for it. Get an appraisal once an offer comes in and have it ready. Chances are they will STILL come in above that appraisal amount.
The thing to remember is Fannie owns a HUGE amount of default loans, so many short sales you look at on the market will go in this direction. Just keep in mind it’s a negotiation. If you want the property, be prepared to PAY top dollar. Fannie is NOT discounting short sales.
Because people are largely overpaying for a property – (Ummmm eehhh hemmm, remember the good days of 2003-2006?) and the economy from what I can see is NOT getting stronger, there is a LARGE portion of these loans that will likely default, so even though I don’t like what Fannie is doing, they ensure that our firm will still be negotiating short sales long into the future.
Thanks, Fannie Mae!
For Realtors, Attorneys, Title companies, etc interested in our services please go to http://massachusettslossmitigation.com/
For homeowners needing assistance with avoiding foreclosure please go to http://shortsalemitigation.net/
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Tewksbury, MA 01876