Are Fanny Mae foreclosures a good buy?
The Federal National Mortgage Association (FNMA or “Fannie Mae”) was established in 1968 to assist low- moderate- and middle-income families to buy homes of their own. They do this by working with financial institutions to construct special mortgage products that will be affordable to people with lower incomes. In the event that a homeowner, who entered the housing market via a Fannie Mae initiative, defaults on their repayments and the situation deteriorates to foreclosure, Fannie Mae will buy the title from the lender and resell it through auction.
Fannie Mae is a New York Stock Exchange listed company and is the largest financial services company in the world outside of the banking industry. Its job is to oil the machinery of the mortgage market to prevent it from stalling.
Fannie Mae Listings
The FMIA website provides access to brief details of foreclosure opportunities across the country. For more information you can either ask a real estate agent to conduct a search under the Real Estate Owned (REO) Identification Number for the property or, if you want to dispense with the agent’s fees, you can conduct the research yourself. All foreclosures are a matter of Public Record and a search at the local County Records Office should uncover the information you need to know.
Foreclosed Properties
Because of the financial predicament of the previous owner, a foreclosed property may be neglected or damaged. This means that the selling price will be below its market value and, depending on the degree of dilapidation, discounts of 30%, 40% or even 50% are possible. The grapevine often talks about $100 bargains that can be turned round in a matter of weeks for $50,000. There may have been situations where this was the case but, these days, most properties sell for closer to their market value.
Fannie Mae will carry out repairs in order to make the property secure, wind and weatherproof but this work is not guaranteed and may have to be redone by the new owner. Properties are sold in “as is” condition, basically what you see is what you get and so your bid needs to reflect the cost of repairs that you will undertake to return the property to its market value. These costs cannot be recouped from Fannie Mae.
Fannie Mae Auctions
To participate in a Fannie Mae auction you will need to make a down payment of around 5% of the purchase price. The auctions are conducted through a real estate agent and all bids must be received by a due date. After that date the referee will scrutinize all bids and sells the property to the highest bidder. If an acceptable offer is not made, Fannie Mae will make a counter bid to force the bidding into the acceptable zone.
Buying and REO or foreclosure property through Fannie Mae is lower risk than other forms of auction as the title is normally cleared of all liens and the new owner need not worry about third parties pursuing him or her for defaulted loan payments or back property taxes.