from Local Attorney, Michael H. Wasserman

Thursday, February 20, 2014

FREDDIE, FANNIE both Offering Incentives to (some) REO Buyers, Brokers

By Michael H. Wasserman

You might not know it from a look out the window or a walk around the block just yet, but the spring real estate market is upon us, and home buyers are out en masse in Chicago searching for the right opportunities.  Everyone’s favorite semi-governmental real estate entities, Fannie Mae and Freddie Mac both seem intent on capitalizing on this now to further reduce their respective REO inventories. Each has announced new incentive packages to try to entice prospective buyers. Notable in the two announcements is the differing strategies they are using. Fannie Mae is offering fairly sizeable incentives to buyers themselves. Freddie Mac, while offering a token to buyers seems to be much more focused on motivating the sales agents that guide buyers. 

Last week, the Federal National Mortgage Association announced that Buyers can receive up to 3.5 percent in closing cost assistance when purchasing Chicago area Home Path properties under its “first look” program. The first look period offers FNMA owned properties to prospective owner-occupant & public entity buyers exclusively for the first 15-20 days they are listed for sale. The closing cost contributions will be available on purchase offers made no later than March 31st on contracts that must close by May 31st. Homepath typically also offers special financing opportunities as well, although not everything that is “special” about that financing is necessarily beneficial to borrowers: For example, Homepath financing does not require a property appraisal requirement. Buyers might end up over-paying for homes relative to market if they do not do their homework.

By contrast, the Federal Home Loan Mortgage Corporation announced this week that it would extend the current winter sales promotion to all first look offers received by April 15th. Freddie Mac is taking a different approach to the incentives: here, the Realtors who list and sell its Homesteps properties stand to make an additional $500-1,000 bonus. Owner-occupying buyers may also be receive a $500 concession that can be applied towards condo assessments, home warranties or flood insurance. These contracts must close by May 30th. 

Buyers wishing to purchase foreclosed properties often see great opportunities to buy properties at prices discounted off the ordinary market valuations, but these opportunities also can present some measure of risk and extra effort. As always, a good idea for prospective buyers to assemble a competent, experience real team (Broker, Lender Inspector, and Lawyer) to help steward them through the process.