Need quick advice on Fannie Mae Homepath bid

weedyacresFebruary 13, 2013

We found a house that looks like a steal in the town we'll be moving to once our house sells. List price is $15K, has bowing basement walls (getting an estimate tomorrow), and needs an interior gut (could DIY for $10K max). Probably worth $60K when fixed up (asking for comps in the morning).

It's a Fannie Mae Homepath, and from what I understand, investors can't bid for 14 days. Today is day 10. We can bid as an owner-occupier, because we could live there until our house sells, and then once our year is up occupying it, could buy something bigger and then either sell or rent it.

I'm looking for tips on putting in an offer, negotiating, etc. Do we need to offer full price? Will they negotiate? Do they consider incoming offers one by one, or are they saving up and will pick the best one? The listing agent said she heard there are 4 or 5 investors chomping at the bit for the 14 day period to be over.

Thanks for any advice.

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function_first

We bought a Fannie Mae property last year, and worked with a buyer's agent (we found through Redfin) who had both listed and submitted multiple bids on Fannie Mae properties. If you work with your own agent, one who has done this before it should help -- it's a very different bidding process and you really want someone knowledgable about the ins and outs of the whole process -- bidding, inspections, through closing. Having an agent who was very familiar with the process saved us a ton of money, not just in our initial bid -- which was low balled (she didn't have any worries about doing this) but they countered meeting us in the middle and saving us 10K -- but also in knowing which things we found during our inspection that they would be likely to fix (we got lots of work done on the furnace, hot water heater, etc.) on their dime -- this was even though it was being sold "as is." In the end the property was a fabulous buy, but it took a bit of patience to get it through the process -- not as smooth as a traditional purchase.

This post was edited by kris_ma on Thu, Feb 14, 13 at 5:10

    Bookmark   February 14, 2013 at 5:07AM
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weedyacres

So an inspection contingency is ok? We're willing to do as-is, but it wouldn't hurt to have that option, if it's typical.

    Bookmark   February 14, 2013 at 7:49AM
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function_first

Inspection contingency was o.k. here (in greater Boston area). It was very helpful in that they found 2 pumps on the furnace that needed to be replaced due to corrosion from the antifreeze they'd put in it, I guess (zone heating, and hot water) -- having the repairs covered more than paid for our inspection fees. If I remember how she explained it right, it seems that if the problem found during inspection made the house uninhabitable (like no heat, no hot water), they were willing to fix it. On the other hand she said we could ask but not to expect them to fix things like lights not working in a room (turned out to be a non-issue anyway).

Some Fannie Mae's are sold "homepath financing eligible" and some are sold "homepath renovation financing eligible", ours was the former so I'm not sure if that affected it or not.

This post was edited by kris_ma on Thu, Feb 14, 13 at 8:39

    Bookmark   February 14, 2013 at 8:38AM
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live_wire_oak

I was under the impression that Homepath loans were for owner occupied first homes, and that second homes were ineligible. Am I mistaken on that? Because if they are eligible for second home mortgages, my ratty cottage on the beach maybe just became doable sooner.

    Bookmark   February 14, 2013 at 11:51AM
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kkllb

Yes, live_wire_oak, you can buy your beach cottage through Homepath!

We bought a Homepath vacation home back in Nov 2011. We, too, low-balled them (to the point where a regular seller probably would have walked away offended), and they countered. We ended up essentially meeting in the middle and everyone walked away happy. Our agent told us a low-ball was a bad idea, but I think she was thinking of her commission.

I'd agree with what the other posters are saying. They will negotiate things that make the house uninhabitable.

I was surprised how "relaxed" the whole transaction was.The FNMA agent was awesome. Would definitely buy through Homepath again!

    Bookmark   February 14, 2013 at 12:59PM
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function_first

LWO: We used homepath financing on our purchase, which was an investment/rental property. Low down payment, no PMI, and they paid some toward our closing costs as well. It was a great deal. It did take a while to find a lender who was familiar with the homepath financing, though, most had not worked with them before.

    Bookmark   February 14, 2013 at 2:39PM
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weedyacres

Kris: sounds like your house was much larger and more expensive that this one. There's not much room to negotiate down from $15K. :-)

There's one decent comp (same neighborhood, size, basement, fixed up) that sold for $56K last year. Foundation guy can't come out for a week, so we're looking at offering $14K, cash, with a foundation inspection contingency, just to make sure it's not going to be a $20K fix. The foundation guy said over the phone that if it could be fixed with steel plates on the inside wall (the common fix), it would be $3-5K.

Agent thinks they'd accept $14K. She confirmed that there's an investor poised and ready to go in at full price no contingencies on day 15. She also said FNMA responds pretty quickly.

    Bookmark   February 15, 2013 at 7:58AM
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function_first

True, not a lot of room for negotiation at that price. You're wise to want a pro to look at it, anything else would be crazy given the potential costs involved. If there really is an investor poised to pounce without an inspection contingency -- and I guess that could be true or could be the listing realtor's wishful thinking -- well, let them have it.

Good luck with your bid, hope you'll let us know how it turns out!

p.s. Ours was (is) a 2 br/1 ba, 1000 sq ft, 130-year old house, so not likely that it's bigger or newer than yours, it's just this region has insane housing costs. Ironically, percentage-wise getting a 1K discount on a 15K house is roughly the same as a 10K discount on a 160K house. That is to say, I think your chances of getting your offer accepted are good.

(edited for clarity)

This post was edited by kris_ma on Fri, Feb 15, 13 at 10:22

    Bookmark   February 15, 2013 at 10:17AM
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weedyacres

Well, the offer's in. We'll see what happens....

BTW, the form we had to sign said: "I will occupy, establish and use the above-referenced property as my primary residence within 60 days after the Closing and will continue to occupy the property as my primary residence for at least one year after the date of occupancy....In the event that I do not occupy the property as my primary residence in accordance with the above certification, I shall pay $10,000 to Seller as liquidated damages...."

I'm not sure how they define "primary residence," or, for that matter, "occupy" (I'm not going to be sleeping there during the renovations), but we were up front about our situation with the agent and she said it was not a problem.

    Bookmark   February 15, 2013 at 5:17PM
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weedyacres

Well, they accepted our offer this morning. :-) Just have to get the foundation company's estimate on Thursday, write a check, do some paperwork and we're back to having something to do on the weekends again.

    Bookmark   February 19, 2013 at 1:01PM
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writersblock

Congratulations!

    Bookmark   February 19, 2013 at 2:08PM
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function_first

Yay! Congratulations! Keeping my fingers crossed that your foundation estimate brings good news, too, and your weekends will soon be completely monopolized by this new project -- and your weeknights, and your vacations..... haha

    Bookmark   February 19, 2013 at 5:34PM
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weedyacres

Kris: nothing new to us. We spent 5 years completely transforming our current 4400 sf house. Holidays have become "what big projects can we get done over the long weekend?" We didn't know what to do with ourselves over Thanksgiving and Christmas this past year.

This one will be pretty tame in comparison. We're estimating 2-3 months of Saturdays, max.

Here's some of the raw material. Can't wait to get my hands on it!

    Bookmark   February 19, 2013 at 6:16PM
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ncrealestateguy

Weedy,
Did your agent explain to you what HomePath considers a primary residence? I could not find the answer anywhere on the net.

    Bookmark   February 19, 2013 at 8:02PM
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weedyacres

Our agent seemed focused on how long we had to wait before selling it. I googled around and found the answer linked at the bottom about the definition of "primary residence." It sounds like they use a common sense approach to defining it, as well as intent to a degree.

Given our intent to move to this new town, I don't think we violate the spirit of the rule. I fully intend to start inhabiting the place during the week once it's de-skankified, instead of my makeshift office crash pad. Should we sell weedy acres before the year is up, that will create a problem, as our household goods won't fit in this tiny place. But we'll just store our stuff to live up to our commitment, and not move on until the year is up. My sister suggested that if/when that happens we go ahead and buy a new bigger place in the new town, but just use it as a storage facility for our stuff until the year is up. Or we find a new place that also needs a remodel, and store our stuff in half of it while renovating the other half. :-) We've got a ways to go before we cross that bridge.

Keep in mind that anyone, investors, second-home-buyers, etc. can buy a Homepath property. There are just a few privileges (financing deals, "first look" advantage, closing cost bonuses) that owner occupants get that others don't. The only one that applies to us is the first look since we're paying cash.

Here is a link that might be useful: Primary residence defined

    Bookmark   February 19, 2013 at 10:11PM
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beth0301

I'm so happy yours went smoothly! I had a little different experience. Around here, homes in that price range fall in to two categories - those that are a good deal and those that are TRASH. There's really not an in between. That was my price range as well (under 22K).

Investors are snatching anything up that's decent on the spot, so I lost out on a few before learning the ropes. I finally found a near perfect (for me) house listed at 22,500. It was past the first look stage.

I bid 20 only to be told that they had multiple offers. I don't know for a fact, but I seriously believe that the other offer(s) came in prior to mine and they saved them up to see what else came in. After a few days, they asked us all to submit our best and final, so I raised to 24. I didn't want to spend that much but this house is ideal for us.

It took two weeks for them to announce the winner, and my gut tells me they played it out to see if something higher came in.

After they said I got it, they then came back asking for more earnest and a 12 day close. I met the earnest and countered with a 15 day close which they accepted.

I'm due to close on Monday and am happy I got it, though a little frustrated that it took so long to choose a bid. I could be wrong of course but it felt to me like they saved them all up and pitted us against each other. I know, getting the most is their job and I get that, but as someone used to submitting an offer with a 72 hour expiration date, this seemed rather cut throat. Then again, I've never played at this level before against investors/flippers.

All in all I still feel like I got a steal on the house but sadly because I had to bid so high, one repair that I desperately wanted to make (replacing the 20 year old furnace & ac with a new efficient set) won't be possible until next year, which means higher utility bills and the possibility of an emergency repair during that time.

    Bookmark   February 20, 2013 at 3:29AM
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function_first

Congratulations to you, too, Beth.

Weedy, the house is adorable -- love the high ceilings in the kitchen, bet it will be beautiful when you're done. If you post progress pics on another forum, be sure to give us a heads up here. Might be some capital gains tax benefits if you stretched your crashing there out just a little longer.

    Bookmark   February 20, 2013 at 4:54AM
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ncrealestateguy

Weedy,
Not trying to cause alarm, but IMHO, you bought this property for investment purposes first. I think the "spirit" of the requirement of using it as your primary residence was not met. You have no intent to live here. I think that should be the first bit of criteria that should be used to determine if it is being bougt as investment property or not.
I could care less either way. Personally, I would think it better for the big picture to have an investor get in there and rehab it into a neat, clean and appealing home, than have someone else move in there and have it and the neighborhood remain status quo.

    Bookmark   February 20, 2013 at 6:34AM
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LOTO

Fannie also likes to hold the Listing and Selling Agent accountable

Here is a link that might be useful: Owner Occupant Certification

    Bookmark   February 20, 2013 at 8:30AM
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beth0301

**** deleted because I don't want to start an argument, best wishes on your rehab ****

    Bookmark   February 20, 2013 at 8:48AM
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weedyacres

NC: You confused me on that last post.

First of all you said "You have no intent to live here." Wrong. I will move in as soon as it's habitable, and live here during the week. I'll return to weedy acres on the weekends. Once our house sells, we'll live there full time until the year is up.

Second point of confusion: you said:
"...you bought this property for investment purposes first."
and then:
"Personally, I would think it better for the big picture to have an investor get in there and rehab it into a neat, clean and appealing home, than have someone else move in there and have it and the neighborhood remain status quo."

So if we're really investors, why are other investors going to do a better job than we will?

I can guarantee you that we will do a nicer rehab job on the place than a typical investor would. And that's because we're going to live there, and I refuse to live in an unfunctional dump.

The purpose of Homepath's preference towards owner-occupants is that they believe it increases the stability of the neighborhood. No, we don't intend to be long-term occupants, but we will live there. I'm not going to try and game the system in that way. I will live up to my commitment.

    Bookmark   February 20, 2013 at 8:49AM
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LOTO

And for your reading enjoyment I am including a standard Fannie Mae Purchase Contract Addendum

Here is a link that might be useful: Addendum

    Bookmark   February 20, 2013 at 8:56AM
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weedyacres

LOTO: Yep, those are the 2 documents we signed.

    Bookmark   February 20, 2013 at 5:08PM
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weedyacres

Grrr. Our agent told us last Fri that title work would all be done by yesterday and we'd close this week. In anticipation of that, we had a great weekend of demo planned. I just checked in and the attorney is still waiting for the deed, so it's not gonna happen. And we're out of town the next weekend, so we're not digging into this until at least the 23rd. Major bummer.

    Bookmark   March 7, 2013 at 1:56PM
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beth0301

Yeah, the one I sold was supposed to close on the 22nd, hasn't happened yet. They are saying maybe tomorrow.

The one i bought was supposed to close on the 25th. Ditto, maybe tomorrow.

I've heard a lot of closings are happening way later than originally planned.

    Bookmark   March 7, 2013 at 2:10PM
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weedyacres

Well, we closed today, and are now the proud (?) owners of our little worker's cottage in need of a gut job. I couldn't resist going over this afternoon and pulling up a section of carpet and chipping out a couple tiles to see if the hardwood looks salvageable. Water got turned on and confirmed the bathroom plumbing leaks, so good thing we're planning to rip out all the old cast iron pipes.

Demo starts a week from Saturday!

    Bookmark   March 13, 2013 at 5:48PM
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LuAnn_in_PA

Good luck!

    Bookmark   March 13, 2013 at 7:10PM
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marys1000

Is that an original old big single cast iron kitchen sink? Love those.

So, can you buy these places to rip down and put up something new?

    Bookmark   March 13, 2013 at 7:45PM
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dekeoboe

I couldn't resist going over this afternoon and pulling up a section of carpet and chipping out a couple tiles to see if the hardwood looks salvageable.

You can't tease us like that - you need to tell us what you found!

    Bookmark   March 13, 2013 at 9:13PM
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weedyacres

mary: No, it's a white ceramic sink. The sink cabinet is coming out, to be replaced by a range, among other things in the kitchen remodel. You could tear this down, but it's in a neighborhood of 40-100K houses, so it wouldn't be smart financially.

deke: I reported over in the Old House forum, but it looks mostly good. The section under the tile is unfinished, so it appears that previous owners put in the tile and then refinished the rest of the floor. The little hallway by the bedrooms has laminate over plywood, so I'm guessing there were water problems in the bathroom that ruined the hardwood there at some point. Bedroom floors are wood but have evidence of past glue-down something under the carpet. Kitchen has a couple layers of vinyl; I couldn't pull off enough without tools to see if there's anything decent underneath.

    Bookmark   March 14, 2013 at 8:18AM
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Iowacommute

Good luck Weedyacres. When DH and I were looking for our first home we looked at a little house just like that. It seemed like it was in much better shape and had been taken care of (lots of original woodwork and hardwoods). It was a precious little house, but when I went downstairs there was a crucifix on top of the stone ledge foundation. It creeped me out, and I hightailed it out of there. I guess I've seen too many horror movies. : (

    Bookmark   March 18, 2013 at 11:14AM
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newnovice

Is there a way to find out the previous history & condition of the house? For a novice home buyer - we did a walk thru - and it was new carpet & new paint - is all we could see. I am not sure what they covered up.

I am looking at a home from 2005.

Any help is appreciated. Thanks!

    Bookmark   February 9, 2015 at 12:52AM
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weedyacres

newnovice: you need to start a new thread since you've got a new question.

Bumping this thread back to the top brings back the memories. :-) Who'd have thought that 2 years later we'd be "almost done" (punch list for the 2nd bedroom and need doors on the kitchen cabinets), or that we'd decide to settle in for the longer term? We've also designed a 12x16 addition to house laundry room, powder room and office and hopefully will find a contractor soon to put up the shell for us.

So much for a quick flip, eh NC? :-)

remodel photos

    Bookmark   February 11, 2015 at 6:49AM
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