[As in all editions of this blog, the "BEST BUYS" are listed at the end of this article. If you would like to by-pass the article, scroll down to find the specific properties.]
Whether you are a first time homebuyer researching the purchase your principal residence or you are a seasoned investor, educating yourself on market conditions and sources of home inventories is an ongoing process. Solid analysis identifies great opportunities, and there is no substitute for doing your homework. Case in point: Fannie Mae Homepath. In previous editions of this blog, I have devoted a fair amount of space to HUD homes and FHA financing. In 2009, Fannie Mae launched “Homepath” as its REO brand. (For those who haven’t read earlier editions of this blog, “REO” stands for “real estate owned” after foreclosure. It refers to homes held in the inventory of lenders who foreclosed mortgages.)
Let’s back up for a moment to learn some basics about Fannie Mae. This will give us some context and a better feel for the scope of Fannie Mae’s REO holdings. Fannie Mae is a government-sponsored entity, chartered by Congress and overseen by the U.S. Department of the Treasury. Banks create loans secured against real property by mortgages. Many banks often sell their loans to investors. This can generate a profit of the bank, and provide the bank with more cash with which to loan more money. Fannie Mae and Freddie Mac are essentially investors in mortgages. (I will devote another edition of this blog to a discussion of Freddie Mac.) Their purpose is to purchase mortgages so that banks are provided with more cash– greater “liquidity”– to write and fund more mortgages. The Congressional intention in creating these entities was provide a mechanism by which more mortgages would be written, and more people could become homeowners.
Have you ever heard the saying: “Be careful what you wish for… because you might get it”? To a large degree, that saying applies to Fannie Mae because it has been the subject of increased criticism in recent years for encouraging the creation of too many mortgages for people who really couldn’t afford to own a home. Unless you live in a cave on another continent, you must be well aware of the recent mortgage market “meltdown.” Many critics place a portion of the responsibility for this market condition on Fannie Mae.
I was quite surprised to read in Fannie Mae’s literature that Fannie Mae currently owns over one-half of all mortgages written in 2010, and it owns one-third of all outstanding mortgages. Of course, Fannie Mae is therefore huge. And an inevitable by-product of mortgage ownership is mortgage foreclosure. As much as Fannie Mae purports to have the goal of assisting homeowners in foreclosure avoidance, there are certainly times when this goal cannot be accomplished. Fannie Mae states that it owns 13% of all delinquent mortgages, and it owns about the same percentage of all foreclosed properties. This is an enormous inventory of REO properties to be resold, and an equally huge potential source of value and bargains for both owner-occupants and investors.
Although Fannie Mae Homepath homes are sold “as is,” and each contract for a Homepath home must include a Fannie Mae “as is” addendum, unlike HUD, Fannie Mae will make certain repairs or renovations to a home. Whether it does this, and the extent to which it will do this, depends on how marketable it believes a property in its inventory is. Fannie Mae relies on BPO’s (”Broker Price Opinions”) and prior appraisals to set values for the properties in its inventory. If Fannie Mae is given to believe that new carpeting, for example, will render the property more marketable, it may replace the carpeting throughout the home. Then the home is listed for sale with a listing broker and placed in the mulitple listing service (the “MLS”), like most other properties offered for sale by other owners.
For the first 15 days a Fannie Mae Homepath home is listed for sale, it is offered only to owner-occupants. Thereafter, it is made available to investors as well. However, unlike HUD homes, investors who buy a Homepath home are subject to a deed restriction. Investors cannot resell the home for more than 120% of its purchase price within the first 90 days of ownership. Fannie Mae says its purpose in this restriction is to maintain neighborhood property values, but one might find it difficult to reason how a restriction on selling a home for a HIGHER price can maintain neighborhood property values. (Does that sound like more misguided social engineering by bureaucrats who never had to worry about making a sound investment?) I am just reporting the guidelines, not justifying the policy. But in this market, investors should probably plan to hold a property more than 90 days after acquisition anyway. In fact, those investors who purchase with the intention of buying, holding and renting or lease-optioning properties are probably operating under a more sound business model in our current economic climate than the old-time “fast flippers” anway.
Fannie Mae also provides Homepath financing. Owner-occupants can qualify to purchase with only a 3% downpayment. (FHA requires 3.5%.) Also, there is no private mortgage insurance (”PMI”), as there is with FHA loans of more than 80% loan-to-value, and this can reduce a homeowner’s monthly payment significantly. Moreover, Homepath financing is also made available to investors with as little as 10% down (90% loan-to-value loans), and that can be a big incentive to an investor in a market where most lenders require at least 20% down on investment properties.
Like the FHA 203K program (scroll back to an earlier edition of this blog for a discussion of 203K), Homepath also will provide repair and renovation funding for owner-occupants. This will even allow for upgrades and improvements like new kitchen cabinets, or hardwood floors, for example. Like 203K, acquisition and renovation financing are approved as a single mortgage. The only requirement is that the improvements must add value to the property.
The reader can search for Homepath homes on his or her own by going to the Fannie Mae website: www.homepath.com . You can search Homepath inventory by location… or price… or size… or a wide variety of other criteria. Information on Homepath financing is also available at this site. And more information on Fannie Mae in general is available it its main website: www.fanniemae.com .
Here are this edition's Charlotte are real estate "Best Buys":
(1)South Charlotte Estate Sale - 4BR/3 Full Baths on .65 acre lot in the Myers Park High School district:
Listing Price: $179,000.00 Here is a full brick ranch on 0.65 acre lot in the sought-after Myers Park High School district. This is NOT a short sale. It is, however, an estate sale and the sellers are motivated to get it under contract quickly. The home features 4 bedrooms and 3 full baths, the listing states there are between 2,500 and 3,000 square feet of heated living area, and the tax assessed value is $285,200. Great neighborhood near South Park, Aboretum and Stonecrest.
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(2)Four Bedroom/2.5 Bath Townhouse in Ballantyne - almost $25,000 Below Tax Value:
Listing Price: $220,000.00 Large 4/2.5 townhome in Villas at Ballantyne Trace community, assigned to highly desirable Ardrey Kell High School (Community House Middle School and Endhaven Elementary). Upgrades include extensive crown molding... Corian countertops... California Closet organizers in all closets... plantation shutters... private rear patio... priced $24,000 below tax value of $254,000.
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(3)Another South Charlotte 4/3 in Myers Park HS District -- this one is near LYNX Blue Line:
Listing Price: $230,000.00 Great Colonial Village location, assigned to Myers Park High School, this home features 4 bedrooms and 3 full baths in a park-like setting and fenced back yard. South End and Park Road shopping, near the LYNX Blue Line light rail. New windows were installed in 2002. Hardwood floors have been refinished. Lower level of home could be used as an in-law suite.
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Of course, one of the main reasons I take the time to publish this blog is to offer to go to work finding you a great deal on your next home or investment. It’s what I do best, and I love what I do. As I have said in every edition of my blog, “solid analysis identifies great opportunities.” I would be more than happy to answer any questions or read any comments you might have. Take advantage of all the tools and resources available on my website, including the ability to SEARCH THOUSANDS OF HOMES FREE: http://edorer.wilkinsonandassociates.com . Or please feel free to contact me.
The next edition of CHARLOTTE REAL ESTATE BEST BUYS, with new information, observations and “best buys” should be published on or before January 15, 2012. Thanks for your interest and Happy New Year!
ERIC J. DORER, B.S., J.D.
NC/SC Broker/Realtor
Wilkinson & Associates
NAR Certified Short Sales and Foreclosures Resource (SFR)
Tel: (980)875-0950
email: ejdorer@gmail.com
web site: http://edorer.wilkinsonandassociates.com
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