Have you spotted a Fannie Mae foreclosure in the MLS that looks like it could be “the one”? Buying a foreclosure from Fannie Mae through their Homepath website is a Buyer Beware nightmare. But if you’re a regular reader of this real estate blog, you know that I take the experience of thousands of other buyers and a lifetime of experience myself, and I share those experiences with you so you won’t have to learn the hard way. If you can sidestep a nightmare, then I’ve done my job, and your life will be better for it. So what do you need to know in 500 words or less about a Fannie Mae Foreclosure and their Homepath system?
Wow! A Fannie Mae Foreclosure
First, making an offer and negotiating on a Fannie Mae foreclosure is not going to feel like any other real estate transaction you’ve ever experienced. When you submit an offer with the standard paperwork as required by their Homepath site, you eventually find out that they throw out almost all the important language in your offer. They use a stamp on the front of your offer, and here’s what it says:
Pursuant to Section 28 of the Real Estate Purchase Addendum, this document is subject to all the terms and conditions set forth in the Real Estate Purchase Addendum.
While that sounds like an innocuous clause, their addendum restates all the important terms in the agreement. In other words, they tell you they accept your offer (once you’ve reached an agreement on price), but they really have not, because they shove an addendum down your throat that changes the terms of the transaction. We don’t have time to go through their 23 page addendum, but believe me, it looks nothing like the offer you wanted to make, and the terms are nothing less than dictatorial.
Fannie Mae Foreclosure Nightmare
Second, you think you are going to be able to have the standard home inspection when you buy a foreclosure through Homepath, and even though you included a home inspection addendum with your offer and they tell you your offer has been accepted, they take out the home inspection addendum and throw it away without telling you. You will have to pour through almost three dozen pages of tiny print to figure out that your home inspection addendum is missing. When you contact them or your Realtor asks what happened to it, they tell you that they don’t allow you to have a home inspection. And they remind you that you are buying the home “as is” with no opportunity to have it inspected to see if it is a nightmare with all kinds of hidden problems. Too bad they say. You want it, you buy it on their terms.
You would never get away with this in the private sector, but Fannie Mae can sell you a foreclosure that is garbage and then tell you have no remedy. Now you could get lucky and maybe the house doesn’t have serious problems, but you have to be willing to take a huge gamble, and that’s not going to be comfortable for most retirees.
I could go on and on about a dozen other major issues (and ridiculous clauses) in this process, but I think I’ve said enough. Besides, I am already over 500 words (566 to be exact). The point is beware of any Fannie Mae Foreclosure.
Last Updated on June 12, 2014 by Chuck Marunde
As a Realtor, I would not do repairs to get a property into the buyer’s hands because you leave yourself open to liability. I’ve heard so many nightmares about HomePath that I typically avoid recommending them to Buyers, unless they are experienced, savvy investors.
Good website Chuck. I am a Certified Appraiser and RE Broker. Have put in bids for buyers and had the same experience you talk about. Then I grabbed the bull by the horn. Went in to a vacant REO with the buyer and Inspector. My buyer wanted that house. Do not care about their rules. Made an offer and when repairs came up.. I got up on the ladder myself and fixed the problems. The appraiser called for repairs and I told the listing broker a lepricon from the land of fairies fix the problems. The 1004D (442) passed and closed the deal. Joseph Benn Appraisal Center, Inc. Seattle