If you’re working with a buyer who’s interested in submitting an offer for a Fannie Mae REO, you’ll have to do it online. The secondary mortgage market company last week launched an all-online system for submitting offers on its inventory of foreclosed homes.
Here’s how Fannie describes it on its HomePath website:
“Making an offer to purchase a HomePath property is now quick, easy and entirely online! Beginning February 2, all offers on HomePath properties must be made using the HomePath Online Offer system. If you’re ready to make an offer, just have your real estate professional click the “Make an Offer” button on the property information and follow the instructions.”
Only licensed agents can make offers, so any consumers shopping for a home on Fannie’s HomePath site have to contact an agent first.
If you’re not already registered as an agent with the site, you’ll need to do that, then click the “Make an Offer” button and follow the instructions. You’ll have to be able to scan documents and otherwise be prepared to input information digitally.
Registering with the site so you can submit offers as a selling agent is not the same thing as registering with Fannie Mae as an approved listing agent. That seems obvious, but sometimes it helps to state the obvious to avoid confusion. To become a listing agent for Fannie Mae in your market, you have to submit an application (also an online process) and then go through its proprietary selection process, which requires you to submit information about your practice. Every market is different, but generally the company works with a handful of brokers or agents that it has selected to list its REO properties.
The company says it pays a commission of 2.5 percent to the listing broker, with a $1,000 minimum, and a commission of 3 percent to the selling broker, also with a $1,000 minimum. It says it has some additional selling incentives in some markets.
Fannie gives owner-occupant buyers a 15-day window after a property comes on the market to make an offer without competition from investors. Offers made by investors during that “first-look” period are rejected from the system with instructions to resubmit after the 15-day period ends, if the property isn’t under contract by that time. The offers are not kept in the system and queued up.
Buyers can use any financing they want, including Fannie Mae financing through its two HomePath mortgage programs, one for purchases and one for purchases with renovation. If the buyer is using HomePath financing, Fannie only requires a downpayment of 3 percent, waives the appraisal and also doesn’t require mortgage insurance. Investors can get up to 90 percent financing.
You can learn more about online submissions on the Real Estate Professionals’ page on the HomePath website and click on “HomePath Online Offers Support page.”
REO sales are a big part of today’s market and it might make a lot of sense for you to consider getting into this niche. But after talking to two REO specialists in Northern Virgina, it’s clear that this niche isn’t for everyone. To succeed, your practice has to become volume-based, because the margin on REOs isn’t as big as it is on regular sales. So, if you’re not already set up to be successful at handling large volumes of listings at one time, you have to move your business in that direction. That means adding team members and adding computer systems to oversee a lot of what you do, including tracking properties and tracking all those team members you’re adding.
On top of adding team members and systems, you have to get up to speed on rules that can come into play when you’re handling REOs, and that includes working with the occupants of homes that are now owned by banks. Are the occupants the former owners of the house? Are they tenants that the bank has put in the house until they sell it? What are the rights of the people who are living in the house?
It’s a lot to consider, but there’s no doubt that it’s a niche that’s thriving today given the high levels of distressed sales. And it can be rewarding to help people who might be facing tough times today but are fully expecting to be back in the market tomorrow once things turn around.
In the video above, REO specialists Leo Pareja of Keller Williams Realty and Jonathan Spinetto of Champion Homes talk about what’s involved in the niche from their perspective.
You can also read what Pareja and Spinetto have to say in a REALTOR® Magazine feature in the January-February 2012 issue. The piece, “How to Make REO Sales Work for You,” is part of a special feature that looks at several aspects of distressed sales, including short sales.