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Government Owned properties (HUD and Fannie Mae) have their own set of rules and contracts, and I get a lot of questions from interested buyers looking in Bellingham and through Whatcom and Skagit County. There is many similarities between buying one of these properties and other bank owned properties, but many differences as well.
Is the process of buying a government owned home take longer than a normal sale?
Not necessarily. Once you are under contract on one of these properties, you can typically finance the home and close in 30-45 days. This is the same average time it takes to close on any property. If you are paying cash, you can often times close in less than 2 weeks.
Are these properties being sold "as is"? And do I have the chance to do an inspection?
Yes, they are being sold "as is". But Fannie Mae and HUD homes, along with most bank owned homes do allow for an inspection contingency and have that built into the contract. In most cases, you have 7 or 10 days to hire an inspector or do your own more thorough inspection of the property. If you find more problems than you expected, you can then back out and get your earnest money deposit back.
In some cases, if there is a major issue that comes up (like a major leak) there is a chance the seller may consider addressing the repair. With Fannie Mae owned homes, an issue that your appraiser points out (dry rot on the siding would be an example) will often times be addressed. Fannie Mae will always consider repairing issues that are lender required for you to obtain your loan. But beyond what is required by your lender, the home is indeed being sold "as is".
I always recommend negotiating your offer with the expectation that there will be some issues that will come up in the inspection, that you will need to deal with on your own.
I am an investor who plans to rent or flip the property. When can I submit my offer?
With Fannie Mae owned properties, you need to wait 20 days. For the first 20 days, it listed as a "First Look" property and is available for owner occupied buyers only. Starting on day 21, investors are free to write an offer. The ONLY exception is buyers using public funds through (a non-profit organization would be an example).
With HUD homes, the First Look period for owner occupied buyers is the first 30 days. Investors may write an offer on day 31.
What does Fannie Mae and HUD consider "owner occupied"?
You must intend to occupy the property as your primary residence within 60 days of closing, and maintain the occupancy for 1 year. You also must sign an owner occupancy certificate acknowledging this before submitting your offer.
What is HomePath financing and what are the advantages of this program?
HomePath financing is a special program offered on most Fannie Mae properties. The advantages of HomePath financing include:
-Only 5% down and no appraisal (therefore no appraisal fee, which typically runs around $500)
-No mortgage insurance. Mortgage insurance is fee that is included in most other programs where you are putting less than 20% down, and this can be a significant savings.
-You can get qualified with less than perfect credit.
-HomePath is available for investors as well as owner occupied buyers. HomePath is also available for renovation loans.
Who offers HomePath financing?
In Whatcom County, lenders that offer the program I recommend include Wells Fargo, Bank of the Pacific, Guild Mortgage, Neighborhood Mortgage, and Homestead Mortgage. There is other low down programs available to finance many of these properties as well. Including 3.5% down FHA and No-Down USDA loans. A loan officer will be able to help you figure out which loan is best for you.
I read with HUD homes, you need to submit an on-line bid. This sounds complicated.
These homes, acquired by the Department of Housing and Urban Development, are the result of a foreclosure on an FHA-insured mortgage
Writing an offer on a HUD home is a little more complex and I'd recommend you use a HUD certified broker (yes, I am one!). But if you have a buyers agent you are working with, your agent can also get certified, so you should check with your agent first if considering a HUD home.
With HUD homes that are new on the market, they do not review bids until 11 days after it's listed. So the first 10 days you can submit your bid, but you must wait until day 11 to get a response. As noted previously, HUD homes are not open to investors until day 31.
When you submit a bid on a HUD home, you often times have a response within 1-2 business days. Once you have an accepted bid, the inspection and financing process are not much different than buying any other property. It is "as is", and the main difference is it's up to you and your agent to deal with getting utilities turned on to inspect the home.
When considering offers, does the seller factor in the tax assessed value?
No. The tax assessment has nothing to do with how the seller is going to determine the list price or what offer price to accept.
Will the seller look at low-ball offers? What is a good strategy on negotiating?
Before these properties are listed, they are appraised, and usually by two sources. Although they are motivated to sell these properties, they are also motivated to get as much for them as they can. Still, they are typically priced for a quick sale. If you recognize the value and want the property, I recommend you write a serious offer. Writing an extremely low offer can sometimes be counter productive. If it is a new listing and priced well, you may miss out. Many of these properties have multiple offers.
If you are only interested in the property at a much lower price than listed, you can still write an offer and try. But it might make sense to wait. These properties will reduce in price if they are not sold, and often times the best deals are on the properties that need more work, or were listed too high initially. Then when the price is reduced, you can sometimes negotiate a price that is far below "market value" if your timing is right.
Also, don't forget about a property if you see it pending and under contract. Many deals fall apart because of financing, or inspection. It's important to stay alert and let your Realtor know if you want to be notified if it goes back on the market.
I work with these properties and all homes, lots, and condos for sale in Bellingham, Ferndale, Lynden, Deming, Everson, Nooksack, Custer, Blaine/Birch Bay, as well as North Skagit County homes--Sedro Woolley, Burlington, Mount Vernon, Bow, and Anacortes. You can contact me here with any further questions.