Homepath homes have a variety of advantages for buyers including a low 5% down payment, no requirements for private mortgage insurance and no required appraisals.
However, there are also important risks that buyers face when purchasing a Homepath home.
1) Failing to Account for Repair Costs– Homepath homes have been foreclosed upon and many sit vacant for months before being listed. Exiting homeowners or people who break in later often strip the houses of appliances and create messes that buyers should account for in their total purchase price. This doesn’t mean that many Homepath houses aren’t great deals but that you need to think more carefully about what you will really be spending when you make an offer.
2) Failing to Properly Inspect the Property– Fannie Mae basically wipes their hands of a house once it is sold. Don’t expect any warranties or legal recourse if you discover something wrong with the home. For this reason, a full and complete inspection is absolutely vital for Homepath homes. Fannie Mae is the owner but can’t account for the house’s status or condition during its foreclosure period.
3) Waiting to Make an Offer– The prices for Homepath homes are determined by Fannie Mae after conducting their own appraisal and taking into account the listing broker’s opinion. These prices are sometimes great deals and other times they are too high. Fannie Mae will discount prices if a property sits on the market but tend to do so faster if offers come in demonstrating a lower market value. The lesson? Submit your offer now, even if its far below asking price. This paper trail will expedite the process of Fannie Mae lowering the price to something you can buy.
4) Failing to Complete the Fannie Mae Contract Addendum– Fannie Mae has its own contract that is required to submit an offer. In most cases your broker can find this document attached to the MLS listing for the property. It is strongly to your advantage to complete the entire addendum correctly the first time. Fannie Mae is handling thousands of properties and the asset managers in charge of these properties have little patience for people who don’t take the time to properly complete the required forms.
5) Missing Past Due Assessments– Foreclosed Properties often have past due assessments (like parking fees, gym costs, home owner’s association dues) that are the buyer’s responsibility. Though Fannie Mae will often provide a credit for these costs, they will seldom do so after accepting the initial offer. If there are closing costs or assessments that you, as a buyer, want covered, they should be detailed in your Fannie Mae offer paperwork. Getting the money later is difficult and can land you with unforeseen costs if Fannie Mae denies your request.
There is one final mistake that we should mention: failing to take advantage of the great deals that the Homepath program offers!
Do Homepath homes require more attention and more detail work than a traditional home purchase? Yes.
Does the discounted price of some of these properties make all that extra work worthwhile? Absolutely!
Your best best is go with a broker that has strong knowledge of the Homepath process and working relationships with Fannie Mae’s asset managers.