I have a friend who will only buy foreclosed homes. He gets awesome deals because, unlike me, he’s not afraid to put in a little elbow grease (I shudder).
Shuddering aside, sometimes the deals are so good that even a fixer upper neophyte like myself can be tempted to buy. However, no matter how hard I’ve tried to bribe him, he’s never revealed his sources for finding these homes.
Well, now I can stop bugging him. Fannie Mae and Freddie Mac, now ubiquitous names in the American housing meltdown, are unloading foreclosed properties as fast as possible.
A recent Yahoo! Finance article revealed that
Fannie Mae and Freddie Mac are scrambling to unload nearly 150,000 foreclosed homes. And that means 2004-esque deals — like requiring as little as 3% down, offering to pay a portion of the closing costs and arranging special financing and warranties for repairs and renovations.
Woah! That sounds too good to be true. So, I did a little research myself. Thankfully, Fannie and Freddie both have Websites for this purpose. What I didn’t realize is that I’ve already seen a few of these homes on the market.
After a quick search, I found a rough diamond. A 3 bed/2 bath 2,185 square foot home for $189,900. That’s about $86 per square foot. Now, for those of you who aren’t from the south, this is an OK deal. Why is it a jewel? Because the price also includes 10 acres. Now that’s more like it.
I mucked my way around the Freddie site but did just that most of the time—mucked. It didn’t show any pictures and stated on every property that I had to contact the listing agent for details. No thanks.
What’s the downside to purchasing a home this way?
Angry neighbors. These types of listings are devaluing nearby properties, says David Howell, realtor and executive vice president at McEnearney Associates, which sells homes in the metropolitan Washington D.C. area. That means in some areas where Freddie and Fannie homes are on the market, buyers could find a better deal on a nearby market-rate home that doesn’t require repairs, he says.
Of course, that’s in Washington D.C. If you live in a more rural area, as I do, people don’t worry as much about their property values. Mostly because these areas weren’t hit as hard by the real estate bubble.
Another downside is that there’s little room for price negotiation. Another property I found looked to be a good deal on the surface. That’s until I found out it was selling for $10K more than the last sale price five years ago. Huh? One explanation I came up with was that it had a home equity loaned wrapped into the price.
However, many of the special financing provisions for these Fannie and Freddie homes allow you to borrow up to an additional $30K for home renovations. So, that may have been included in the price as well. Either way, I wasn’t interested enough to pursue any further.
If you’ve found a worthwhile home deal through Fannie or Freddie, I’d love to hear about it.
Thanks to Financially Fit at Yahoo! for the inspiration.