Real estate: Buyers Who Will Live in Homes Get First Chance at Foreclosures
15 days “First Look” programs
Two major lenders, Fannie Mae and Freddie Mac, want to keep investors at bay when they list foreclosed homes for sale. At least for a couple of weeks.
Their “First Look” programs give temporary preference to buyers who will occupy a home as their primary residence. Those buyers, as well as some nonprofit groups and public entities, are given 15 days to submit offers to purchase properties before investors jump in the mix. Several such properties are listed in Tucson.
The idea is to stabilize neighborhoods and cut into housing vacancies by selling homes directly to those who will live in them.
Before First Look, investors would make low-ball offers on foreclosed homes, shutting owner-occupants out of the competition, said Jay Ryan, vice president of foreclosure sales at Fannie Mae.
“Especially in hot markets, there was a lot of activity and homeowners were not able to get a lot of the houses because of that,” Ryan said.
It’s also worth pointing out that Fannie Mae and Freddie Mac were taken over by the federal government in the wake of the housing crash. As such, it appears the feds consider it an obligation to ensure that investors aren’t the only ones cashing in on the glut of foreclosures.
Since Fannie Mae’s program started in August 2009, and through the first half of this year, the lender has sold 56,000 properties to owner-occupants nationwide during the First Look period, Ryan said.
Another 7,800 have gone to public entities, which purchase the properties through the U.S. Department of Housing and Urban Development’s Neighborhood Stabilization Program. They then spruce up the vacant houses and resell them.
The program can frustrate investors, but only when properties are priced aggressively enough to attract their interest, said Justin Bentley a real estate professional with Tierra Antigua.
Often, when properties are listed on Fannie Mae’s foreclosure listing website, they’re priced too high for investors, said Bentley, who himself invests in bank-owned properties.
Without a grace period, Bentley agreed that investors can push any potential owner-occupants out of the bidding competition.
“If they don’t have that rule, it turns into an investor feeding frenzy,” he said.
Everyone, for the most part, agrees that investors contribute to the housing market’s recovery. They purchase and fix up properties that banks otherwise wouldn’t.
Fannie Mae agrees with that, which explains why the First Look period only lasts about two weeks. The time period gives owner-occupants and public entities enough time to check out properties, but it’s short enough to ensure the homes aren’t languishing on the market, Ryan said.
Fannie Mae won’t even accept offers from investors during that period, said David Kipling, an agent with Keller Williams Realty who sells foreclosures.
Overall, that’s good for the housing market.
“If there’s a foreclosure next to your house, wouldn’t you rather have an owner occupant?” Kipling said.
When investors purchase properties, they generally hold on to them, leaving them vacant or renting them out, because they’re waiting for prices to rise before selling them.
While investors have their place in the market’s recovery, they do drive down housing prices. That can affect values in entire neighborhoods.
“An investor is going to try and beat the price down because he’s got to make money,” Kipling said.
AT A GLANCE
During the First Look marketing period — which is usually 15 days — Fannie Mae and Freddie Mac allow offers only from buyers who plan to occupy a house as their primary residence, or from some nonprofits and public entities.
Fannie Mae’s properties are listed at www.homepath.com
Freddie Mac’s properties can be found by clicking “search our homes” at www.homesteps.com
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(c)2011 The Arizona Daily Star (Tucson, Ariz.)
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Source: By Dale Quinn, The Arizona Daily Star, Tucson
