FNMA REO Property Purchase Process: Offer, Contract and Closing
The first factor to consider when figuring out the negotiation strategy and offer price on a REO property is the number of days the property has been on the market, listed for sale as a Fannie Mae REO home. The second important factor to consider is the condition of the property, which can be assessed after the completion of a professional home inspection report.
The real estate market conditions also play a big role in determining the price offered on a repo home. Both local and national market conditions and real estate values also have an effect on REO offers made to Fannie Mae.
When financing sources are plentiful and interest rates are low, many buyers flock to buy real estate. This usually leads to multiple offers and higher prices, especially for attractively priced Fannie Mae Homepath properties. In such circumstances, the buyer has a better chance at success by making their initial offer itself the best one.
Unique and desired features such as swimming pool and large porch on a property usually positively influence buyers and thus expectedly their offer prices. This must be kept in mind by the buyers, especially when making offers on properties that have features which may be in strong-demand.
“No Offer” Period
On all new Fannie Mae REO listings, the initial three business days are “no-offer” period. FNMA doesn’t accept any offers made on properties during this duration. This rule is intended to provide enough exposure and eyeballs to the new REO property listing. FNMA homes give priority to owner-occupant buyers. During the initial 15 days after the no-offer period, only offers made by those buyers who wish to occupy and live in the property are considered, along those made by any public government entity.
Fannie Mae REO Real Estate Sales Contract
The purchase contract to buy a Fannie Mae REO home must be in the state-specific standard format. A number of purchase addendums are usually required to be filled and signed along with the sales contact. In a situation where the buyer doesn’t feel comfortable or understand a certain portion of the real estate contract, one should consult a real estate attorney, FNMA REO selling agent or the buyer’s agent to overcome any doubts.
The following documents must accompany any purchase offer to buy a FNMA owned REO home.
- The standard local or state real estate contract that is completely filled and signed.
- Completely filled Fannie Mae Real Estate Purchase Addendum.
- A cheque or instrument for earnest money noted on the contract. Offering earnest money demonstrates the seriousness of the buyer to the seller. When a contract gets accepted by Fannie Mae, the earnest money is handled by the escrow agent of a title insurance company. This deposit money held in escrow is later applied towards the down payment and closing costs.
Fannie Mae also needs the buyer to either show proof of funds, in case of a cash offer, or pre-approval letter from a mortgage lender, in case of home financing. This is critical as the type of finance being used determines the length it takes to close and the seller understandably prefers to close and collect its funds faster and sooner rather than later.
Steps after acceptance of a purchase offer by Fannie Mae REO
Congrats..your offer has been accepted by all concerned parties. The immediate next step is the execution of the contract between the buyer and the seller, Fannie Mae. To allow buyers the ability to perform inspection and assessment, FNMA allows the buyer a 10-day window to do so. This is the period during which the buyer determines the suitability of a Fannie Mae Homepath property for his occupancy needs.
To perform a home inspection on a FNMA home, it’s best to employ the professional services of a qualified and experienced home inspector. The purchase addendum required as part of the Fannie Mae REO contract stipulates the exact start date for the beginning of the 10-day home inspection period.
Some type of loans, especially FHA, VA and Conventional mortgage loans may require that all repairs and deficiencies be completed before closing. In such cases, the home lender contacts the FNMA broker to inform them of the necessary requirements. After that, it is up to Fannie Mae to either accommodate these new findings through changes to the earlier contract or reject them. In most cases, Fannie Mae REO department will allow the re-negotiation of a signed contract to account for needed repairs, especially in cases where the mortgage lender requires so in order qualify a buyer for home financing.
In those rare instances where FNMA rejects certain repairs, it will be upon the buyer to find new financing to address such rejected repairs. If alternative financing isn’t an option, the buyer will have no option but to choose another REO home from Fannie Mae REO listings.
Loan Closing on a Fannie Mae REO property
The closing dates are often difficult to meet due to unforeseen circumstances and incidents that crop up quite frequently in a real estate transaction. The seller, Fannie Mae, prefers to close as soon as possible. In spite of their best intentions, buyer should be patient as it’s quite reasonable to face delays when closing on a REO home.
A closing date is generally schedule with co-ordination of all parties by the closing agent of the Title Insurance Company after all outstanding conditions have been met. Loan approval along with evidence of a clear title must be in place in order to pave the way to a closing table.
Depending on the laws governing the state in which the Fannie owned REO home is located, the closing may be conducted in a attorney’s office or at a title insurance or escrow company.
The buyer should carefully review the closing docs prior to the closing. All fees, costs and charges need to be reviewed and understood. It’s better to compare the settlement fees and costs with the GFE (Good Faith Estimate) provided by your mortgage broker or lender. Before going to the closing, carry a cashier’s check for the exact moment in the format preferred by FNMA. This amount can be found out by calling the escrow agent ahead of closing after the docs have been prepared for signing.
A closing agent disburses all the funds provided by the financing lender to the seller and other parties involved. The mortgage lender receives the title for the property in return for their financing.
At this point, the REO property comes into the possession of the buyer. It’s no longer owned by Fannie Mae or part of its listings or REO inventory. For any further clarifications, don’t hesitate to consult with the agent representing you.