New Foreclosure Rules

New Foreclosure Rules

Here is an interesting new policy change coming from Fannie and Freddie.  If you have been trying to buy a foreclosure home recently, you have probably been just as frustrated as I am.

When they first hit the market, most foreclosure homes are listed about 10%-15% under “market price”.  This is mainly to make sure the asset does not sit on the market a long time and lose even more money, but also in some part because a foreclosure buyer is taking some level of risk since the seller is not testifying to the property condition and reports are non-existent.

The low price has attracted a lot of investors, who in many cases are buying with all-cash, or first time buyers.  Of course, the all-cash investor has a strong offer through a quick close and no appraisal; this puts the first-time buyer at a big disadvantage and what we’ve seen in the market is a “feeding frenzy” where investors are blocking normal buyers out of the market completely.

So to help make situation more fair, the latest announcement from Fannie/Freddie is that they will force a 15-day waiting period before hearing any investor offers so normal owner-occupied buyers can be allowed to make a reasonable offer.  Great news!

I wonder if this policy change is a result of many complaints from eager buyers.

-Mark