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Issues with Fannie Mae and Freddie Mac

FANNIE MAE and FREDDIE MAC are the two largest buyers of mortgages in the US; in recent months, FANNIE MAE (I'll call them Fannie from now on) has been evidencing its "evil twin" side. In a number of cases, agents in our office have noted that Fannie has taken the "foreclosure option" rather than allowing a short sale. However, rather than just saying that this is what they intend to do, they wait until they have an offer, and then send out an "appraiser," who evaluates the property; then they recently demand a "premium" to allow the buyer to buy the property at short sale--in general that premium kills the transaction, because the NEW lender's appraiser (the buyer's lender) has valued the property at 10-30% less than Fannie has. When no agreement can be reached, Fannie continues its foreclosure. Later, they put this property on the market overpriced by as much as 20% (after they own it through foreclosure), and offer financing. With Fannie's financing there is no appraisal needed, so that the buyer after foreclosure winds up paying Fannie's premium. The problem with this is that Fannie (a Government Sponsored Entity) is consciously foreclosing on property where there is a bonafide buyer at the preforeclosure appraised value, and then offering the foreclosure for substantially more than it is worth.
For this reason, all the agents in our office are recommending that in ANY Fannie transaction, the clients insist on an appraisal, even if Fannie is doing the financing. If you don't insist on an appraisal, you will possibly pay as much as 20% more than the value of the property. This way, Fannie can have its cake and eat it, too. If they get the offer they want, they take it--even if it's substantially over the actual value; if they don't, they reject it, foreclose, and then put the property back on the market at the overvalued price, and offer it with financing through their agency so that nobody will find that it's overpriced.
Sad to say, some real estate agents are complicit in this, either consciously or unconsciously, and seem completely unwilling to demand that their clients get proper value for their real estate dollars.
Know your agent, and ask for an appraisal--barring that, ask for comparables to verify that the price you are paying is reasonable in the current market, for your property's area, and in your property's condition. An agent who follows the proper ethical guidelines will always recommend some evaluation of the property's pricing, whether he or she does the comps, or you get a third-party appraisal.

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