When the foreclosure market heated up just a couple of years ago, banks, asset management companies and federal agencies selling off these properties caught a lot of flak from the general buying public that they were feeding "investors" with properties and people actively seeing a home in which to live were being left out of the process.  Fannie Mae decided to counter this objection by creating their "First Look" program.

The following is taken directly from their website:

Fannie Mae's innovative First Look marketing period contributes to neighborhood stabilization by encouraging home ownership. During this period, owner occupants who occupy the home as their primary residence, some non profits, and public entities and their partners can submit offers and purchase properties without competition from investor offers.

The First Look period is typically the first 15 days a property is listed on HomePath.com, except Nevada where it is 30 days. Properties within the First Look period include a countdown clock on the property details page, which displays the number of days remaining for negotiation with eligible purchasers.

Investor offers submitted after the expiration of the First Look period will be considered along with all other offers.

Ask a Fannie Mae listing broker for more details

If you are concerned that the First Look marketing period is not being handled appropriately on a particular property, please contact the Fannie Mae Resource Center immediately at 1-800-732-6643

This is an example of their first look "clock" on homepath.com.

Offers can't be submitted to the seller on days 15, 14, and 13.  Once the first look clock hits day 12, offers may be submitted. Offers are REQUIRED to be accompanied by Fannie Mae's owner occupant certification signed by the buyer and the buyer's agent.  This certification is attached to the listing in the MLS for the buyer's agents convenience.  There is also a generic one below in the ONLINE RESOURCES section.

 As the list agent, I'm required to search local tax records to see if the buyer owns other real estate.  Should I find a name that matches ownership of other real estate, I'm required to seek further information from the buyer's agent.  Fannie wants to be as sure as possible this purchaser will occupy the property for which they are making an offer.  It's not unusual for people to be able to purchase a property in the first look period when they own other property.  Common explanations are the buyer just got married and their family size increased and they are seeking a larger home, recent family size decreases and seeking smaller homes, etc.

It is at Fannie's SOLE DISCRETION whether they choose to negotiate with a buyer that owns other property.

The owner occupant certification states that the purchaser "will occupy, establish and use the above-referenced property as my primary residence within 60 days after the Closing and will continue to occupy the property as my primary residence for at least one year after the date of occupancy, unless extenuating circumstances arise which are beyond my control."

Sometimes, properties are not in a condition that Fannie feels anyone could actually fulfill their obligation to meet these criteria.  Examples are properties being sold "as-is" that lack functioning electrical, plumbing or hvac systems, properties uninhabitable due to environmental issues, etc.  In those cases, Fannie often decides that NO ONE may offer during the First Look period and no one may purchase the property as "owner-occupants." Due to the condition and the extensive repairs that may need to be made, all purchasers will be considered investors and offers will only be entertained after the First Look period has expired.

Things sure are different than they were just a few years ago.  All you hear about now are foreclosures, hud homes, Fannie Mae and Freddie Mac, short-sales, etc.

If you're planning on buying a home today, you need to do some homework first.

Most all sellers will require seeing a preapproval letter from a lender if you're planning on getting financing or proof of funds if you're going to be offering cash.  Contact your favorite local lender and ask them for a preapproval.  Make sure you get a preapproval and not a prequalification.  There is a difference!

Be sure your loan type you get preapproved for will work with properties you may be interested in.  If you're going to be  searching for a home in the middle of Rogers, Springdale or Fayetteville, a USDA-RD loan won't work.  If you're wanting to buy a fixer-upper, not only won't RD won't work, neither will FHA or VA.  You'll need a conventional loan type.  Visit with your lender about down payment requirements too.

Be prepared with some ready cash.  Most sellers will want to see at least $1000 earnest money tendered with offers.  If the offer isn't accepted, the money never changes hands.  If it is accepted, the earnest money will go towards the purchase at closing.  The days of purchasing a home and not having any money in the bank are long gone folks.

There must be some late night talk show or infomercial out there that is telling people they can purchase foreclosed homes for pennies on the dollar amount they are listed for.  I hate to tell you this, but that is simply not true.  Sellers are savvy about what their homes are worth and typically properties sell for within 5% of their offering price. 

There are a million other things to know about buying a home today.  A good lender and a good Realtor will help you with your preparation.  Don't expect realtors to jump in the car and show you homes without your having done your preparation. 

Most of us will be glad to meet with you in our offices to help you with your preparation.  Once you're armed and dangerous with your preparations, we'll head off into the wild blue yonder of home viewing.

So, you've seen the advertisements and heard the words "HUD Owned" or "HUD Home" a lot recently - just what does that mean?

A HUD Home is a 1-4 unit residential property acquired by HUD (the Department of Housing and Urban Development) as a result of a foreclosure action on an FHA-insured mortgage.  HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.

HUD contracts with local real-estate agencies to list these homes in the MLS for them.  We go to the homes, measure them, take pictures, and enter all the information into the MLS and our websites.  We have no agency relationship with HUD, meaning we don't represent them in the sale of the property, we only represent those who are interested in purchasing the property.

Only HUD authorized agents are allowed to represent potential buyers.  We have special training on the forms and processes as well as the different financing methods to purchase these homes.  We have developed relationships with lenders specifically geared toward helping potential homeowners with their purchases.

In order to purchase a HUD Home, potential homeowners that will need a loan will need to be pre-approved thru a lender for a loan and have proof of that preapproval.  This is easily done.  Also, if the home is offered at more than $50,000, they will have to have $1000 earnest money at the ready in the event their offer is accepted.  If it's offered at less than $50,000, then only $500 earnest money will be needed.  If they are paying cash, the earnest money rules still apply, but they need proof of funds, easily obtained by a letter from their bank on the bank letterhead.

Once you have your preapproval or proof of funds, a "bid" is made on the home.  Along with the bid, there is quite a bit of paperwork the agent will go over with you.  The agent will help you understand your rights to inspections, utility info (to get a good inspection), earnest money agreements, lead based paint disclosures, termite contract prorations, etc. etc.  If the bid is not accepted, no earnest money is tendered, and you either make another bid or move on to a different house.  If the bid is accepted, the agent has 48 hours to get the paperwork and the earnest money overnighted to the appropriate places.

After the paperwork is complete, the buyer typically has the right to an inspection, the agent should make arrangements with the buyer to get the inspection completed and will help the buyer with all the paperwork and extra tasks necessary to get the home thru the purchase process.

Just a note about HUD Homes.  There is a very common misconception that HUD will accept lowball offers on their homes.  This is simply not the case.  They have a pre-set bottom dollar amount they want to net on each property at the list price.  A seasoned HUD authorized agent can help you understand what an appropriate offer on each property might be.

So, if you're interested in a HUD Property, give me a call, I know the ropes, and can help make your purchase a smooth one.

For dribs, drabs, Gary's personal info, listings, and his thoughts on real-estate in NWA, read his wordpress blog.

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