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Why Fannie Mae REO's are Often Priced Higer Than Market Value in California.

More times than not it seems as if Fannie Mae REO’s are priced extremely high in CA, compared to list prices of other REO properties. Sometimes understanding why something is done is half the battle, and it helps ease the frustration of completing a excellent BPO only to have the client list the property 20K higher than suggested list price.

A few months ago, I had the opportunity to sit in on a conference call with Fannie Mae representatives and it all became clear as to why their properties in CA are listed so high.

The current mission of Fannie Mae is to bring about neighborhood stabilization, and preserve neighborhoods. In conjunction they want to lessen losses; however one cannot be accomplished without the other. So what does this have to do with overpricing homes in California?

First and foremost, California is considered to be a premium state to Fannie Mae. (What this means, I don't know ,your guess is as good as mine, but my assumption is this: California leads most other states when it comes to appreciation and migration of a state to live. Maybe it dates back to the Gold Rush Days. LOL

With Fannie being the leader in owning mortgages, chance are that for every one Bank Owned home or Foreclose on a street, they own 10-12 others on the same street. So it is of benefit to both Fannie Mae and the neighborhood for the REO home to be priced higher. The hope is to be less of a shock factor for those other ten - twelve performing notes on the block, so that they keep performing and paying their mortgages. (This is a must to bring about stabilization.) I'm going to go out on a limb here and predict that in the near future you will see less homes go on the market, meaning there will be FC's of DIL’s you don't even know about and previous owners will remain in homes as renters until they can buy back the homes .

Fellow agents now that you understand, don't get frustrated, keep doing your BPO's and just remember, the comps don't lie, and true market value is what a ready, willing buyer, is willing to pay for a home. I have been quite surprised by my last two list prices, as they have been rather aggressive. I’ll keep you posted.

Let me leave you with these word of wisdom. What’s good for Fannie, may not be good for Saxon, or Aurora, and ultimately not good for you. Stay tuned for my next blog and I'll explain.

Remember this, “ If your going to thrive in any market, knowing where it is going, and how to position yourself will be key for your success”

Very Truly Yours,

Jonathan Burgess

Coed 3 Real Estate


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Comment by Brandon Jordan on November 15, 2010 at 9:56pm
Comment by Donald C Hascall on February 15, 2010 at 3:09pm
Repairs and estimated construction costs was standard operating procedures and still is today. Yes remember it all and you had to also obtain bids for thrash outs, boarding, rekeys and repairs. Agents were always asking me for these figures. They usually showed up about the time I was there doing my job wanting to leave and the agents wanting to be shown the foundation, roofing, and plumbing problems that I had noticed. Agents were fun to educate then and even today...Of course some argue, and of course I smile. I used the term boarding up -- when was the last time you boarded up a property?
Comment by Michael Robinson on February 15, 2010 at 2:43pm
Well, I did 1000 Freddies, and of course we did a bpo on each of them. And talked to the appraiser as well. I can tell you, I had the highest respect for the appraisers back then. In fact, respect for the whole process. I knew the appraisers, and we would joke, but then it was business. And we worked for one thing, how do we get the top dollar for this asset? Should it be repaired? (remember that?). In those days, we talked to the asset manager daily. wow.
Comment by Donald C Hascall on February 15, 2010 at 2:36pm
Michael In the 90's I was a broker/appraiser and the one appraising in my market area for Fannie and Freddie and HUD/FHA and several others. I had a choice either to price or to sell these properties and I couldn't do both. I decided to set prices and not sell them. Which then was a smart choice. I have always set BPO, sales or listing prices at fair market value as any listing with Fannie Mae, and Freddie. As for listing high I remember several BPO's and up to two appraisers setting values in the early 90's. Since I wasn't selling these homes I never did check and see what they were listed for or for how much difference there was in listing and in the final sales price. Back then I was doing about 60 plus appraisals monthly and didn't even remember addresses or resale prices or even REO sales prices versus listing prices, somehow there just wasn't enough time to check. I chuckled some for the memory of the 90's. I'm a former appraiser specializing in REO's as I have always been in this niche business it seems. Thanks for the memory lane walk.
Comment by Michael Robinson on February 15, 2010 at 12:23pm
I was doing Fannie Directs in the 90's, as well as Freddie Direct. Even in those days, it seemed Fannie listed high. Freddie Mac was much better.
Comment by Jonathan on February 13, 2010 at 10:16pm
Sounds good and I will add you to my network..
Comment by Donald C Hascall on February 13, 2010 at 10:04pm
Thank you as I reread all the posts and didn't know how to answer your response if you decided to respond. I am only 150 miles North of you, if you have clients moving up this way, we can work together. I do pay referrals and cooperate with out of the area agents. Thanks again.
Comment by Jonathan on February 13, 2010 at 9:55pm
I agree, and thanks for making it clear..
Comment by Donald C Hascall on February 13, 2010 at 9:24pm
Thank you for the reply -- let me clarify my statement please, we set a listing price and if Fannie decides to list higher all we can do as agents is to keep the asset managers aware of the market conditions including the economic conditions and property value trends and to keep the Monthly Status Reports as accurate as possible. If the asset managers decide to override our opinions then who is the client? They are and we are only their eyes and ears in this area. I look at not selling this property and not able to keep it priced accordingly as my failure to inform correctly. I agree with you about our reputation and I explain to agents that it is the asset managers who price out the properties. It is my job to market and to sell.
Comment by Jonathan on February 13, 2010 at 9:18pm
Don,you are correct in eventually the price comes down as long as one is doing effective MMR's. However the problem is chasing the market when your overpriced and facing re-assignment after much hard work. REO or not, my agents as well as myself are running comps for our buyers when we are writing offers. Its our job as the professional to inform our clients where there offers should be. Personally I wont waste my time and write low ball offers for clients, REO or Not. In the end its our reputation on the line. When my peers see and offer with my name on it, they know it is legit and that goes a long ways in this business..

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