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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 Donald C Hascall on February 13, 2010 at 8:43pm
I wrestle with this situation when I price properties as offers have been lower than listing prices no matter which or whom owns the property. Buyers have a tendency to view REO's as a buyers opportunity to purchase lower, then their lenders ask for repairs and for closing costs. When I view the property for my listing comp it is the sales that weigh heavy in my decision for setting my value if the sales are available. Fannie Mae and others have been slow to bring prices down every month and by doing the market status reports the comments section can reflect the number of showings and the number of offers plus the buyers comments about the home. Eventually the price does comes down. If you are worried about listing to sales prices -- it is the current list price that is the one that is looked at and not the original one. If you worry about listing prices then you should be aware of Fannie Mae's 'APR' aged property reassignment' as it is called. This allows a new agent to come in and to be the new listing agent with a new price normally priced $5000.00 lower than you had for one year....Don't know if this fits in with your idea of how you wanted this blog to go but this is my two cents worth.

Don Hascall Broker
CA Dre#01044242
Comment by Billie Dalessio on February 13, 2010 at 4:02pm
Jonathan, thanks for the insights. I agree with your viewpoint of the strategy.

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