Homepath And REO Stigma

[Tim in NJ]

REO properties are pretty much investor purchases, niche buyers who'll purchase at the right price properties with no utilities on, hidden problems etc. Price can be 30% off market for its (repaired) condition due to the REO stigma. I routinely adjust non-REO comps when appraising REO properties. The FNMA Homepath properties are also REOs but buyers get repairs, home inspection, $$ concessions etc. Homepath properties are far fewer in number. Beyond the known concessions, how do I estimate a supportable / reasonable adjustment?

 

[Bobby Bucks]

You also need to factor in their 90-120 day marketing time for their REO properties. Although it isn't always possible, homepath comparables are the best when the subject is homepath. On the other extreme , Nationstar REOs... not so good comps for homepath properties....often firesale auctions. Measuring REO stigma has always been like nailing jello to the wall for me, if using REO comparables, I try to use comps that were owned by the owner of the subject. I try to avoid using HUD M & M comps if the subject is homepath, especially when there wasn't a PCR with the property, many of those are close to being teardowns.

 

[Sid Holderly]

In this area in past years (2-6 years ago) Homepath properties sold for equal to or lower than other REO properties, about 60% under standard market average condition values for the same type of property. In the past year the discount has shrunk to about 40% under, likely because there are much fewer numbers of REO's and the same number of buyers.

 

[glenn walker]

In my area Homepath properties in some cases have been updated or remodeled and I do not compare them to typical bank REOs . In fact some are in C-3 condition. I simply explain in my addendum that even though they are lender owned they have been brought up to average or good condition and do not compete with typical distressed properties that are in poor condition or ones that may not qualify for traditional Conventional , FHA or VA financing. *** Your support is going to come from using standard sales that are in average or good condition NOT trashed Reos unless your Homepath property is a trashed REO

 

[Sid Holderly]

Most in this area take too many $ to bring up to C4 or C3 and are sold in the decaying REO state. If they are updated as such they would be gems in the market.

 

[Meandering]

Homepath properties are sold as fee simple defeasible,

the defeasance is that the buyer must agree to live in it as a primary residence for at least one year, and within like 90 days from the date of purchase.

Within that first year, they can not rent out the property, else title reverts back to Fannie.

This keeps investors from bidding on and buying these homes, so it's a smaller pool of buyers, and a difference in property rights conveyed.

.

 

[glenn walker]

Homepath in Southern California sell very quickly and often at full price and since most are purchased by real family's that intend to live in the home for more than one year the one year clause and no rental for one year has no negative effect on the sale or marketability. Maybe it's different in other States but some of these homes are being updated and in real nice condition at time of sale and the one year clause helps stabilize some neighborhoods which have a glut of rentals.

 

[Howard Klahr]

Not all homeopath properties have ownership or rental restriction

 

[Meandering]

You are right, not all are sold with defeasance clauses, but those that aren't sold that way, have to be marketed longer than those that are.

Owner Occcupant Buyers
When a home is purchased by a buyer for occupancy as a primary residence, they are considered to be owner-occupants. Fannie Mae offers owner-occupant buyers of its REO homes special consideration. The “First Look” provision excludes any buyers other than primary residency buyers from submitting offers on Fannie Mae REO listings. Some public entities and designates are the only others allowed to make an offer during the “First Look” period. Investors can still make offers during this period, but they won’t be given due consideration till the completion of the initial 15 days reserved for owner-occupants.
http://fanniemaereo.com/homepath-property/

 

[CindyR]

Homepath in Southern California sell very quickly and often at full price and since most are purchased by real family's that intend to live in the home for more than one year the one year clause and no rental for one year has no negative effect on the sale or marketability. Maybe it's different in other States but some of these homes are being updated and in real nice condition at time of sale and the one year clause helps stabilize some neighborhoods which have a glut of rentals.

Same here in Phoenix - Homepath properties are often the top of the market. they are rarely sold with deficiencies and they are nicely updated and remodeled. Buyers loved them.