More and more international and even local homebuyers have been asking me lately about the First look program put forth by both Fannie Mae and Freddie Mac, the two largest holders of REO property in America. There seems to be some confusion on the Program itself and how it impacts their purchasing power in the Arizona foreclosure marketplace. I put together some information that I hope clarifies both the program’s objectives and the manner in which today’s homebuyer views these listings as they hit the market.
Fannie Mae First Look
The First Look program was designed to promote owner occupancy and homeowner involvement in their community. Individual homebuyers and public entities are given a set period of time, usually 15 days after a property is listed on the HomePath.com website, to submit an offer to purchase before the property is made available to investors and second homebuyers. According to the policy, Second homeowners (such as Canadian vacation home purchasers) are included in the investor category since they will not occupy the home primarily. Public entities have financed over 5,000 properties through First Look using Neighborhood Stabilization Program funds. “While investors play an important role in the REO market, homebuyers who intend to occupy a home make an immediate and lasting commitment to the community and therefore merit priority consideration in the REO sales process,” said Jay Ryan, Vice President for Alternative REO Dispositions at Fannie Mae. “Public entities under the Neighborhood Stabilization Program also benefit from inspecting eligible properties and making offers to purchase without pressure from open market competition. These entities are making considerable investments in rehabilitation and stabilization.” The main idea here is to give primary owner occupant purchasers the first shot at these listings. Without this program in place, many owner occupant buyers would be helpless in competing with cash investors who can close in a matter of days. The main restriction as I see it is lumping Second homebuyers with investors, as many of these buyers are legitimately looking to occupy the property for many months out of the year, and sometimes even nearing full time. Second homebuyers typically show a strong pride of ownership and take pride in their neighborhood. Overall, the program does definitely help the primary owner occupant in a competitive Phoenix Metro REO market so it is a vital component in reviving struggling neighborhoods.
Freddie Mac First Look Initiative
Freddie Mac First Look Initiative program offers homebuyers and select non-profits an exclusive opportunity to purchase HomeSteps/Freddie Mac homes before competition from investors and second homebuyers. This program offers owner occupant homebuyers, Neighborhood Stabilization (NSP) grantees and non-profits engaged in community stabilization efforts the ability to purchase HomeSteps homes during their initial 15 days of listing. After the 15 days expires, the home will open up to all Purchasers. The initiative supports Freddie Mac’s mission to stabilize communities and support housing recovery through the creation of affordable home-ownership opportunities.
How does the initiative work?
During the first 15 days a home is listed for sale on the Multiple Listing Service (MLS), HomeSteps will consider purchase offers from owner-occupants, public entities or their designated partners only. Buyers intending to purchase the property for investment, may submit offers to the listing broker and HomeSteps will consider them after the initial 15 listing days have expired; this assumes the house hasn’t sold. Many sell during the first 15 days to owner occupants. Typically condos have the best shot at making it through First look since financing programs are difficult to find.
What homes are eligible to be included in the Freddie Mac First Look Initiative?
All HomeSteps homes listed on or after September 17, 2010, are eligible for inclusion in the program.
How will a homebuyer know if a home is included in the program?
Buyers may contact their selling agent or the listing broker with questions about the eligibility of a home; this information will also be included in MLS listing information.
How can a homebuyer determine the number of days the home has left under the initiative?
Buyers must have their broker check MLS or contact the listing broker to determine how many days are left. They can also check the Homesteps website to see when First Look expires.
How will the Seller know if the homebuyer is buying the home as their primary residence?
The buyer and their selling agent must sign an affidavit confirming that the buyer will occupy the home as their primary residence. If this affidavit is fraudulently signed, the homebuyer and their agent may be subject to criminal prosecution and fines. Please click here for detailed information from Freddie Mac regarding First Look. To participate in the Freddie Mac or Fannie Mae First Look Initiative as a homebuyer or to submit offers as an investor, contact me at firstname.lastname@example.org or on my cell at 480-296-5959.