An important resource for first-time and other homebuyers who find themselves in unfair competition with deep-pocket investors bearing cash just got better: The two biggest players in the mortgage market, Fannie Mae and Freddie Mac, are now giving noninvestor shoppers 20-day exclusive rights to bid on and buy new listings they are selling.
During the 20-day “first look” period, investors will be excluded from submitting bids. To qualify, noninvestor buyers will need to commit to make the home their principal residence for at least a year. The idea, according to Fannie and Freddie officials, is to encourage greater owner-occupancy, stabilize neighborhoods that have seen significant numbers of foreclosures, and generally help out shoppers who find it difficult to outbid all-cash investors.
All-cash purchases of homes hit a high mark last month, according to a new report from RealtyTrac, a housing data firm. A stunning 42 percent of all residential sales nationwide went to buyers who paid cash – the highest rate since RealtyTrac began measuring the phenomenon in early 2011, and nearly double what it was as recently as May.
First-time buyers looking for affordably priced homes have been hit especially hard by the profusion of investors waving cash at sellers. They locate a home that fits their budget, make an offer with a mortgage contingency, and then lose the sale to an investor who has no financing requirements. A mortgage contingency ties the contract to the ability of the bidder to obtain a loan, which slows the process and often makes the offer less attractive to the seller.
Fannie and Freddie have large inventories of previously foreclosed homes for sale – byproducts of the economic woes of 2008-10. As of last week, Fannie had roughly 35,000 houses listed for sale around the country through its “HomePath” (HomePath.com) program. Freddie had 13,000 active listings on “HomeSteps” (HomeSteps.com) program. Buyers can access the listings online by state, city and price range, then submit offers through a participating realty agent.
In California, for example, Fannie had 2,136 properties listed, many below $200,000. Current listings range from a $139,000, two-bedroom single-family house in Big Bear City to a $700,000 three-bedroom home in South San Francisco. Buyers in San Diego could pick up a two-bedroom condo for $394,000.