Why is an incentive always symbolized by a carrot? I wouldn't do anything for a carrot. They should hang a beer in front of that mule if they really want results.
Earlier in the summer I blogged about how the number of Fannie/Freddie mortgages entering foreclosure is increasing at a rapid pace. In addition, the combined real estate owned (REO) inventory of Fannie and Freddie increased 59 percent from quarter 1 of 2009 to quarter 1 of 2010. Long story short, REO inventory is quickly amassing at Fannie and Freddie, and nobody is really quite sure what to do with it. With the possibility of 4 million more foreclosures (total, not just with Fannie and Freddie) looming, policymakers are going to have to scramble to come up with plans to determine what will be done with all these homes.
A few days ago I wrote about the Fannie Mae First Look Initiative, which allows potential owner-occupants and public entities to have the first crack at REO before it is offered to other investors. This program managed to liquidate 34,000 foreclosed properties (there were more than 200,000 foreclosed homes owned by Fannie and Freddie at the end of the first quarter of 2010).
Now I have learned about another Fannie Mae initiative to move REO from an article by Jon Prior on Housingwire. Fannie Mae is offering real estate agents and brokers who sell a foreclosed property to an owner-occupant a bonus of $1,500. I am not extremely familiar with broker/agent compensation, so I will pose this question to those of you who are: is this enough of an incentive to get brokers and agents to push REO property? Let me know in the comments section below.
In addition to the broker incentives, Fannie Mae is offering buyers 3.5 percent of the sales price of the home to be used to cover closing costs. In order to be eligible for the program, you must have signed an agreement after September 23rd and close prior to December 31, 2010. The program is being offered through Fannie Mae’s Homepath program (click through for complete details).
If you are in the market for a home, would the 3.5 percent incentive be enough for you to consider purchasing an REO property? Let me know in the comments section below.
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shawn buige
September 28, 2010 @ 10:46 pm
I am a realtor/broker. The incentive is nice but the bottom line here is not whether or not we’d sell a foreclosure if we had more commission/bonus money.
It will no doubt make a lot of agents that are averse to selling foreclosures give them a second look. And yes, it may be worth it to deal with more headache from inspections, etc. on a foreclosure for the extra $1,500.
However, the big deal here is that it will open up another level of buyers, immediately. We have a lot of qualified folks that need a little push to get off the fence. If they are shy of the down payment money, this is huge. I think the impact will be akin to what we saw with tax incentive.
Limiting the availability – through December – is also a great move. Now all we need is for rates to come up quickly, at least 2 percentage points. THAT would push things along.
Lastly, guys, someone needs to take another look at how quickly folks can buy after they go through a short sale and/or foreclosure. Right now, folks can literally walk away from a home, rent for 2 years, and buy again. Mortgage lenders and the government need to step in and push that time period back to at least 5 years.
The government is great at offering the carrot. But given the ‘just walk away’ siren song pitched via the media (strategic foreclosure?), there needs to be pain involved when people willingly disregard their commitment.
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