Fannie Mae has launched a pilot program in three markets in which it’s only accepting offers on properties in its real estate owned (REO) inventory when they are first submitted online by agents representing buyers.
If the six-month HomePath Online Offers pilot program is a success in the three test markets — Orlando, Fla., San Diego and Detroit — it will be expanded to markets nationwide, Fannie Mae said.
The stated goal of HomePath Online Offers is to provide increased transparency and efficiency in the REO bidding process by providing buyer’s agents with offer confirmations and allowing them to track the status of submitted offers.
By requiring that all offers be submitted by buyer’s agents, Fannie Mae may also be able to prevent "property flopping" — a fraudulent practice in which listing agents representing distressed or REO properties receive multiple offers but withhold one or more of those offers in order to help an investor purchase the home at a lower price.
In the three pilot markets, Fannie Mae is accepting offers for REO properties only from licensed real estate agents representing buyers — not listing agents or buyers — and only through the HomePath.com website.
Buyer’s agents must register to use HomePath Online Offers, a process that Fannie Mae says should take less than 10 minutes if agents have reviewed training material that includes webinars and answers to frequently asked questions posted on HomePath.com.
Listing agents are not allowed to accept offers from buyer’s agents via fax or hand delivery, or enter an offer into HomePath.com on behalf of a buyer’s agent.
"The goal of the pilot is to get the (buyer’s agents) to enter 100 percent of their offers into HomePath.com," Fannie Mae advises listing agents in a FAQ. "HomePath functionality such as multiple offers only works correctly if all the offers are in the system."
Realtors contacted by Inman News who specialize in REO properties in San Diego County, where HomePath Online Offers launched on Nov. 10, said they support the program and believe it will be a success.
Fannie Mae also launched HomePath Online in the Orlando-area market, including Lake, Orange, Osceola and Seminole counties, on Nov. 10, and in the Detroit (Wayne County) market on Nov. 17.
"I like it," said Rose Avedisian, designated broker for Bancroft Realty who has 20 years of experience representing REO properties. "I think that it’s a very straightforward approach to having Fannie Mae (aware of) all offers submitted on a property."
Avedisian said the additional transparency — including having the seller’s addendum online — should help avoid last-minute surprises that can derail a sale. Sometimes, after weeks of negotiations, a buyer sees a seller’s lengthy addendum and doesn’t want to close the deal, she said.
Avedisian, who is currently representing about 30 Fannie Mae REOs, said HomePath financing also has fewer pitfalls than FHA-guaranteed loans. There’s a HomePath rehab loan for owner-occupants who want to make improvements to the REO property they are purchasing, she said.
REO specialist Greg Cocca of Allison James Estates & Homes, who works as an REO listing agent and a buyer’s agent, agreed that HomePath Online Offers will help buyers know what to expect.
Cocca thinks HomePath Online Offers will speed up the bidding process and give buyer’s agents "a little more control."
As a buyer’s agent, "It would make me more comfortable" knowing that in a multiple-offer situation all offers are in plain view, he said.
HomePath Online Offers automates communication only between the buyer’s agent and listing agent. Listing agents will continue to transmit offers submitted to the system to Fannie Mae, and consult with their Fannie Mae sales representative or asset management provider (AMP).
Sales reps or asset managers will make decisions on each offer, and listing agents use HomePath.com to communicate that decision back to the buyer’s agents.
But HomePath.com creates a history of online offers that Fannie Mae and its AMPs can access — a capability that could be used to verify that all offers were considered, and that the best offer was chosen.
Although Avedisian and Cocca said they haven’t personally seen instances of "property flopping" in the San Diego market, a recent analysis of mortgage fraud by loan data aggregator CoreLogic identified Southern California, Phoenix, Detroit and Atlanta as "hot spots" for flipping and flopping.
Fraudulent property flips involve buying a property and selling it at an artificially inflated price — often to a straw buyer. In a property flop, properties are obtained at below-market value, so that at resale it generates a greater profit.
CoreLogic estimates that about 2 percent of short sales are part of an "egregious resale," costing lenders about $310 million a year. The potential losses on REO sales are even greater, with about 4 percent of those transactions deemed a "suspicious resale."
