Banks using home path to sell homes over maket value?

Question

I tried to buy a home  for 109K  and was informed I had to wait two weeks because I am an investor so I did and now they tell me someone is going through the home path loan for 150K! This property looks to be worth a max of 100K. Is this the banks new trick to take advantage of people? Who in their right mind would pay 1/3 more than a home is worth? Up to date tax records indicate the value is 98K.

J Scott · Answer

First, if the house is worth "a max of $100K" (your words), why did you offer $109K?  If it's reasonable for you to pay more than it's worth, why isn't it reasonable for someone else to.

That said, Tax records don't define a houses's worth.  And banks don't determine what a buyer will pay, they just try to get the best price possible...which it appears they did.

Why are you an angry at the bank for finding someone to pay $40K more than you would?  That's their job, not to make sure you get great deals.

Suck it up and move on.

J Scott · Answer

Nope.  You were willing to pay more than "market value" because the house provided something you wanted/needed.  Yet, you can't seem to grasp that others might be willing to do the same thing.  Even if their sole reason for overpaying was that they're idiots, that's no reason for you to be bitching about how FNMA sells their houses.

Let me ask you a question -- if YOU were selling a property that was worth $100K, and you received two offers, one from an owner occupant for $150K and one from an investor for $109K, who would you sell it to?  Would you feel bad for the investor who you didn't sell it to?  Would you tell the owner occupants that they were crazy to spend so much for your house and discourage the purchase?

No.  You'd sell it for $150K, be thrilled that you did, and then brag to all your friends about your real estate skills.

If you're going to whine every time you get outbid by someone you feel is overpaying, you probably want to get out of real estate investing -- it's not for you.

Don Konipol · Answer

By definition, if everyone is paying over market value then what they are paying IS market value; it's just that market value has increased and has not yey been reflected in historical price statistics.

Last year I was able to purchase 3 highrise condos at prices 35-40% what they are know because of a very specific circumstance - the condos did not qualify for financing and I am an all cash buyer.  Now that the condo associations have tightened up procedures and qualify, prices reflect market value.

What I am really hearing here is that investors are upset because sellers are marketing houses to a broader spectrum of buyers and hence obtaining the highest price possible.

Sharetha H. · Answer

Jeff--
Homes offered through Homepath are for Fannie Mae-owned properties only, not banks.  Typically, any government entity-owned property (i.e. Fannie Mae, Freddie Mac, HUD) have a certain period where owner occupants have priority in the bidding process, which is why you had to wait until day 16 to bid on the property.  Like someone said earlier, the purchaser could have incorporated repairs into the purchase price.  Also, like many people have already indicated, a property's tax value is not at all an indicator of market value.

Joel Owens · Answer

Jeffrey,

The property still has to appraise.If it won't appraise then the price will likely get reduced to the appraisal price to close it.

Depends on if your local market is declining in pricing or starting to shoot back up.

A deal is a deal.As an investor I have ZERO emotion about it.

If you can get a 3,000 sq ft house for 160k why not offer 140k on it??

You are then only 31k more than your 109k and you are not getting a 1940's house with a ton of issues.Unless you are wanting a large lot with no HOA etc.

When I sold residential before commercial people would buy and pay all kinds of different prices for properties.

If you lined up 4 buyers for one property and asked what they would pay and why many would be different in the response.

Did you have an emotional attachment to this property?? From your posts it seems like you do.You can still watch the property to see if it closes.Sometimes the buyer falls out.

Account Closed · Answer

I have no problem waiting two weeks occasionally to bid on a home if it's at market value. The realtor told me the couple was not even interested in the extra garage and just wanted a home to live in.

Right now there are two new homes the same size for under 100K in a gated golf course community near my home. I am bidding on those right now, one has never been lived in and the other was occupied one year. In this area I can get a newer 3,000 square foot home for 160K or less. Now can you see why I am shocked by what they paid for a worn out 1940 house?

Jerry R. · Answer

1.  Very typical that a homepath home sells above list price here in SW Florida.  
2.  Tax records here are also all below current market price
3.  Market prices in SW Florida are way up the last couple months
4. Someone else felt the property was worth it.  Maybe they liked the extra garage and could not find a better comparable home for less.
5. You may be right that Fannie is taking advantage of a buyer by  offering them the best financing deal and allowing them to way over pay. If that is the case this is the first I have heard of it. Also, if that is the case we should start seeing more of it soon.

Steve Babiak · Answer

Wow, imagine how the OP would react if he had to compete with investors who were willing to overpay - like some of us have happening right now in our markets.  I fully expect if a house is owner-occupant ready, that I won't be able to out-bid any buyer - unless I get lucky.

Karen Margrave · Answer

It's my understanding that the reason investors must wait is to give people wanting a home for their family to live in first opportunity to purchase. I have no problem with that myself, and like to see families able to afford and purchase homes where possible, over investors buying them for rentals. Of course, once they come to market for investors, I love the opportunity of being able to bid on them too!

Account Closed · Answer

The main reason I wanted this home and was willing to pay more than i thougt it was worth was it had an extra garage on the property. I need to store my construction supplies my own home is getting over run and it's taking up room for my cars and my 10 x 20 shed is so full I can't get in it without pulling items out first.

It's an old 1940's home everything in it is original but clean so it needs to be at least painted in and out and new flooring. Homes in the area the same size are going from 78K to 95K.

I saw that I could still make more in rent than the mortgage taxes and insurance and was willing to pay a little more for the storage. I passed a home up just like this when I was getting started last year because it was too old and newer homes could be had at the same price.

Home path makes the market unfair for investors because even if we get to bid on the place it will never appraise for that. The banks will only lend what the house appraised for so that leaves us to either come up with the rest in cash or walk away to the next deal.

I just hope they don't start doing this often or it's going to really ruin it for investors. The 55K extra over market on this house is two more down payments on the type of homes I buy.

Banks using home path to sell homes over maket value?

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