Home Buying in Denver>Question Details

M B, Home Buyer in Chicago, IL

Fannie Mae response was practically insulting. Are they usually tough negotiators?

Asked by M B, Chicago, IL Fri Feb 18, 2011

Fannie Mae owns a home and they have it listed for slightly under $300,000. The home is in rough shape to put it mildly. It needs new floors, has had its appliances taken out, and its an older home that's been on the market for over 365 days, and has been listed by Fannie May for over 80 days. We bid VERY low, anticipating a reasonable counter offer, but they lowered their asking price by 1%. Are they usually this unreasonable? is the selling agent the person in charge of negotiating for the people in Washington? The market in Denver has REALLY softened as of late, and if this home as so desirable it likely would have sold in the past year. I had expected that with so much shadow inventory that Fannie Mae would have countered with something that didn't seem so insulting but it almost felt like a "Go away" counter to our offer (Which was $65,000 under asking) rather than a reasonable counter somewhere north of the middle. Any advice to brokers that have successfully negotiated with FM?

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BEST ANSWER
MB-

Lots of good answers here and I would suggest the following to help put some realistic expectations in place. Have your agent perform a power search through MLS and add remarks as one of the filters. On the remarks filter search for Homepath and look at only Homepath solds going maybe 6 months. Your broker can then take those results and pull a price and days on market analysis.

For example I just ran this in Broomfield going back six months with no filter on price and had 15 results. Based on these 15 sales my price and DOM analysis tells me the average discount off original list price is about 10% and discount off sold list price is about 4.5%. The average days on market is 60.

The same search except in NW Denver gives an average discount off original list of about 14%, avg DOM of 103, and this is based on 13 sales.

Every area is different, but this approach might give you a better idea of what kind of "deal" to expect on a Homepath property. Good luck with the purchase.
2 votes Thank Flag Link Fri Feb 18, 2011
They have to go by their guidelines. When there was an appraisal dont the listing agent should have been there to give the appraiser comps. Otherwise the appraiser doesnt know what the offer is for
2 votes Thank Flag Link Mon Apr 11, 2011
From my experience, it seems that there is some negotiating with Fannie Mae but it can depend on the broker handling the sale with Fannie Mae. I have had instances where we put in low bids and were countered by Fannie Mae lowering the price by just $1000 of the original list. I then explained the the agent that we would not offer any more than $171,000 for a Denver home and Fannie Mae accepted. I also was able to negotiate $8,000 off an Erie property with Fannie Mae paying closing costs and mitigating the radon.

Unfortunately, in Northglenn we were able to get price and closing costs but not anything else so we went on to a HUD property. I do not think there are any clear cut answers but as more people get into the market this spring, negotiating will be more difficult.
Web Reference: http://nancymikoda.com
2 votes Thank Flag Link Fri Feb 18, 2011
OK let me play a devil's advocate here, hope this doesn't come across as obnoxious, but I have done a lot of bank BPO's and the rules for valuation on a fanniemaee or freddie mac broker price opinion, BPO are very strict. They scrutinize 2 or three agent BPO's and get a distressed appraisal from a licensed appraiser to reality check the agent BPO's. So there is a great deal of precision in those prices based on cost per square foot analysis. That said, the property condition scares away a lot of buyers and investors aren't interested because this is a high price point for rennovation and flip or rental. So the real question is why doesnt the bank lower the asking price to what you offered and create a multiple offer situation? Only advice I offer as to price relates to using a buyer agent to represent YOU and not the listing agent as a dual agent. A buyer agent can help you stategize and create a more accurate valuation. Your offer price was to feel the bank out, they responded by not participating in that game. FNMA or not, in a regular deal I would advise my seller to counter at asking price if someone came in 25% under asking price.
2 votes Thank Flag Link Fri Feb 18, 2011
No one, Banks, Fannie Mae, freddie mac, Hud , Regular sellers are NOT giving away home. You need to get real and make a good offer. Most Bank owned homes go for full price in the first 30 days and most only move about 5%. If you made a low offer you are not a real buyer and they will come back higher than they really want. I had a Fannie Listing and it was listed at $300K I got many offers at the $250K range and all the counters were full price. When I got an Offer for $285 the Buyer DID get the home, Do not lowball! this will make you pay more that if you wrote an offer that was not wasting every ones time. Do your homework and write an offer you think they will take. Low ball offers will frustrate you and ANY seller.
Brian
2 votes Thank Flag Link Fri Feb 18, 2011
MB,
The answers below are all good. However, I would like to chime in on statement about the Denver market having "REALLY softened of late". Did you know that the Denver Metro Market's AVERAGE Home Price increased 7% from JAN 2010 to JAN 2011? Number of transactions are off significantly, but good homes priced well in good locations move quickly. FYI, the increase in average price was driven by increased sales of high end homes.

Fannie Mae holding tight to a price probably has more to do with their perceived value based on their appraisal/BPO (Broker Price Opinion)... just like a private individual seller would. My advice to answer your question: Keep Trying. I've often gone 5-7 rounds of negotiations with banks. We didn't get and weren't looking for a 20% discount like your example, but we did shave thousands off the asking price.

Good luck!
Web Reference: http://www.jonrroberts.com
2 votes Thank Flag Link Fri Feb 18, 2011
Fannie certainly has guidelines they have to follow when they counter. The longer the home has been on the market, the more flexible they will be with pricing. Keep in mind the average discount across ALL of Denver metro is right at 3%. You can see
Web Reference: http://blog.yourcastle.org/
1 vote Thank Flag Link Mon Apr 25, 2011
For everyone that was helpful - thanks for your time and input. It is Realtor's valuable advice that makes Trulia such a great place to find help.

FYI: Fannie Mae has now come down 40,000 on their price, the Realtor submitted a BPO to FM stating that my initial offer was much closer to the true value, and I will end up saving almost 50,000 on the original list price in a market that is not hard, in fact it's predicted to be one of the softest markets in the country this year.

John R Roberts - The reason that the average home price has INCREASED is because home sales above $1,000,000 have not softened, they are usually inelastic to the economy - and less people are buying homes. Most of the homes I began looking for when I began my pursuit of a home in Colorado are STILL on the market, almost 365 days later - and brokers are either giving their buyers bad advice or...it's just bad advice.
1 vote Thank Flag Link Wed Mar 2, 2011
M B,

What was your Buyer's Agent's valuation of the home? Fannie Mae has done their homework and cruched numbers and had other professional Realtors give them BPO's (Broker Price Opinions). They don't normally just throw a number out there that is way over market value for the area, size, and condition of the home. If I knew the home I would have a better answer. What area of town is it in? But in general all banks have stffened up lateley whether they are REO's, short sales, Fannie Mae or Freddie Mac.

The market in Denver is probably stronger than you think. Values are going up and not down. The distressed home market is very strong in Denver and these organizations are all severly short staffed and don't have time to deal with low ball offers. You are right though about the 'Go away' statement. When I have gotten low ball offers on my listings I have often had the Seller either counter at full price or tell the buyer 'go away and come back when you get serious' with no counter. Our time is our most valuable asset and we can't afford to waste it this way.

Robert McGuire ASR - 303-669-1246
Your Castle Real Estate
http://www.rmcguire.yourcastle.org
1 vote Thank Flag Link Fri Feb 18, 2011
Purchasing one of these homes can be quite a hard learning curve for consumers! What is not as apparent is that the current listing price already reflects a heavy discount. Imagine if the original note was $500,000 and the bank has already lost $200,000 through the foreclosure process with consideration in place for the current conditionof the property, they are not going to want to "give away the property" in their eyes and will simply use it as a write off. As other realtors have already mentioned they have had the market evaluated prior to setting the price and listing the home as a bank owned home so there may be a small margin for negotiation however in their eyes they have already lost some signifcant amount. What we as realtors and consumers don't realize is that banks simple use these homes as losses-similar to how you would write a loss on your taxes to off set your income and taxes due-same story for the banks. It is a business decision and there is only so much of a loss that makes sense for these banks. Ask your realtor to do some more homework so the "whole picture" is much clearer. Hope that helps-Good luck with your next offer!
Web Reference: http://www.HomeZero.com
1 vote Thank Flag Link Fri Feb 18, 2011
It's likely that you offer was compromised by being "very low" and included you in a pool of candidates that the lender would consider not serious buyers.

Keep in mind that banks have a well defined process for establishing their "asking price" that includes appraisals and BPO's. These professionally established second party values normally take into consideration the home's flaws...bad roof, no appliances, vandalism, etc. but are not always "spot on."

If you are indeed serious about this property we would recommend resubmitting another offer. Be sure to make this one a true reflection of the current local RE market but that if you have proof that their number is not accurate, submit this information in detail in support of your offer.

Banks can be reasonable but if you take a rediculous position they will likely return the favor. Keeping your offer real and providing supportive information may get the results you are seeking.

Good luck,

Bill
1 vote Thank Flag Link Fri Feb 18, 2011
Fannie certainly has guidelines they have to follow when they counter. The longer the home has been on the market, the more flexible they will be with pricing. Keep in mind the average discount across ALL of Denver metro is right at 3%. It does vary by neighborhood. You can see your area's recent discount trend on the maps on our blog site. I hope that info will be helpful to you.
Web Reference: http://blog.yourcastle.org/
0 votes Thank Flag Link Mon Apr 25, 2011
The bank obviously feels the listing price is in line with what they are going to sell it for. If you don't like their counter, move on. It is not offensive for them to want to sell the property at or near their price. Perhaps they are not motivated to take an even bigger loss. BTW, the listing agent has no control over the negotiation with the bank. Don't blame it on him/her.
Web Reference: http://www.wendylucas.com
0 votes Thank Flag Link Wed Mar 2, 2011
Dear MB-
Aren't you the attorney form Chicago that wasn't sure of whether or not you needed a buyer's agent? I am guessing you didn't hire a buyer's agent thinking you would be able to get a better deal and hence that figured in to your negotiation. If that is the case, it might be time to look into hiring one as they can help you structure a strong offer with price and terms that the asset manager will seriously consider.

Look at it this way: A good agent processes 24-48 transactions/year. Multiply that by the number of years they have been in business and even an agent who has had only 2 years experience should have processed at least 48 transactions-if they are good and serious about staying in the business. I would suggest an agent with more experience as you want to see a lot of value but no matter how you look at it the experience of 40 or more successful transactions can be invaluable when negotiating in this market. The average person buys 4 or 5 homes in their entire lifetime- not quite the same volume of transactions. And I might add if you did end up hiring an agent it might be time to get a different one.

Not knowing anything about the property or the location I can not reasonably speak to the offer that you made, as there are a lot of factors that would affect the value of the property and the listing agent and asset manager's perceived value of the property. Your offer might have been too low or it might not have been packaged well when it was sent to the seller's agent or it might just be an unrealistic asset manager. However, in my mind your rational was spot on - if I get an offer or a counter to an offer I have made for a buyer that is within what I call "striking range" I always counsel my client to "split the difference" even on short sales and REOS. Unfortunately not everybody looks at negotiations this way and, I have had investor clients make cash offers on properties that were turned down - typically after weeks of haggling only to have the seller's agent call me and ask me to resubmit because the asset manager was now "motivated." If you are not working with an agent and you need some help/coaching we would be happy to talk with you and offer more suggestions
Either way good luck and I hope you get the home you really want here in CO
Cheers!
Carole & Greg
0 votes Thank Flag Link Mon Feb 21, 2011
My bad, saw you were from Chicago and now see you are buying in Colorado. Here is a heads up regarding colorado agency law, its a transactional brokerage, TB state like Florida. TB means that the agents on both the seller and buyer represent the transaction and NOT you. Unless you get a buyer agency agreement, the agent you are working with is a transaction agent. In Illinois we do designated agency, assumed that anyone we work with has the right to assume we are working for them unless we disclose otherwise. I had the same gripe with florida agents not helping me as an out of state buyer and states that do TB don't brag about it. Basically it is a HUGE liability dodge and there is no requirement of full fiducuary care, placing client interests above our own. If you are buying in CO be selective who represents you and understand that a friendly TB agent doesnt represent your interest ahead of the seller! If you want counter offer advice, TB agent shouldn't tell you, where should you bid at, they wont tell you. There role is purely to fascilitate the transaction. Get an agent you trust to let you sign a buyer agency contract.

Fannie Mae Homestep properties are great deals and worth targeting. they have good incentives and are often repaired to sell
0 votes Thank Flag Link Fri Feb 18, 2011
many of fannies homes get multiple offers and are under contract in the first few days, since this is not the case with this home you should be able to get it if you net them 89 % of list price. Theyll probably lower the list price at the 90 day mark.

I hope you get the house if its in your best interest!

Sandy Kinslow
The Kinslow Team LLC
Coldwell Banker Residential Brokerage
0 votes Thank Flag Link Fri Feb 18, 2011
There are a lot of great answers here about the Denver market and how it truly is not as "soft" as people assume. While there are still neighborhoods that are experiencing declines in value, many are stable or inclining. The amount of homes being sold are down, in large part to those home that are not put straight to market by the banks. For banks are not in the position they were two years, or even 18 months ago; which contributes to the incline of home values.

Having bought several and put in too many Fannie Mae offers to remember, my experience is they will reject low offers and continue to reduce the price. The reason is that Fannie Mae (and Freddie Mac) is a publicly traded stock with shareholders to appease. Which I have learned from listing brokers associated with Fannie Mae (Freddie Mac, and Indy Mac) is that there must not be a high discrepancy of what the list price is and that which Fannie Mae accepts as an offer. The listing broker priced the home according to the market, the BPO came in somewhere slightly above or below the list price and Fannie Mae is content. When low ball offers continue to stream in it signals a price reduction. Keep in mind that if you continue to watch that Fannie Mae property and it continues to sit on the market, there will be slight price reductions until it finds that buyer willing to buy at that price. So if you really want this home (for whatever reason, investment or owner-occupancy) keep an eye on it and continue to put in offers when the price drops. Welcome to investment game.
0 votes Thank Flag Link Fri Feb 18, 2011
Great answers and I agree with everyone. I would do your homework with regard to making an offer. Hire a Realtor to verify the comps in the area. This home sounds very distressed and values might of dropped significantly since the last "broker price opinion" or BPO was done. Also, hire a Realtor that is used to dealing with bank owned properties and can negotiate on your behalf. The bank usually has no idea what the neighborhood is like, the overall condition, or other factors leading to value. Most of the time, all they look at is the net to Fannie after the sale. As time goes by, you would think they would be more willing to "cut their losses" but I have seen foreclosure properties stay on the market far too long and get way less then previous offers over time. Keep coming back to them with several offers and hopefully 1 will stick. Be ready to "hurry up and wait" as well. Unlike most real estate transactions time is not of the essence when dealing with banks. Its a crazy system!
Web Reference: http://www.ChrisMerman.com
0 votes Thank Flag Link Fri Feb 18, 2011
They are big fan of numbers and they have people to which they report. They need to show they tried in good faith to get as much as they could for the house. There are a lot of 'drive-by' offers these days where people put offers in saying that they'd buy it if they could get it for x and they typically do not do a follow-up or counter offer themselves. That said the negotiators know this and will usually do a small counter initially to see if you are a real buyer. Go back and try again to see if the 2nd round is better.

On the other hand they know that the national average is 5% off asking and you've asked for 20% off. If they are getting a lot of activity, if the negotiator has something to prove or there's myriad other reasons that you guys may be too far apart. I say try again. Good luck.
0 votes Thank Flag Link Fri Feb 18, 2011
They are "tough negotiators" but may also be fair, depending on a number of factors, including the BPO on the property, the ARV neighborhood comps, etc.
Your agent should be able to supply this information so that you can make a reasonable offer, backed up by the facts necessary to prove that it is reasonable.
Good luck.
Chuck Strauss
Your Castle Real Estate
720-318-7598
denverhomeguru@gmail.com
0 votes Thank Flag Link Fri Feb 18, 2011
M B when they saw your offer at less than 80% of list price the first thought may have been that your offer was insulting. You admit yourself that you bid very low. At least they came back with a counter instead of an outright rejection. That meens they are willing to play ball. They have done market value opinions from more than one source to determine the list price. Take a look at neighborhood values and how much repair the property needs. That is the way to establish value.
0 votes Thank Flag Link Fri Feb 18, 2011
The banks are being quite unreasonable, which is one reason these homes are languishing on the market and bringing the values of other properties down. They bank is in charge of the negotiations and, depending on who is assigned to this property, they are probably in another part of the country and completley unfamiliar with the market conditions in your area, or even the condition of the home. You just have to be persistent. Give them a comprehensive list of the major issues with the home, the cost of repair and then figure a reasonable return on your investment of time and work. Make sure your offer is reasonable as well under the circumstances. Too many times unsophisticated buyers think they can come in and 'steal' these properties, and if the negotiator ran into a few of them before your offer was submitted their response may be more understandable.

Be persistent, be thorough, and be reasonable. Make a reasonable retturn on your investment, but don't try to 'steal' from the banks. Remember, the bank is trying to cut their losses, too.
0 votes Thank Flag Link Fri Feb 18, 2011
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