Is it common practice for Fannie Mae to refuse to negotiate on a Homepath home if major (not cosmetic) problems are found at inspection?

Asked by Sjm, Seattle, WA Tue Aug 7, 2012

I have an accepted offer in on a Homepath home. We offered $12,000 over list price because we liked the home, it seemed in pretty good shape when we walked through, and there were multiple offers. On inspection, we found several unexpected problems with the home. Holes in the roof that appear to be leaking, powder post beetle infestation in foundation support posts and joists, rot fungus around several windows, no egress in bedrooms as windows are not functioning properly. There are bare electrical wire/shorts in the attic space.
We went back with "items we disapprove" as our contract stated but the listing agent said Fannie Mae would make no repairs. Then, we tried a different route and asked for a $8000 reduction in the price. (Still above the original listing price.) Again, the listing agent said, "Fannie will not enter into further negotiations or affect any repairs that are not called out by an appraiser." Homepath homes don't require appraisal. Any ideas? Advice? Similar exp.?

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Ray Akers’ answer
Ray Akers, Agent, Seattle, WA
Tue Aug 7, 2012
The path seems clear; the appraiser needs to call out these items on the inspection. These days, appraisers are independent of lenders, and presumed to be immune from outside influence. That said, the appraiser would have to give at least some consideration to serious structural problems, including any pest infestation they observe.

Talk to your lender and see if they will forward a copy of the inspection report to the appraiser. If the lender has no direct contact with the appraiser, then ask if you can submit the inspection report yourself. If all else fails, you could ask to be present at the appraisal, and hand the a copy of the inspection report to the appraiser.

It will cost you an appraisal fee if you back out. On the other hand, you may secure a lower purchase price if the appraiser chooses to acknowledge the structural problems.

Good luck!
2 votes
Thanks Ray, I will talk to my agent about this. On Homepath homes, if the bank orders an appraisal the property is no longer eligible for Homepath financing however, I can order the appraisal myself and maybe this will help me with negotiating the structural issues.
Flag Tue Aug 7, 2012
Keith Zeiler, , Issaquah, WA
Tue Aug 7, 2012
I sell a lot of fannie mae properties for fannie mae and that is correct. They will not do any repairs or negotiate on price. They make it very clear up front. And i tell people they have the choice to have a pre inspection done before you submit an offer.

The only time they do anything is if something comes up on appraisal. If you are doing a homepath loan then there is no appraisal. You can try to switch to a diffrent loan that has an appraisal . But they are very strict on this policy.
1 vote
Oh, and also Keith, thanks for taking the time to reply to my question!
Flag Tue Aug 7, 2012
So, if it is so clear, why in the contract does it say, "The seller may, in its sole discretion, make such repairs to the property..."? Are they just trying to mislead me? Make me think they will employ some sort of common sense in this process? If they don't/won't make any repairs, why don't they word it like that in the contract?! Like maybe say, "Seller will make absolutely no repairs to property, with no exception."? (Sorry, this whole thing is very frustrating!)
Flag Tue Aug 7, 2012
Ardell Della…, Agent, Kirkland, WA
Tue Aug 7, 2012
It is actually true of any home purchase that you may have the right to cancel on inspection, but you don't have the right to insist on any changes on the seller's part from the original agreement based on that inspection.

No seller "has to" anything except agree to the return of your Earnest Money if your contract allows for you to cancel on inspection, and you do so in the required time frame.

The seller considers "will another buyer buy it "as is"? If the answer is yes, then there is no reason at all for any seller to do anything except say "next!".
0 votes
Agree. However, it is a Fannie Mae Homepath home which specifically requires the home meet certain listing criteria to qualify for the program in the first place. Thinking the home met this criteria, (No roof problems, foundation problems, and no code violations.) is the factor which led us to offer $12,000 over listing and basically come up to fair market value for the property/area. Too bad for us, I guess. I don't think I suggested they "had to" do anything. Just trying to figure out what possible avenues to take in order to get this deal done.;)
Flag Tue Aug 7, 2012
Phil Leng, Agent, Kirkland, WA
Tue Aug 7, 2012
I sell a lot of Fannie Mae homes, both as a listing agent and as a selling agent.
What happens often is that people try to get to get the home by bidding higher, then get the price they want using the inspection to do so, and ask for a price reduction.
I am not saying that you are doing this, but Fannie Mae typically will rather kill the deal and start over than feel like they were set up for a price reduction.
0 votes
I understand what you are saying, however from my perspective, I assumed the house met the Homepath listing criteria as stated on [ie. a structurally sound roof (maybe this only means it is not caving in, leaking is okay?), no rotting support beams (I would think this includes bugs munching down on support beams and posts?), working windows, and no code violations.] If it doesn't meet the listing criteria in the first place, how does it get listed? Does a bank really want to give me a loan on a house with a leaking roof and bug infested foundation? That seems sort of flawed.
Also, if they relist it at the original asking price, do you know if we are allowed to re-submit an offer?
Thanks for taking the time to answer my question.
Flag Tue Aug 7, 2012
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