CHARLOTTE, N.C. HC — CHARLOTTE, N.C. -- The idea of buying a foreclosed house is pretty intimidating.
Bidding on a house at a courthouse auction is risky for the amateur investor. And sending off sealed bids to federal officials for Housing and Urban Development-owned properties -- usually sold "as is" and without inspections -- is also threatening.
There is an easier way: buying from Fannie Mae or Freddie Mac.
Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.) buy conventional mortgages and repackage them for sale to investors.
When one of these mortgages is foreclosed, the agencies acquire the property and sell it the usual way -- by contracting with a local listing agent and putting the property in the Multiple Listing Service.
That means a buyer can negotiate an offer on these houses just like any other listed property.
"There's a lot of confusion about how to buy these properties," said Vince Furnari, a Realtor with RE/MAX Executive Realty in Charlotte. He has a Freddie Mac listing.
"Even Realtors call me up and ask me how a buyer can bid," Mr. Furnari says. "You don't bid; you buy them much like any other property. It's handled very much like a relocation home, with an out-of-town seller."
So, what are the advantages of buying foreclosed properties?
* Price. "Conventional foreclosures are nearly always priced below market value," said Dan Markham, a Realtor with Coldwell Banker Property Group in Charlotte.
The price is set after the listing agent prepares a competitive market analysis and a local appraiser gives Fannie Mae or Freddie Mac an opinion of the house's market value.
In addition, both Fannie Mae and Freddie Mac will consider paying a buyer's closing costs and discount points.
* Defects will be disclosed. As part of the listing process, the agent hires a contractor to inspect the property and provide an estimate for needed repairs. Fannie Mae and Freddie Mac then decide if they want to fix the problems or cut the sales price.
"These houses usually get $3,000 to $7,000 in repairs," Mr. Markham said.
Fannie Mae and Freddie Mac usually make all repairs. If they don't, they will disclose the problems they know about. They also will allow the buyer to hire an independent inspector.
* Financing help may be available. Fannie Mae, and sometimes Freddie Mac, will offer special financing for the buyer.
For an owner-occupant, for example, Fannie Mae now offers 95 percent financing with a 30-year fixed rate at about 8.8 percent, with no discount points and no private mortgage insurance.