The government is getting lots of offers lately for its huge stockpile of foreclosed homes. But most of those would-be buyers are asking for deep discounts, offering just 40 to 60 percent of the list price for many homes.
The government’s response? Call us back when you’re serious.
“We are not considering any such significant discount pricing,” Freddie Mac, the taxpayer-owned company that owns 61,000 foreclosed homes across the country, said in a letter to potential homebuyers. The letter was obtained by American Banker.
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Instead of selling its homes at a deep discount, in most markets the mortgage giant is holding off until it finds buyers who offer 90 percent or more of the asking price, Freddie Mac said.
And the company also is being picky about whom it sells to. That includes bulk sales, usually neighboring houses or multiple condominiums in a single building. Freddie Mac refuses to bundle properties together and sell them as a unit until the buyers can prove that they already know who will be the primary purchaser, meaning the person who will end up owning the property and either living in it or renting it out.
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The main reason for this cautious sales approach? Many of Freddie Mac’s properties are concentrated together in certain neighborhoods. If the company simply starts unloading those homes at fire sale prices, it could cause radical devaluation in those areas.
In addition to the immediate problems that might cause for the neighborhood, large-scale price drops could also increase the incentive for homeowners to walk away from newly-underwater mortgages, which would simply prolong a housing crisis that already has lasted over three years.
“We are extremely mindful of the impact in our approaches to pricing and how it affects the values of neighborhoods should a discounted sale occur,” Freddie Mac said in the letter.
Image: cammom, via Flickr.com