Fannie Mae ends up owning houses when the loans behind them go through foreclosure, and it lists them for sale on HomePath. Investors can buy them. They just cannot buy them first.
Who gets first crack at a HomePath home?
Owner occupants do, along with public entities and their partners and some non-profits. Fannie Mae calls that head start First Look, and its HomePath page for investors gives the terms: the First Look marketing period runs 30 days, and it begins when the listing for the property appears on HomePath.com. A house still inside the window carries a countdown clock on its property details page showing the days left for eligible buyers to purchase without competition from investors.
The same page defines an owner occupant tightly. They have to occupy the property as their principal residence within 60 days of closing, keep that occupancy for at least a year, and sign an Owner Occupant Certification as a rider to the purchase and sale contract. It is a signed promise, not a box to tick.
When can an investor make an offer?
Once the First Look marketing window closes. Fannie Mae’s own instruction is to check for the First Look logo on a listing to see whether the property is still active to First Look buyers, so the logo is the thing to watch rather than your own count of the days.
Offers go through an agent. You add your agent to your HomePath account, and they submit the offer for you from the “Add your agent to this property” button on the property details page. For a Fannie Mae house that is not listed on HomePath, you contact the listing agent instead.
The practical effect on a flip is a wait, and a house that every owner occupant in the area has already had a month to look at. The ones left when the window closes are usually the ones that need more work than a family wants to take on. That is the opening, and it is also the risk.
What does a HomePath flip look like on paper?
Take the house a flipper would want out of that group: $150,000, about $45,000 of work, with renovated comparables nearby selling around $275,000. Six months from keys to closing, paid for with a short-term loan at 10% with 2 points, 15% down, rehab inside the loan.
Then add what tends to come with a house that has sat empty through a foreclosure: $10,000 of repair the inspection did not catch. That figure is the example’s own assumption, not anything Fannie Mae publishes.
| Amount | |
|---|---|
| Sale price | $275,000 |
| Purchase price | −$150,000 |
| Rehab budget, including the $10,000 surprise | −$55,000 |
| Closing costs to buy (2%) | −$3,000 |
| Holding costs ($900 a month for 6 months) | −$5,400 |
| Loan points and interest | −$12,775 |
| Selling costs (8%) | −$22,000 |
| Net profit | $26,825 |
These are example figures, not a forecast for any market.
The same deal with the rehab coming in at the budgeted $45,000 makes $37,525. So a repair that costs $10,000 takes $10,700 off the profit, because the extra work goes on the loan and carries points and interest of its own. Your cash in the deal rises too, from $42,975 to $43,675, and the return on that cash falls from 87.3% to 61.4%.
What does the extra month cost?
A foreclosed house is also the kind that runs long. Permits, a system nobody has turned on in two years, a contractor who finds the rot behind the plaster. Hold the rest of the deal steady and move one thing at a time.
| What changes | Net profit | Your cash in the deal | |
|---|---|---|---|
| Rehab lands on budget at $45,000, six months | $37,525 | $42,975 | |
| A $10,000 repair the inspection missed | $26,825 | $43,675 | |
| Budget holds, but the job runs a seventh month | $35,188 | $45,313 | |
| Both at once | $24,404 | $46,096 |
A seventh month is cheaper than a surprise repair, at roughly $2,300. The two together cost about $13,100 of the $37,525 you started with. Neither one sinks the deal on its own, which is the point: the deal has to be priced to survive both, because on a house like this both are likely.
What happens to the houses nobody buys?
They go to auction. Fannie Mae says that if a HomePath property does not sell through traditional marketing, it may pull the home out of its retail inventory and sell it through an auction run by a third-party company. Auction listings carry an Auction logo and the auction vendor’s contact details, and the Listing Type filter in HomePath search finds them.
An auction is a different purchase with terms the vendor sets, so read those before you bid. The arithmetic above does not change. What often does change is how much you get to see first, and whether the deposit is refundable if the house turns out worse than the photos. A deal priced on a walk-through you never got is a guess wearing a spreadsheet.
What to settle before the window closes
The 30 days are useful if you spend them. By the time the logo comes off the listing you want three numbers already pinned down.
- The resale price. Every other figure hangs off it. How to calculate ARV covers using sold comparables rather than asking prices.
- The rehab budget, with room in it. On a vacant foreclosure the walk-through is the whole job. How to estimate rehab costs breaks the work into lines you can price.
- Your ceiling on the offer. The 70% rule puts it at 70% of the resale price minus the rehab. At $275,000 and $55,000 of work, that is $137,500, and the $150,000 price is well past it. The 70% rule, worked through explains when the rule is too blunt to follow.
A fourth number is worth an hour of somebody else’s time: what the house actually needs. Fannie Mae sells these homes as-is, so nothing in the listing promises the furnace works. The $10,000 line in the table is there because an empty house hides its problems well, and because the person who finds them after closing is you. An inspection during the First Look window costs a few hundred dollars and is the cheapest insurance in the deal.
If you have never priced a flip end to end, a first flip from offer to sale walks every cost in the table above. Then put this house’s own figures into the calculator and see how far the sale price can slip before the profit is gone.