Mortgages Just Got More Expensive For Buyers, But It May Be Sellers Who Pay The Price.

In a post on real/diaBlog, we talked about how Fannie Mae has begun charging an up-front fee of 0.25 percent on all new mortgages bought or guaranteed by them. Freddie Mac will also begin assessing a similar fee. On a $400K mortgage, that’s an extra $1,000 in fees. Based on the fact that Fannie and Freddie own or guarantee over 40 percent of mortgages outstanding, this will directly affect a huge number of future home buyers.

But will it really effect buyers?

Some buyers will have the additional money to pay for this fee. Others may not. Those that do not have the money may wait to buy, unless someone else will pay for the fee. Those that do have the money may still buy, but they will also want someone else to pay for it.

That someone else is the seller.

Much like seller concessions were non-existent in the boom days, but quickly became a tradition once the market turned, the passing of the buck for this fee from buyer to seller will become tradition as well. Sellers will see their net proceeds drop because buyers will want that extra fee paid for by the seller in the form of a concession.

Along with this extra up-fron fee by Fannie, don’t forget about the 500 percent increase in the Virginia Grantor’s Tax. These two fees will increase the cost of selling a residential property going forward.

Let’s look at an example…

Here’s the criteria:

• $440K sales price
• the buyer is obtaining a $400K Fannie Mae-backed mortgage
• the seller is picking up the cost of the new Fannie Mae fee
• the property settles on or after March 9, 2008

Here’s the effect on a seller:

• the seller will have to give an additional $1,000 in seller concessions to cover the Fannie fee
• the seller will pay an additional $1,760 for the Virginia Grantor’s Tax
• a total decrease of $2,760 in net proceeds

As you can see, it’s not exactly small change and the seller ends up taking the hit in the end.

Thursday Poll – What did the Mortgage Crisis do to Loudoun County Home Prices?

In the third quarter of this year, the biggest story in real estate was the Mortgage Crisis.  And while the majority of the attention was given to sub-prime loans, the rates for jumbo loans (mortgages over $417,000) spiked up during this time period.  And with the majority of homes in Loudoun County priced in the Jumbo category, we are wondering what impact it will have on prices in Loudoun County.

So the Thursday Poll this week asks the question:

We will publish a post giving the actual change in median prices in the beginning of January.

And yes, we forgot to publish the poll yesterday (Thursday). But better late than never.