Michigan Foreclosures- New Buyer Fee to Consider
It is customary in Michigan real estate transactions for the seller to pay the transfer tax- both state and county- to the tune of .86 of a per cent of the sale price. Bank owned homes backed by Fannie Mae and Freddie Mac have been exempt from this fee until now. Fannie and Freddie are refusing to pay this fee and passing it on to the buyer and this includes sales that are currently pending.
A little background:
Up until now Freddie and Fannie have been exempt from this cost which is not exactly a puny little fee. For every $100,000 of house that is an $860 charge. There has always (probably not literally always) been a clause in the addendum to purchase Fannie and Freddie homes stating “Seller is exempt from payment of state taxes and tax stamps on deeds, mortgages and notes (12 U.S.C 1452(e)) and if payment of such state taxes or stamps is necessary to record the deed or mortgage, the tax will be paid by Purchaser and will not be considered part of closing costs.”
When representing the buyer we have just told them to not worry- Freddie and Fannie are exempt in Michigan, so go ahead and sign if they want the house. Unfortunately on bank or government homes (foreclosures) there is no changing or tossing their addenda. They have standard forms and they don’t deviate.
I personally never felt it was right to exempt Fannie and Freddie from paying the transfer taxes; it’s not like our state is so flush we don’t need the revenue. And if we want to exempt anybody, why not exempt people instead of a quasi-governmental agency which is organized as a privately owned corporation that issues its own common stock? Or stated another way- a private company when it comes to profits and a government agency when they need money.
The change in Michigan Law, or the interpretation of current law, I have no argument with. I have a problem with the cost applying to currently pending sales and with the addendum that states that the transfer tax can’t be considered a closing cost.
The bottom line:
When considering a foreclosure listing, discuss any additional fees with your Realtor regarding that specific home. Fannie and Freddie homes now have close to an additional per cent in fees that other listings don’t have. The last PNC owned listing I sold the buyers had to pay $300 fee plus were required to use the seller’s title company for the lender’s policy (which is probably illegal but if you want the house….). Other banks have their own fees that get passed on to the buyer. Many foreclosure agents have added required buyer fees in order to present an offer.
Often times a regular, non-distressed sale is truly the best “deal” once you consider additional buyer fees, the fact you may need to have utilities in your name in order to have a home inspection, the fact you may have to pay to un-winterize a house in order to inspect, the fact that there are probably obvious issues with the house and probably hidden problems you may not discover in a home inspection.
Are Bank Owned Homes Really the Best Deal?
More About Buying Foreclosed Homes
Jackie Hawley
Keller Williams Realty, Clarkston MI
Cell: (248) 736-6407
E-mail: Jackie@JackieHawley.com
