A Game Changer for Cash Buyers

Almost every day I hear of another change in the mortgage industry.  Far too often, these changes are initiated to fine tune the already super strict guidelines to prevent any further turbulence.  When drastic changes are made it often has the reverse effect causing many potential buyers and investors from not obtaining financing either because they still do not quality with the stricter standards or they are still so gun shy they just remain on the fence.  It is not uncommon to hear the strict guidelines are the reason for buyers who still want to remain in the game are foregoing a traditional mortgages altogether and are becoming cash buyers.

Today, cash buyers make up one third of all buyers in the marketplace.  Last month, Fannie Mae woke up, smelled the coffee and had a very BIG reality check.  I'm positive their recent reality check came to fruition because they realized they're missing out on potential business due to the growing cash buyer pool.  Fannie Mae's most recent update is a game changer for buyers who make or have made all cash purchases.  The Fannie Mae's change now waives the six month ownership or waiting period allowing for owners to tap into their investment much sooner than before.  The update now allows a buyer who ditched the traditional mortgage method and opted for cash purchase to now take cash out of their property via an equity loan anytime after the purchase, rather than waiting for six months to pass.

Now a buyer can purchase in cash, immediately turn around take equity out to improve the property, place it back on the market again and sell.  

• Will this create a new breed of investors and/or home flippers?  
• Is this creative thinking on behalf of Fannie Mae? 

Ponder this.... an investor pays for a property in cash, takes out an equity loan to improve the property, a few months later the investor places the updated home back on the market, a buyer who needs a traditional method of financing to purchase makes an offer and buys the house.  

I believe this recent update is great news for both investors who don't want to spend their reserves on updates and the owner occupied buyer who doesn't have the means or desire to purchase a home that isn't move in ready.