The following program, the ENT , mortgage and Realty Show is paid for in full by ENT mortgage, LLC and equal housing lender consumer access.org number 2 5 5 3 6 8. The advice and opinions expressed during the Academic Mortgage and Realty Show are solely that at the hosts and guests of ENT mortgage, LLC, and not WTMJ or Good Karma Brands.
Speaker 2:Welcome to the Accu Net Mortgage and Realty Show, getting you inside information on buying, selling, and financing your home with expert advice from Accu Mortgage and Realty. And now, here's Brian Wicker and Tim Holman .
Speaker 1:Welcome to the a Cadet Mortgage and Realty Show. The , uh, first edition for 2024, the new year. I'm Brian Wicker , uh, the licensed real Estate broker with a Cadet Realty Advisors, and also the owner and president of a Cadet Mortgage, along with my son-in-Law this week. Tim Holdman , welcome back to the show, Tim. Thanks,
Speaker 3:Brian. Good morning and , uh, happy 2024 to everybody out there listening.
Speaker 1:You bet. Hey, two , two weeks in a row for you. Yeah . Remember, if you've got a question or a comment, you can call or text us on the Old National Bank Talk and text line, which is 8 5 5 6 1 6 1 6 20 Old National Bank. Get old. And you can also get a podcast of today's show wherever you normally get your podcasts, like Apple or whatever the one is for people that don't have Apple <laugh> , um, Google, probably something like that. Anyways , they're on Spotify too, so, oh , Spotify. There you go. So Tim , uh, mortgage treats were falling nicely in the second half of December. Mm-Hmm. <affirmative> . Yep . And , uh, now this week they went a little bit the wrong way , uh, and, and, and, and not helped by this last Friday's jobs report for December. Correct?
Speaker 3:Yeah.
Speaker 1:Uh, and , and the reason that we care about the jobs report is that for two reasons really. One is that if more people get jobs , uh, that increases the amount of money that people have in their checking accounts to spend on things. And if exactly people spend money on stuff, that increases the demand side of the old supply and demand equation. And if there's not enough supply, well then prices could go up. And that's called inflation, right. And inflation is the arch enemy of mortgage rates, because if you're an investor who's getting the interest on a mortgage, you need the mortgage rate to be higher than the rate of inflation. So that's kind of the basic reason why interest rates have gone up the last, you know, 18 months, I guess we'll call it. Mm-Hmm. <affirmative> . Uh , and , uh, and so now, and also the reason by the way, with the federal, the Federal Reserve had been increasing interest rates , uh, short-term rates. Remember, they do not, the Federal Reserve does not control , uh, long-term mortgage rates.
Speaker 3:Say that one more time. It's, it's worth repeating <laugh>.
Speaker 1:Yeah, that's right. The Federal Reserve only controls one rate, which is the overnight rate that banks charge each other. That's called the Fed Funds rate. Uh, and that has the most direct impact on the consumer interest rate, known as the prime rate, which is used to determine the rate you pay on your credit card and the rate that you pay on your home equity line of credit. And so , uh, that's the what, what the Federal Reserve has. But in general, if inflation is the enemy, hey, the Federal Reserve is trying to do its thing on the short end of the interest rate curve. Well, inflation is also a concern, maybe even more so for the long end. You know, when you're talking about a third year fixed rate loan, that is a long term , uh, interest bearing asset to somebody that's receiving the interest. Well,
Speaker 3:E exactly. And I know you mentioned this last week, Brian , when you were talking about , uh, you're sharing a story of a customer of discussing refinancing with her dad, and, you know, are rates gonna get better or, or they're gonna, you know, get worse? And the Fed, when they announced their anticipated two rate cuts for next year, that news is partially what caused long-term mortgage rates to improve immediately. So for everyone out there thinking that rates are gonna go down , uh, you know, lockstep with the fed rate cuts next year, that's not the case. That current rate pricing and some of the improvement we got last month was already because of the announcement of anticipated rate cuts in the future. So that's already kind of baked into the cake right
Speaker 1:Now. Exactly, yeah. It's kind of that weird thing where then when it actually happens, as long as it's in step with expectations, it's a nothing burger.
Speaker 3:Exactly. And if they don't do the cuts that could actually cause rates to go back up too
Speaker 1:Well. And now there's a slightly diminished chance the market was betting on a first red Fed rate cut in March, and now with the Better Jobs report, that percentage has diminished a little bit. Exactly . It's still , I think at 55% the last time I checked for fed rate cut. But if that happens, folks, nothing should happen to long-term interest rates. Right. 'cause we are already anticipating that anyway, back to the jobs report for a second. So, so it's that fact that more money in , in people's pockets , uh, gives 'em more money to spend. That's inflationary, right? Mm-Hmm. <affirmative>. And, and so we got a word on Friday that 216,000 new jobs were created in the month of December. That's 46,000 more jobs than what economists were expecting. So that's a pretty big miss. And by the way, that number comes from a survey , uh, big employers and also payroll companies like a DP and Paychex . Okay? Um, Now, now the market decided to largely ignore the fact that the October number was revised, was revised by almost exactly the same amount of 45,000 jobs. It's like , right , we're not gonna pay attention to that. And by the way, November was revised down by 26,000 jobs. Uh, but it's , we're not worried about that. So stock prices went down and interest rates , rates went up slightly. I did an interesting little piece of math, if you take, oh , the other number that I want to point to. In the jobs report for the entire year, the economy created 2.7 million new jobs. Whoa.
Speaker 3:That's big.
Speaker 1:That's a , that's a lot of jobs on average, 225,000 a month. Mm-Hmm. <affirmative> . So if you take that 2.7 million jobs times the average hourly pay rate, which was $34 an hour times the average work week , which is 34.3 weeks, times 52 weeks a year, that comes out to 165 billion with a B more dollars whoa . Flowing into the economy. So that's, that's a lot of money.
Speaker 3:That's a lot of spendable money right there . A lot of
Speaker 1:Spendable money. When we come back, we'll just finish up a couple nuggets on the jobs report, and then we're gonna , uh, and where , what it did to interest rates. And then we're gonna come back and , uh, talk about people who you're helping to buy homes here in January. Tim. Yep . You're listening already listening to the Academic Mortgage and Realty Show on AM six 20 WTMJ
Speaker 2:Home buying advice from the guys who know it best. This is the ACU Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back to the Anette Mortgage and Realty Show. I'm Brian Wicker, the , uh, elder, that's Tim Holdman over there. Good morning. Senior , one of our senior loan consultants, and also my son-in-Law, father of my two of my four grandchildren. And , uh, so we're talking about the jobs report and , uh, and, and that it was hotter than expected. Uh, that's one of the elements that the marketplace looks at , uh, because more people employed means more money being spent. Uh , by the way, we also get a , got a glimpse at wage increases year over year. They're up 4.1% in December. Okay ? So that's hotter than, you know, the Fed wants to see a 2% annualized inflation rate . So the wage increase is a little hotter than that, although the expectation was only for 3.9. So not too far off the , uh, expectation. And , and the other thing that you can say is the reason why what people make matters is labor is part of every good and service. Right ?
Speaker 3:Exactly. You know , that
Speaker 1:We buy as consumers. So bottom line is the , the interest rate markets, including mortgage rates, did not like , uh, the report , uh, on the jobs because it was better than expected. And so if we ended the week, if you wanted to , uh, put down 25% and you were buying the median priced home in the five county Milwaukee area, which ended the year, by the way, and we'll have a little wrap up of MLS uh, home sale data later in the show, the median sales price in, in the five counties southeastern Wisconsin metro area end of the year at 310,000. So if you're putting 25% down and borrowing $232,000 at the end of , uh, this past week, low overhead, a connect could offer you a 6.99 rate with no points , um, or a 6.5 rate if you were willing to pay a one and a quarter points. And Tim, what are points and what points are, yeah,
Speaker 3:Points are prepaid interest, which I try to avoid using the word points and the word prepaid interest when describing it to customers. 'cause basically all you're doing is you're raising your hand and saying, I wanna spend more at closing as a one-time investment, for lack of a better word , uh, in order to buy down my rate and therefore pay a little bit less on my monthly mortgage payment due to the lower interest rate. And it's just a matter of, you know, it's a couple factors. A, how much money do you have to spend in total? Uh, you know, a lot of people say, oh, I want to put $20,000 down. And what they really mean is, I wanna put $20,000, you know, to the closing table in total. Not just my down payment, but my all in , you know, nut that I'm bringing to the closing table. So part of that discussion that I have with almost every customer who has an accepted offer is, okay, where do you think rates are headed in the next couple of years? And do you think it's worth spending more at closing to save a little bit every month on your mortgage payment? 'cause eventually you'll save that, you know, investment back, but it takes several years. And if you refinance the mortgage due to rates naturally coming down on their own, you may not make that money back , uh, if you don't have the mortgage long enough. So,
Speaker 1:Well, and in fact, on the numbers I just gave, hey, if you were gonna pay up to get that six and a half rate, which by the way mm-hmm . I gotta say the annual percentage rate is 6.66%. Uh, and , and that's because you take the cost of the points or interest paid up front and you spread it out overall 30 years. Uh , whereas the 6.99 rate has an annual percentage rate of 7.02. Well, that break even point, the difference in the payment is 75 bucks a month.
Speaker 3:Okay. And what's the dollar amount? The points that the
Speaker 1:Extra dollar amount , the dollar amount is $2,667 difference. Okay . Between, you know, a choice A and B. So it happens to take exactly three years to make back that extra money that you would pay upfront . Yeah .
Speaker 3:So over a 30 year mortgage, obviously you'll save way more if you pay points and go with that 6.5% rate. But no one keeps a 30 year fixed mortgage for that full 30 year period. So it's a question of, do you think in the next three years, Mr. And Mrs. Customer, are rates gonna come down enough to where you refinance? And most people would probably say yes to that question right now, because we're optimistic that we've hopefully, fingers crossed, hit that high point in, in rates when rates were tickling the upper sevens or low eights. You know, even though we've seen a little bit of , uh, rate increase in the last week, you know, getting a 6, 9 9, that's still quite a bit better than it was when we were at our peak . Oh my gosh . Peak in October or November. Yeah .
Speaker 1:At 8% basically.
Speaker 3:Yeah . So we're , we're still down a full percentage point in a relatively short amount of time, which is great.
Speaker 1:Correct. And now, by the way, the next big economic number coming out is this coming Wednesday, January 11th at 8:30 AM the government will tell us what inflation was as measured by the consumer price index, or CPI, by the way, should also mention that our special first time home buyer rate for on a 30 year fixed rate , uh, this is for Wisconsin first time buyers only, is still at 6.125%. And that'll have a higher a PR depending on how your credit score is , uh, which will impact the cost of the PMI, but it might be as low as 6.35
Speaker 3:Mm-Hmm . <affirmative> . And that rate is , comes with no points. You can achieve that with paying no points at all, just standard closing costs plus , uh, an extra $500 review fee for that particular program. Right . But that's still no points
Speaker 1:Smoking. Good deal. Yeah . Alright , when we come back, Tim , uh, you said you had a couple of home buyers recently get accepted offers on new construction, which comes with its own little kind of set of things to be aware of. You are listening to the Academic Mortgage and Realty Show on Wisconsin's radio station AM six 20 WTMJ,
Speaker 2:Getting you into the home of your dreams. Here's more of the ACU Mortgage and Realty Show with Brian Weer on WTMJ.
Speaker 1:We're back and thanks for tuning in again. This , uh, first Sunday of January in 2024 . They go Packers tonight. It'll be rooting for them. And , uh, anyway, Tim , uh, we're talking about kicking off the new year. You have had a couple of home buyers lately , uh, buying new construction , uh, spec homes as they're called. Tell us about that. Yeah,
Speaker 3:I've noticed an interesting trend because I mean, obviously people buying spec homes from builders isn't a new thing. But what is a new development in my opinion is I've had three customers recently in the span the last couple months that are all first time home buyers that are buying new home builds. And in the past I mostly saw that as a kind of a move up build, you know, scenario where maybe , uh, it was a second, you know, primary purchase or a third Yeah . Move . So the, the, you know, it makes sense with inventory being such a challenge right now, but more first time home buyers are considering buying , uh, a new home build from a builder as, as an option. What's
Speaker 1:The price range that these people are in ? I gotta be over 400.
Speaker 3:Yeah . It's , uh, spanned from, I think the , the cheapest one was in the low fours. Uh, up to the mid fives was the most expensive one. Okay.
Speaker 1:So these are, so it's above average, if you will, above mm-Hmm. <affirmative> above average income, first time home buyers. But, you know, people are waiting, I think I read that the average first time home buyer age is now something like 36 years old.
Speaker 3:That's a good point. So people
Speaker 1:Are kind of established in their careers and if you have two income earners, that seems plausible. Alright . So what do you have to remember when you're, when you're buying a new construction home, is there anything different versus you're buying that, you know, a hundred year old house in , uh, in Wauwatosa?
Speaker 3:Absolutely. And that's why I wanted to bring this up is because , uh, there's a , a , a couple different things , uh, that are, are unique and different about buying a new home build. So the first thing is the whole process is most likely gonna take way longer. If you're buying an existing home, a lot of times we can do the whole process and the span of maybe three or four weeks, you know, maybe a month and a half on the long end of things. But if it's a new home build, you gotta wait for that build to be completed. And a lot of times my customers are writing offers either on just specs alone or just the frame of the home is built and they're still waiting for a , a vast majority of the completion to happen. So I just had a customer earlier this week that I talked to. They got an accepted offer on a , uh, uh, a new home build with Carrick Homes . And that estimated completion date isn't gonna be until the end of May. So we're, we're looking at, you know, easily five months where they're under contract, they know they're gonna buy this home, but there's gonna be a lot of just sitting around and waiting, you know, we're gonna work on getting the loan approved, but still too early to even lock in the rate environment. Uh, obviously, you know, they're just kind of waiting for that bill to , to progress over the next couple months. So that's, you know, thing number one is just be aware the whole process is gonna take way longer than normal, typically,
Speaker 1:Which , uh, 'cause a lot of times isn't it true, hey, maybe you get to make some final selections, you know, may maybe the countertops haven't been put in or the cabinet finishes or stuff like that.
Speaker 3:Absolutely. Yep . Uh, the second thing that I think is helpful to know if you're a first time home buyer buying a new home build is if you're not putting 20% down, you're gonna be required to escrow for your property taxes and insurance, which is just a fancy way of saying you're gonna set aside one 12th of those anticipated bills into your , uh, monthly mortgage payment. So that way when the bills come due, the money's already saved up. But with a new home build , and maybe we'll spend more time in the next segment, 'cause this is a complicated topic here, but , um, we have to set up the escrow based on what we anticipate the property taxes will be after the reassessment of the property happens. Right . 'cause right now the tax bill is literally on a plot of dirt. So the municipality obviously has , uh, dirt cheap property taxes, no pun intended. Right ? Right. Yeah . Yeah . But eventually they're gonna be aware of a shiny brand new nice property on that , uh, on that land. And then the tax bill is gonna go way up. So when we are escrowing, so obviously some customers maybe don't escrow if they're putting more than 20% down, but if they are escrowing right on day one, we have to set up that escrow based on what we expect the taxes to go up to in the future. Um, and there's a calculation that, you know, I , I let customers know that it's not like we're just throwing a dart at a wall. We're , you know, sure there's some logic to it .
Speaker 1:We get the tax rate from the local municipality called the mill rate, or how many dollars per thousand of fair of , uh, assessed value. Mm-Hmm . <affirmative> . And then you have to know what's the difference between what they're taxing you at the assessed value versus the fair market value. 'cause those are frequently slightly different. Mm-Hmm . <affirmative> , you know , maybe the municipality's only taxing you at 95% of the fair market value of the home.
Speaker 3:Yeah. The assessed value in this last one was 87%, which wasn't , uh, wasn't too shabby <laugh> .
Speaker 1:So , so we go through that calculation for two reasons. One, we wanna make sure you qualify and you can afford what that future property tax payment
Speaker 3:Is gonna be. Exactly . 'cause it's common . Yeah.
Speaker 1:Yep . And then we also need to set aside the money. Like we know that that's gonna happen. Alright. So I think, do you have any, you have more meat on , uh, on this , uh, topic to share some more topics after the news?
Speaker 3:Uh , yeah. I mean those are the two big ones, but there's a couple other smaller things that we could get to the next segment for sure. Okay.
Speaker 1:And then we also , uh, after the news, let's get to the , uh, total year and also December , uh, home sales statistics for the five county metropolitan area. We'll get to that, but right now it's time to turn it over to the 24 hour news center.
Speaker 2:Don't break the fact to get into a house. Back to the ACU Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back and thanks again for tuning into today's show. Uh, Tim, before the news, we were just talking a little bit about , uh, new construction that you're doing. I have two questions. Okay. Uh , about that. Uh, what about landscaping and, and driveway? 'cause those are two things that, you know, when you buy an existing home, it's got a driveway Yeah . And it has some kind of landscaping. But when you're doing new construction , uh, sometimes, you know, it's like, ah , we're not gonna put in that driveway for a year. Right . Or maybe they are. And then the other thing that comes up is landscaping. What are you seeing these first time home buyers experiencing on those two topics?
Speaker 3:Well, there's this seasonality piece to it, obviously, because, you know, if they're buying a new home build and it's set to close in January or February, you know, obviously landscaping isn't gonna be part of that. At least not done pre-close because, you know, we're in winter in Wisconsin , uh, the most recent example, the one we were just talking about, where the closings gonna be end of may, the driveway is part of that contract. And actually, it's funny you should mention that because it wasn't included in the original listing that I looked up and they agreed upon a purchase price that was about 15 k higher than the list and then added the driveway into the contract. So they sort of baked it into a new hire purchase price. Uh , so that contract is stating as such that the driveway's definitely gonna be done before closing. And the buyers are expecting that, you know, in , in this scenario. Okay .
Speaker 1:And driveways are not cheap, especially if they're made outta cement just by that . Right . So that's like a , a real thing, a real cost. So one other tip is Yeah. If it's in the contract, it's gotta get done before closing is Exactly , you know , from a mortgage lender's perspective, unless it's weather related . I've had a couple of those in the past , uh, you know, like, oh yeah, we're closing in February and you know, you can't get the grass in until, you know, may Right. When it warms
Speaker 3:Up enough stuff like that . Yeah . And even then, I mean, there's only certain things that Fannie Mae will allow an escrow holdback for, even if it's weather related . You know, I had, and we don't have to get off on this tangent if you don't want to, but I had two septic related issues on prior purchases. Ironically, both of 'em happened to be in Minnesota, oddly enough, but , um, they, the agents just assumed an escrow holdback would be okay. But no , a septic is on that list of Fannie Mae's radar where it's like that's a safety issue if the septic is truly broken. Right. Or if it's leak, you
Speaker 1:Need to Yeah. You
Speaker 3:Need fecal matter all
Speaker 1:To be working .
Speaker 3:Yeah, exactly. So they, you know , uh, again, we don't have to get into it, but maybe that's a topic for another show. Uh, agents, please don't just assume that you can escrow hold back for anything at any time because it the each, you gotta take it on a case by case basis in terms of what the issue
Speaker 1:Is. Like, like a roof. A roof , uh, repair is an example. Mm-Hmm . <affirmative> of one where, okay, hey you're in January now we don't happen to have any snow yet and maybe that would allow a roofer to do their job, but you can't put a new roof on if there's snow on roof. Right. Right. At least. Exactly . Not , not any roofer that I know. So that's an example of something. Okay. We could do an escrow holdback for that. Yeah. Yeah . And then that's typically at , is it 120% now of the quoted price?
Speaker 3:Yep . It depends on who holds the escrow , uh, if it's the title company or if it's , uh, you know, us as the lender holding it. But yeah, generally 120% .
Speaker 1:Alright , well anyway , so, so new construction, you're seeing some, interestingly that's a sign of inventory's tight. Right? And , and , and yeah . Unlike other parts of the country, we don't have any first time home buyer . Typical first time home buyer, new construction , uh, being built because our new construction in southeastern Wisconsin typically starts in the four hundreds. Uh right.
Speaker 3:But to your point, I mean, my first time home buyers are in their mid to upper thirties. And , uh, you know, if, if those people are out there who have waited that long and want to jump into that price range , uh, don't be afraid to consider, you know, spec homes from, from builders . 'cause there are definite advantages to
Speaker 1:That'd be happy to help you do that , uh, for sure. Here at Academic mortgage. Alright , so now let's turn the page and start talking about, hey, how did the housing market do in 2023? And one of the headlines is that not as bad as I expected. Hmm . Um, home sale , the total number of single family detached homes and condominiums. So not counting three unit properties or even duplexes. Uh, the total , uh, number of sales handled by a member of the National Association of Realtors and the Greater Milwaukee Association of Realtors 16,838. Okay. Now that was 3,650, less fewer than in 2022. So a 18% decrease. Sure . Uh , in the number of sales, you know, for a while there, like at the beginning of the year we were clipping along and sales were like 25% less, you know, kind of in that range. So we had a relatively better second half of the year. Yeah . The
Speaker 3:Rate shock probably wore off a little bit for some people. Yeah ,
Speaker 1:Exactly. Because remember it was last year that it was kind of ugly where race , you know, had gone up late in 2022. Kind of the opposite of what we had year of this, this year where race actually came down <laugh> . Yeah . Um , alright , so let , let's get back to that a little bit more. It's time for one more break here. You're listening to the Accident Mortgage and Realty Show on the biggest stick in the state, which means it has the largest broadcast area in case you ever wondered <laugh> . Uh , that's called AM six 20 WTMJ.
Speaker 2:Important home buying questions and answers you can count on. This is the Accu Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Thanks again for tuning in to today's show. I'm Brian Wicker , uh, the president and owner of Acuate Mortgage and licensed broker with Acuate Realty Advisors. That's Tim Holden over there. My son-in-Law. Hello . Hello. One of our super senior loan consultants at Academic Mortgage. And , uh, we're just talking about how , how did the market fare in southeastern Wisconsin real estate wise . And the answer is down 18% in terms of number of sales compared to 2022. And then the other thing that we can say is , uh, listings. 'cause that's the supply side of the equation, that was only off 15% compared to 2022. Wow . We had 20,275 new single family detached and condo listings come on the market in 2023. Um, and , uh, there weren't very many that came on the market in December. Tim, only 779 new listings hit the market in.
Speaker 3:Understandable. December's a slow month even in , you know, even in good rate environments. Yeah . December's kind of
Speaker 1:A slow month . Well that's , that's down , uh, 45 listings compared to December, 2022. But if you go back to a pre covid year Mm-Hmm , uh, like 2019 there's a thousand.
Speaker 3:Okay.
Speaker 1:So, you know, we , we are off, you know, from the
Speaker 3:Yeah . Grace and I , our Grace and ours , uh, old House was one of those listings , uh, that that year in December Yep . In
Speaker 1:2019. Yeah. And that's sold pretty quickly, didn't it? I remember that. Yeah.
Speaker 3:Yeah. Yep . Couple offers and I think we showed it a weekend and it was gone.
Speaker 1:Yeah. Alright , so, so , um, uh, uh, what's another nugget I can tell you? So the median sales price was 310,000 , uh, for the entire year, and that is up $24,000 from the prior year on a percentage basis. That's 8%. And you know, I just asked you , uh, while we were on the break, if you are seeing any trends this time of year relative to are people having to pay , uh, over asking price , uh, like the , like they did for most of 2022 most
Speaker 3:Of the year. Yeah. And, you know, this is only my small sliver of data as, as a personal loan consultant. So , uh, you know, take this with a grain of salt, but I'm, I'm not seeing a lot of over bidding. Uh, I'm seeing, you know, most of my accepted offers come in either at or slightly under the list price. Now, as David likes to say, the listing price is a made up number anyways, so Right . Just because customers are getting their offers accepted for maybe at or under list, that doesn't mean home values are going down folks. You know, the generally home values are still going up and 8% year over year is a pretty health healthy clip. But I don't even think that's, that's not even as egregious as maybe some people who don't look at the data, think it is. Some people are think, oh my gosh, homes are going up 20% value. Yeah . You know, year over year. So it's, you know, 8% is a nice healthy increase. Right.
Speaker 1:And remember that's not a perfect number either because it does not take into account the size square footage, number of bathrooms, number of bedrooms. Yeah , exactly . It's just , hey , of all the homes that sold, what was the median sales price? Now you'd mentioned something else. I wanna come back to you . Speaking of real estate agents and realtors and commissions, you said one of your new construction , uh, buyers was surprised about something.
Speaker 3:Yeah, it was. We were doing the deep dive , you know, mortgage pastoring phone call and I , at one point, you know, I , I paused to take some questions and he said, Tim, he's like, my, my realtor told me this and I actually can't believe it, so I want to check with you. And he's like, as a first time home buyer, I recognize that I just don't know any better. My realtor said, I don't have to pay them any of their commission for helping me buy this house. And I know they're getting paid 2%, which this was on a, I think a 550 ish thousand dollars home purchase. Okay . So he did that math. He's like, that's a lot of money that my realtor's making. I don't have to pay for any of that. And I said, I, I appreciate the question. I know it sounds too good to be true, but as it sits right now, that is entirely correct. The seller is taking that out of their net proceeds to pay your agent and they're doing the same thing with their own realtor. You know, so there's a big cut of proceeds that the seller is losing out on going to pay the , the two different real estate agents involved in the transaction. But
Speaker 1:It's baked said into the price, it's baked into the price of the house. Yes . Right. When you're selling a house and you're asking a certain price, you know, you're saying, okay, you know, I'm gonna sell it for $550,000. Mm-Hmm. <affirmative> , you know that you're gonna pay a real estate commission as it stands right now. But this, we talked about this last month, there are lawsuits that have been , um, settled. They're gonna get appealed that says, Nope , the seller should not pay for the Buyer's Real Estate Commission. Yeah . And so that is something that may very well change in the future. Yeah. However, it , it could, my hunch is that the new world is gonna be such that it's like, okay, yes Mr. Buyer , you have to pay your own real estate commission, but it's still gonna be okay to ask the seller to pay for it. Right . So it's gonna be form over substance, but it's gonna, you know, a seller doesn't have to agree maybe in the future world, the seller, it's not gonna be the standard practice that the seller agrees to pay for commission .
Speaker 3:Just , I mean, change happens slowly and I told my customers, Hey, there is stuff happening out in the world. It's not gonna happen in , uh, a month or two <laugh> . So it's gonna not gonna affect your transaction, but Right . Yeah. I think there's gonna be some changes to that, you know, gradually over time. For sure.
Speaker 1:Alright, so , uh, and we think by the way, that, or at least I think 2024 is gonna be very similar to 2023 in terms of the number of home sales . I agree . Why don't we come back and our , for our last segment of the show, Tim , you said you had , uh, a situation , uh, where somebody's looking at buying a home in northern Wisconsin. Yes . And we've got some options for them to consider. We'll cover that when we come back. You're listening to the Anette Mortgage and Realty Show on AM six 20 WTMJ.
Speaker 2:Find a place to call home without the headache. This is the Accu Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 3:Alright , welcome back. We're all having a good time on the AC at Mortgage and Realty Show. AM six 20 W-N-T-M-J. I am senior loan consultant Tim Holdman joined by , uh, chief Honesty Officer Brian Wicker. Uh, Brian , uh, before break you mentioned, I I talked to a customer earlier this week , uh, that has, they're contemplating scenario that's fairly common in our neck of the woods. He wants to buy his dream , uh, second home up north in the north woods somewhere, ideally on water. Uh , and eventually when he retires in a few years, he'd like to move up there and make it his primary residence. Sure . But for now it's gonna be a second home vacation home pop up there over the weekend, you know, things like that. Uh , so he said, Tim, do you do those mortgages on second second homes? I said, absolutely. Yeah . Fannie Mae does have some different requirements in terms of down payment reserves, things like that. The rates are a little bit higher because logically Fannie Mae thinks that's a riskier mortgage to do on a home that isn't your primary residence. Um, but we do those loans
Speaker 1:And let me say this. Yeah . I , I think they're just trying to soak people. I don't think that they're
Speaker 3:<laugh> . They probably don't actually want to do them. Yeah, yeah, yeah.
Speaker 1:They , they , so they make the rules though. And so they're say , yeah, you're gonna pay a little bit of a premium and we can make the rate difference go away by having you pay money up front called points. But anyway , go on. Correct . So you got , yeah . You got a slightly less favorable pricing if we put the loan on the vacation home up north. Correct.
Speaker 3:Or, and I said, all right , uh, Mr. Customer, that that's excellent. Have you considered another maybe, possibly better way? I said, do you obviously, do you own your home , uh, in southeastern Wisconsin? He said, yes. I said, do you have a , a mortgage on your primary home? And he said, no, actually I've paid that off a couple years ago. My paid home is free and clear. Oh . I said, congratulations. That's amazing. I said, I would actually recommend pulling some cash equity out of your primary home to buy that second home up north in cash. And here's a couple reasons why. I think that's a way better execution of, of his goal. Number one, the interest rate's gonna be better 'cause it's gonna be a mortgage tied to your , uh, primary home. And I've heard David say many times, if it's all borrowed money at the end of the day, why wouldn't you wanna borrow it at the lowest rate possible? A cheaper rate ? Yeah . Also, then you can present yourself as a cash buyer on the up north property, which is huge. I mean, there's lots of competition. A lot of people want to get their own little slice of paradise up there. And if you're a cash buyer, you can close faster and you're gonna be way more desirable to the sellers. Right? Sure . The cash buyer's the best thing out there. Also, then, if there's any lability issues with the property itself, maybe you want to buy a rustic hunting cabin or a manufactured home or Right . Something that Fannie Mae doesn't like, it's not an issue anymore. Right . 'cause that mortgage isn't actually tied to the up north property. It's tied to your primary home, your plain Jane single family . Sure . Super safe lendable property. Um , he loved all those explanations. And then, you know, the other thing I said in his case, he's not like as he , he's not giving up a 3% rate on his primary
Speaker 1:Mortgage. Right . Because it's Right . That's , that's a Yep . That is the Yeah . Nice thing. But Tim, I have an objection. <laugh> , he won't be able to deduct the interest because under the 2017 Tax Reform Act , uh, taking equity out, whether it's on a home equity line of credit or a refinance of a first mortgage, the interest on that loan is no longer tax deductible.
Speaker 3:Mm-Hmm. <affirmative> , uh, my answer to that, and I'll say I'm not a licensed tax advisor, but my answer would be, unless you itemize your property or you itemize your tax deductions, it actually doesn't matter. 'cause if you're taking the standard deduction, which I think for a married couple filing jointly is like 27,000 or something like that , it's
Speaker 1:Huge. Yeah. Yeah.
Speaker 3:You're not gonna have a , a pro , you're , you're never gonna actually see a difference in your tax returns anyways.
Speaker 1:That that's, and nobody understands. There are very few people realize that. Right.
Speaker 3:Very few people itemize. I think actually at
Speaker 1:The end the day , well I , I'll look up the percentages and report that back on the next show. Yeah . But it's fewer and fewer. So, so what about timing though? 'cause you don't wanna borrow this money too early. How are you gonna handle that?
Speaker 3:Right. And that was the last thing is that I, I kind of said like, this is almost like a bridge loan, but it's like a, it's like the Golden Gate Bridge loan. It's a law on bridge loan. Right. Yeah . Because it's years , not months. Yeah , exactly. And, and he was very comfortable with that because the payment was manageable. It's a fixed rate. He could still refinance this of freights go down into the short term , but you know, he's got about three or four years left before he wants to retire and then he's gonna sell his current primary home, pay that mortgage off when he sells and then he's gonna have no mortgage on the new, you know, on his new primary anyways. 'cause he was a cash, which
Speaker 1:Is probably his goal if his, if he has his current primary mortgage paid in full. Right. He's not like me where , you know, I love my product <laugh> , I wanna have a mortgage on my vacation home. I wanna have a mortgage on my primary
Speaker 3:Residential , all the mortgages
Speaker 1:I eat the home cooking. Yeah . And , and , and that's because, you know, in my heart I believe I can take the money that I'm not using to pay off my mortgage, give it to my investment advisor and earn more , uh, than my interest rate.
Speaker 3:Exactly.
Speaker 1:Luckily I don't have an interest rate at seven or seven point half percent. It's slower than that. Right . So, you know, it's all relative. Alright , well that's all the time we have for today's show. It's Tim , thanks for joining me to co-host today's show. It's all this fun to have Pleasure . Have you on .
Speaker 3:My pleasure . Absolutely.
Speaker 1:You've been listening to the Academic Mortgage and Realty Show on Wisconsin's radio station AM six 20 WTMJ. The proceeding was a paid program. Advice and opinions expressed during the Accu Mortgage and Realty Show are solely that of the host or guests of academic mortgage and Academic Realty advisors and not WTMJ Radio or Good Karma Brands . Milwaukee, LLC.