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 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 Academic Mortgage and Realty Show. I'm Brian Wicker, licensed real estate broker with Academic Realty Advisors and also the majority owner of Academic Mortgage, along with my son-in-Law. Tim Holdman , who is one of our top senior loan consultants. By the way, my individual NMLS ID number is 2 5 9 6 1 0 And Tims NMLS ID number is 1 5 9 3 1 4 6. We had a regulator in Minnesota say they'd like us to put that on the radio show <laugh> . So there you go. All right there it's , if you have a question or a comment, you can call or text us on the WTMJ talk and text line , which is 8 5 5 6 1 6 1 6 20. And remember, just like those regulators in Minnesota, you can get a podcast of today's show at any of our past shows wherever you normally get your podcasts. So Tim, the uh , national Association of Realtors came out this last week with their report on January home sales . And uh , you know, this, this goes in the category of does the national number apply to our corner of the world? Right. And they reported that existing home sales expanded 3.1% in January
Speaker 3:Year over year or uh , well
Speaker 1:I'm glad you asked that because always have to ask compared to what that 3.1% number was compared to December.
Speaker 3:Ah, okay,
Speaker 1:Gotcha . To an annual annualized rate of 4 million. And, but then when you do it year over year, they say sales declined 1.7%. Uh , by the way, the median existing home sales price was up 5.1% from a year earlier to 379,100 bucks. And they also say the inventory of onsold existing homes increased 2% from a month ago to 1.0 million, which is the equivalent of a three month supply of current monthly sales base . And remember the old rule of thumb is that , um, three and under , uh, no, what is it? Three and under is a , uh, is a seller's market three month supply or under. Right. Three to six you're starting to get more balanced. Mm-Hmm . <affirmative> and over six is a buyer's market. So we are way far away from a buyer's market.
Speaker 3:Yeah . And we have been for quite some time <laugh> . That's
Speaker 1:Right. So, you know, the national numbers don't matter. And so I ran the numbers for Southeastern Wisconsin and I particularly looked at the five county metro area and looked at those listings. 'cause I wanted to scratch my curiosity and say, is the supply getting any better? Mm-Hmm . <affirmative> . So I looked at those single family detention condo listings that came on the market from January one through February 22nd. And that number was 2,164 new listings.
Speaker 3:Okay. That
Speaker 1:Compares to 2023 for exactly the same period. 2200. That's a difference of 36 listings.
Speaker 3:I'm pretty much flat
Speaker 1:Yeah . A tie . Yeah. Now what's interesting, and I think this is a continuation of what we saw all last year , um, uh, seven out of 10 are still active, meaning about 36% already have closed, which was kind of surprising. That's pretty quick. Yeah. But about 68% or seven outta 10 are still active, although half of those have accepted offers. Alright , sure . So let's talk about what's really on the market that does not have an accepted offer right now. If you just look at those listings that are brand new for 2024, the fresh meat if you will, the total number is 857. That's from all five counties. Single family detached and condos. Uh , that ha Now though, I thought to myself, you know what, they're probably some listings from 2023 that don't have offers
Speaker 3:Yet . They're still active. Yeah.
Speaker 1:And if you throw those in, they answer is 1300 Okay. Of homes for sale in the five county metropolitan area listed by a member of the National Association of Realtors that do not have offers. The number of closed sales in January was 845. So we have about a one and a half month supply of homes for sale here in southeastern Wisconsin.
Speaker 3:Heavily in the seller's market territory. Yeah.
Speaker 1:Yeah. And , and you know, I want to bring people up to speed on the story we talked about , uh, last week of this young first time home buyer couple , uh, that I'm working with. And part of that story is we, we , we got 'em fully rock solid, verified, verified everything about 'em , and 30 seconds after that they're like, we found these two homes. Shocking. We want to go see. And I helped them connect with the buyer's agent. Well, since they're young and they didn't know any better, they didn't notice that one of 'em already had the uh , red C highlighted in yellow. That means it's already got an offer. Yeah . And the other one, by the time they made an appointment to go see it, it had an accepted offer. Yeah . So is that what you're seeing as well? The velocity of the market can be pretty quick
Speaker 3:For the, for the desirable properties? Absolutely. I tell my clients that if you see a house you like, you need to go see it as fast as possible because if you wait a couple days, someone else is gonna see it and likely make an offer. Maybe multiple parties will do that.
Speaker 1:Let me give you a little bit more , uh, update on that particular story 'cause it's got some interesting twists to it. We will get to that right after this. You're listening to the Accident 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 and thanks for tuning into today's show. I'm Brian Wicker, the elder here, and that is my son-in-Law over there, the taller, handsome, younger Tim Holdman ,
Speaker 3:But with less hair
Speaker 1:<laugh>. And well, thanks for making me feel good. Yeah, I got that little hole in the ozone in the back, but yeah, you've gone kind of , uh, smooth on the top, but with a nice , uh, trim beard too, I might mention. Oh, thanks very much. So , um, last week we started talking about this , uh, first time home buyer couple in their mid twenties who's done really well for themselves with savings. And this was a introduction from , um, our husband's father who we just helped buy a new homeless last fall. And , uh, by the way, we used a temporary buydown for his loan . So let's pick up on that later in the show, Tim. Oh yeah . As
Speaker 3:A for sure
Speaker 1:Tool of , uh, the current interest rate environment. And so this young couple , um, the interesting thing that we were able to , uh, erase any doubt about, we had the , uh, wife in this case changed jobs and she was hourly on her last job. She's hourly on the new job. And our , that's called variable income when you get paid hourly if you work a different number of hours every week. Right . And so what happens when you're on a job less than a year? You know, usually we can just get by with pay stubs and a W2, which looked good for her income documentation, by the way, is being good steady, but that doesn't cut the mustard when you're on the job less than a year. So we need a written verification of employment. We send that to her employer. But the , um, manager was struggling mightily with filling it out correctly. So the first version we got back was kind of mangled and didn't result in somebody looking at it and saying, oh, she works 40 hours a week and she gets paid biweekly and then there's a place to fill in the year to date income. That was not all jiving Sue . So our rock solid preapproval desk person, your sister-in-Law, Sue Holdman , shout out to Sue back on the phone with that person and walked him through, okay, yeah, this is what that box means. He got it back, put it on the altar of one of our Fannie Mae Surfacers. 'cause we just wanted to make sure there would be no surprises. And within literally 30 seconds of getting the confirmation that her income was all square, this young couple had found not one, but two homes. Ah , that they Shocking, shocking how that happens. Yeah. It's , isn't it , does that happen to your buyers? Like once you authorized Them all , like , oh yeah. Yep . Okay, now let's get busy. Right. So and I had connected them , um, I dunno if we talked about this last week. Um, they had had the name of somebody that they were considering using and I did the research 'cause they're looking in Washington County and in the three to $400,000 price range. And so I just run the numbers, Hey, who is there a buyer's agent? Is there a real estate agent who has worked with more buyers than other others? And one person's name came to the top of the list and I called that person and talked to her and she happens to be the owner of the brokerage. It's a small brokerage. And she said she'd work with them , uh, you know, individually, she's not gonna hand 'em off to somebody else. Perfect. Yeah . So I thought that was pretty cool. And so we, we, you know, go about our business and unfortunately , uh, both of those properties, one was showing up in Zillow as already having an offer. The other one was showing us still available, but by the time this buyer's agent had set up the , um, appointment to go through, which was only like a day later,
Speaker 3:Okay, not terrible,
Speaker 1:That property was already had an accepted offer. Sure. Now the other thing that's cool about these people is they're smart and they're really good students. So we did a go-to meeting , uh, where she can, where they could see my computer screen. Uh , I think that was on Monday night. And I showed them the MLS data that , uh, tells you that, hey, once you get to March in that price band in Washington County, between three and $399,999, 78% of people paid over asking ,
Speaker 3:Not surprising. And 33 ,
Speaker 1:Yeah. 33% paid 10 grand or more. And then it gets into the 80% range in April and May with over half of people paying $10,000 or more over asking . But what I was able to show them and given their particulars , um, I was able to show them that you could offer like 15 grand over the asking price. Mm . So let's say you saw a home listed for 3 85, you could offer $400,000 and still tell the seller, Hey, I'll pay you the 400 even if the house appraises as low as three eighty five.
Speaker 3:Right. We call that the appraisal wiggle room. Yeah.
Speaker 1:The appraisal wiggle room trick. It's the best card trick that we have. Well, there's one better one. We'll talk about that later.
Speaker 3:<laugh> . It's a good one though. Yeah,
Speaker 1:It's a good one. And because they would have to bring absolutely no more dollars to closing and it wouldn't change their payment at all.
Speaker 3:Amazing. Yeah . Because
Speaker 1:We're staying in that same down payment bracket.
Speaker 3:Right. Their down payment is so strong that if we lend them or have to lend them a slightly higher percentage of the value of the property, it doesn't matter. It doesn't change their reality of what they have to bring to the closing table.
Speaker 1:And most of the time it does change their payment, I would say.
Speaker 3:Yeah . Yeah . More often than that . Yeah . More often than not .
Speaker 1:But only by , you know, 10 or $25. Right . Because most people always assume they have to , um, bring the difference to closing. That's not the case. So they were really ,
Speaker 3:I don't have $15,000 more to bring to the closing. Yeah, exactly.
Speaker 1:Exactly. I don't want to do that. But there's more to the story. I want to tell you how we further bolstered their rock solid pre-approval letter when we come back. 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 Net Mortgage and Realty Show with Brian Weer on WTMJ.
Speaker 1:Welcome back and thanks again for spending part of your Sunday with us or whenever you listen to the podcast. So we're in the middle of a story about this first time home buyers that were , they're all equipped now to go out and write offers. Uh, and one of the interesting things , uh, about their situation is they have a strong down payment. They could put down 10%, but there's one thing that , um, is not a up to a $400,000 purchase. And they actually have more than that saved up by their own money. Uh, but they wisely kind of want to keep their cash out of pocket to about $40,000 so that they have guess what money and reserved him . I don't know , when you bought a house, did you do anything to it?
Speaker 3:Uh, yeah. Try a lot of stuff and sooner than we thought we would have to. 'cause that's always the case , uh, as well. Uh, we had to do new drain tile in our entire perimeter of our basement on our first home. Uh , within a couple years of buying it, you know, a lot , a lot of things came up. And guess what, even if bad stuff doesn't come up, you're gonna want that money for what I know you and I both jokingly refer to as the second down payment, which is, oh, we need new bedroom set, or we need a lawnmower or a snowblower, or, you know, all these things that we need have a fence,
Speaker 1:A fence in our yard for our dog and our kids or what have you. Right . Okay. So, so these people are wise to that. But since I knew the dad, remember the , the story is the referral came from the father. I said, let's talk to your dad, mom and dad about the possibility of giving a gift. I , when I, when we bought our first home , uh, I always think it was my parents that gave us the gift for the down payment. Becky thinks it was her parents <laugh> . I'm sure I'm right, <laugh> , but you know, that's a tale as old as time parents, grandparents wanna be helpful. Mm-Hmm. <affirmative> . And so I, I talked to the dad and I explained if we can get a signed gift letter from you and your wife , uh, saying you're willing to give, let's say 40 grand , um, and you are actually willing to give it, if necessary, I can then write their rock solid preapproval letter with 20% down. Mm-Hmm. <affirmative> . And that just looks so much better to the seller, to the typical seller and the listing agent than anything less than 20% down.
Speaker 3:And that 40 grand doesn't actually have to leave dad's bank account yet either. It's, they're just signing a letter saying they're willing to give it if it's needed. And then once the offer's accepted, it's really between them and the parent if that money ever actually is given. Absolutely . You know , this is about , this is about the window dressing of making the pre-approvals stronger so that their offer gets accepted over somebody else's 'cause as you already talked about, the competition is going to be steep in this area and price range that your clients are shopping in.
Speaker 1:Exactly. And so we got that in hand. And I was able to produce on , uh, Thursday of last week a pre-approval letter. 'cause remember we also verified her variable income, her hourly income was fine. Yeah . 'cause the , the verification of employment clearly stated she works 40 hours a week and all the numbers beautiful have to prove that she is actually working 40 hours a week, not 31 week and 38 the next. And, you know, 22 the next week it's steady, so therefore it can be used. That's the level of detail that we go to in the rock solid preapproval process. Whereas opposed , uh, you know, a lot of other lenders would just say, well, how much do you make? And she would've said , 23 bucks an hour. And they would've assumed
Speaker 3:Sounds good. Yeah.
Speaker 1:It was 40 bucks. And then if it came back as variable, you're in deep trouble. Yeah . So we got all that squared away. And so they are now have a placeholder until they actually write an offer. But it says $400,000 with an appraised value as low as 3 85. Awesome. And with 20% down, huge . So they , they are loaded for bear .
Speaker 3:So now just the tough part of actually finding a house they wanna buy <laugh> .
Speaker 1:Well, exactly. And, and to get there swiftly enough to , uh, you know, make that before
Speaker 3:Someone else does. Yeah .
Speaker 1:Strong offer. You know, and I explained to them in an email, a lot of times home sellers will hold open. They'll say, well, we wanna show our home, you know, over the course of a weekend, let's say Mm-Hmm . <affirmative> , you know , open weekends, sellers
Speaker 3:Will review all offers at 4:00 PM on Sunday afternoon or, you know, whatever the case.
Speaker 1:Right , right. But in this particular case, that one that they saw , uh, up in West Bend got snapped up, must have been a really strong offer. And the sellers decided to take it. Now, the thing that, let's talk about this. Um, 'cause rates are a little elevated, you know?
Speaker 3:Yeah . Compared to a couple weeks ago. Yeah. Yeah.
Speaker 1:Seven, seven a quarter ,
Speaker 3:Seven ish .
Speaker 1:Yeah . If you want points , it all depends on the percentage down payment and your credit score and a
Speaker 3:Bazillion other things . There's a mental thing when it crosses a three , you know, from six to seven, that it's just like when it went from seven to eight, you know, that that's a big mental gymnastics thing in the, in the mind of a lot of buyers where if, if, you know, rates were in the mid to high sixes, but all of a sudden they're in the low sevens, the reality is rates didn't change that much. But it's, it's a men , it's a mental thing. So 6, 9 9,
Speaker 1:We offer 6 9 9 for a reason . Oh
Speaker 3:Yeah, exactly.
Speaker 1:It sounds much right , because it's a six in front of it . But now, so the tool that we used with her, with his parents Mm-Hmm . Back in the fall because rates were elevated. Is this thing called a temporary buy down ? Yeah , it's is old. I mean, we used this tool back, you know, 22 years ago when rates were elevated. It's back and it's a great tool. Mm-Hmm . <affirmative> , I wanna cover that , uh, because it's really instructive and, and , and a fantastic tool in a number of different circumstances. We'll talk about the temporary buydown when we come back, but now it's time to hand it over to the WTMJ Breaking Newsroom.
Speaker 2:Don't Break the Bank to get into a house, back to the ACU Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back. Uh, we want talk about this nifty tool , uh, called a temporary buydown. And it's, it's a handy tool right now because rates are elevated. And the other true statement is that adjustable rate mortgages to many people's surprise are no good right now. And that's because short term interest rates, which correlate to adjustable mortgages are higher than longer term interest rates, like 30 or fixed rate mortgages. So the , our market is basically dead. And so this tool, the temporary buydown allows us to, Hmm . I'm gonna say, well, it's real. We suppress, we lower the home buyer's effective payment rate by either one or 2%. And Tim, you've got an example where you just used it. Can you clue us in on that?
Speaker 3:Yeah. So , uh, I'll be the first to say this tool is not a one size fits all solution because , uh, like you mentioned, the way this actually works is we as the lender create a little pool of money off to the side. And that , uh, little bit of , of that pool of money leaves that account every month to subsidize or lower the effective , uh, monthly payment for the borrower for the first either year or two years, depending on what, you know , uh, buy down products you pick or you know, how much money you put in that subsidy account in the beginning. So it begs the question, who's gonna put that money in there? Right. Is is it gonna be the, the buyer? Because if the buyer does it , it's kind of the same as if they would've just kept that money in the bank and used it to make the higher monthly payment. Right? Correct. So
Speaker 1:I I agree that is not an effective , uh,
Speaker 3:You're robbing Peter to pay Paul
Speaker 1:Way to fund the buy down account. And again, I like the way you explained it. It's literally subsidizing the borrower's payment for either the first year or in some cases the first two years. So go on.
Speaker 3:Right . Yeah. So I had some customers who were in a little bit of a unique situation, but nothing that we haven't seen, you know, several times before they were renting and they had a good relationship with their , uh, landlords, the owners of the home, and they found out that the landlords were thinking about selling. So they said, Hey, we really like this house. We already live here. We'd like to buy it from you. So I said, that sounds great. We can absolutely help with that. And the con the main concern of these buyers was rates and where their monthly payment would be. And I said, aha, I have a great suggestion for you guys. Let's craft the offer so that , uh, you can ask for a seller credit, which can be used to fund that temporary rate buy down program. So that's the key is that you're not paying any of your own money to get an a lower effective payment rate. The seller is, and it, it's really not , uh, to the disadvantage of the sellers at all because you can just like , let's just use some made up numbers. Let's say you're gonna ask for a $3,000 seller credit, you can just offer to pay $3,000 more on the purchase price than you otherwise would have so that the seller nets the same amount of proceeds. Right. And values are so robust right now in our area, and I think this home was in Grafton , uh, the , the appraisal did not come in low. In fact, I think it still came in a little bit above the asking price, even though the asking price was was three grand higher. Yeah. So at the end of the day, what they did is they um , they did what's called a two one buy down in the industry. Uh , the lenders out there listening will know what this is, but essentially what that means is that for the first 12 months, the first year's worth of payments, the effective payment rate was 2% lower than the actual note rate of the mortgage. And 2% on a, you know, decent loan size. That's pretty substantial. I think their monthly payment was $190 a month lower than what it would've been otherwise. Okay.
Speaker 1:And that's for the
Speaker 3:First year. Yep . And then year number two, so the next 12 months worth of payments, the effective payment rate was 1% lower than the note rate. So, you know, 'cause that money was running out in that subsidy account. Right. So only in year number three, will their , uh, interest rate match the note rate of the mortgage and their payment will be what it will be for the rest of the life of the loan. 'cause this is a 30 year fixed mortgage, which I think is a key factor to point out as well.
Speaker 1:Yeah. It is fixed rate. So what happens, Tim, 'cause isn't the idea that rates are gonna come down. Right? So what happens if we , um, refinance 'em ? You know, what if rates naturally come down to some lower level that's mm-Hmm . <affirmative> lower than what they'll end up paying in the end, what happens to that money?
Speaker 3:Yeah. So I'll recommend we absolutely refinance even if we're not at the end of that sort of temporary buy down program. Because here's the nice thing. Whatever money is left over in that subsidy account, which again, remember the sellers really were the ones who put that money in there. That money goes towards reducing the principle of the mortgage at the time of the refinance. So they don't lose that money. Whatever left or over money is in there gets basically put as a little extra principle payment at the time of the ,
Speaker 1:The refinance. Yeah . Whatever's left over , you don't get a cash check back. But it goes against reducing your principle when you sell or refinance. And that is way better than paying points upfront . Big time. So in this environment where rates are a little higher than we'd like, and the forecast from all the smart people is that they're gonna come down. Mm-Hmm . <affirmative> , you know, let's say you're in a situation where , um, there's a credit coming to the homeowner because of something to do with the , um, uh, inspection. A great use of that money is to fund a temporary buy down account. Mm-Hmm . <affirmative> . Because you are enjoying either that lower monthly payment for a period of a year or two and you know you're gonna get all that money back. So I've got a little bit more on that and then I wanna switch gears to another story from last week. A follow up . You are listening to the Academic Mortgage and Realty Show on Wisconsin's radio station, A six 20 WTMJ.
Speaker 2:Important home buying questions and answers you can count on. This is the ACU Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Thanks again for tuning into today's show. I'm Brian Wicker, the elder here, and that is Tim Holdman, my son-in-Law and Senior Loan Consultant at Academic Mortgage.
Speaker 3:Hello. Hello.
Speaker 1:Uh , co-hosting with me today. And I just want to say a couple more things about this really powerful tool called the Temporary Buydown. So as you were explaining it, it's generally not a good idea for the homeowner to fund that account , uh, because you could just hold onto the money <laugh> and subsidize your payment. And so in the case of my first time buyers where I did this temporary buy down for the dad, it just so happens, I'm gonna give you their example. If they bought a $400,000 home and they borrowed $364,000, we could give 'em a 30 year fixed rate if they happen to get that accepted offer today of seven and an eighth . Okay. Okay . 7.125 mm-Hmm. <affirmative> and their total loan cost would be $1,884. Well if I give 'em a temporary buydown where the effective payment rate for the first year was six and a half . And then our worst case is that at the end of the 12 months of the payment subsidy, their long-term rate would be seven and a half . So we're taking a little bit of a gamble that we're gonna be able to refinance 'em in the first year a
Speaker 3:Little bit. Sure.
Speaker 1:First of all, their closing costs go down instead of $1,884. I can do that for 629 bucks. Nice. And for the first year, their monthly payment would be $152 less per month.
Speaker 3:Amazing. Yeah . So ,
Speaker 1:Uh , we , you know, I've been overloading them or I haven't been overloading 'em . I've been getting them up to speed on a lot of things. I haven't broached this topic yet of the temporary buydown.
Speaker 3:And really this is more a conversation of where our rates when they get their accepted offer as well. Right. I mean, you might wanna inoculate them a little early, but , uh, one thing I'll jump in 'cause I've had this conversation with several customers. This is a question of where do you think rates will be a year from now? Or you know, really if , if they get an accepted offer, they'll probably close in April. So where , where do you think rates will be April of 2025, right? Correct.
Speaker 1:And if they say risk , they gotta be lower. Yeah.
Speaker 3:Yeah. And if they think they'll be lower than seven and a half or or 7.125, then yeah, let's, you know, let's get you a six and a half for that first year and have a lower monthly payment and then, you know, plan to refinance before we hit that worst case scenario of the 7.5% rate. But you know , even then, let's say rates don't behave the way we all expect them to. The nice thing about this is it's, you know what the worst case rate is, it's not an arm. You're not gonna see future adjustments if rates go the wrong direction. You know, on day one what the highest rate will ever be on that mortgage. 'cause it's that backend 30 year fixed.
Speaker 1:And another point in this particular example, acuate would be funding the temporary buydown account. And what some people don't realize is that um, a mortgage loan is worth a different amount depending on the interest rate. Mm-Hmm . <affirmative> . So if we did a loan for them at 7.125, it's worth a certain dollar amount. If we say to Fannie Mae and the investors on Wall Street, Hey, we're gonna deliver this same exact loan, but instead it's gonna have an interest rate of 7.5,
Speaker 3:It's more valuable. Yeah.
Speaker 1:We'll get the extra money from the entity ultimately that bought the bundle of mortgages of which their loan was apart . So we get this extra money and we don't put it in our pocket. We put it in this temporary buy down , uh, payment account and it goes to fund their , uh, monthly payment for the first 12 months. And then again, just like in your case, if we happen to refinance 'em in eight months, they get what's left over . Right. That's so much better than saying them spending , uh, I have 6.99 they could get right now, but that would cost them 3,250 bucks and they would never get the
Speaker 3:Point , don't get that money back
Speaker 1:1800, they'd never get the $1,800 back.
Speaker 3:Right.
Speaker 1:You
Speaker 3:Know ,
Speaker 1:That's , that's why this is such a powerful tool.
Speaker 3:Yeah. And if higher rates are keeping you out, you know , on the sidelines, it's like we can get you an effective rates still in the sixes, mid, mid to low sixes even, you know , uh, so get out there and start looking <laugh>.
Speaker 1:Well, and the other thing, you know, this is kind of a family , uh, transaction, right. Because the dad's involved. Yeah . He is by the way, a real estate attorney. Oh . So, you know, we're , I was showing the dad trying to get him comfortable with paying over asking and showing him the statistics on that and how the appraisal wiggle room works for his son and daughter-in-Law where it's not really gonna cost him anymore. And he and I both agreed that, you know, nobody is building more three to $400,000 homes in Washington County No. In Waukesha County for that matter. And, and so there's gonna continue to be a pinch on supply.
Speaker 3:Mm-Hmm. <affirmative> it's gonna drive up prices. Yeah.
Speaker 1:And the demographically the demand is, is still there. So, you know , he and I are at least of the same belief that, you know, you're, you're okay paying 15 grand over appraisal if you need to in order to get the house under contract. Otherwise you may not own a house.
Speaker 3:Right. <laugh> , it goes back to the ultimate question. How bad do you want it at the end of the day? Well,
Speaker 1:That's right. And, and you know , is it worth the risk? You know, and the Sure . 'cause remember we're trying to help 'em buy a home that they can be in for 15 or 20 years, not exactly five minutes or even five years. That's the other important thing. Alright. When we come back, I want to give an update on the folks that got lucky, got the rock solid preapproval and got a contract the very first weekend on the very first property they wrote on. Tell you a little bit more about that when we come back. You are listening to the Academic Mortgage and Realty Show on the biggest stick in the state AM six 20 WTMJ.
Speaker 2:Find a place to call home without the headache. This is the ACU Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back. Uh , Tim, last week on the show we were talking about a referral from a financial advisor where these folks had taken a break from home ownership and , uh, were looking for a very specific type of property, something with a little acreage. So they found this property, five acres in Washington , uh, county, and happened to have a couple unique features, an above ground pool and two pole sheds. Two , two outbuildings. So what does that do to a mortgage lender's? Mm . Concern <laugh>.
Speaker 3:I mean, it ticks up a little bit because , uh, you know, an appraiser, when they go out to establish the value of the property, at least for lending purposes, they need to find comparable properties that have sold within the last 12 months and ideally have similar features or characteristics to the subject property. So I'm sure what you're thinking or what you did think when you saw the house that they got their offer accepted on is like, shoot how many five acre properties in Washington County with a pool and two pool barns are there that sold within the last year.
Speaker 1:And people naturally assume that the , you know, pole sheds and the , and the pool are, that's all gravy. That's not always the way it works. <laugh> in appraising. Yeah . And in then mortgage lenders evaluating appraisals. Well, luckily , uh, in addition, 'cause remember they got this offer accepted under the asking price in part because they didn't have a home to sell. That's always attractive. Mm-Hmm. <affirmative> they had a huge down payment and they were super flexible on when these relocating sellers , uh, could close. And then they even gave them like two months of post-closing occupancy for free. So they were like the model of accommodation. That's why they got their offer accepted. And , and so we're cruising along and , and I got the appraisal back , uh, this past week. And what most folks don't realize, most realtors don't realize this either, is that , um, all appraisals, all the appraisal reports get an automated score from Fannie Mae's computer system. It's called Collateral Underwriter, and it's a CU score and it's on a scale of one to five where one is the least risky and five is the most risky and is gonna get a , some kind of a review.
Speaker 3:Mm-Hmm. <affirmative> , the in-person underwriter is gonna say, Hey, we gotta take a deeper look at this. If the score is, you know, near five
Speaker 1:And the magic number that we wanna see is 2.4 or less or under , because Fannie Mae promises that if the cu you score the risk score on the appraisal is 2.4 or less, they will never force a buyback on that loan because of the appraisal. So this property came back with a CU score of 1.70 awesome .
Speaker 3:And
Speaker 1:I received a big sigh of relief Yep . And said, okay, we don't have to worry about anybody nitpicking on this appraisal. Mm-Hmm . <affirmative> because , um, it's got a bulletproof CU score. Alright . So that's my update on that. We're just waiting around now for the closing , uh, uh, to occur on that Nice and boring .
Speaker 3:That's
Speaker 1:Good . Off the air about somebody who , uh, we got another referral from a different financial advisor. Mm-Hmm. <affirmative> . And , uh, tell us a little bit about that customer.
Speaker 3:Yeah, so this is an interesting , uh, situation because this , uh, uh, woman is retired and sold her previous home a couple years ago. She's been renting and she has her site set on a condo within a very specific condominium complex. And the reason she wants to buy there is 'cause she has a lot of friends already owning condos within that HOA or that, that neighborhood. So because of that, she has , uh, sort of a <laugh>, a collective of people either on the lookout for for sale signs in the yards, or already talking to people who are, eh , I may , I might sell this spring or this summer or next month, whatever. Got
Speaker 1:Spine network.
Speaker 3:Yeah. She's got a whole network of people who are, you know , uh, looking for opportunity for her, which is huge because of that. She told me, and , and this is, I mean, to her credit, she's thinking, you know, next level, she's like, I don't want to use a buyer's agent because A, I kind of don't need one and BI wanna make my offer appealing to the sellers where maybe I can just contact them directly and work out a for sale by owner. Yeah. Yeah . And you know, that way the seller doesn't have to pay a 6% or whatever percent , uh, fee to the agents involved. We can work it out amongst , I sell , I've even already procured the services of a real estate attorney who will help me, you know, just draft up a , a purchase contract for a flat fee and then they'll remove themselves from the transaction. I said, that's awesome. Now, you had mentioned also off the air, what would be a reason, at least from a realtor's perspective, what would be the argument to , to not do that and still have an agent?
Speaker 1:Yeah. The argument would be you're not giving yourself full exposure to the market. You know? Right, right. 'cause if you go out, if you let me , uh, go out there and list your home, a lot of people are gonna see it. And you might get an offer way above asking, or you have people competing up the math. Yeah . The , the math would've to be , you'd get an offer that exceeds what you were gonna sell it for without the agent by the cost of the real estate commission. Well, that's all the time we'd had for today's show, Tim. It went by like greased lightning. Thanks for filling in again for your brother-in-Law, my son David. Absolutely . You've been listening to the Academic Mortgage and Realty Show on AM six 20 WTMJ. The proceeding was a paid program. Advice and opinions expressed during the ANet 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.