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 Net Mortgage and Realty. And now, here's Brian and David Wickers.
Speaker 1:Welcome to the Aced Mortgage and Realty Show. I'm Brian Wicker, licensed real Estate broker with ANet Realty Advisors, and also the majority of Accu Majority owner of NT Mortgage. Uh, and my NMLS ID is 2 5 9 6 1 0. And I'm here today with my son David, who's our senior loan consultant, one of our senior loan consultants, and also our , um, chief Client Experience Officer. David, what's your NMLS id?
Speaker 3:3 2 8 8 4 7. Good morning, Deb .
Speaker 1:Okay. Yeah, you're welcome and good morning to you. And if you've got a question or a comment, remember you can call or text us on the WTMJ talk and text line , which is 8 5 5 6 1 6 1 6 20. So David, we had a big fed meeting on Wednesday of last week, and , um, I was advising people to lock in their rates before that if they had an accepted offer because I thought the only thing that could happen was a negative surprise. Um, and, and , you know , 'cause nobody expected them to raise or lower rates at that meeting. Right? But the big deal is that four times a year, all the participants on that open market committee give their predictions of how many rate adjustments the open market committee will have in the future. And so my thought was, ooh , they could like lower the number of rate cuts for the rest of the year, and then that would make the market mad and interest rates would go up. What actually happened, David ,
Speaker 3:Uh, you know, this . So they kept the Fed funds rate, right, where it was just as everyone predicted, by the way, I just, I even looked up here. Now, the, there's a futures market that says, Hey, when do we think, you know, at the next, which upcoming fed meeting, might they cut rates? Well , uh, at the end of business on Friday, there is an 87%, you know, of those in the gambling parlor here on , you know , will , when and will the Fed cut rates 87% think they'll actually keep it the same at their next meeting, early part of May. Okay? But otherwise, by June , uh, on June, then the, that same group thinks that there's a 64% chance they will cut rates by a quarter of 1% at their June 12th ish meeting.
Speaker 1:And then when they do that in June, if they do that, that'll make rates in mortgage land come down a quarter percent. Right, David? 'cause the Fed has a big dial that controls every single interest rate, including mortgage rates, right?
Speaker 3:No, and no , you know, and this is how markets work. By the time the Fed has actually done something, markets have already skated to where that hockey puck is. Mm-Hmm . <affirmative> , they're not waiting for the Fed. So let's say the Fed does that June 12th markets will already have gotten there. They're not gonna, they're not, the only time the fed moves markets is when they do something that is surprising, right ? If they do something that they telegraph in words and otherwise, markets will skate to that, where that puck is going to be before the Fed actually arrives there.
Speaker 1:So the dot plot as it's called, the predictions from all the Fed open market committee members as to when and how many interest rate cuts will the Fed do. And remember, they only control one rate. The interest rate that banks charge each other overnight. That is the shortest end of the yield curve overnight. And it's at five and a quarter . And you and I don't get to borrow at that. That's for big banks. Um, and , and so they came up with the same number three, that was the median of all the predictions . We think the Fed is gonna lower that Fed funds rate from five and a quarter down to 1, 2, 3, 4 to four and a half by the end of the year.
Speaker 3:There was one open market committee member. By the way, this, I think it's anonymous because one of the open market members had rates actually a full percent higher one year from now. So there is not, there is not unanimity amongst all members, and they're , it's not required to be unanimous either. Um ,
Speaker 1:Sure. Right, right. That's, that's why it's a committee. Hey, in other rate, forecasting news. Now let's go specifically to mortgages, right? Which are 30 year mortgages and the investment market, those who buy mortgages usually think they'll have a duration of seven to 10 years. Mm-Hmm. <affirmative> not all 30. And so back in February when Fannie Mae came out with their rate forecast for the rest of the year, they saw interest rates sliding down on the 30 year fix to 5.9 by the fourth quarter of 2024. Well, they just came out with their revised forecast, and now they're predicting rates will only slide down to 6.4%, so a half percent higher than their month before. And you like to point out how mm , flexible their, their predictions are. I'd just like to see,
Speaker 3:I'm tell you. Yeah , yeah . It kind , they're never wrong,
Speaker 1:David. They're just early or late. They're just, you know, I ,
Speaker 3:I'm gonna tell you the score of the basketball game the day after the game, and I'm gonna nail it.
Speaker 1:And , and then by the way, they only see it getting down to 6% by the end of 2025. So that's a major shift in their long-term interest rate predictions for 30 year fixed rates. Hey, you know what? That ain't, that is not, interest rates are not holding any buyers back or hmm , they're , they're , they're holding some buyers back. But there are still plenty of them out there that are willing to go forward in today's interest rate environment. Let's talk about that when we come back. Your listening to the Accurate 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 in to today's , uh, Palm Sunday edition of the Acuate Mortgage and Realty Show. I'm Brian Wicker, the elder. That's David Wicker over there, the younger, taller , more handsome wicker. And we were just talking about how interest rate forecasts are a little higher now from all the smart people with economists on their staff. And they were even just a month ago , uh, right now, by the way, if you wanted to borrow , um, 75% of a $310,000 purchase price, which happens to be the I median sales price in the five county Milwaukee area, low overhead ACU net could give you a 6.99% 30 year fixed. That's again, with 25% down and top notch credit, which means seven 80 or higher. And that would be with no points. And your total loan cost to fetch that interest rate today would be $1,415. And that's if we needed an appraisal. Uh , by the way, David, what's the rate on our fabulous first time home buyer? 30 or fixed rate program?
Speaker 3:6%, even 6.0%
Speaker 1:By the way, the a PR on that 6 9 9 rate is 7.005. And the a PR on that first time home buyer rate could be as low as like 6.02. But if you need mortgage insurance that gets baked into the a PR , that's if you put less than 20% down. So that's gonna be variable, but you know, maybe as high as 6.6 if you have Sure . If you didn't have that great of credit, but , uh, plenty of home buyers out there, David. And , uh, you said you, you had six people writing offers last weekend
Speaker 3:At least,
Speaker 1:Or this week. Go ahead. And what's the, what's the state of affairs in the mortgage supply and demand , uh, area?
Speaker 3:Well, regardless of what rates , how supply demand , sorry. Yeah. Regardless of what rates are doing , uh, I had one client write against 12 other offers , uh, did not get it. Had another client write against 18 other offers , uh, also did not get, it didn't matter if you are second place or 17th place. Yeah , exactly. Uh, and, and all of them were strong. Um, I just, there's just not enough homes to, you know, soak up. As I've started to say to buyers, you know, anytime the topic of rates come up, I was like, okay, well when those 12 people wrote on a house, let's say rates, I said, if rates go to 2%, what do you think's gonna happen to the supply and demand equation?
Speaker 1:Hmm . Yeah. Yeah.
Speaker 3:I was like, well , I think it's gonna go from 12 to 32 people, because now even more people are hungry, you know, or are
Speaker 1:Yeah . At , at a lower monthly payment.
Speaker 3:Exactly. And , and so, you know, almost the reverse of all of this is if you want less competition Yeah . As a buyer , you want high rates, you want 11% rates, you want everyone to be scared away, which is hyperbolic. I know. But that's the if rates, you know, as you , uh, shared in the first segment, Fannie Mae thinks, Hey, rates might come down. I then, you know, okay, great, we over here on the left side is this discussion about rates. Then we turn our chair to the right side and we have to talk about, and so what will home buyers do with this future lower rate environment? I think it's going to make it even harder
Speaker 1:To
Speaker 3:Compete. Well ,
Speaker 1:And and although with this new forecast where , hey, you know what, we're at 6 9 9 now, I just told you on a 30 year fixed rate, it's coming down to 6.4 , uh, according to Fannie now by the end of the year and then down to six by the end of 2025, the real issue is that those rate declines are not gonna cause the person with a 3% mortgage to say, oh , rates at six, now I'm gonna list my house for sale. It's life events
Speaker 3:That cause people to it disd it will dislodge some, but not to the amount. It will not be a one for one , as we've said, you know? Correct.
Speaker 1:So as , yeah, you're not gonna get enough buyers to, are rather enough sellers to list their home to make up for the increase in buy side . Okay. So I , I had a client, well, you and I were tag teaming on this transaction last weekend. Yeah . And, you know, they clicked on the blue button, apply it online, we got 'em all teed up initially, they said they really only wanted to put 3% down and we, we put the , um, pre-approval out there for them to use and they found a house. You know, that always happens. Things get really urgent when you find a house that you think you'd like to call home. Oh yeah. And so this was, this was, you know, a dash , um, I think the property had only been on the market a couple of days. So interestingly this, oh man, we can, we got a lot of interesting facts to talk about. This particular buyer decided to work with the listing agent, you know, which, which speaks to the whole thing of, oh, real estate commissions are changing. And , um, and I wanna tell you a story when we come back from this next break about that , um, and how, as I got talking with him over the weekend, because I kind of took over from your initial assistance, David, and how we talked about how can we make this offer even more irresistible to the seller. We'll cover that when we come back. You are listening to the Acuate 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 Accu Net Mortgage and Realty Show with Brian Weer on WTMJ.
Speaker 1:Thanks again for tuning in to today's show. We were just talking before that last break about a deal. You and I are, are , uh, a transaction, David, you and I are collaborating on. And , uh, this is in , uh, up north Wisconsin northeast part of the state. And , uh, so the initial house, this nice house was listed for 1 59 9. And , um, and our buyers working with the listing agent, who is an agent of the seller, they wrote the offer to say, you know what, we're gonna offer you 1 62, I think it was with an escalator clause that will beat any other offer , uh, by a thousand bucks up to 1 71 7. Oh . So $10,100 over asking . And then their offer was contingent upon an appraisal, of course. And , uh, financing. We, we had a pre-approval letter for them , uh, with 3% down. So now it's Saturday. And I get on the phone , uh, with the buyers and I go, okay, what , you know what, I think we can do some things to enhance your offer in the eyes of the seller. And so those were, 'cause I had , we had none since the initial credit verified preapproval. We had gotten their bank statements along with their income documentation, which allowed us to here on Saturday, upgrade the preapproval to rock solid because we verified all, all
Speaker 3:Three . They didn't just tell us they had the down payment. I have put my eyes on the money. Look there, it's,
Speaker 1:That's right. They really have it . And they have way more than 3% down. And so I said, let us make this look better in the eyes of the seller because 3% down to a seller means no wiggle room. Mm-Hmm . <affirmative> if the appraisal comes in low. Second of all , uh, so, so we increased the down payment to 10%. Okay. Not
Speaker 3:Crazy on , on the pre-approval.
Speaker 1:On the pre-approval. And then the other thing, we had a conversation about the couple and myself was, okay, where , where , where are we at? And they had been talking with the listing agent who's saying there's another offer. It's quite a bit higher than your maximum he shared with them. Mm-Hmm . <affirmative> . But it's got a whole bunch of contingencies. And , and so our client had written with minimum of contingencies, no inspection, contingency, you know, stuff like that. Uh , they don't have a house to sell their first time buyers. Um, so we kind of started talking and then we came to the conclusion, the buyers and I that why don't we just go right to one 70? Why monkey around with this , um, clause of escalation if you kinda already know there's another deal that's
Speaker 3:Gonna get you i'll, but I don't want to unless I'm forced to. Right. That's , that , that's how it can feel with an escalation , escalation clause. And a seller is just like , that's right . Can you just pay me? Can you just pay me what you think the house is worth, Danny ?
Speaker 1:Well, and then we talked about the old appraisal gap, or as we like to call it, wiggle room. Yeah . And so we talked about, you know, what other assurance could you give to these people? And so we came around to the fact that our buyers would still be willing to pay one 70 even if the house apprais for 1 67. Okay, sure. Yeah . So let's , let's put that in there. And so then we get on the phone , uh, the, the man of this couple and myself and the real estate agent, and I said, Hey, I just wanna let you know I'm, I'm gonna get a new fully verified pre-approval to you. Here's what it's gonna look like. You know, it's gonna say one 70. I'm thinking you probably wanna , you know, change your existing offer that was on the table to eliminate that whole escalator clause business. Mm-Hmm. <affirmative> , it's gonna have the appraisal gap on there and we're increasing the down payment to 10%, you know, to give the, the seller more comfort. You know, how does that seem? Oh , that seems really good. Um, and so , uh, that they did all that change on Sunday, and then the , uh, seller was gonna evaluate offers on Monday, and lo and behold, our buyers won. How's that? Even though that other offer was like, we are led to believe substantially higher. Well , but
Speaker 3:O only if they got through all the, you know, every contingency, all the obstacles that they Yeah, I'll pay you a million dollars for your house. It's like, well, except for 1, 2, 3, 4, 5, 6, that's , that's not really what that top line number is.
Speaker 1:And I don't know if you know that offer had a sale of home contingency. That's always the kiss of death. Oh , right. Or, but I, you know, it seemed like it had other, he the agent just let on that there were many more contingencies. Yeah . You know, was it the inspection? So one thing we took a look at is they would've actually been better off going with FHA financing because of where their , uh, credit scores currently are and their desire to put 3% down. And the reason is that, that private mortgage insurance companies , uh, differentiate the monthly premium that you pay based on that intersection of down payment percentage and your credit score. Yeah . Um, and so change is not okay. Also, Fannie Mae changes to the underlying price of the home. But when I looked carefully at all the pictures , um, the garage, it's detached has some otting wood on the soffit. Oh . And so I went over that . Was
Speaker 3:AJ's gonna care about that?
Speaker 1:Exactly. We would've had to have either fixed it or torn down the garage. So that kind of kaboshed that idea. 'cause it is still usable. So we got ,
Speaker 3:Before I buy your house, can you just tear down your garage? That would be garage . That would be an amazing ask.
Speaker 1:Yeah, that's right. So at least that that took that off the table. We're also gonna try to get their credit scores higher before we submit the loan for underwriting. David, when we , when we come back, what story do you wanna share?
Speaker 3:I wanna talk about a gift of equity. How when you're buying a home from a family member, the variables is not just about the price you pay for the house, but there's a couple other ingredients in that recipe. We'll get into that. Now it's time to turn it over to the WTMJ Breaking News Center.
Speaker 2:Don't break the fact to get into a house. Back to the Accu Net Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 3:Welcome back to the ACU Net Mortgage and Realty Show. I am David Wicker, the younger, that's Brian Wicker, the wiser over there. Uh, dad, as we've, we've done so many family, you know, transactions over the years that it really is a, it's a subspecialty of mortgage lending, right? Sure. The traditionally you're buy in or selling your house to a stranger. And, and most , um, most mortgage professionals are trained and understand, you know, how that works when you get into a family transaction. There's just a couple other ingredients that you want to be mindful of because you're kind of puppy guarding both sides. Mm-Hmm . <affirmative> of helping both buyer and seller. So I got a referral , um, over last weekend from a commercial banker friend of mine. Okay . Which off the top, I'm sure you're pleasantly pleased that this commercial banker decided to call, well, the team at Acuate Mortgage David over at Acuate Mortgage, not the residential banker mortgage person who might be in his branch, which I always enjoy if only because this is his family member. And it's actually even better than that. His in-laws and his spouse's sister. Oh boy. Alright .
Speaker 1:So a lot
Speaker 3:At stake. As I texted to him , uh, as we got into the details, I said, and don't forget, it is my job to make you look good. Having made go this referral as well. So first thing as, as I think is always the default, parents want to give their kids a deal on the house. Yeah.
Speaker 1:Let me give you a screaming low price on this property. That's how I'm gonna help you . Which ,
Speaker 3:Which, you know, I think makes sense . They're doing Yeah. They're doing that out of the goodness of their heart, out of their parental instincts. And this is where it comes into, you know, having that subspecialty expertise. And I, and I said, I was like, I totally get that. What I'd like my first edit of your plan. I said, they're their first , uh, hey, we're just gonna sell you the house for 1 35. I said, what do you think the home is actually worth? Like if the parents put the house on the market and Yeah. Yeah . Stuck a for sale sign in the front yard. What do you think it would fetch? Well, probably like 1 65 or one 70 mm . And so I said, I was like, okay, great. Because here's the thing, a mortgage lender calculates the loan amount based on the lesser of the purchase price or the appraised value. So their first edition , Hey, we'll sell it to you for 1 35. Well if it appraises for one 70, I don't get to use the one 70. Right . I'm stuck at the lower number. 'cause that's what you agreed to. I mean,
Speaker 1:What percentage down were they thinking of making or dollar amount
Speaker 3:Minimum. Uh , you know, maybe zero.
Speaker 1:How old can you go? Right.
Speaker 3:Exactly. Um , and so, you know, had they proceeded with that plan, it wouldn't have been the end of the world by any means. You know, they would've figured out how to get the house and whatnot if they hadn't have called me, I guess. But I said, well, you're telling me that the home is actually worth this. My advice would be to draft the contract at what you think the reasonable market value of the home is. One, they decided on 1 65. Okay. Because, and I made a referral to a real estate attorney. I was like, okay, here I want you to talk to pay the couple hundred dollars to have a professional look at and draw this up for you. Yeah . Because I want mom and dad to do, if they're comfortable to do a gift of equity that they can draw it up. That's , so it was gonna be a 1 65 purchase price, 20% down for a loan amount of 1 32 30
Speaker 1:$3,000 down . Okay .
Speaker 3:Exactly. And the gift of equity, the most straightforward way I can describe it is, instead of mom and dad walking away with their 1 65, there's actually no mortgage on this house either. So it makes it even cleaner. Alright . Instead of mom and dad walking away with 1 65, they're just gonna walk away from the closing table with a 1 32 and not walk away with what they're essentially sliding across the table to their kids. Yeah . As a gift.
Speaker 1:But they were , they were willing to sell it for 1 32 anyway. So they were only expecting 1 32 out of this.
Speaker 3:Exactly.
Speaker 1:So you're, you're gave , you're giving the sellers what they want, but you are now gonna avoid what
Speaker 3:What we're gonna avoid PMI
Speaker 1:Oh PMI our
Speaker 3:Friend , which
Speaker 1:Is gonna , we love PMI helpful tool, but if you
Speaker 3:Can avoid it , I love PMI.
Speaker 1:Yeah.
Speaker 3:And so we're gonna get them a little bit, well , they're gonna benefit from all that equity by not having the PMI. They also fit into the bucket for Home Ready so that they get , um, they've got good but not great credit. But Home Ready sets aside any of the pricing adjustments you get if you've kind of got good but not great credit.
Speaker 1:And that's a special program from Fannie Mae and Freddie Mac has one too for 30 year fixed rate loans where they say, oh, you know what, because your income is at 80% or less of area median, which is about 80 grand. Mm-Hmm . <affirmative> . Um, and we only have to use the income from the people that are on the application. Not everybody living in the household. You'll get a special deal, you'll get a better deal than people that are, you know, making $200,000 a year, which is nice.
Speaker 3:I got a couple more details. I just want to lay out , uh, not only on the plan, but then the execution. So let me cover that after we come back. You're listening to the Accu Mortgage and Realty Show on 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 3:Thanks for hanging out with us here on your Sunday morning. I'm David, that's Brian dad talking about a family transaction , uh, parents selling to daughter and her husband. And when we're trying to line up this family transaction, one of the ways that I come at this is from the seller side. You know, they're giving this gift and I don't want there to be surprises on the seller side, you know, that compound that they are also, you know, feeling like they're giving this gift. And what I mean by that, I poses the question as how much money do the sellers want to walk away? There
Speaker 1:You go. Yeah.
Speaker 3:Number that we begin with the end in mind. What is their number? Which is, in a way I call that it's almost reverse engineering the mortgage. Mm-Hmm. <affirmative> . Yeah . I'm beginning with what do the sellers want? Okay. What are the costs that it'll take to manufacture the mortgage? And then how much money do I need to lend the buyer in order for it all to shake out the way that everyone's expecting?
Speaker 1:Well, 'cause remember, in a normal transaction, the seller pays for owner's title insurance. Yep . So what, what did you do with that detail?
Speaker 3:So we're not doing an owner's policy. Okay. We are gonna proceed with only a lender's policy for title insurance. Okay .
Speaker 1:Which is acceptable so that that's up . You don't have to get owners title insurance. In fact, I , uh, on my big Florida transaction that I wanna talk about Yeah . Before the show is over today, the buyers there opted not to get an owner's policy and instead rely on the coverage from the lender to take care of that issue. What about the transfer tax to the state of Wisconsin, which is $4,800 in this deal?
Speaker 3:Uh, only 400 some dollars, not
Speaker 1:$400 left off a decimal.
Speaker 3:Four , 400 some dollars. The buyers are going to cover that cost.
Speaker 1:And then the last thing would be property tax prorations. Normally the seller says, yeah,
Speaker 3:We're not gonna do a proration from mom and dad to the buyers.
Speaker 1:Okay. So literally, if am understanding this correctly, the uh , seller's gonna get the mortgage amount.
Speaker 3:Exactly. Then what I, knowing that, hey, we've got our bogey for the seller side, I then, you know, turned to the buyer's side and I'm like, one of my instructions was can we line it up that the buyers, they're getting this gift of equity, can they also bring next to no money to closing? They do have some savings, but hey, as we've said a gazillion times, the down payment's probably not the only thing you're gonna wanna pay for. Yeah. When you move into your new house, they also happen to have a 1-year-old. So it's like you're probably gonna need or want to buy a new couch for your new home. And, you know, your 1-year-old turns into a 2-year-old and they need clothes. So they're going to , to be able to keep their cash is important. And so what I did is we, the tool that your smart cats at Academic Mortgage are gonna reach for is, I used a lender credit, ah , to offset, I'm gonna get it down to the penny. Like I'm, I'm gonna be able to line it up where they're only gonna have to show up with their driver's license and we'll bring the pens. What about, what about the
Speaker 1:Deposit? Are they gonna escrow for property taxes? They
Speaker 3:Are, but this isn't a part of the state of Wisconsin where the taxes are actually quite low. Okay . Hundreds of dollars . Not exactly . Okay . And so they , um, the way that I'm able to do that, I'm, I'm dialing up the interest rate in order to create the juice cash, the revenue, a higher rate creates higher revenue. And what your smart lenders at Acuate do is we take that higher revenue and we use it to offset the hard cost to manufacture your mortgage. So I'm dialing them all the way up to 7.49%
Speaker 1:Ooh . For the no rate .
Speaker 3:I , right. But the and the a PR is the same 'cause there's no closing cost . We are literally paying for all of it. Yep . And the other thing, as we've said through many shows as well, they have no sunk cost for any opportunity to refinance in the future. Right. And so, if come Christmas time , you know, they're kind of at this like seven and a half number If come , if come Christmas time rates have come down to six and a half , they're not waiting. They didn't spend any money to get the lower rate. They're , they're instantly in the money when rates arrive to whatever makes it worth their while. So those are the variables. It's not, I mean, it , you can do it. You can buy a home from family and do it without smarts
Speaker 1:<laugh> Sure. Yeah. You can do it kind of the blunt force . So I'm just gonna sell it to the lowest price. You're gonna be paying PMI forever, you know, and you're gonna pay all your closing costs and good luck. Or you can hook up with a nice smart loan consultants at <inaudible> and we'll help you save money. Alright David, when we come back, I'd like to give our listeners an update on a , on a transaction in Florida. A big one. Uh , about a $2.9 million purchase , uh, that's supposed to close next week. And , uh, late in the week , uh, this past Friday, we had a major hitch in the giddy up , uh, of that transaction having to do with homeowners insurance. We'll cover that when we come back. You're listening to the Academic Mortgage in 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 at Mortgage and Realty Show with Brian Wicker on WTMJ.
Speaker 1:Welcome back. And David, we've been keeping the , uh, radio audience here and podcast audience up to date on the transaction. A quick one , uh, down on the west coast of Florida where some past customers of ours are buying a really nice home on one of the keys on the, 'cause you know, everybody thinks of the Florida Keys down off south of Miami, but there are keys on the left hand side Oh . Of uh , Florida as well. And so they already own a condo there. They're buying a beautiful home. Uh , and , and it's not cheap to be on the water now they're not on the golf side. They are facing the inward side, whatever you call that. Leeward I think , uh, on this key. You like that? A little terminology there. And so not cheap. Uh , 2.9 something million , uh, purchase price. And so there've been lots of ups and downs in this transaction already. One of 'em was when I discovered by going to the county's website that oh, your property taxes aren't 8,000, they're really probably gonna be more like 34,000 a year. And, and so that caused , you know, I thought, oh that's gonna scuttle the deal. They're don't wanna do that . And they're like, ah , know that's okay. That's fine. We'll take that. And by the way, we don't think they're gonna be that high and it's not gonna happen for another year. You know, we think it's gonna be more like 25. I'm like okay, we had to use the higher number that I verified from the county, but power . Cool . Then it came time for um, hurricane insurance. Oh they do have flood insurance on this. Well 'cause on this home as well 'cause it's right on the water. But they were able to , uh, take over the existing owner's , uh, flood insurance policy, which is only like 3,600 a year. I was surprised that it was that cheap. But then when it came down to homeowners insurance, and this is the crux of our issue, the first quote they got, and this was for by the way, just the replacement value of 1.2 million, not the entire value of the house, just 1.2 million. The initial quote they got was $42,000.
Speaker 3:Can I just replacement value means what would the cost of the two by fours be to reconstruct the structure? Correct. That you have. Yeah ,
Speaker 1:Yeah, yeah. You don't have to reconstruct the land, you just have to redo the property. So ,
Speaker 3:Well , I mean unless it's a real bad hurricane, but go on. Yeah,
Speaker 1:Well then, then 32,000 was their second bid and they got a bid back for 19,000. The only way to make a $19,000 insurance policy look good is to have a $42,000 quote first.
Speaker 3:I, I guess.
Speaker 1:And so now we're coming down to, you know, hey , um, they had to have some, the , the owner had to do a couple of repairs in order to get it insurable having to do with GFI outlets in the electrical box. I mean you're talking like less than $600. So those get done. Now it's time to get the insurance policy and our buyer mentions to their insurance broker. Well yeah, the sellers are gonna live in the house for 30 days. They're gonna rent it back from us for 30 days after closing. And the insurance broker goes , uh, let me check on that. And the answer is, sorry. In this part of Florida, we are not writing uh, any insurance for people for when there's a rent back, you have to occupy it. No one else can be in the property. Even though we have in mortgage land, we can still call it owner occupied. Yeah . As long as they occupy within 60 days and there is a written agreement for them to lease back the property for a certain dollar amount for up to 30 days. Uh, but this is all of a sudden, 'cause remember the insurance market in general is getting twitch here by the
Speaker 3:Minute. Upheaval
Speaker 1:And upheaval. Yeah . And so that apparently is something on the west coast of Florida. They are not writing rental uh , policies, at least not on this particular key in the west coast of Florida. Any you want to
Speaker 3:Guess they'll for $42,000 they will <laugh>
Speaker 1:No, no. They came back and said we don't have any carrier that will insure this property as anything but owner occupied. Which in our dictionary means nobody else can be living there. But you,
Speaker 3:You drive straight from the closing table to the house and put your underwear in the dresser in
Speaker 1:The drawer immediately. Yeah. You've occupied it. No, but they just don't want anybody else living there. So any solutions come to mind. Oh by the way, this is a cash offer, no financing contingency.
Speaker 3:I mean he stump folks. They could show up with cash and try to do a refinance after the fact. Yeah,
Speaker 1:Yeah. Okay. That ain't
Speaker 3:Happening to , you know, so that they're not on the clock for the homeowner's insurance.
Speaker 1:Alright , so I'll give you the answer 'cause I had more minutes to think about it and we're running outta time. One was, I did ask the insurance company on Friday, Hey if they allow the sellers to live for free, would that work? But what's the other solution? You seem to have one.
Speaker 3:I was gonna offer to pay to put the sellers in a hotel for a month.
Speaker 1:Okay. Okay. That could work. Uh , and they may not need the whole month by the way, but the real solution is gonna be I think delay
Speaker 3:The closing pay for pay for delay closing . I was gonna say pay, pay for a mover. The only reason you need 30 days afterwards is 'cause you got a bunch of stuff in your house and it takes time to get moved. Pay pay for a moving company to help them get out.
Speaker 1:The real answer is gonna be that we're gonna have to delay closing, which will cost something in terms of a rate lock extension. Yeah . But I think when I end up doing the math, it's gonna be cheaper than the actual, remember how expensive I said the insurance was and the taxes and everything. <laugh> . Yeah. The daily cost of extending the rate lock is gonna be cheaper than the daily cost of owning is . I think what the reality's gonna be. Alright , that's all the time we have for today's show folks. Thanks for tuning in. 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 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.