The acronym mortgage and Realty show is sponsored by academic mortgage and equal housing lender and[inaudible] and academic Realty advisors, which is a separate company from, but still affiliated with accurate mortgage.
Speaker 2:Welcome to the Acushnet mortgage and real to show getting you inside information on buying, selling, and financing your home with expert advice, but accurate mortgage and Realty. And now here's Brian and David Wichert. Well, good morning. I'm Brian Wicker, P a old guy
Speaker 1:Mortgage. Well, one of the owners, because now David's an owner too. Again, congratulations on that step, David. Um, and also the owner of Econet Realty advisors. So David wicked here, the younger, more handsome, taller, uh, Wichert male. He's our chief client experience officer, and I can add mortgage. I want to give a special hello this morning to my mother, David, your grandmother, Marjorie who's tuning in for the first time in a long time, because she now has a am radio that through the good graces of Amazon, I got shipped to her apartment. I'm not hearing you again, David. I don't know what the problem is, but, uh, Hey anyway, uh, hi mom, thanks for tuning in today. Uh, we know that we have at least one listener. All right. So, um, topics we're going to talk about today and we've got a lot to talk about. Um, we've got some followup and joyfully, some success stories of our buyers who have been fighting with others to, uh, get their offers accepted. Um, and then also some I'm going to call it first time refinanced or stories. You know, these are people who have bought in the last year or two and are now thinking, you know, that shouldn't refinance and they are lost. So I've got a variety. All right, you're back, David,
Speaker 3:I'm back with you. Sorry about that.
Speaker 1:All right. You want to say hi to your grandma quick.
Speaker 3:I was going to say, what am radios? What's old is new again. I bought a radio within the last year because I'm just a hundred years old, too, so good times.
Speaker 1:Wow. She, her hers gets the FM too, but mainly we wanted it for the am radio station. Okay. So first of all, in the course of one of our success stories, uh, one of the things that we do at Acushnet whenever possible is the loan consultant and I'm acting as the loan consultant in this case, uh, because it happens to be one of our team members, uh, at Acushnet who's the home buyer, he and his wife. So, uh, the call or the text, I guess it was came over to both of us, David, you and I on Thursday morning, uh, saying, Hey, we got a new listing. We're, uh, we went and saw it last night. We want to write an offer. And, um, and so we're thinking of offering, uh, um, I guess, I don't know if I should say the real number, but I, I guess I will, uh, three 90 and, um, the asking price is like three 40, so a 50 grand over the asking price. And so over the course of several of these offers, I think they've written at least three where they've come in second place or lower, which is the same as last place folks in real estate when you're the second best offer, kind of like an election. Yep. You didn't win. Um, and, and so we had been talking about how much wiggle room can we provide on the appraisal. And so they were, you know, I think maybe on the first offer that they wrote, they wrote with 10 grand wiggle room, then maybe on the second or third, they wrote with 15 grand wiggle room. So now they were kinda, I think, tired of losing. And so they were going to write with 20 grand wiggle room. And so I said, well, hang on a second. Let me just kind of work up some numbers. Can we get on the phone with your buyer's agent, David,
Speaker 3:This was this listing under listed, or did, or is it just, you think it's a measurement of that's how hot it is that, that they have to offer that much more?
Speaker 1:Well, one of the things that came out it, because then we had a four-way call myself the listing, uh, I'm sorry, the buyer's agent, um, our team member. And then we got his, uh, spouse on the phone who was at work, because this was all about how aggressive are you going to get, you know, on this particular purchase price. And, and first of all, though, before we get to the details of how we did that, one of the things that came out, uh, from this, uh, buyer's agent who I really like, um, he and his wife, uh, are the folks that came up with that term, no regrets offer, you know, where it's like, Hey, you're putting your best offer out there. And if you don't get it, it's okay because you're not sorry, you didn't offer more. And if you do get it, you're not sorry that you overpaid, you know, if you're right in this lofty area of being over the sales price. And so one of the things that he said, and I ran some numbers on this, that we'll share in a little bit is that there were 240 new listings that came on the MLS, uh, just on Thursday. That's an awesome day. Wow. In one day now I forgot to ask him if that was in the whole state or the five County area or whatever, and more on that later, but it seems like we're getting more listings now, which is awesome. All right. So then if this came down to, how do we craft that preapproval letter? How much wiggle room do we give them on the appraisal? We'll give you those details and the happy ending. When we come back, you're listening to the academic mortgage and Realty show on am six 20 WTMJ home buying advice from make guys who know it best. This is the accurate ed mortgage and Realty show with Ryan Wicker on WTMJ it's, we're talking about one of our own M and a team members who, uh, has actually succeeded in getting a, uh, a home under contract, uh, just, uh, late this week. I think it was Friday night. And, uh, the story here is that we're talking about how, how do you finalize that offer? And so here we were on this conference call Friday morning, a buyers agent myself, and both borrowers buyers talking about how much wiggle room, uh, do we want to give, because remember in this story, the house is appraised.
Speaker 3:I was going to say, can we do a refresher on, on the, the need for wiggle room, probably in this hot market, the difference between your purchase price and the appraised value. Cause this is what you've been coaching, both our listeners on the show and these particular home buyers on that wiggle room. Can you do the 62nd refresher?
Speaker 1:Sure, sure. Okay. So what's happening for, uh, well priced homes like this one, um, it's going to go for over asking that's that is the trend it's going to go for over the asking price. So if you're bidding, like in this case, they're going to say, Hey, we're, we're really going all out on this and we're going to offer 50 grand over the sales price. Wow. Well, if you include the standard Wisconsin appraisal contingency in the offer, eh, it's, it's not that exciting. Cause you're, you're saying, Hey, I'll give you 50 grand over, but it's got to appraise out for that. Well, these folks listed their home, you know, at three 40, they're not really expecting to get three 90. I really not. Right. And so the currency, uh, in today's market that we're helping people understand is to say, okay, if you offer three 90, how, where does that appraisal need to come in? And either that's something, if they've got gobs of cash, they can decide
Speaker 3:Based upon where does that appraise value need to come in. If you're offering over the list price based upon how many, how much funds you have to still pull it altogether is the key.
Speaker 1:Correct. And so in this particular case, the mathematics, you know, I, we, as the mortgage lender could say, and this is what the call was about. Hey, you can offer three 90. And as long as the appraisal comes in at three 65, so$25,000 less than your offer price, you've got the wherewithal in terms of cash and our ability to lend money combined. We can still lend this money. Yup. That is powerful. And so we put that we've, recrafted our rock solid guaranteed pre-approval to make that abundantly clear to the listing agent and the seller that, okay, here's the, here's the band within which this home buyer can guaranteed by academic mortgage perform. They can actually afford to pay 50 grand over as long as your home appraises for three 65. Now, if it appraises for three 50, well then the, the home buyers could get out of the deal or negotiate. You know, they can say, you know what, I'll still offer you a 25 grand over the appraised value because that's really what they're communicating. And so the buyer's agent in this case then has to craft the offer and say, okay, the offer price is three 90. And, uh, but we're modifying the appraisal contingency so that if the appraisal comes in at three 65 or higher, my buyers are still obligated to buy at three 90.
Speaker 3:Well, and so what you're saying is it's, it's making it a shorter bridge. In our example, the bridge from three 40 to three 90 seems rickety in terms of value, but Hey, mentally getting from, we listed it for three 40 and Hey sure. We think maybe it could have praise for three 65. That's a more reasonable leap for a seller,
Speaker 1:Correct. On the part of the seller. Exactly. And so the Spire agent who is also, of course, sometimes the listing agents said his whole office just had this meeting about how be aware of what should we call them. Rick giddy offers, right? Where, you know, the, the buyer says, Hey, I'll, I'll, I'll, um, I'm only putting 3% down and, uh, but I'm willing to pay you three 90. And, uh, you know, that's just a Trojan horse relative to the financing contingency. Right. Because you don't know if they can afford it. All right. So the great news is our team member got the accepted offer. They couldn't be happier and yeah, and I'm, I'm delighted as well. And you know, they're taking a little bit of a risk. Well, by the way, the buyer's agent thinks it could easily appraise for three 65 is his opinion. Now that's going to be the next step is we're going to get our independent appraisal. Remember folks, the appraiser gets to see the purchase price number. So it's not a complete blind test, you know, as to what the value is. All right, when we come back, we got a follow up from, uh, we had a call in last week of a very happy buyer in the midst of, of a similar situation where, um, the appraisal came in below the wiggle room that, uh, he and his wife were giving in their contract. We'll tell you what happened on that story. When we come back, you're listening to the acronym, mortgage and Realty show on the biggest stick in the state am six 20. WTMJ
Speaker 2:Getting you into the home of your dreams. Here's more of an accurate mortgage and Realty show with Brian worker on delegate TMJ. Hey, before we get to the follow up on last week's story about the buyer negotiating or relative to the price,
Speaker 1:Well, you, I did run some numbers here quick, uh, during the last couple of breaks and sure enough, uh, the number of coming on the market, I ran the numbers for the five County Metro area, just single family, detached, not condos. We've got, um, if you look at that last full week of March, there were 305 listings the following week, which was kind of the end of March and the beginning of April leapt up to 403. So, you know, that's a 33% increase in the number of new listings. Then, um, the first full week of April three 65, and it looks like this week is going to be about three 85. So I
Speaker 3:To throw cold water on your analysis, but isn't that just the natural, uh, Hills and valleys of the summer buying season. I mean, which is, it's fine, we'll take it,
Speaker 1:But what, what, I, I haven't analyzed the data, but what I believe to be true is this is about a month or two late that usually we start to see the listings really start to ramp up in February and March. Okay. And so this has been somewhat delayed and that's what this, uh, what the agent, you know, who first brought up the topic. The other thing I happened to run before the show was just how fast homes are selling. And so, um, this is for all the homes right now that haven't closed in the MLS system for the five County Metro area, but have accepted offers 33% of them, uh, have gotten offers within the first three days. That's pretty impressive. Then you hit the 50% Mark at day five. And once you get to eight days, uh, two thirds of them have got accepted offers and that's all price Rangers. They didn't filter anything. Yeah. So that is a lot that I call that velocity of the market. And, Oh, by the way, there are 1,893 single family detached homes that have accepted offers, uh, right now in the, in the five County area, according to the MLS. Do you have a comment, David?
Speaker 3:No. I, I, I w I hope that more listings continue as you noted to come on the market as sellers get comfortable to have people walk through their homes. And it kinda what you described, those dates, you know, a three or a five day window. It sounds like it's a good houses are a one weekend kind of event like a sale at a store. It's this weekend only come on Thursday. We'll decide by Monday at 10:00 AM on who's going to win on this house.
Speaker 1:Usually I think it's Sunday. I think the usual drill, as you pointed out on the break is put it out there on Thursday. Uh, you know, put the information out on MLS and start letting people through on Friday and Saturday, maybe even on Sunday morning. And then by Sunday afternoon, you pick the winner. Um, okay. So back to our story from last week where our kind home buyer did actually call in and said, nice things about us. Um, I did set up a golf shirt, but that was only after the fact, uh, for calling in that, that I didn't do the set them beforehand. Um, and anyways, so in their situation, uh, they wrote the offer. They gave, let's say$25,000 a wiggle room on the appraisal. Like we were talking about, uh, with our first time all by buyer. And then the appraisal came in about 10 grand or 15 grand, less than that. So w in, in real estate, this whole contract thing, it's like, if, then it's a, it's a bunch of what ifs, right? So the original contract is, Hey, if your appraisal comes in 25 grand, I'll still buy at my high offer. Right. Okay. Well then what happens if it doesn't? Well, it contractually the buyer gains the right to cancel the deal, but then they say, don't buy the house. Right. That's right. And so you always like to say asking is for free. So their buyer's agent went back to the seller and said, Hey, it came in lower than that number. And they agreed to the lower price. Bam. So they met in the middle. Awesome. Is what they meant. Well, I'm sorry.
Speaker 3:I still ask it because it, they could have said no, but Hey, at least they got some relief, make it to everybody comes together somewhere in the middle, which is awesome. So glad that worked out.
Speaker 1:That's right. That's right. It's a free market system. All right. When we come back, we're going to talk about some first time refire stories that I think will be interesting and instructive. And right now it's time for the news.
Speaker 4:Don't break the bank to get into a house back to the accurate and mortgage and Realty show with Brian Wicker on WTMJ.
Speaker 1:All right. So I took a call, uh, this week from a person and who along with his wife, bought their first home in TOSA, uh, in like September of 2019. So, uh, in the meantime, and he'd shared with me, their rate was 4% and he was talking to somebody that he knows. He said, you gotta call academic mortgage. They will help you figure out what to do. So, so this is a group of people I'm going to call it your, a recent first time buyers who let's see Bob within the last year or three, they kind of know she's their ship. I hear the rates are lower, but what should I do another, I do that, that this, well, how do I do that? And then the other fact pattern that this person shared was, and you know what, we just spent 35 grand on, you know, putting a new windows and blah, blah, blah. Oh, wow. Okay. So they just came out of pocket for a significant chunk out of their savings. Um, and then what else? So of course, then I know, Hey, your property is worth a lot more right now in 2021 than it was 18 months ago. So, you know, you have this equity. Um, and so I, I sent him, we're going to get together for a chat, uh, with his wife and himself, but I said, here's a starter. You kind of have to think about philosophically, how you want to use your house and then the related mortgage to it. And the equity that you have. How do you want to think about that asset that you have the equity in your home? So, one thing I showed them is, Hey, you know what, uh, we could get you up to$46,500 cash out. If we can get an appraisal at three 68 on your home now, and your payment compared to what you're paying now would go up$97. And the total costs to do that would be 1000,$234. So there's like one way to do the whole world or the set of circumstances. Yeah. I can replenish my savings that I came out of pocket. I don't remember if we talked about yet. I think we did, you know, college savings is another thing. If you didn't have any for your young children, you could take that cash out and literally just plop it into a college savings account and watch it grow tax free for the next, however many years before your kids go to college. All right, then door number two, I showed him was, well, maybe you just want to go for the lowest payment, don't borrow any more money. And in that scenario, we could save him$111. Oh, by the way, even though we'd be resetting the clock to 30 years, which some people are, Oh, that's some sort of a sin, um, that would save him. What did I say in my email, like 25,$26,000. I'm going to call that the, have your cake and eat it too. Not only can you lower that payment, uh, or it's$20,000, you will actually save$20,761 of interest whilst enjoying the$111 per month savings. Even though we were going back to 30 years. Okay? So that's the cake you need it to. And then I said it, but other people are really hell bent for leather. They want to pay off that mortgage faster. So in door, number three, I showed them a 2.9, 9% 20 year fixed for they'd have to pay a little bit in closing costs to get that trophy rate. Um, their pain would actually go up$194. So the right way to do that comparison is to say, Hey, how does that look compared to just keeping your mortgage and paying another$194 a month on top of that? And the answer is there. You would save$37,742 of interest versus doing nothing. So it's that three different philosophies. Do you want to tap the equity in your home? Do you want to lower your payment or do you want to pay off your home faster? And of course we could have actually customized, uh, the loan term. So, uh, when we still can, cause we haven't decided which way they're going so that their payments stayed exactly the same, but they're paying it off faster at a lower rate. There's another obvious, uh, alternative. All right. When we come back, I think we'll talk about, um, I got a condo story, a son buying a condo from his father will give you the scoop on that. When we come back, you're listening to the accurate mortgage and Realty show on am six 20 w T M J
Speaker 2:Helping you find a place to call home base is the accurate mortgage and Realty show with Brian Wichert on WTMJ.
Speaker 1:Let's not forget about that. David Wickford guy, their chief client experience officer at Acushnet, my son, and welcome back. All right. So, uh, before we get to my condo story, David, you had some philosophical comments on the philosophy of whether you should pay off your loan faster or any other option there. Yeah,
Speaker 3:Well, I just it's it's uh, that paying your loan off faster has an immediate satisfaction. It's paying down debt it's contained. I know I have control versus conceptualizing my future self 10 years down the road where I've actually, instead of paying down my mortgage, I've taken that money and I've invested it or maybe just socked it into a savings account and trying to visualize my future self, having this pile of money, that's going to accumulate, you know, one little bit at a time
Speaker 1:And you don't know if that money is going to grow. I mean, what if we have another pandemic induced market crash or goodness knows what else? And people are nervous right now because stock market values are at all time record highs. So, gosh, I don't know what to do.
Speaker 3:The risk in investing in equities is not the stocks themselves. It's the humans and the emotions that try to interact with those equities. But that's for a separate various show here on six 20 WTMJ
Speaker 1:Yeah, that's right. Annex wealth management show. They'd probably talk about that all all the time. Um, but my other real quick story on a refinance of a person I happened to talk to this week was they're sitting there. They bought their house again 18 months ago. Um, in like the mid, mid 300 are low, low, low three hundreds, I think. And so now they still haven't put on that deck. So they still have, you know, a 10 foot drop out of their kitchen with, with a couple of boards across it. And so that, they're a very good question, but you know, people only know what they know is, Hey, so we want to borrow like 18 or 20 grand or we have a savings, but we don't really want to deplete our savings. So we're, should we, they needed to talk to somebody about, should we do a home equity line of credit? Uh, and what is that by the way, or should we do a refinance and take your cash out? Well, your home equity line of credit, that conversation on that went like this. Well, the home equity line of credit is kind of awesome. There are some teaser rates out there, but they're all going to eventually revert to the prime rate and a home equity line of credit is like a credit card, right? Uh, you can borrow it, pay it down, borrow it, pay it down. The prime rate is currently a three and a quarter. Okay. So your rate is at 3.625. And so I said, well, I can lend you the money and tag it onto your current 30 year fixed rate loan. Yes, we can. We can go at 28 years or we could go at 30 years depending on your philosophy, but I can lock in that rate at three and a quarter and help you take the cash out, Oh, by charging you how much$0 at that rate, given their excellent credit scores and everything else. And so to me, that's a no-brainer, if you can borrow the money and fix that rate for 30 years or three and a quarter, or you can borrow it on something called a home equity line of credit, where it's tied to the prime rate and what happens when the prime rate goes up. David, so does your payment and your rate on your home equity line of credit. So why would you go with a variable rate instrument in their case when you could go with a fixed rate? So that's my story there.
Speaker 3:Sorry, on, on the remodel story, because just to go down this rabbit hole, it sounds like though, if you have a remodel that is material to the health and safety of your home, that may need to get done first before you might borrow any new money, unless there's more
Speaker 1:I'll check with operations. That's a good question, but I think we're okay. I think we will be okay because this sliding door that has the 10 foot drop off the hands,
Speaker 3:It's like, I'm in a pool and it's 10 feet deep of water kind of thing. Okay.
Speaker 1:Yeah. You know, it's an exposed basement. I'm pretty sure that's how it works in this particular house. I'm not sure, but, but if you put, if you have somebody screw boards across that opening so that a person can't step through it and we've done those before. Okay. Okay. Because we've, we've cordoned off that risk. If there was nothing there and they were just relying on the sliding glass door to be locked. Yeah. That would be a problem. That would be a safety issue. So as long as it's kind of boarded up and screwed and kind of semi-permanent, we're going to be okay. All right. So let's just kind of set up the last segment here that I want to talk about, which is a family to family, a transaction. So that's called a non arm's length transaction because the parties are related. And so the most typical thing is for the seller, which in this case is the dad to, to try to give the son or daughter a good deal by discounting the price. So we've already successfully communicated that that's not the best way to do things. Do you want give a gift of equity instead of lowering the price, because then the buyer, your relative gets the benefit of that equity when it comes to financing, we'll give you a couple more details. When we come back, you're listening to the accurate mortgage and Realty show on am six 20 w T M
Speaker 2:J WTMJ W2, 77 CV and w KTI HD to Milwaukee from the annex wealth management studio. This is news radio. WTMJ find a place to call home without the headache. This is the accurate mortgage and Realty show with Brian Wicker on WTMJ.
Speaker 1:Okay. So if you're looking to sell a piece of property to a relative, um, well, let us help you because there are good ways to do it and, and, and less good ways to do it. And so the best way is to actually set the sales price at the market value and not to discount the price. And then what you do is you, uh, gift the equity, like in this particular case, I think the dad, um, help wanting to sell his condo to a son is willing to give them$15,000. Okay. And I, and I haven't actually talked to the son yet. Um, but you can either do that by cash, or you can just say, Hey, at the closing table, you can subtract$15,000 from my side of the ledger. So it doesn't have to be in the form of a check upfront. You want to say something, David? No, no, no. Okay. And so what happens then is the question is how much cash is the son, if any, going to bring to the closing table. And, uh, and then how much money are we as the mortgage lender going to bring to the closing table? Uh, because it's those two sources of money, either from the buyer who is the son or the mortgage lender, those two sources of money are going to be used to pay the closing cost, set up the property tax escrows, and then what's left over, is going to go to pay off the dad's mortgage and then give him the rest. So in a way, the higher we set the mortgage, the more money the dad will get in the end, right? Because the son's got a limited amount of money to stay in another way, the less he has to gift. Right? So I set this up and it happens to be a condo. I set it up with 10% down where check this out because it's a modestly priced condo, like 107. They think it's worth the payment, not including the HOA dues. So this is principal interest, property taxes, mortgage insurance, and homeowners insurance,$643. You can't rent for that Kenya, no new new. Um, okay. So, and then with 5% down, which by the way, total cash needed to buy an Ester, an IO just over 13,000, which again can either come from the sun in the form of actual cash at the closing table or a gift of equity. So we already have enough for the 15,000 proposed gift of equity to take care of everything. Or if we haven't put 5% down, uh, it can be just over$7,500, you know? So like a six grand difference there. And if I've ever caught, by the way,
Speaker 3:Go ahead.
Speaker 1:I was gonna say the payment difference between 5% down and 10% down is a whopping$33 a month. Okay. Yeah. So kind of interesting, interesting laws of small numbers. Now what's the problem. David have a 10% down on a condo versus five. Why wouldn't we want to go with Chen as mortgage lenders,
Speaker 3:As mortgage lenders. When we help a borrower put 10% down on a condo, the review of the condo association, the health of that condo association is only subject to a limited review emphasis on the word limited. If you put less than 10% down and your example, 5% down, then we as mortgage underwrite or mortgage lenders. And then thus underwriting is like, we would like to do a full review of the health of the condo association, because there's a limited amount of wiggle room in the down payment, the skin in the game, the equity that you have in this condo and condo values are subject to what your neighbor sold for because the units are very similar. And so there's really not a lot of buffer there. So from a mortgage lending perspective, it's easier to do the limited review. It's a lighter touch. However, if you're about to get married to this condo, why wouldn't you want to do the full review? Hi, I'd like to see, you know, all that's going on in this condo association. Yeah. The main tool to know what's going on,
Speaker 1:The budget, the budget and the bylaws. What are the rules of living in this condo? Is there anything in there that Fannie Mae doesn't like? And then the second part is the budget and what, what can kill deals is if the homeowner's association is not setting aside 10% of their annual budget. So let's say there's a bunch of units in here and their average or their, their, their, um, annual budget is$250,000. They gotta be setting aside 25 grand at that two 50 as a buffer. And many condos don't do that because they don't know any better. So we're going to have a conversation just out of ignorance. I think she's, you know, you, you, you want to have enough money so that when all the windows need replacement at once, you've got enough money there. So as somebody really planning to do that. So from a lending perspective, we'd rather do the 10% down. And in fact, if this was not a family, uh, oriented transaction, where time was not of the essence, our current required down payment is 10% down on condos. Because if, if you are under contract, there's often a, not enough time to do a full condor review. So the only reason we're considering in this case is because of, um, we don't have a time deadline. All right. One thing we failed to mention and shame on us, mortgage rates are back down to 2.9, 9%. If you have 25% equity and all the other rights stuff on a 30 year fixed rate, uh, loan amount of$250,000, we've got ads starting today that remind people that that's a nice dip because we had a little run-up. So if you are one of those potential, first time, refinancers let us help you figure out how to succeed in the refi game. And of course, if you're thinking about buy-in, let us help you with a rock sell guaranteed pre-approval to buy, and you can get started with both just by clicking on that blue button@acushnet.com. You've been listening to the acronym, mortgage and Realty show on am six 20 WTMJ. The proceeding was a paid program at bison opinions express during the acronym mortgage and Realty show are solely that of the hosts or guests of academic mortgage and accurate Realty advisors and not WTMJ radio or good carbons Milwaukee LLC.