Speaker 1 0:00

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 0:21

Welcome to the Accu Net Mortgage and Realty Show, getting you inside information on buying, selling, and financing your home with expert advice from Anette Mortgage and Realty. And now, here's Brian Wicker and Tim Holdman. Welcome

Speaker 1 0:36

To the Accu Mortgage and Realty Show. I'm Brian Wicker, licensed real estate broker with AED Realty Advisors, and also the majority owner of Acade Mortgage, where my individual NMLS ID number is 2 5 9 6 1 0. And I'm here today along with my son-in-Law, Tim Holdman , who is our top senior loan consultant at AADE Mortgage. And his NMLS ID number is 1 5 9 3 1 4 6. If you've got 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, you can get a copy of today's show as a podcast wherever you normally get your podcast. So , uh, Tim, another good week for interest rates.

Speaker 3 1:15

Yeah, absolutely. Terrible

Speaker 1 1:16

For stocks, by the way.

Speaker 3 1:17

Yeah, I'm trying not to look at my , uh, IRA or IRA and my retirement portfolios. Yeah . Nor should I at the, at the 10 age at the age that I am. Yes. Yeah , yeah .

Speaker 1 1:26

<laugh> . But yeah. And , and that often happens. Oh yeah . That's the norm, is that if , uh, stocks are doing bad, a lot of times interest rates or bonds are doing better.

Speaker 3 1:35

Yeah. And vice versa.

Speaker 1 1:37

Yeah. And , and so the , uh, catalyst for better interest rates this week , uh, was the big Daddy , uh, jobs report that comes out the first Friday of everyone Friday Yep . From the Bureau of Labor Statistics. And the reason we care about the jobs report is it is one of the two mandates of the Federal Reserve. Mm . Their job is to keep inflation low. Right. That's why we look at the two monthly inflation reports, the CPI, which I think is, I'll check , uh, on the next break when that's coming on next, but it's bet it's before the next Federal Reserve Open Market committee meeting. Yes. Uh , between now and then , uh, and , uh, so they're watching out for inflation. 'cause they don't want inflation to get outta hand. Right . Remember, that's why they cranked up interest rates so high. Right.

Speaker 3 2:21

C uh , CPIs on , uh, next week, Wednesday the 11th, by the way. Okay.

Speaker 1 2:25

Alright . Thank you for looking that up . Wow. There you go. Instant. So that'll be another indicator that they'll be watching closely. And the other thing is they're supposed to keep everybody with a job full employment. And so you may recall that July's Jobs report was a little weaker than expected. Yep . And so then in the meantime, fed chair Jerome Powell came out and said, you know what, it's time to lower rates. So he is telegraphed at the September meeting. We're gonna lower the rate. Now the only debate is whether it's gonna be a half percent cut. And by the way, as of Friday, the odds of that, according to the commodity , um, the mercantile exchange, CME , uh, futures, fed funds futures market, 75% chance of a quarter cut. Okay. Yeah. And only a quarter, a 25% chance for a half a percent cut.

Speaker 3 3:12

Ah ,

Speaker 1 3:12

All right . So that's different. It was running more like 50 50. Hmm . So, kind of weird that it's now tilting towards

Speaker 3 3:19

Just a , kinda dialing it back on the odds for the half percent. Okay.

Speaker 1 3:22

But if you, you can also look at that same tool and look towards the end of the year, and you can say that, well , by the end of the year, don't know exactly how we're gonna get there, but we think they're gonna cut by about a full percent.

Speaker 3 3:33

Right. Either by number of cuts or, you know, the size, how mu Yeah. The size of the cuts. Exactly. Yeah.

Speaker 1 3:39

So the thing to remember is all of that's baked into today's mortgage rates already. Right. Exactly . Uh , but , uh, what the jobs report told us, it was a disappointing number in two ways. Only 142,000 new jobs were created over a anticipated one 60. Right. So a little light on that headline number. Yep . And then the past two months, so July and June, the total payroll numbers were revised downward by a hundred thousand. Right.

Speaker 3 4:09

So even last month's numbers weren't even as good as the bad what they Yeah . Is what they came out as originally, so , right.

Speaker 1 4:16

Yeah . So all of that was friendly for mortgage rates. Correct. Yeah . And interest rates in general. Right. Um, by the way, if you want to just kind of see how things have cooled, if you look at the last, if the three month average with the revisions , uh, for non-farm payroll job creation is down to 116,000 per month. Okay. Okay. You go back to last year it was 2 32. Whoa . 232,000 new jobs a month. Yeah . And the year before almost double. Yeah. Yeah. Uh, and in 2024 year to date , it's 207. Sure. So you definitely a cooling of Yeah . The jobs market. Yeah . Um,

Speaker 3 4:55

I'll say this too , Brian , if , if you don't, you know, if , if you're a , a casual listener and don't want to get into the minutiae of the jobs report and the, you know, CME and all this stuff, the, the best quick hit data point I usually recommend for my customers to watch is the 10 year treasury price. Right. You can see that scroll . The Rach . Yeah . The yield. The yield . Yeah . The yield. Yeah. You can see that , uh, scrolling across the, you know, bottom ticker on , uh, you know, M-S-N-B-C and all these different, you know, news sources. Right. Generally, not always, but generally the correlation is is that 10 year yield down, that means mortgage rates are trending down. That's right. If you see the 10 year yield going up, that means mortgage rates are trending upwards. So if you don't want to nerd out as much as we do about the reason why rates are behaving the way they're behaving Yeah. Just

Speaker 1 5:41

What

Speaker 3 5:41

It is . Just check , check out the 10 year yield. There

Speaker 1 5:43

You go. That's a good point. And that dipped under 3.7 Yeah . On Friday for the first time. A

Speaker 3 5:48

Long time in a while . Yeah.

Speaker 1 5:50

Uh , a whole percent down from where it was earlier in the year. Yeah . So I'll , I'll give you this , uh, teaser here. So I was, was talking to a customer on Friday, and he's sitting at a six and a half rate. And so we could do 5.99 , uh, on his 30 year fixed rate loan of , uh, $434,000 with a 6.07 a PR or Okay. We could have given him a 6.125 and that would have an a PR of 6.15. Let's talk about, Hmm . How do you, how do you decipher that? How do you choose Yeah . In the current rate environment? We'll talk about that when we come back. You are listening to the Accident Mortgage and Realty Show on Wisconsin's radio station AM six 20 WTMJ

Speaker 2 6:35

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 6:44

Welcome back to today's show. And , uh, at the last , uh, at the end of the last segment I just mentioned that we had , uh, a customer I was talking to on Friday, we gave two options , uh, to refinance his 430 some thousand dollars , uh, 30 year fixed rate mortgage that we had already lowered, by the way, last January. Oh, okay. Of

Speaker 3 7:04

February.

Speaker 1 7:04

Awesome. Because he was a person who bought in fall of 2023

Speaker 3 7:10

At the , at the peak. Yeah . Basically.

Speaker 1 7:12

Yeah . So when rates were kind of at their highest. Sure. And so it made sense already to refinance. I guess we closed in March, now that I think about it. And we dropped his rate from like seven and a quarter down to six and a half , something like that. Okay. And , um, and, and so now he reached out and I was, you know, he was on my radar screen too. Yeah. And it's like, Hey, is it, is it time to go? Is it time to do it again? And so the two options I came up with , uh, for his consideration were 5 9 9. And , uh, the closing costs , or the loan costs on that to fetch that really sexy sounding rate , uh, was $2,546.

Speaker 3 7:56

Um , which isn't honestly, isn't terrible. Especially on what a , a loan size over 400,000, right? I mean that's, yeah .

Speaker 1 8:04

I mean Right. But the , I mean the , what we're gonna talk about in the segment is yes. Is now the time to bite that bullet.

Speaker 3 8:10

Right. If, if you just want that , uh, ego boost of having a five in front of your mortgage rate. Right. Uh , or the other option I think you presented was a 6.125. Right. So maybe not quite as sexy as, you know, eye catching, but with the 6.125, Brian , the key factor, what , what are his loan costs for that refinance $0, ladies and gentlemen .

Speaker 1 8:35

Right. Right. So, so because that loan is worth more when we go to sell it on Wall Street Yep . It's worth a little bit more, we can take that extra money and we can pay for the transaction costs Right. Of doing the loan, which are basically, and you know, what is my 5 9 9 number? 'cause I had a, he's , we won't, we will not need an appraisal.

Speaker 3 8:55

Yep . Very common. We can waive that on a refinance.

Speaker 1 8:58

Yep . And so those costs are 2000, you know , uh, dollars 2070 $1 to get the trophy rate. Okay . Or , uh, and that would save them 144 bucks a month.

Speaker 3 9:07

Not too shabby, but if you're spending, you know, two grand, you know, to save $144 a month. Okay. Well, it's like you gotta actually, you know, sort of ride that mortgage for 13 months just to recoup the, the two grand of loan costs . Right?

Speaker 1 9:22

That's right. Yeah . And , and so whereas the zero loan cost option saves 'em 106 right

Speaker 3 9:28

Outta the gate, starting with that very first monthly payment and it

Speaker 1 9:31

Costs them nothing. Right . So that's an instant gratification Yeah . An instant return on investment. Exactly. And, and so, you know, the discussion then turns right now at this particular point, emailing him back and forth. Mm-Hmm. <affirmative>. Well, do you think we should wait until after the Fed meets Yeah . On the 18th? I'm like, mm , uh,

Speaker 3 9:49

No, <laugh> is the answer. Not really,

Speaker 1 9:51

Because, you know, the Fed rate cut is already baked into today's rates. Yeah.

Speaker 3 9:57

So, and, and what if they only cut a quarter instead of a half? I mean , we could lose some of the sharpness that we have right now. Correct. What if CPI comes out next week Wednesday and it's hot, it's hot, it's hotter, we might get a knee jerk reaction rates might go up a little bit. Correct.

Speaker 1 10:13

It's like,

Speaker 3 10:14

So let's take the bird in the hand here, folks,

Speaker 1 10:16

And especially in a downward trending rate environment. Yeah. Right. Because my, my theory and you know, is, hey, if there is, if there's a $20 bill on the sidewalk, shouldn't you just like pick it up? Mm-Hmm. <affirmative> , you know, and, and, and , or No , I'm gonna wait to see if I find , uh, two $20 bills on the sidewalk. Yeah.

Speaker 3 10:40

It's like if someone said, Hey, every month that you walk down this block, you're gonna find a 20 every month forever. Wouldn't you just do that? Or would you say, oh, well I I think next, maybe next month might be maybe it'll be a , it'll be a 50. Yeah. Right. It's like, well, yeah, but every month you wait, you lost that $20.

Speaker 1 10:57

So in a declining, in an anticipated declining rate environment Yeah . This isn't the last kick that we'll have at the can. No. You know, the question is, do you wait for the ultimate bottom? 'cause while you're waiting, you're giving up those savings. Right.

Speaker 3 11:11

'cause you're paying the same higher rate that you currently have. That's right . Which is higher than the current market.

Speaker 1 11:15

And , and , and so really this all comes down to what are you paying for closing costs now . Exactly.

Speaker 3 11:20

That's the

Speaker 1 11:21

Key element. And , and I think you might have a story to dovetail on this, is when you go to refinance, you have some choices. So if you want the lowest monthly payment, you'll come to closing and write a check for the interest that is due at the refinance closing table. Right. 'cause you always pay at least one month of interest in lieu of your next mortgage payment. Yeah. Then another thing is if you're escorting for taxes, there's a little bit of a changing of the guard. Mm-Hmm. <affirmative> , where the old lender servicer will wait a couple of weeks to give you that money back. Well, if you want to escrow on or you have to escrow on your new loan, you got a pony at that money up front . And so the last time we did this fellow's loan, he kinda wanted what we call the stealth cash out . Sure. Refinance. And , uh, maybe we'll cover that in the next s uh , segment. Um , that, and then we also want to get you, I've got the August home sale numbers and let's talk about what's happening to buyer mentality as well.

Speaker 3 12:15

Yeah. In the midst of all these rate news of the rates dropping. Yeah .

Speaker 1 12:19

Right. Alright , we'll get to that right after this. You are listening to the Accident Mortgage and Realty Show on AM six 20 WTMJ getting

Speaker 2 12:27

You into the home of your dreams. Here's more of the Acuate Mortgage and Realty Show with Brian Wicker on WG MJ

Speaker 3 12:35

Welcome back to the Acuate Mortgage and Realty Show. I'm senior loan consultant Tim Holdman joined by the boss himself, Brian Wicker. Uh, Brian , we're gonna keep it on the refi talk for one more sign . 'cause I, I think it's really important for listeners to understand that there is a difference between bringing money to closing for refinance and what you ultimately choose to borrow on the new loan amount because,

Speaker 1 12:59

And what you're paying to get the refinance.

Speaker 3 13:00

Well, e exactly right. Because when in the previous segment we were talking about true no cost , that is where ANet is paying for the closing costs with the lender credit. So you are not bringing money to closing unless it's for another source, which we'll talk about. And you're also not financing any loan costs into the loan either. And that's a key distinction because I talk to customers all the time where they get a little bamboozled by other mortgage companies thinking, oh, well I didn't need to bring any money to closing. So there must have been no cost. Right. No,

Speaker 1 13:29

It'd be cost you

Speaker 3 13:30

$5,000.

Speaker 1 13:30

Yeah. You know , because you didn't pay attention and look at what , what the loan costs . So there's a Yeah . Line

Speaker 3 13:35

Item. You just looked at the rate .

Speaker 1 13:37

Look , look at , you gotta look at the line item on the loan estimate Yes . That you get front or we send you a worksheet. Yeah . And it says loan costs. Right. Same term that the government uses. What are you paying in loan costs that is different than the amount of cash you are bringing to closing?

Speaker 3 13:51

Yes. And on a refinance you can choose if you have the equity to finance loan costs and, and even other items such as maybe the setting up of your escrow account, you can finance that into the new loan balance. You cannot do that when you're buying a home. Right . And getting that mortgage. But on a refinance,

Speaker 1 14:07

You have that option if you have the equity.

Speaker 3 14:09

Yeah . This is a very key detail that I want everyone out there to understand. And Brian, your customer that we were talking about last segment, he chose to do what we like to call the stealth cash out refinance. Tell everyone a little bit more about what

Speaker 1 14:21

Yeah . The last time we did it in March, that's what he wanted to do. 'cause he had just remodeled his basement. Okay. And so in presenting the numbers to him on Friday, I said, well, here's two ways to go at this. In , in the one case , uh, a mortgage lender can provide a homeowner with cash back up to $2,000. Correct. Or 1% of the loan amount, whichever is lower. And just say, oh , that was incidental cash back . It doesn't get painted with the worst pricing of being a cash out refinance.

Speaker 3 14:51

Which is very important. 'cause a true cash out refinance does come with higher interest rates and

Speaker 1 14:56

Or closing costs . Yeah.

Speaker 3 14:57

Or or both <laugh> . Yeah,

Speaker 1 14:59

<laugh> . So, so I said, okay, I can give you like $1,900 there. Yeah. Then if we close this, like on October 1st, you don't have to make a October payment, nor would you have to make a November payment so you can keep that $3,000 per month that's in your pocket. That's real money . There're six grand. Yep . And I said, then you're gonna get a check back from your , uh, existing servicer for the amount that's in your tax escrow account right now. Yeah . That

Speaker 3 15:26

You've already been funneling money to just by making the mortgage payment

Speaker 1 15:29

Every month. Right. So, so that's about 6,500 bucks. Mm-Hmm. <affirmative>. So you're looking at 12 five plus the two grand . You can have essentially a stealth cash refinance of 14 five.

Speaker 3 15:41

Yeah. 14,500 of net savings

Speaker 1 15:43

In a combination of either money that's not leaving your checking account. 'cause you're not making those two payments. Mm-Hmm. <affirmative> , uh, but we're gonna lend you more money in that case. Right . And , and that is going to diminish the payment savings that would've Yeah. Reduced his payment savings to only , uh, $42 a month instead of we were looking at $144 a month payment savings if he were to choose to, to bring those , uh, costs to closing. Well, right. Exactly. Could though Yeah. Bring that money, even though I'm not charging him a thing in , in either case. Right. It's like, oh, do you wanna bring the money for your two months of interest? Do you wanna bring the money to restart your escrow account knowing that you're not gonna have to make those two payments and that you're gonna get the money back from your Yeah.

Speaker 3 16:25

You're, you're getting the savings. You're just choosing to almost get it in a big lump sum cash Yeah . Uh , distribution upfront .

Speaker 1 16:31

Right. And so it depends on, it's just an opportunity to have a discussion with a client about Yeah . What's important to you right now. Right.

Speaker 3 16:38

What are your goals? Maybe you

Speaker 1 16:39

Got a credit card balance that you want to get rid of.

Speaker 3 16:42

Yeah. Yeah. It's like, oh, are you paying , uh, do you have a $14,000 credit card balance where you're paying 22% interest on that? Yeah. Maybe . Okay , well

Speaker 1 16:49

This little

Speaker 3 16:49

Kindergarten's an opportunity. My 5-year-old could tell me that , uh, 22 is a higher number than six. Than six.

Speaker 1 16:55

Yeah. And then, you know, the other thing that we can do is we can , uh, customize your loan term . Yeah. So if you're wanna go back , back to 30, you can go to 29 year loan. Sure . We can do in any increment number of loans that you want. Anything else to add to the refi discussion?

Speaker 3 17:11

Yeah. I mean, you know, I'll , one other story I'll share from a big , uh, akin at fan, longtime customer who's up in Minnesota, we do lend in Minnesota, by the way. And, you know, I was talking to him this week and he said, Tim, my wife knows just enough about mortgage rates to be dangerous. And, you know , she's worried that if we refinance now, you know, A, is there no cost ? 'cause they're sharp, they realize that no cost is the way to go. And B, like what if rates continue to drop? Can we do this again? Yeah, absolutely. Is the short answer. We have unlimited bites at the apple, so to speak, and, you know, in a few months, five, six months, who knows how long, you know, it takes for rates to drop significantly if rates improve enough where they can get a lower rate at no cost, we'll just do it again. They , the key is if you've spent no money to do a refinance now, you won't have any hesitancy to do another refinance at any point that there's additional rate savings, especially if you can do that one for no cost as well. Right. Exactly. So at least in the meantime though, you're taking the opportunity that's available today, which I think is the key thing to understand. 'cause if you don't, you're every month goes by that you wait, you're paying more on the old mortgage that you wouldn't have to be paying anymore. Yep .

Speaker 1 18:19

So let's just put a button on it and say there's more to refinancing than , you know, meets the eye . It's not just about the rate, it's also about what are you paying in loan costs. We'd love to help you evaluate your options. And obviously you can do that by clicking on the blue button@kinat.com. Uh , when we come back, let's talk about , um, August home sales and kind of the attitudes shifting , uh, a little bit among home buyers. Mm-Hmm. <affirmative> . But we'll do that right after we hand it off to the WTMJ Breaking News Center.

Speaker 2 18:48

Don't break the bag to get into a house. Back to the ACU Net Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 1 18:55

Welcome back and thanks again for hanging out with us. Uh , I'm Brian Wicker , uh, the elder, the managing , uh, owner of Nette Mortgage and also the licensed broker at Academic Realty Advisors, along with my son-in-Law. Tim Holdman, who's our senior loan , one of our senior loan consultants at Academic Mortgage. And let's just do a little quick recap. Uh, Tim of the August , um, home sales Yeah . Into the five county metro Milwaukee area, which , uh, they came in and do you think that they were , uh, better or worse than August of 2023? I'm

Speaker 3 19:26

Gonna go worse.

Speaker 1 19:27

You are correct, sir. All right . There were 129 fewer home sales according to the multiple listing service of which I'm a card carry member through the ANet Realty Advisors company. And that's down 7% , uh, from a year ago. There you go. Also down from July, which is kind of a more normal-ish seasonal pattern. Yeah . Frankly, last August was better than last July. Interesting. So down about a hundred sales from there. Okay. The median sales price was 350,000 bucks. Now that was actually down from July's median sales price of 365. Okay . Does that mean home values are going down? Jim

Speaker 3 20:07

<laugh> ? No. <laugh> ?

Speaker 1 20:08

No. Why not?

Speaker 3 20:09

Well, I mean, you can't , uh, take a one month over month piece of data and then , uh, make the large blanket statement that home values are going down. There's a seasonality to , uh, home buying in general. <laugh>.

Speaker 1 20:21

And the median sales price doesn't take into account the square footage of the homes. Yeah.

Speaker 3 20:26

The number of beds, number of baths,

Speaker 1 20:28

And even location. Right. Because I'm doing a five county average, you know, generally , uh, homes are more expensive in Ozaki County than in Racine. And so what if, oh ,

Speaker 3 20:37

You can even go more micro than that. I mean, even if you picked up, you know , my house in TOSA and moved it, you know, out to Sussex, it would have a different value attached to it. Yeah . Right .

Speaker 1 20:48

So , okay. So, so don't, you know, clutch your chest with that. Looking at it on a year over year basis, the median sales price was still up 23 grand. Okay. From a year earlier. That's a 7% increase. Now, what sellers and buyers should be most interested in is , um, listings versus sales. Yeah. Right. So, I don't know if I said this yet, but there were 1,675 actual sales.

Speaker 3 21:11

Okay.

Speaker 1 21:12

Number of new listings with a member of the National Association of Realtors was just a hair under 2100. So the good news is that, you know, there's about 400 more , uh, listings that came on the market than sales. Okay. So inventory is

Speaker 3 21:30

Growing , going , going up. Yeah.

Speaker 1 21:31

Now the next question is, is it a buyer's or a seller's market? Right . And so to do that, the traditional measurement is to take the number of listings and there are currently thirty six hundred and fifty seven listings on the market. Okay. Um , and that includes those that already have accepted offers. Right.

Speaker 3 21:48

A pending ,

Speaker 1 21:49

This is just for using this rule of thumb measure. Sure . And you divide it by the most recent number of monthly sales. Okay . And you find out that we have a two month supply Right. That is still a sellers market. Yeah. Big time. And anything less than three months of supply is considered a seller's market. Mm-Hmm . <affirmative> three to six months is considered balanced and over a six month supply

Speaker 3 22:09

Buyer's market. Yeah. So

Speaker 1 22:10

That varies greatly by, you know, in some parts of Florida, I'm sure it's a seller's market right now .

Speaker 3 22:16

Yeah. Well, or you mean buyers ? I'm sorry ? Buyers . Buyer's market. Yeah. Yeah. I

Speaker 1 22:19

Said that wrong. I'm sure it's a buyer's market. Yeah. But here in southeastern Wisconsin, it is definitely still a seller's market.

Speaker 3 22:26

Yep .

Speaker 1 22:26

Another thing I like to track on a monthly basis is a percentage of cash buyers. And uh , that was 22%. Okay. In August. That's down from 23% in July. So not a big difference No . But down 25 from 25% a year earlier.

Speaker 3 22:41

Sure. And Okay. In August of 2023. Correct.

Speaker 1 22:44

Okay. And we're gonna talk a little bit about cash buyers Yeah . I think in our next segment, right?

Speaker 3 22:48

Yep , absolutely.

Speaker 1 22:48

I've got one. I know you've got one. And then lastly, I like to track , um, percentage of sales that are over asking. And so , uh, in the month of August, 54% of buyers in the five county metropolitan area still paid over asking that is down from 56% in July. And if we compare it to , uh, August of 2023, it was 59%. Okay. So a bit of a cooling off, but still more than

Speaker 3 23:16

Half. More than half Yeah. Are

Speaker 1 23:18

Paying over asking . And then I look at , uh, percentage of people paying over 10 grand or more over asking Mm-Hmm. <affirmative> . And that was , uh, 34% in August and that compares to 40% a year earlier.

Speaker 3 23:30

Okay.

Speaker 1 23:31

So again, a little bit of a cooling.

Speaker 3 23:34

Sure. Still

Speaker 1 23:35

A lot of people paying over asking Yeah. But not as many or by as much Right . As it was earlier .

Speaker 3 23:42

Earlier . And that , and that's the key, is like by as much, right? It's like over asking , it's like, okay, five grand over asking . I think most people would be willing to do, even if they didn't have the numbers explained to them right. On what that does to their monthly payment. If someone said, oh, I don't want to go 60 k over asking , it's like, okay, well it's probably a little bit more understandable unless you really want the house and you also have to factor in, well what's the purchase? What's the list price? Right. Correct.

Speaker 1 24:06

As a percentage basis

Speaker 3 24:08

You wanna look at , yeah . 60 k over a $900,000 listing is not as egregious as 60 k over asking on a 200,000 listing.

Speaker 1 24:15

That would be a lot over asking . Well , when we come back, I know you've got a story I wanna tell one about , uh, some buyers who are getting a mortgage, but they wrote their offer as a cash buyer and uh, they wrote , um, $45,000 over asking, okay, so let's talk about that kind of, Hey, when you know

Speaker 3 24:34

That strategy, you're

Speaker 1 24:35

In a battle. Um, you know, how do you go about winning? And then, you know, what happens if the appraisal comes in short because all of those things happened . Yeah . In this particular , uh, instance, we'll get to that when we come back. You are listening to the Accu Mortgage and Realty Show on AM six 20 WTMJ.

Speaker 2 24:52

Important home buying questions and answers you can count on. This is the Accu Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 1 25:02

Welcome back and thanks again for joining us today. So we are talking about , uh, the fact that in southeastern Wisconsin, it is still a seller's market big time where there are fewer homes for sale than, than what buyers would like about a two month supply. Mm-Hmm. <affirmative> according to our analysis. And so I have some clients , uh, Tim, who back in July called me up after they had written an offer on a home <laugh> and they Okay . Uh , their primary residence is in Florida, so now they're trying to buy , uh, and they sold their big home up in Wisconsin Okay . Here , which used to be their primary residence. Sure . They did that about a year ago. And so now they wanna buy a smaller home in a very specific community. Right. And they want it to be a single fa a single story . Right. Because their retirement age and all these other very specific things that narrows their search. Yeah. And so unfortunately they contacted me too late in that process when they made their first offer on a target home in July. Uh, because they lost out, you know, they , they were like contacting me after they had submitted their offer and they wrote it with a financing contingency. I think they may have also had a home inspection contingency in there . It was not what you would call a strong offer. Yeah. So they lost out on that one. And so throughout the rest of the summer they've been looking, look , boom, all of a sudden , uh, on Labor Day weekend , uh, home, actually the , the week before it was previewed, right? Sure. Yep . And it was in , so

Speaker 3 26:26

You knew it was coming just

Speaker 1 26:26

The right place and just the right street and listed in the mid to upper 300 range. Oh, alright . Okay . But in , in good condition. So , um, had connected them with a good real estate agent and we talked about that concept called the no regret offer. Yeah . Because they had lost out. Right.

Speaker 3 26:47

So they had regrets.

Speaker 1 26:48

Yeah. So they, they, they had, you know, put , uh, you know, we know where the, the listing price is. Mm-Hmm . <affirmative> mid to high three hundreds seemed like it was priced to attract bids

Speaker 3 26:59

In incentivize , uh, some competition. Correct?

Speaker 1 27:01

Sure. So the conversation was, let's look at the math. You know, how much money do you have put to put down? It's a big down payment that they have from the proceeds from the sale of their previous home. Okay. What can you afford for a monthly payment and what is the number that you would wanna write where if you get the offer, you're, you're not sad about it. Like, dang, I may have overpaid. Yeah . And then also , uh, if you lose out on the offer, that's really the top dollar that you wanted

Speaker 3 27:29

To offer. Yeah . You made your best effort.

Speaker 1 27:31

That's right . So they came up with a number, 45 grand over the asking price. Okay . And we were all set with that math. Then they set out to write a cash offer because they had sufficient retirement funds, which they really didn't want to use. 'cause what's the problem with using retirement funds to buy all ? Well , you

Speaker 3 27:45

Gotta pay, it's a taxable event. Yeah. You

Speaker 1 27:47

Gotta pay the income tax on it, which is horrible. Right. Right. 'cause it puts you in a really high bracket. And

Speaker 3 27:53

The key thing that you said, Brian, is they had the ability, if they absolutely had to, they could liquidate those funds to buy the home. And that's in Wisconsin all you need, that's all you need to make a cash offer. I I have this conversation all the time and I'm sure you do too. People think that a cash offer means they actually paid cash for the home, not the case. I think the , of the 22%, you know, that, that made cash offers, I'd be willing to bet that probably 20% of that 22% got fined .

Speaker 1 28:22

Oh , you think that high ? Well,

Speaker 3 28:23

Yeah, because the cash offer is simply it , it's, it is the best safest offer for a seller to accept. Right. We call our rock seller pre-approval. The next thing thing , the cash offer, guess what's better than that actual and actual cash , cash, cash offer . Right . Actual , and we can still be involved in that process just like you are with your clients. 'cause a, the, the advice and strategy is crucial in their case to getting their offer accepted, which I think spoiler, they got their offer accepted. They got their offer

Speaker 1 28:48

Yep . Got their offer accepted. But then

Speaker 3 28:49

They are absolutely allowed to pursue getting financing so that they don't have to liquidate that retirement money. It's

Speaker 1 28:57

Pre-printed Right. In the Wisconsin offered a it's WB

Speaker 3 29:00

11 purchase . Yeah . And the , the listing agent has to allow access to the property for an appraisal if, if we need an appraisal done for the purpose of loan approval. 'cause a cash offer is just a buyer's way of telling the seller, my ability to get a mortgage isn't dependent on me buying your house. If I something crazy happens and I get my loan denied, I'm still on the hook to buy

Speaker 1 29:18

Your property. That's right. To buy your property.

Speaker 3 29:19

That's literally all the cash offering .

Speaker 1 29:20

Now these people did no way did they want to actually pay cash. No. So of course we ran all the numbers, gave 'em a rock solid preapproval. We did not give that to the real estate agent. Don't need to. Yeah . It's for , it's for their peace of mind . It's for their peace of mind. And then we also did the calculations of how low could the , um, home appraise Sure. And what would the consequences be , uh, if the appraisal came in low? Yeah. Well, as it turns out, the appraisal came in , uh, $22,000 under the asking price or under the agreed upon sales price, which

Speaker 3 29:51

Is still 22 over the list price, by the way. Correct.

Speaker 1 29:54

Correct. Yeah. It was 23 over the list price 22 under the , uh, agreed upon sales price. And so in their particular situation, the consequence of that was rather mild. And we anticipated this , uh, because they had less equity. Fannie Mae and Freddie Mac make us price loans according to the percentage of equity it's simply in .

Speaker 3 30:16

And equity is established on a purchase on the lower of either the appraised value or the purchase price. Correct . Good point. Yeah. I want to be clear on that. Our version of equity is different than real life equity. 'cause as soon as this closes, the value is the purchase price. Yeah . Ironically.

Speaker 1 30:32

Ironically. Right. But

Speaker 3 30:33

For the purpose of the lending transaction, the value is the appraised value, which means that we just, we took a haircut on the equity that we could use.

Speaker 1 30:41

So the the punchline is they're having to bring $1,260 more to closing

Speaker 3 30:46

1200, 1,260

Speaker 1 30:49

$60 and they're getting the whole

Speaker 3 30:50

Pretty mint

Speaker 1 30:51

On the street in the neighborhood. Yeah . In the town that they want to have, you know, where they wanna spend their summers. And so they're, they're very, very happy. Alright . When we come back, you've got another story of a low appraisal. I think you wanna share

Speaker 3 31:04

A low, low, low

Speaker 1 31:05

Appraisal. All right . We'll cover that.

Speaker 3 31:07

House's not , not all that bad. Alright .

Speaker 1 31:08

We'll cover that 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 31:17

Find a place to call home without the headache. This is the ANet Mortgage and Realty Show with Brian Wicker on WTMJ.

Speaker 3 31:25

Alright . Welcome back , uh, to the ANet Mortgage and Realty Show. My name is Tim, I'm here with Brian Wicker. Uh , Brian, we've been swapping home buying stories. Um, and I wanted to share one where we had , uh, some customers write an offer , uh, on a house that frankly was, this is the opposite of your customer story. This house had been on the market for quite a few weeks.

Speaker 1 31:49

Oh really? No offers . Right. Okay .

Speaker 3 31:50

Alright . Um , so there was no competition and the buyers took advantage of that. The home was originally listed for seven ninety nine nine, so we'll just call it 800,000. Okay.

Speaker 1 31:58

Yeah. Right .

Speaker 3 31:59

And uh , originally they , our , my buyers wrote an offer at seven 60, so 760,000. Okay . So 40 K under list and they got their offer accepted za . Right. Very strong buyers who were originally deciding to put 20% down. Okay . Uh , 'cause they had the funds, they, you know, didn't really particularly have an appetite to pay any , uh, mortgage insurance or PMI as it's called in the industry. Right. So they did 20% down. I said, sounds good. At 20% down. Once I ran the scenario through Fannie Mae's automated underwriting system, we got a property inspection waiver, an appraisal waiver. Right , right . Oh ,

Speaker 1 32:39

Appraisal . So no appraisal

Speaker 3 32:40

Needed. No appraisal needed. Now they had an appraisal contingency in their purchase contract. And I told 'em when we were putting together the, the game plan of the financing, I said, Hey, you, you don't need to get an appraisal for the purposes of loan approval. Yeah. Right . We can get this loan approved 20% down no appraisal. Fanny believes that the lendable value of this property is seven 60. Okay . And they , uh, said, actually , uh, we are would like to get an appraisal.

Speaker 1 33:06

Okay. That's their right.

Speaker 3 33:07

It is absolutely their right. So they, they have the protection in their contract where they can try to renegotiate the purchase price based on a low appraisal value. It's called the appraisal contingency. But I said the risk is the seller doesn't have to agree they can stick to their guns and stick at the original purchase price of seven 60, and then it's up to you to decide if you wanna move forward.

Speaker 1 33:29

Right. Right. It can or ,

Speaker 3 33:30

Or break the contract in

Speaker 1 33:31

The state of Wisconsin. Then the , the current state of the art is you can click a box that says, oh, if the appraisal comes in low, I'm giving you the seller the right to force the transaction forward at the lower appraised value. Right. And I don't know , did they have that one clicked? Maybe? Uh , let's see . Probably that would be standard .

Speaker 3 33:49

Yeah. I think it , I don't have the

Speaker 1 33:51

Contract up . Yeah . But if it comes in way low , the , the , the, the , uh, seller doesn't have to agree to that. And then the , and then the contractor just dies. So what happened in this case,

Speaker 3 33:59

So the home appraised for significantly under the agreed upon , uh, purchase price of seven

Speaker 1 34:04

Three tens of

Speaker 3 34:05

Thousands of dollars. Tens of thousands. Yes, exactly. Um , so they kind of had some back and forth with the sellers. The sellers were already doing some repairs from a home inspection , uh, negotiation. So they were not inclined to drop the price all the way down.

Speaker 1 34:21

Okay. So they didn't want to go all the way down to where the appraised value came in.

Speaker 3 34:24

No. And the buyers, you know, we're actually, they, they presented their final and sort of best offer to the sellers and they were ready to walk if the seller didn't agree. Oh , okay. Okay. The seller ended up agreeing, but they, they met somewhere in the middle. Okay. They didn't drop the price all the way down. But guess what, because our buyers originally putting 20% down, they chose not to bring a dollar more to the closing table. Oh . And we bridged the gap by lending a greater percentage of the

Speaker 1 34:52

So same dollar amount. Same dollar amount, but it changed the, you know, amount of equity in the eyes of the , uh, mortgage world . And so they're gonna pay a little bit of private mortgage insurance Right.

Speaker 3 35:02

To the tune of $91 a month, which is way better than bringing tens of thousands of dollars more to the closing table. Okay . Alright . You know , so

Speaker 1 35:11

That is a happy

Speaker 3 35:12

Alls well that ends well , uh, you know, even with a significantly lower appraisal, which I think most people think is, you know, kind of the death sentence to a deal.

Speaker 1 35:20

Correct. Well, and if you'd like to work with a mortgage lender that is able to help navigate Navigate, yes. Yeah. When things don't go exactly as planned, we'd love to be that , uh, mortgage company. We think we are the best in the business. So all you gotta do to get started with a rock solid guaranteed pre-approval to buy, or if you'd like us to help you think through your refinance options so that you're not overspending Yes. Uh , and fallen for the old, oh, you didn't pay anything, even, you know, because you didn't have to bring any cash to closing, let us , uh, be your trusted guide. We'd love to help you. All you gotta do to get started is click on that blue button@accunet.com. Thanks for listening today. You've been listening to the Anette Mortgage and Realty Show on AM six 20 WTMJ. The proceeding was a paid program. Advice and opinions expressed during the Accu Net Mortgage and Realty Show are solely that of the host or guests of Acuate Mortgage and Acuate Realty Advisors, and not WTMJ Radio or Good Karma Brands. Milwaukee, LLC.