Tracie DeMars
ReMax Equity Group
traciedemars@aol.com

Ok guys…. I’ve been talking about the changing market recently, but this is something that has come up quite a bit recently, so let’s talk about it.
 How do you find a Realtor?  Now, obviously I AM a Realtor, so locally… that is an easy answer!  I am a very good one one too.  However, one of my clients is selling their home in a different state, and I have a few clients moving out of the area, and I can’t be everywhere.  After this long in real estate I know a lot of people, so I refer out Realtors in other areas as often as I can because I know that my clients will be taken care of, but what if I don’t know someone there?  I am getting calls from my clients regarding their Realtors, and the issues they are having.  So, let’s start with the #1 thing about real estate…… What many people fail to realize is that, as a home buyer, or a home seller, YOU are the boss.  You are hiring someone to help you with one of the most important stages of your life.  YOU ARE HIRING SOMEONE…. this is an interview.  What questions should you be asking?  Why is this important?  Especially in this changing market…. who you hire with the most important financial decision you make… it is a different real estate world than it has been the past 5 or so years… 
When you are talking with a Realtor, you need to ask yourself these questions… 
What are you looking for in a Realtor?
What are your expectations in communication?  with your purchase?  sell? 
What questions (& answers) are important to you?
…and no matter what you ask, or what their resume says (or doesn’t say), sometimes you just have to go with your gut and hire the person who you connect with. 
Some questions you could (or should) be asking….. 

HOW long have you been in the real estate business?     Do they have experience, a network of people that they can contact to help?  Nothing wrong with a newbie, but do you know everything about a job when you first start out?  How do you learn?  In real estate, we are always learning, but do you want to be the transaction that an agent ‘cuts their teeth’ on?   Especially with the changing market, has this realtor been through any other market?  What is their ‘plan’?  Talk to them about this market and what they are seeing.  How are they going to use their experience, skills, etc to use their knowledge of this market, and what they are seeing, to help you?
HOW long have you been licensed?     This ties into the last question.  Sometimes an agent worked with another licensed agent as an unlicensed assistant so they could have a couple of years in the real estate industry, but very few (or none) as a licensed agent.  Again, nothing wrong with a ‘newbie’ agent….often times they have more time to help you vs an experienced agent who has other clients we are working with as well.  An experienced agent usually has a pipeline of clients and closings so we’re not as concerned with ‘pushing’ a sale because we don’t need to.  Newer agents usually don’t have that pipeline so may be more concerned about getting you into (or out of) a home as fast as possible.  For some Realtors, they have never seen other markets, and it is going to get harder for some of these Realtors who have been ‘floating’ through, and not having to really work.  
WHAT did you do prior to real estate?  What was your other careers?   Why is this important?  Buying, or selling a home is one of the largest financial decisions you will ever make.  You are hiring someone to assist you with this decision.  What qualifications does this person have to help you do so?  Did they working in marketing?  Office management?  Accounting?  Did they wait tables?  Work in a factory?  Were they a car salesperson?   How does this help you?
DO you have any college education or degrees?   Again, see above…this is your largest financial decision….how is this person qualified to help you with that?  What background do they have that will assist you?
WILL I be working with you, or an assistant?   Sometimes you hire an agent to help you, but then you never see them….you’ve been handed off to an assistant who may not have the qualifications you had asked about to that other agent that you ‘thought’ you had hired.  Sometimes you hired the assistant because they had the qualities and the qualifications you were looking for, and you are surprised that they are actually part of a team.  I know Realtors who are just the name, but don’t really have much to do with the real day-to-day, or the paperwork. WHAT days/times are you available?   This is pretty important as you need to know if the times you are available are going to work with the times that your agent is available.  Are they there for you when you need them?  Or can you never get a hold of him/her?HOW many homes to you sell (on average) per year?   Why does this matter?  Most people think that a ‘full time’ agent sells about 12 homes a year…but really that is a part time agent.  It’s a ‘gross’ check vs ‘net’ check kind of thing…and in real estate there are a lot of expenses, dues, fees, and taxes.  Being self employed has some great things, but they come with expensive costs and overheads, like marketing & health insurance (oh boy! Health Insurance…).  When you are self-employed, this IS my job.  This is ALL I do.  I don’t have a ‘side hustle’, or something I am peddling on the side.  All I do is help people with their home adventures.  I am the main source of income, and to ‘break even’ I have to sell, at least, 2 homes a month.  Of course, a lot of that depends on the types/values of the homes an agent sells.  I work a lot with first time and move up buyers/sellers vs some agent friends of mine who sell luxury homes.  They don’t help as many people as I do, but make more.  You know… like that supervisor at work who makes more than you, but does less work? 
WHAT is the average price of the homes you help people buy/sell?   This does tie into the last question….  If someone works mainly with luxury homes, do they understand the market for the type of home you are buying or selling?  Not too long ago, I had a call from someone who wanted to sell their 4000 sq ft home in a very swanky Portland neighborhood.  I actually referred them to a different agent for 2 reasons…one reason being that I don’t work in the Portland area and I believe that agents should stick to the areas they know.  Not all markets are the same, and I am not helping someone if I am taking on an unfamiliar market, am I?  …and that’s also kind of the second reason…they have a luxury home and that is a different selling, and buying market.  Honestly, they are better serviced by the agent I referred them to as that agent specializes in Portland, and in that high price range.  I’m always too busy wondering how long it would take to clean it!!  Another question would be what type of homes are you knowledgeable with?  I recently helped a client sell a home on a very large land parcel, but I do understand land as I grew up on acreage, and I have assisted other clients with their agriculture property adventures.  I mean… after 17 years in real estate, I feel like a real estate grandparent….sigh…  where is my walker???
DO you have another job besides real estate?     This kind of ties into the question about how many homes does an agent sell per year as many part time agents have other jobs to supplement their income.  This also ties into when that agent is going to be available to help you.  Real estate isn’t just about showing homes…there is SO much more to it.  Phone calls, marketing, searching for homes on the internet, calling about that home, calling other agents, other vendors, paperwork, more paperwork, talking, phone calls, texting, emails, title companies, inspections, appraisals, lenders, etc… it’s an 80 hour a week job some weeks.  There are no ‘real’ vacations as you are always ‘on duty’.  HOW do you feel about Dual Agency?  This is an interesting question as you don’t know what I’m talking about…so let me explain as quickly as I can…  When a seller hires an agent that ‘sellers agent’ should be working for THAT seller.  They will be marketing the home, and ‘selling’ that home to buyers, and buyer agents…in a nut shell the sellers agent is selling that home for the seller for the highest possible price and lowest amount of money out of the sellers pocket book (ie buyer closing costs and repairs).  A buyer hires an agent to help them find that ‘perfect’ home.  To work with them with the lender, to negotiate the offer trying to get that home for them in a multiple offer situation (and maybe for less?), to negotiate closing costs, repairs, to be with the buyers for the home inspection, to help understand appraisal, paperwork, the process…and to support the buyers from contract to keys…and beyond.  Real estate is a relationship business, and we LIVE for referrals.  You should always feel comfortable talking to, and contacting your agent ANYTIME with ANY questions…before, during, and even years after you get keys.  As you can see, the sellers agent and the buyers agent kind of have two different agendas.  So, if you call the sellers agent to help you buy the home, and that agent works for the sellers, and the buyers on the SAME home…that is a dual agent.  Who is that agent really representing?  Dual agency isn’t illegal in the state of Washington, it’s just my opinion that each side should always have their own representation.  
So, let’s play a game… I’ve been married for a long time… a very long time… if my husband and I were to divorce, I would hire a really good attorney (I have a client who is a really good attorney), would he hire the same attorney to represent him as well?  Well, most likely not (unless he was an idiot, and he’s not … which is why we have been married a long time), because that would be a pretty big conflict of interest…what do you think??  Real estate is about contracts, about legal contracts, so there is some similarity there.Builders agents are dual agents which is why you should always bring your buyers agent with you when looking at have a new home built.  Teams are dual agents.  Who is working for, and looking out for you?
For sellers:  Some further questions that are important for you to ask in this market… ask about marketing, you can’t just stick a sign in the yard now and expect multiple offers.  Ask the Realtors about their marketing.  Who do they think is your most likely buyer?  How are they going to reach them?  What is their pricing strategy?  Ask that the agent go over the comps with you so that you can ‘see’ how the agent came up with their suggested sales price range.  What about photos?  Flyers? Cleaning?  What is their commission rate?  What does that include? 
DO I have to sign a contract to work with you?   If you are selling a home, there is a sellers contract that you will need to sign.  This contract gives your agent the right to represent you for marketing, offers, and negotiations.  But what about if you are buying a home?  There is a form called a Buyers Agency Form, that is a contract between the buyer and the buyers agent.  As a buyer you do not have to sign this form.  As a buyer, I probably wouldn’t sign this paper, no matter how good an agent makes it sound.  Real estate and lending is all about verbiage and there are a ton of ‘scripts’ that can make any form sound reasonable….and good for you, when it may not actually be so.  In real estate, the buyers agency form is a pretty hotly contested piece of paper…there are agents who won’t work with you if you don’t sign it, and there are others (like me) who think it’s awful.  Customer loyalty is built with good customer service…not a piece of paper…but this is only MY opinion.  If you, as a buyer, choose to sign a buyers agency form, you are now legally in contract with that agent to buy a home with them.  Technically you always have the right to fire someone, but that is a legal contract for a period of time for a specific purpose.  The first question that, as an agent, I always ask a potential client is if they have signed a contract with a previous agent.  This protects everyone involved….it protects the other agent as I don’t want to step on another agents toes, it protects the potentials clients since if they are in a contract with a previous agent then they need to either let that contract expire, or deal with it in another way before hand, and it protects me because getting that call from another agent that they have a contract with one of your clients is not a good one.  So what happens if one of my clients then talks to another agent and signs a contract with that other agent?  Well, then they’re not my client anymore….they’re now they other agents client.  No matter what an agents says, or which ‘script’ they’re following…. you do NOT have to sign a Buyers Agency agreement to hire a Realtor to help you buy a home. 
I’m not going to lie to you…. I know that this blog is going to ruffle some feathers, and while I debated actually sending it out…  I decided to do it anyway.  I want to say that I am not knocking anyone in my industry here.  Everyone has to choose to work the way that their ethics and morals dictate.  As a buyer, or seller, YOU need to ask the questions that mean most to you when hiring an agent.  What questions, and qualifications mean most to you?  Are you looking for someone professional looking, or someone more laid back?  Someone with a warped sense of humor, or someone more ‘traditional’?  There are a LOT of great agents out there, and some…well…  like any industry we have our share of crappy.  Sometimes you just have to go with your gut when talking with an agent, and hire the person that you are most comfortable with.  Always ask questions!  This is your adventure, and you are driving the bus…. we are just gps. Informationis power,  and as always…May the odds be ever in your favor out there….  If you are looking for a real estate agent, I would love to be able to help you.  If you have any questions, or comments please get a hold of me anytime.  You can call, text, email, or even facebook me.  Please remember that while I mean these emails/blogs to be helpful, and educational, I am still hoping that you will call, or email me as I would be honored to help you with your home buying, or home selling adventure!  🙂

Next home buyer & home seller classes (in person & online) are available at:
www.learningtobuyahome.comwww.freesellerclasses.com
Don’t want to go to the website?  (Hey!  it has other awesome blogs & videos on there too!), you can always email me at traciedemars@aol.com and I will email you the schedule.  

Hello, Hello!  

Schools back in session, and fall is coming fast!  So, remember early last year when I talked about closing costs?  I even did a video on it as so many buyers were struggling with closing costs even if they had a down payment.  Well, my friends, how the times have changed.  If you remember that video, please forget it now because nothing I said about closing costs from early last year apply right now at all.  It is a different market, so let’s hash closing costs out again.  
Even if you don’t remember that video, let me remind you about what closing costs are to begin.  Let’s start with the other fund facts first…
Every buyer has fees to get into a home.  I don’t care what the radio tells you, you can not buy a home without some skin in the game.  —First, you need earnest money.  Earnest money shows to the seller that you are a serious buyer.  Earnest money will be deposited to the title company.  When you close, your earnest money goes toward your down payment, or your closing costs, and sometimes (only sometimes) you can actually get your earnest money back after closing.  If you do not close, and if you back out WITHOUT a legal reason, then the seller has a right to all, or partial, of your earnest money.  We will talk more about legal reasons later. —Second, you need money for inspections.  We talked about this recently… home inspections, and sewer scope inspections.  You can also do a radon test, & a well test…depending on the property you are wanting to purchase.  Inspections are done by 3rd parties, and they will want to be paid for their time, and expertise to come out and perform the inspections.  I know… crazy talk…  these are out of pocket funds you need upfront.  —Third, you need to pay for the appraiser.  Remember that the inspections are for YOUR information.  The appraiser is for the bank’s information.  The bank wants to make sure it isn’t lending you more than the house is worth… you know… just in case you don’t pay your mortgage and they end up taking it back.  The bank will only lend you either the purchase price OR the appraisal amount… WHICHEVER IS LESS.  So no, you can not take out ‘extra money’ as part of your purchase…even if it is for something you want to do to the house.  They don’t do that anymore because people didn’t use it for the house.  It’s like your mom said, “it only takes one person to ruin it for everybody”, or in this case … thousands of people.  
You can go to the website to read the blog we did on these in more depth.
Down payment…  This is the amount required for the buyer to bring in depending upon the loan the buyer is using.  Every loan has different requirements…FHA – 3.5% of the purchase priceConventional – 5% of the purchase price (there was also a 3% version)
USDA (Rural Development aka RD) – 0%  as this is a 100% loan, but there are some location/home requirements on this one)
Down payment assistance – 0%, this is a 2nd loan. This is a loan program that assists buyers with the down payment requirement on their loan.  It is a GREAT program especially for folks who have some money, but not enough for a down payment. It is a loan that has higher fees. 
Most people are aware of the down payment portion, but they forget about closing costs.  There are 28 people that are involved in the purchase & sale of a home, and because no one pays anyone for our good looks, or sparkling conversations, every one of those 28 people want to be paid.  

For the buyer, Closing Costs are the costs associated with the buyers loan and legal transfer of the property to the new owner.  Closing Costs for the buyer can also include ‘Buying Down Points’.  This will increase the buyers closing cost amount that they will need for closing. 
Today we are just talking about the Buyers side of closing costs.  Give me a holler for the information on the sellers side of closing costs.

Every buyer is going to have a different amount of closing costs depending on their loan, how much their lender origination fee is, if there are any lender ‘junk’ fees, etc.  For buyers the majority of their closing costs are going to be for the amount that they are being charged FOR their loan.  Closing costs are really to pay for everyone who touches their file to help them get the loan to buy the home, and for the buyers portion of costs for the legal transfer of the homes ownership. 
When the government was buying down interest rates, and rates were in the 2%-4%, closing costs were about 2%-2.5% of the purchase price of the home.  However, the government has stopped buying down rates, and so they’ve gone up, and up, and up.  To be honest, I’ve felt a bit like Chicken Little the past few years as this should have happened back in 2018….at least… but that is water under the bridge and none of us have a life jacket.  So let’s deal with what we have …right now…

Closing costs for many buyers are going to be higher now than they were because your lender is going to want to use some, if not all, of those costs to ‘Buy Down The Rate’.  These are called, Points.  Each point is about 1% of the purchase price.  
We have a client buying a home at $450,000.  They are buying down the rate to 5%, but it is going to cost them an additional $9,000 in closing costs to get the lower rate.  At $450,000, we got the seller to ‘pay up to 2.5% of the closing costs’, and yes, this sounds great.  However, because there is no sugarcoating at my bakery, I’m going to tell you the truth…  the seller never actually pays your closing costs.  WHAT?!  Yes, you read that correctly, but let me explain…
Purchase Price $450,000  (the amount your loan is based off of minus your down payment)Closing Costs $11,250  (these are contributed by the seller off of their net)
Seller net — $438,750.  
Seller paid closing costs means that the sellers are agreeing to a lesser net so that the buyer CAN FINANCE their closing costs into their loan.  Yes, again, you read that correct.  The seller does not actually pay your closing costs.  The sellers are agreeing to net a lesser amount than the purchase price so that the buyer can finance those costs into their loan.  The last couple of years of multiple offers and bidding wars above & beyond the listing price are pretty much behind us….at this time.  The Bright side of rising rates is that buyers can get into a home without offering 20k over purchase price.  Sellers are also willing to negotiate closing costs as part of the purchase/sale contract that the buyers can use to cover all, or a portion of their closings costs…..or to buy down points for a lower interest rate.  Rising interest rates have been like a cold shower for the superheated market we have had, and let’s be honest… no one actually likes a cold shower. A lukewarm one?  Absolutely, but a cold shower?  Nope!
If you are a buyer, it’s a better time for you to get into the market now than it was the last few years.  A lot of good people got burned with the way that the market was, and there was no salve or spray to help with those types of burns.  We saw people offering WAY over listed price, waiving inspections, giving months of free rent back, offering their first born child, free tacos for life, etc… While all of this sounded great for sellers, most people who were selling their homes still needed to buy a new home, so it was just as bad for them when they were trying to get into a new home so a market like we had just caused a lot of bad feelings.  
Our current market is a more balanced market which helps both buyers and sellers.  We have had a lot of new Realtors jump in the market the previous couple of years, and they’ve never seen, or experienced a changing market like this.  This market changed so quickly, it was like dealing with a teenagers mood swings!  Many Realtors are still pricing homes based off of home sale prices from earlier this year, and that isn’t accurate.  Realtors need to look at what homes are going pending at.  What is the percentage of price drops?  What is the average time on the market? (no more fast weekend sales!)  From about May of this year to current… home prices have gone down on an average of about 10%… with some a bit less, and some a bit more.  If you weren’t asking questions before, you should definitely be asking now!  See my last blog.  

   It’s not all gloom & doom here though… a balanced market is better for everyone.  There are pros for sellers as well as most of them want to buy a home.  Other sellers are totally looking at, and accepting contingent offers again!  I had one seller complain about the money he was ‘losing’ on the sale of his home, but forgot about everything he was gaining on the purchase of his new home.  Once he looked at both sides, he was actually much happier that he waited.  Sometimes we can project out what we think the market is going to do, and sometimes we really can’t.  This current market is so volatile that we are on a quarter by quarter basis. It’s like petting a kitten who wants you to rub its belly… do you, or don’t you?  There is no magic 8 ball for this crazy…. just me…  and my family likes to stick my crazy on the porch with a drink.  So, that’s where you will find me, and I am always happy to help with your next home adventure!

Have a great day, and I will talk to you soon,
;-D
Tracie DeMars
Real Estate broker 
Re/Max – Van Mall
360/ 903-3504 cell
360/ 882-3600 fax
www.traciedemars.com
traciedemars@aol.com

“Interested in free and non promotional home education classes?  Go to www.learningtobuyahome.com or www.freesellerclasses.com for local upcoming home BUYER and home SELLER classes, or facebook: Tracie DeMars Real Estate for my home buyer education blog.”
“Listen to the mustn’ts, child. Listen to the don’ts. Listen to the shouldn’ts, the impossibles, the won’ts. Listen to the never haves, then listen close to me… Anything can happen, child. Anything can be.” 
   – Shel Silverstein, American poet, cartoonist and composer, (1930 – 1999).

Next home buyer & home seller classes (in person & online) are available at:
www.learningtobuyahome.comwww.freesellerclasses.com
Don’t want to go to the website?  (Hey!  it has other awesome blogs & videos on there too!), you can always email me at traciedemars@aol.com and I will email you the schedule.  
Hello, hello, hello!
  Ahhh…  a ‘normal’ spring/early summer!  After a few years off her meds, it looks like Mother Nature is getting back to ‘normal’.  Yes, there is a lot of rain, but that is ok.  Rain is good for the 4th of July!  We have been so dry the past few years…we really need this.  

   Talking about ‘normal’…..yeah, I can’t quite apply that to the real estate market…..yet.  Well, maybe a little.  Unless you have been molding under a rock in a backwoods somewhere, or have no access to TV, or the internet (you lucky duck), you by now know that interest rates have been steadily climbing the past 6 months.  In fact… I already did a post on this.  I do get questions on how this affects buyers & sellers, so let’s talk about it…
   One thing the rising interest rates have done, is put the white hot housing market in an ice bath, and everything has shriveled and pulled back faster than a teen caught skinny dipping.  We look to be getting over the multiple, multiple offers of the past 2 years, and (gratefully) getting over the buyers offering over what an appraisal might come in at with those 22AD addendums.  If you are not sure what the 22AD, Low Appraisal Addendum, was…please refer back to one of my previous posts in which I really dug into it.  You can always call and ask me too.     We are seeing some homes last longer on the market, and housing inventory has gone up. When I say that the housing inventory has gone up, I mean that we have about a months worth of inventory … which is better than 2 weeks worth where we were at not too long ago.  Buyers have a chance now to buy a home without promising their first born child, their kidney, and a lifetime supply of tacos to the sellers.    
   Let’s be honest, the last few years have been brutal to buyers.  Even buyers with money for large down payments, and their own closing costs were struggling.  The rising interest rates are balancing the scales with buyers and sellers.  This is good.  The bad?  Well, you know there is never good with out some bad…
   Rising interest rates means that, as a buyer, you are preapproved for less money to buy a home with….for the same payment.  For example…  someone who purchased a home last summer for $700,000 has the same payment as someone who purchases a home for $550,000 right now.  That is the bad. Of course, the buyer who purchased their $700,000 home last summer probably offered way more than the home was listed for. 
  The good is that a buyer has more homes to look at, has less buyers to compete with on offers, won’t need to promise $$$ over a low appraisal or list price, & won’t need to waive their inspections (which, as a buyer you should never do), and in fact, a buyer in today’s market can request reasonable repairs for health & safety and have the seller be willing to negotiate them.  Not to get crazy, or anything, but my last 2 buyers even were able to finance some of their closing costs into their loan (aka seller paid closing costs…subject of our next blog).  This is just huge and something that I haven’t been able to do in the last few years!!  I felt like dancing the samba… that is, if I could hold a beat and dance.  If you are a buyer, now is a great time to be one.  Rents are seriously higher than Johnny Depp on a bender, and unlike dear Johnny, they are probably not going to come down anytime soon due to inflation.  Yeah… I said it.. Inflation.  I know it is a dirty word…it’s like saying the ‘F’ word in a daycare, or the “L” word on accident to your crush on your first date.  

The market … it is a-changing… 
   Whether you are thinking about buying, or selling, you have seen a lot of BOM (Back on the Market) homes.  There are legal reasons for a buyer to back out like home inspection, appraisal, financing, HOA review period, and a few more.  Buyers are using these contingencies to back out of the contract.  I’ve seen a few buyers back out of contracts recently because the buyers didn’t get their rates locked, and they jumped.  I’ve seen a few buyers recently back out because they felt they could get a ‘better deal’ elsewhere.  As a sellers agent & as a buyers agent, as soon as the contract is signed around, I am sending that signed around contract immediately over to the lender.  As a buyer (& buyers agent) you want to make sure you get that interest rate locked in.  Buyers should not be backing out because they feel they could get a ‘better deal’ elsewhere….because with interest rates… they are not.  
   We are also seeing a LOT of ‘price corrections’, and price reductions. These are sellers who listed too high for our current market.  I’ve been telling sellers for awhile that we need to list for what comparable homes are listing for…not selling for.  With the market changing, and so quickly, this is the time to get AHEAD of that change.. not behind it with price ‘corrections’ (aka REDUCTIONS).  As a seller, we need to be realistic about the market as it currently IS….not as it was 4 months ago, or a year ago.  
Heads up my friends… We are in a different market.  When you are thinking about buying, or selling… in this market, you need to be asking the right questions. Ask the realtor you are talking with those all important questions to make sure they are equipped to help you with this changing market.  Those of us who have been licensed awhile have seen this before.  It is time to go back to basics…. so make sure your Realtor has those basic skills to fall back on. 
Is it a good time to sell?  Yes, it is still a good time to sell.  I know many people were holding off because they were not sure they could find a home to buy, well, now there are homes to buy, and sellers are looking at contingent offers again!  For folks who want to sell, & are looking to buy their next home, this is a big thing.  When selling your home talk to your Realtor about their marketing plan.  These last few years, marketing plans were like parsley … pretty to look at on the plate, but pretty pointless.  Now though?  In our changing market, a Realtor’s marketing plan is going to be the juicy steak (or juicy tofu if you are into that).   Is it a good time to buy? Yes, it is still a good time to buy.  Owning your own home means you are not at the mercy of rising rent costs, and landlords looking to sell investment properties.  If interest rates drop.. you can always refinance later for the lower rate.  Remember that real estate is not supposed to be a sprint where you sell & move every few years…. real estate is like nice jog (for those of you who like that sort of thing) or a nice meal with friends that you linger over.  There is a pro & con to every market.  Nothing is ever all good, or all bad.  In the meantime, I will continue to stare at my crystal ball & shake the magic 8-ball relentlessly… 

Have a great day, and I will talk to you soon,
;-D
Tracie DeMars
Real Estate broker 
Re/Max – Van Mall
360/ 903-3504 cell
360/ 882-3600 fax
www.traciedemars.com
traciedemars@aol.com

“Interested in free and non promotional home education classes?  Go to www.learningtobuyahome.com or www.freesellerclasses.com for local upcoming home BUYER and home SELLER classes, or facebook: Tracie DeMars Real Estate for my home buyer education blog.”
“Listen to the mustn’ts, child. Listen to the don’ts. Listen to the shouldn’ts, the impossibles, the won’ts. Listen to the never haves, then listen close to me… Anything can happen, child. Anything can be.” 
   – Shel Silverstein, American poet, cartoonist and composer, (1930 – 1999).

Hello!

Upcoming home buyer classes & home seller classes (both virtual & in person) are available on the http://www.LearningToBuyAHome.com & http://www.FreeSellerClasses.com websites!  
Once upon a time in the home buyer classes, I would talk about my first mortgage payment being at a 6.875% interest rate, and everyone in the class would gasp.  Then I would get questions about why it was so high.  I would laugh a bit, and say that in a more normal market… 6.875% is a great rate, and that in fact, my husband & I had been so very excited to get a loan under 7%!  The class attendees would shake their head and just say that rates like that were crazy….   I would then pull my Chicken Little act, and tell them to prepare because the government wouldn’t be buying down rates forever.  Ah….the good ole days…. for awhile there I felt a bit like Cassandra because no one believed me.  

…and here we are…  Yes, interest rates have gone back up.  Home prices are slowly adjusting.  However, now we have something else that people haven’t heard of in almost 2 decades…  Assumable Loans.  

I have a client with a 2.99% assumable loan, and as soon as I put it out there I have received daily phone calls from realtors (and lenders) who have no idea what it is.  Honestly though…why would they?  The vast majority of Realtors and Lenders have been licensed for 10 years or less, and it simply wasn’t a thing.  When interest rates were at an all time, historical, once in a lifetime, low… who cares if you could take over someone else’s loan at their interest rate?  …especially if you could get a lower rate???

Well, again, how times have changed.  Now, my interest rate of 6.875% on my first home sounds pretty good again, and assumable loans are back in fashion.  So, what is an Assumable Loan?  Let’s start with an example…

Let’s say I have a client who is selling their home for $500,000.  They a current loan (that they’re making payments on) with an interest rate of 2.99%.  Their loan balance is $375,000 and their current payment is $2,300 a month.  They have owned their current home for 5 years, and have 25 years left on their loan.  
For the right buyer, this is a deal of a lifetime!  The buyer can ‘assume’ the sellers current loan of $375,000 owed, 2.99% interest rate, $2,300 a month payment, and only 25 years left on the loan…. so what is the catch, right?   Well, the home is being sold for $500,000, so the remaining amount of $00,000 minus $375,000 ($125,000 for those of you without a calculator handy) would need to be made up with either cash at closing, or with a 2nd loan.  
Heads up…. 
** The buyer isn’t just buying the home for the current mortgage owed on the assumable loan (Sorry Peter who called me and yelled at me for 45 minutes that I was wrong and he just wanted to buy the home for the current amount owed on the assumable loan…. because obviously who wouldn’t?)  That is not the way it works…. 
** When you assume the loan, you assume all terms of the current loan. You don’t get to assume the loan, and then change it to a different loan because there is mortgage insurance on this one.  You can assume the current loan with the current terms, but if you want to change the loan type/terms…that would be refinancing…and you would lose the 2.99% interest rate.(Sorry Linda who wanted to make an offer, but didn’t want to pay mortgage insurance, and couldn’t understand why she just couldn’t drop the mortgage insurance on the current loan, or assume the current loan … but with a different loan type) 

So, if you are interested in a home with an assumable loan, there are questions your Realtor needs to ask…
1 – What type of loan is it currently?   2 – How many years are left on the loan?3 – What is the current amount owed on the loan?
4 – What is the current interest rate?
5 – What is the current payment?
6 – Does that payment include mortgage insurance?  Taxes? Homeowners Insurance?
If you decide to make an offer on the home, you and your Realtor make an offer just like on any home, and it is contingent still on the financing of assuming the current loan.  There will be additional papers to fill out from the lender/servicer of the current loan.  .
** Yes, you have to go through their pre-approval process, and be approved to assume the loan.  Just like any pre-approval process when buying a home, they want to make sure you have a current job, acceptable credit score showing that you pay your debts, that you have acceptable debt to income balance for the loan you are trying to assume, etc.  It is just like getting pre-approved for a normal loan.  (Sorry Wendy who was positive that an assumable loan was like a rent to own and couldn’t understand why she should have to go through a preapproval process when she just wants to take over the loan payments and rent to own the home until she can buy it.  I let her know that my clients want to sell to pay bills and buy another home.  She was shocked that the sellers would really want the money from the sell to pay off the other bills, and then who got nasty with me when I explained the process and told me that it was people like me keeping people like her down with my boot on her neck.  I don’t wear boots?)

** If you do not have the cash to bring to closing to cover the difference between the assumable loan and the purchase amount (because, yeah…it is a lot of money and most people don’t have that in their couch cushions), the other option is to get a 2nd loan to cover the difference.  This may not be the best option for many people because when the market crashed, a lot of people had 2nd loans, and walked away from them.  The banks took a hit on this….  The 2nd loan will most definitely be at a higher interest rate than current market rate.  How much?  It depends on the buyer, the lender/bank that they are getting the 2nd loan from, and how much of a 2nd loan they are getting.  Maybe you have some of the difference buried in a coffee can in the backyard, but not all of it.  A 2nd loan may be able to help cover the difference.  That is definitely something to talk with your lender about, and ask what other options they may have for you.  

**No, the seller will not carry the difference so you can make payments on it.  (Sorry Jerry, who for an hour tried to explain to me why it would be a good idea for him to assume the loan at the amount owed, and for my client to carry the difference.  He is good for it… he swore it to me.  When I told him that the seller wouldn’t be able to purchase a new home without a down payment and that they would still be on the title for this home… he was so surprised that the sellers would still be on title.  Sorry Jerry… you haven’t purchased the home if the seller is carrying the remaining amount.  It’s ok though… Jerry didn’t want the sellers to be on title if they couldn’t take his word that he would make the payments…. sounds legit, right?)

Oh my friends.. the assumable loan is a great option for a lot of people, and you will be seeing so much more of them as interest rates continue to go up.  Just like clothes and music, what goes around, comes around. If mullets can come back in fashion, it was only a matter of time before assumable loans did too.  Pretty soon, Aqua Net & shoulder pads will be everywhere as well. 
As great as an assumable loan is, it will not work for everyone.  I think for people who are selling their current homes, using their down payment and assuming the loan of their next home might be a  good option.  
We will, I think, see other assumable loan options for even first time home buyers.  If you are thinking about selling, ask your lender/loan servicer if you have an assumable loan.  If you are buying a home, have your Realtor ask the sellers if maybe they have an assumable loan.  Maybe the difference won’t be so great, but the rewards could definitely be worth it!  

In the meantime, yes, I will be adding this information in to the home buyer & home seller classes.  ….and Yes, my phone is always on, just please don’t yell at me anymore.  Have a fantastic Thanksgiving!!  
Have a great day, and I will talk to you soon,
;-D
Tracie DeMars
Real Estate broker 
Re/Max – Van Mall
360/ 903-3504 cell
360/ 882-3600 fax
www.traciedemars.com
traciedemars@aol.com

“Interested in free and non promotional home education classes?  Go to www.learningtobuyahome.com or www.freesellerclasses.com for local upcoming home BUYER and home SELLER classes, or facebook: Tracie DeMars Real Estate for my home buyer education blog.”
“Listen to the mustn’ts, child. Listen to the don’ts. Listen to the shouldn’ts, the impossibles, the won’ts. Listen to the never haves, then listen close to me… Anything can happen, child. Anything can be.” 
   – Shel Silverstein, American poet, cartoonist and composer, (1930 – 1999).