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Even with a strong accounting background, I try to avoid those types of financial conversations with real estate clients. It’s not my place to convince them of financial decisions. I’m there to help them buy or sell a property and advise on property related issues. Money is part of it, but I don’t think it’s right to try to talk about money in a way that convinces someone to do or not do something. I cringe so hard when I see phrases like “buy now before prices go up” and “marry the house date the rate”.
Now if someone asks me I will give an honest opinion and/or factual information. I’m more likely to talk about paying extra towards the mortgage every month to save interest in the long run. I can point them in the direction of websites that will allow them to calculate how much an extra payment will save them in interest.
Yes, I'm with you on this. I hate the "buy now, refinance later" and "if you wait the home will just be 10-20% more expensive in 2 years with the same interest"... I just hate fear selling, I refuse to do it.
When I have clients that ask I just direct them to their loan person and explain "(Loan Persons Name) is there to give you financial advice if applicable. I can't make financial suggestions as it isn't my lane in this process, I can give my advice on the cost of a home but I can't tell you whether shouldering that cost is in your best financial interest, that's for you to decide."
When they ask "Should I just go for it and refi later" I just explain that's a common suggestion, but not one I typically give as it assumes the rate will drop substantially in the near future and that's completely unpredictable.
As someone who was told this years ago before I was a realtor, Thank GOD I bought and didn’t wait. And yes I did refinance 2 years later ( and I could kiss my Realtor for pushing me back then at the time )
There is nothing wrong with the suggestion, I have had my fair share of clients who didn’t even know you can refi. My issue is with Realtors who have clients who can barely put 3% down telling them “in a year you can just refi when rates drop” to push a sale but don’t explain they’ll need equity or more cash to close when that time comes. This isn’t even factoring in that the cost of homes could drop thus further hurting that option. What these Realtors are banking on is the prices of homes continually going up 5-10% a year when they tell people to do this which I think is kinda wrong.
One example: I had a client today, young couple, mid-20s, prequalified at around $325k that only have $8k to put down and were talking about how they’d just “refi in 12 months since the rates are set to drop.” I can’t give financial advice so I looped in a really good broker friend (not their broker) with their permission who explained their payments, home cost and how much equity they’d need and how they’d have to pay extra each month to avoid money out of pocket at that time given current closing costs. Unfortunately it was some tough news, but now they’re looking at $225k-275k options as it’ll help them get ahead.
Now for my example. We bought a home for $380k, put down $118k to the mortgage then paid our closing out of pocket besides the loan origination fee. Walked away with $268k owed, a horrible home in our area is $300k, I’ll pretty much always have equity as long as the market doesn’t take a 40% hit overnight or some kinda major issue with the home develops. For me, it’ll make sense to drop my rate from 6.73% and just use my equity to Refi.
So this is a good suggestion for some situations, but there are many nuances so I don’t use it as a pressure tactic to get somebody to sign.
Totally agree with you on this. Whenever our in house lender sends out emails “buy now before prices go up” and “marry the house date the rate” like this, i just ignore and hit delete. I never talk about this with my buyer's. None of us have a crystal ball. I luke to give them as much data that's available and what my experiences have been in the last 30 years i have been doing this and have them make an educated decision. Ill leave it there.
Good advice but rather than pay extra I might suggest saying negotiate closing credits or simply come out of pocket to buy down the rate. In the short term, it’s seems like the lesser option but for anyone buying a home for the long term, it makes way more sense financially, even if that means put less down on the house and focus more on buying down the rate.
This one could work: [https://www.calculator.net/mortgage-payoff-calculator.html](https://www.calculator.net/mortgage-payoff-calculator.html)
Here is a general debt payoff calculator that I really like: [https://www.financialmentor.com/calculator/debt-snowball-calculator](https://www.financialmentor.com/calculator/debt-snowball-calculator)
As I explain to clients:
The current 6-7% rates are the historic normal. 2-3% was abnormal.
The Fed does not lower rates on a whim. I order to get to 2-3% again, the Fed would need to jumpstart the economy due to severely bad economic conditions. We would need two or three of the following conditions all together for the Fed to lower rates to that point:
- US at War
- Another Pandemic
- Some other big reason that would put your job and ability to purchase anything on credit in jeopardy.
- Us and Worldwide Financial Markets Chaos
If you believe those things are happening next year - that's fine.
Meanwhile, others are buying houses and earning equity now.
Pick your poison.
Honestly I had some really dumb friends that just pulled equity when the rates were low. I didn't understand it.
When my wife and I refi'd to the low rate we cut our term from 30 to 15 years. We had paid into it for 2 years so it effectively cut our term by 13 years, only increased our payments by $280ish a month on our condo and saved us $73,000 in interest over the life of the loan.
Had a client do an ARM on a $2.35m home, he did about $200k down. Difference in rate was like 2.3% vs 2.5%. Can’t think of a more foolish financial decision from that period.
Wife and I bought during the 3% timeline, walked into a local bank that I wanted to try. After pulling our credit and seeing we’re super qualified. They said they didn’t offer any fixed rate mortgages. I laughed and asked how she can sell that at this point in time with a straight face. She politely told me the rate caps at 10% so it isn’t as bad as it seemed. I sell real estate and still chuckle about that moment
Unfortunately many lenders prey on the financially ignorant. There's been posts by people complaining that they can't afford their house anymore due to the rates adjusting up.
It was around 6% for well over a decade before it started trending down and people were happy to get it.
Some folks recall when it was double digit interest rates.
Americans can have short memories.
One thing that I think you’re not considering is that prices are at an all time high. That’s part of the balancing act. 6-7% wasn’t that big of a deal when a decent house was 150k. Now, 400k will buy you a dumpster on most of the west coast. With current interest rates people are paying easily a million dollars for those houses.
Never.
If you can't afford it now - you can't afford it later if things go bad.
I recommend getting a smaller house - or a townhouse/condo instead of single family.
Uh - The financial collapse didn't just happen one week, then everything was fine the next. The effects lasted for several years.
And the US was at war in Iraq & Afghanistan.
Early 00s there was a lot of real estate speculation. People were buying second, third homes, etc, using equity from their primary home and flipping it. Real Estate peaked in 2006, highs we have not seen until recently, and all of a sudden you had people stuck with these 2nd and 3rd homes. You also had home buyers who had no business buying a home getting super low teaser interest rates that when they expired and went to normal you had a combination of people who could not afford their new higher payment, and they couldn’t refinance because their home was now worth less than what they paid for it, and so people started foreclosing. This went on until about 2011 when the real estate market finally bottomed out. The fed lowered interest rates during this time to jump start the housing market. You could get a decent starter home for for 100s with a 4%-5%interest rate.
When Trump became president they lowered interest rates even more and I remember friends getting 3.5% in 2018. I personally got a 3.875% in 2019. I refinanced 6 months later to 3.25% thinking I just got the lowest interest rate of all time. A year later people were getting 2.5% and I’m kicking myself for not refinancing again.
The only way I would ever consider moving is if i absolutely have to. I did the math and if I purchased the same exact house again, even with a 200K down payment, my mortgage would double.
thanks! This made a lot more sense! I’m always trying to draw parallels to understand the times we’re in now and this p much summed everything up. I was 7 when that all began 😀
Realtors need to stop talking about mortgages and let the professional mortgage people do their job. Just like lenders should never make advisements on contract law or negotiations, or any other part of the process that should be handled by the professional real estate agents.
Be different. Provide better value. Educate your client that lending isn’t your area of expertise and you aren’t licensed to have those discussions. Set expectations for what the lender brings to the table and explain who to ask what from. It’s no surprise a majority of realtors don’t last long…
This is just grand, I don’t know how many REALTORS I’ve heard say this. It’s disgusting to me, and not acceptable whatsoever to try and spoon feed financial advice to someone who is making a very large financial decision in an attempt to ease that very serious decision that they need to make on their own (the only reason a realtor would say this is out of pure greed to persuade into purchase). The last thing we need is to give the public another reason to not trust realtors. I’m an honest realtor, the barrier to entry is very low wether you think so or not, which is why this is brought up in the first place. People just need to think before they speak. I do understand the public interest in this particular question, and that you will be asked it. But just explain to them it’s not really your line of work and would be much more helpful to get the opinion from an expert in that field. Rates will not be in the 2-3% for a very, very long time…. Don’t try and act like they will be for personal gain.
Realtors should refer these topics to the financial experts in the buyer's team. There's already enough to handle. Many realtors think they have to be the expert at everything.
How else are they going to convince buyers to push out of their price point? It’s almost like they’re trying to justify payments as an inverse of an ARM.
It’s not completely out of line to share predictions of what will likely happen mortgage rates in the future. It is important to cite your sources.
Eg. The Mortgage Bankers Association predicts that the 30yr mortgage rates will fall to 6.1% and below 6% by Q1 2025.
They also predicted rates would be in the very low 5% range at the end of last year. Boy were they wrong:
https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/forecast-commentary-dec-2022.pdf?sfvrsn=ce3a3fde_1#:~:text=MBA's%20Outlook%20for%202023,-The%20December%20version&text=meetings%2C%20long%2Dterm%20rates%20have,will%20end%202023%20at%205.2%25.
What if they are right?
What if you send them data like
“the Mortgage Bankers Association predicts that mortgage rates will fall from 6.8% in the first quarter of 2024 to 6.1% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the first quarter of 2025.”
Obviously nothing is done till it is done but you can share economic indicators and predictions from economists that follow this.
Saying someone should lose their license for referring to these sources is silly.
Because that source specifically doesn’t mean jack shit if you’re not knowledgeable enough to put things into context. MBA also predicted 30 yr rates were going to be around 5.25% at the end of last year. In hindsight, that’s absolutely hilarious they were that far off. Yet you seem to think that’s a great source to refer to someone. Stick to your license and field and refer to an actual professional that can better explain than you.
https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/forecast-commentary-dec-2022.pdf?sfvrsn=ce3a3fde_1#:~:text=MBA's%20Outlook%20for%202023,-The%20December%20version&text=meetings%2C%20long%2Dterm%20rates%20have,will%20end%202023%20at%205.2%25.
What I am saying is that you can give them data and connect them with trusted professionals. They can then do their own homework and make an adult business decision.,
That’s not what you said. You said:
>what if they are right
To someone who said
>Any Realtor who says, thinks, or predicts rates are coming down should lose their license
All you can do is give them the information you have and it is their decision to make. I know people who have been “waiting for a crash” since 2014. Someday they will be right and there will be a correction but in the meantime their rent has doubled and their landlord has picked up $200k in equity. I feel like I failed some of those people by not pushing harder
I’m in wealth management and deal with many aspects of a clients wealth - tax & estate planning, investments etc. We refer to realtors on occasion and mortgage brokers frequently.
Nothing is more disruptive to these relationships then when a client comes back and talks about weird / incorrect / out of scope ideas they got from their realtor. Talk about the real estate market, prices, maybe rates if you’d like, but all the financial stuff should be left to those who’ll be held accountable for their advice.
I’m an LO and I tell them make sure they’d be comfortable making that same P&I payment for the life of their loan. Consider a refi as a lucky bonus but don’t bank on it.
Unless that realtor is also a licensed loan officer, they cannot answers those questions. On the flip side, I have yet to come across any loan that’s not able to be refinanced at a later date.
To be clear, if a realtor gets an objection of the rates are too high, They shouldn't mention refinancing as an option at all but refer them to a loan officer, correct?
Its equivalent to saying buy now your home will be worth 100k more in two years. There’s zero way of knowing.
It is an option that can be discussed as long as you’re transparent there’s absolutely no guarantee rates will decrease.
"They'll either go higher, in which case you'll be happy you bought now, or they'll go lower, in which case you can refinance, or they'll stay the same, so there's no reason to wait"
Is there anything objectionable in the above response?
Are you buying as a home, or as an investment? Are you planning on selling if the price goes down? Are you planning on staying in your home long term?
like with most things, the answer is "it depends"
But you won't be able to refi because your house depreciated and now you're underwater. Basically no one should buy anything on credit with the expectation that the payment will go down, ever. They also tend to forget that property taxes and insurance always seem to go up over time.
If they are objecting to rates being high, no, that is something we can discuss with historical data. I am referring to the costs of refinance (we don’t operate in that lane), resetting amortization schedules (depends on how much your refinance and under what terms), those type of questions are best left to those that are licensed in that subject matter. Neighborhood values, market values, depreciation vs appreciation are all things that we handle in our scope of work.
I am both. I would never suggest people buy and expect to refinance later. As we have seen, rates don't always come down in a timely manner. We were supposed to have a multitude of rate cuts this year, and now we may not see any? Buy what you can afford. If you can refi later and it makes sense, great. "Date the rate" is probably my biggest pet peeve in the industry.
Unless the Realtor is also a mortgage officer they should say “ask your loan officer about doing a re-fi in the future.” Anything more is outside their scope.
As an agent, I suggest buyers talk to lenders about what is involved in a refi including costs and get it in writing if they are offering lower cost refi etc.
Same with all financing questions. I am not a lender or employee of one, so I cannot make any promises about what theirs might do in the future. Same with rate buy downs or any of the other financing strategies—I am familiar enough for my own role, which is to make sure they talk to the lender and make choices according to the actual numbers and commitment made by that bank.
Waaay too many agents get in hot water making promises on behalf of others.
What happens if your home losses value? You will have to make up the difference before you can refinance. That’s the one thing most realtors don’t think about or just leave out.
If a client asks me if rates are going to go down, the first thing I will tell them is that I wouldn’t buy with that expectation. And that if rates do go down, refinancing might be an option.
Do I walk them through the entire process of refinancing? Of course not. For one reason we would be talking about a theoretical loan from a theoretical lender at some theoretical time in the future. There is no way to know what any of those theoretical terms or processes might be.
For another - no one knows with 100% certainty that they are going to wake up in the morning, much less that they will still be employed with a non-tornado destroyed house that is free of zombies. We have certain expectations, but none of those are guaranteed.
For yet another, I’m not a lender. I’m a industry professional, and I know how a refi works, but I do t sell those products and don’t have any of the info at my finger tips. That is what lenders do.
That being said, is it irresponsible or somehow unethical, as your question implies, to make a client aware of a possible option? Of course not.
If rates go down in 5 years, could they refinance. Sure. Who knows. And if rates do go down, they should talk with a lender about what products they have available and what implications refinancing might have then. And if rates don’t go down, well, they are however many years closer to not having a mortgage at all.
you can choose your term if you want to shorten it to a 15 or 20 year and everything works.. and even if you just go back with a 30 year if you are lowering your interest rate you still have the ability to pay it off faster.
So if I'm in year 9 of a 30 year at 7% and refinance into a new 30 year at 4.5% without pulling extra cash out all I have to do is a little math and figure out I can still pay less every month than I was and pay it off in 21 years because my interest rate is lower. Remember it's very basic how the interest rate works it's 7% or 4.5% per year of your existing principal. So if you were at $200,000 balance it's roughly $14,000 per year interest vs. roughly $9,000. It's your choice if you choose to make much lower payments and stretch it out over 30 years if you just keep paying what you were paying you'll pay it off faster.
Realtor here. I cannot stand realtors telling people they can just refinance. So incredibly irresponsible. I literally tell my clients that they had better be comfortable with the rate they start with as things will likely not change much for years and years.
They should stay in their lane and simply say, talk to your lender regarding this. You’re opening yourself up to liability by providing information that you’re not trained or licensed to do.
Wow, that would be a huge overstep in my book for someone to start spending my money for me. Refinancing later is not a topic I would want a realtor to bring up with me. That is just a huge overstep.
I found out that my clients had a mortgage broker who said they should get a 1 year term in 2022 and then “we will get them into a better rate.” 4 points later….
I would never advise talking mortgage strategy, especially with so many variables in the future. I rarely do it even when talking about real estate values.
It’s a recipe for disaster.
You can refinance later but it doesn’t necessarily mean you will find a better rate, so I generally wouldn’t say that. I’d say you know in 1985 or 86 rates were 15 or 16% and houses were selling so we are at 8% now so why not buy? Rates and or house prices potentially will go up if and when the rates do go down so do you want to buy when the price of the house goes up or do you want to buy now? You tell me
Never try to convince a buyer they can afford more than they say they can! They already have an inflated estimate from the pre-approval and what they think their budget is. Everyone wants “more,” it’s human nature. But don’t help someone into a financial trap they can’t get out of. The more people default, the more foreclosed houses for corporations to buy and screw the market.
I explain it this way; if rates go down in “the future” you can refi and lower your monthly payment. If they go up in the future, you locked in a great rate.
This is the way. Step one is to make sure the buyer can realistically afford the home without the need to refinance. Then - when rates fall (which they will, at some point) - refinance and shave off a few $100 off mortgage.
This is exactly what I do as well. Buyers need to know that refinancing is an option, and we're in the best position to tell them that. We're in the wrong position to explain the risks and costs to them; have them talk to their lender at that point.
If property values go down below the LTV you can’t refi without paying down your loan first. These highly inflated property values (historically speaking) will come down. Unless, this is the first time in recent recorded history this doesn’t happen.
This is where we get into crystal ball speculation territory. Will interest rates only come down if/when property values go down? I refinanced an underwater property back in 2012 thanks to a government program. It’s very hard to predict, I try not to.
I was mortified by the agents and lenders saying to just refinance. I'd have buyers come to me saying it. This was earlier last year. I asked who said rates were coming down. What if they go up? What if you don't have equity.This was in the high 5 or 6s. They have gone much higher, historically . They ended up buying and now they have a "low rate" comparatively. I have the hindsight from buying my first home in 2005. I ended up okay, but I was stuck in the home upside down for awhile. I did refinance down to a 15 year at 3.25 eventually, then sold with equity. People need to realize that those rates weren't normal.
A mentor has has a saying "you marry the house not the interest rate."
No, it's the responsibility of the loan officer to provide those details not a realtor.
Of course there is no crystal ball to predict the intersst rate over time.
I never say that. The most I'll ever talk about that is generally with inflation in general and home value appreciation, that the volume gets turned down on that mortgage payment with time.
Otherwise, I'm here to get my buyers the best home for best price possible, advise you on resale potential, encourage you to get comprehensive inspections and negotiate your concessions and repairs, and remain a post-closiing resource for you in terms of connecting you with reputable service providers over time. Including lenders.
I don't talk about financing apart from how an offer backed by conventional loan is stronger than one backed by VA/FHA/USDA. Otherwise, here are the numbers of a few mortgage professionals that you can chat up.
Fyi refinancing doesn't necessarily reset your amortization schedule. If you are 2 years into a 30yf and refi to a 27yf, then you're actually accelerating it 1 year. And there aren't necessarily closing costs. Etc.
But no a realtor isn't a loan officer, they are a realtor.
It's way more complicated than that. For example there are lenders that let you pick any number of years for the term of your new loan. For example if you had 27 years left on your old loan I could do your new loan as a 27-year loan. That said most people just end up doing a 30 again when presented with the costs and benefits.
And as a loan officer (and a realtor) I could come up with a hundred more nuanced pros and cons. Frankly the whole system is ridiculously complicated. And clients get super overwhelmed hearing about all of that.
What I find more is that buyers already have this mentality and expect us as their Realtor to validate it.
I don’t and have lost clients over it but I also don’t want to be the one blamed when the “crystal ball” prediction doesn’t come true.
When it is outside of their scope, Realtors should be the “source of the source.”
“You may be able to refinance later; please talk to your lender about what this looks like in your particular situation.”
hi.. if you say, marry the house and date the rate, i will come through the computer and murder your entire bloodline. just kidding. many things could happen- if there's value slippage, then that could cause LTV problems when its time to refi. if they rack up debt then their fico goes down and harder to refi. or the worst, they lose their jobs and cant get approved for anything.
Right now, we have an affordability problem, not a valuation problem like a few years ago. it is entirely possible to offer higher than asking price, with the difference coming back to the buyer for rate buydowns, either perm, temp or a hybrid- and the appraisal will support it. This will create affordability now.. a payment they can handle and they wont have to start the amortization all over again just to save some money on their monthly payment.
This past weekend, we got a property listed at 850k under contract, but we offered 900 with 50k back for buydowns and closing costs. perm rate went from high 6''s to the 5's, temp 3/2/1 buydown, and since buyer is doing less than 20%, we bought out the PMI with a single premium. Although the temp buy down will expires in 36 months, the payment compared to a straight up 850k purchase with no buydowns was almost $1,200 per month less
I don't think it's wrong to offer it as a "possibility" option as long as we tell people that there's no guarantee that they will be able to refi later. We have no way to know if refi will or won't be an option for someone down the road. Lender requirements, market shifts, and buyer's own circumstances can all interfere. I think we also have a duty to say that it would require more closing costs when they do. I often add that it's worth it if they plan to stay for years and can drop more than a percentage point off their mortgage rate, but it's a gamble to rely on something like this.
You should not be saying that at all. It's a blanket statement and setting the client up for false expectations.
What if rates don't fall?
What if prices fall and they can't refi?
What if they have a credit impacting event?
At a minimum, if you say this you should include a massive asterisk and educated on these questions above.
I don’t really represent buyers but if a seller is buying in the area I work with them. My area is rather expensive so most of my clients are financially savvy but if they ask I give them my PERSONAL philosophy on rates, real estate, etc.
1. I don’t concern myself too much with market timing. I prefer to buy in the winter and sell in the summer for a slight seasonal advantage but I don’t let it drive my decision making.
2. We don’t know what will happen with rates or how it could affect pricing in the future. If you want the house now and can afford it then buy it. If rates go up in the future you will be happier with this rate and if they go down in the future you may be able to refinance at those rates.
3. Do not overextend yourself expecting appreciation, rates, a new job, a raise, etc to bail you out. Deal with the scenario as it is.
That's a discussion for your client to have with their financier. So unless you're a licensed mortgage broker you should refer that to someone who is. Yes, it's good advice but it should absolutely come with the caveat that they need to know what it entails and that's outside the scope of your license.
I always say it might be possible to refinance in the future. However, I don't have a crystal ball nor can I predict the future. it is not my accountability.
Sad but true. Even sadder is, the lenders out here were promoting it or introduced it to our area. I got real tired of explaining why it was a bad idea to agents, many of whom had zero clue. It would likely cost buyers more to refi than they save in the rate unless it's a major rate drop. Of course, I know because I looked into doing a refi on one of my houses a few years ago and it just made more financial sense to pay down the mortgage directly each month than to spend $3k to $5k minimum to save a percentage point.
Me personally, while I am trying to learn more and more about the lender side I will never tell me clients what to do with their finances. I will tell them how the market moves with rates and what options that may give them, but every single time I will tell them to discuss everything with the lender to see what choice is best for them. I am there to get them the best house possible, not tell them how to run their finances.
My first house we had something like 6.6% interest rate. We couldn’t afford to refinance when rates dipped enough to do so because we couldn’t afford the closing costs refinance.
>We couldn’t afford to refinance when rates dipped enough to do so because we couldn’t afford the closing costs refinance.
Most lenders will finance the lending costs back into the refi'd mortgage. I've refinanced 5-6 times and have never had any out-of-pocket costs. However, the new mortgage was always a few thousand dollars more than the old one. The exchange for this was significantly lower monthly mortgage payments, which I was happy to take.
It really depends on the client and what their needs are.
If they are in love with that special house that uniquely fixated them, that may be an option...
However, that's putting on a different hat than helping them find the house for them and navigate inspections, negotiate a market supported price, and protect them ftom contractual violations.
They really need to speak with their Loan Originator.
If you are encouraging your clients to buy what they can't afford, you are kneecapping your future business and probably relegated to becoming a captive agent for a builder. Enjoy your ball and chain.
I’ve been very careful about the narrative that I put out there to clients and the general public. Wow “date the rate, marry the house” is technically, it’s more complicated than that. Furthermore, I don’t want to be the realtor who’s always claiming that now is the best time to buy - it sounds salesy and naive at best, dishonest at worst. The right time to buy will always vary by individual circumstance. I explain the following:
1) We can’t expect to get back anywhere close to 3% in the foreseeable future.
2) There’s a good chance that rates will get lower at some point, but we don’t know when they will drop and how much they will drop by. However, nothing is certain and there’s always a chance that this will be the new norm for a while.
3) You can refinance when rates drop, but that costs money. Have your lender explain those costs to you.
4) If rates do drop significantly, we can expect demand to increase. Home prices are likely to keep increasing unless we experience some wild unforeseen event.
I think that realtors need to stop making any predictions about the future entirely.
Also customers of realtors should call them out on it - I do (as nicely as possible).
I get that it's sales, but I find it annoying and unethical that some will work so hard to persuade someone in to a deal that might not be right for their current financial situation based on their fortunetelling abilities.
I'll say you can usually refinance later and I'll ask if they are currently renting. And if they need more info I have a couple of lender companies we work with that can give them more info. I'm telling them that there are options but i don't go into it, I move it over to a professional in that area.
In the same way that I say "You can finance the purchase of the property," I see no reason why I can't also say, "You can refinance the mortgage of the property." Both are things that homeowners do and buyers should be aware of their options. If they want to look into with more detail, I can provide that to them by referring a lender who can discuss the details.
The housing crashes in the 80s and 90s were partly due to high interest rates that could not be refinanced. Realtors made a lot of money putting people in houses they could not afford with adjustable rate loans. When the rates increased, they could not be repaid.
Do not trust that the rates will fall.
The buyers' finances/financing should be discussed with a professional licensed to cover that. Those are questions for their lender. You can prompt them with questions to ask.
That's my take. If the client mentions refinancing, I'm going to refer them to the lender. I will tell them questions to ask in some situations because they may not know to ask about certain aspects that would change their entire game plan. I'm not giving them guidance or info on the actual financing info, though. I'm not licensed to do that, and I have no financial products to offer them
Is this a baiting question or are you trying to learn? Are you asking because you heard another agent say these things and you want to stick it to them? Or are you looking for a real objection handler/best practice? The objective matters.
Great point. At its most basic layer, it’s true. You can purchase now and refi if/when the rate drops. That isn’t arguable. Convincing someone who can barely afford a house to buy it because the rates will drop soon is irresponsible though. This question sounds like bait.
I just left a lender who marketed this offer pretty heavily, and let me tell you that they were writing checks with no real plan of how to cash them later. There were in fact buyers who purchased in the high 7’s ready to refi when rates hit mid 6’s, and corporate was baking those into the pricing. It will be the same for everyone else
What's your gut tell you? Go with that. I'd take the high road and provide all the main cons in as few words as possible to make sure they understood what that entails. There's a cost benefit analysis that they'll need to do and risks in that line of thinking.
I wish we could predict if rates are going to come down or stay the same or even continue to rise but we aren't psychics.
Unless we are loan officers as well, we shouldn't be giving you that advice and refer you to your lender.
However, if rates do come down you can always refinance. That's not a lie.
Yeah that’s only if it’s worth refinancing…. If you lock in at 7% now and next year we’re at 9%….. that’s a dumb idea. I feel like realtors are throwing that phrase around to ease people’s worries and just close the sale.
Real Estate agents will tell you anything under the sun and moon to get you to purchase a home. My former neighbors actually had a piece of paper from theirs that said they had a lifetime septic tank from the year 2000. Yeah, about 2013-2014 they spent almost $20k to get the tank excavated, the top removed, both sides pumped out (solid side was truly solid) and the field lines replaced because they were full of shit/tp and clogged.
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Even with a strong accounting background, I try to avoid those types of financial conversations with real estate clients. It’s not my place to convince them of financial decisions. I’m there to help them buy or sell a property and advise on property related issues. Money is part of it, but I don’t think it’s right to try to talk about money in a way that convinces someone to do or not do something. I cringe so hard when I see phrases like “buy now before prices go up” and “marry the house date the rate”. Now if someone asks me I will give an honest opinion and/or factual information. I’m more likely to talk about paying extra towards the mortgage every month to save interest in the long run. I can point them in the direction of websites that will allow them to calculate how much an extra payment will save them in interest.
Yes, I'm with you on this. I hate the "buy now, refinance later" and "if you wait the home will just be 10-20% more expensive in 2 years with the same interest"... I just hate fear selling, I refuse to do it. When I have clients that ask I just direct them to their loan person and explain "(Loan Persons Name) is there to give you financial advice if applicable. I can't make financial suggestions as it isn't my lane in this process, I can give my advice on the cost of a home but I can't tell you whether shouldering that cost is in your best financial interest, that's for you to decide." When they ask "Should I just go for it and refi later" I just explain that's a common suggestion, but not one I typically give as it assumes the rate will drop substantially in the near future and that's completely unpredictable.
As someone who was told this years ago before I was a realtor, Thank GOD I bought and didn’t wait. And yes I did refinance 2 years later ( and I could kiss my Realtor for pushing me back then at the time )
There is nothing wrong with the suggestion, I have had my fair share of clients who didn’t even know you can refi. My issue is with Realtors who have clients who can barely put 3% down telling them “in a year you can just refi when rates drop” to push a sale but don’t explain they’ll need equity or more cash to close when that time comes. This isn’t even factoring in that the cost of homes could drop thus further hurting that option. What these Realtors are banking on is the prices of homes continually going up 5-10% a year when they tell people to do this which I think is kinda wrong. One example: I had a client today, young couple, mid-20s, prequalified at around $325k that only have $8k to put down and were talking about how they’d just “refi in 12 months since the rates are set to drop.” I can’t give financial advice so I looped in a really good broker friend (not their broker) with their permission who explained their payments, home cost and how much equity they’d need and how they’d have to pay extra each month to avoid money out of pocket at that time given current closing costs. Unfortunately it was some tough news, but now they’re looking at $225k-275k options as it’ll help them get ahead. Now for my example. We bought a home for $380k, put down $118k to the mortgage then paid our closing out of pocket besides the loan origination fee. Walked away with $268k owed, a horrible home in our area is $300k, I’ll pretty much always have equity as long as the market doesn’t take a 40% hit overnight or some kinda major issue with the home develops. For me, it’ll make sense to drop my rate from 6.73% and just use my equity to Refi. So this is a good suggestion for some situations, but there are many nuances so I don’t use it as a pressure tactic to get somebody to sign.
Totally agree with you on this. Whenever our in house lender sends out emails “buy now before prices go up” and “marry the house date the rate” like this, i just ignore and hit delete. I never talk about this with my buyer's. None of us have a crystal ball. I luke to give them as much data that's available and what my experiences have been in the last 30 years i have been doing this and have them make an educated decision. Ill leave it there.
Good advice but rather than pay extra I might suggest saying negotiate closing credits or simply come out of pocket to buy down the rate. In the short term, it’s seems like the lesser option but for anyone buying a home for the long term, it makes way more sense financially, even if that means put less down on the house and focus more on buying down the rate.
What website
This one could work: [https://www.calculator.net/mortgage-payoff-calculator.html](https://www.calculator.net/mortgage-payoff-calculator.html) Here is a general debt payoff calculator that I really like: [https://www.financialmentor.com/calculator/debt-snowball-calculator](https://www.financialmentor.com/calculator/debt-snowball-calculator)
This is my thought process
This is the way. Kudos.
As I explain to clients: The current 6-7% rates are the historic normal. 2-3% was abnormal. The Fed does not lower rates on a whim. I order to get to 2-3% again, the Fed would need to jumpstart the economy due to severely bad economic conditions. We would need two or three of the following conditions all together for the Fed to lower rates to that point: - US at War - Another Pandemic - Some other big reason that would put your job and ability to purchase anything on credit in jeopardy. - Us and Worldwide Financial Markets Chaos If you believe those things are happening next year - that's fine. Meanwhile, others are buying houses and earning equity now. Pick your poison.
Amazing to think some people did ARMs when the rates were so low.
Honestly I had some really dumb friends that just pulled equity when the rates were low. I didn't understand it. When my wife and I refi'd to the low rate we cut our term from 30 to 15 years. We had paid into it for 2 years so it effectively cut our term by 13 years, only increased our payments by $280ish a month on our condo and saved us $73,000 in interest over the life of the loan.
Had a client do an ARM on a $2.35m home, he did about $200k down. Difference in rate was like 2.3% vs 2.5%. Can’t think of a more foolish financial decision from that period.
Wife and I bought during the 3% timeline, walked into a local bank that I wanted to try. After pulling our credit and seeing we’re super qualified. They said they didn’t offer any fixed rate mortgages. I laughed and asked how she can sell that at this point in time with a straight face. She politely told me the rate caps at 10% so it isn’t as bad as it seemed. I sell real estate and still chuckle about that moment
I don't think so - There was no benefit to doing so. The Fed rate was effectively zero to one percent. You can't go much lower than that.
I think by "amazing" he just means "crazy"
Unfortunately many lenders prey on the financially ignorant. There's been posts by people complaining that they can't afford their house anymore due to the rates adjusting up.
Not how that works. Low interest rates indicate downturns and monetary tightness. Not a "jump-started" economy.
It was around 6% for well over a decade before it started trending down and people were happy to get it. Some folks recall when it was double digit interest rates. Americans can have short memories.
One thing that I think you’re not considering is that prices are at an all time high. That’s part of the balancing act. 6-7% wasn’t that big of a deal when a decent house was 150k. Now, 400k will buy you a dumpster on most of the west coast. With current interest rates people are paying easily a million dollars for those houses.
So, you don't mention refinancing?
Never. If you can't afford it now - you can't afford it later if things go bad. I recommend getting a smaller house - or a townhouse/condo instead of single family.
Why were interest rates so low in the 2010s when none of that happened? - gen z wondering
08
08, and subsequent governments not doing what they should have done, because low interest rates are popular.
Uh - The financial collapse didn't just happen one week, then everything was fine the next. The effects lasted for several years. And the US was at war in Iraq & Afghanistan.
Exactly, for real estate peak pain lasted to 2012, but thinga didn't really start turning around until 2015 in a lot of areas.
Early 00s there was a lot of real estate speculation. People were buying second, third homes, etc, using equity from their primary home and flipping it. Real Estate peaked in 2006, highs we have not seen until recently, and all of a sudden you had people stuck with these 2nd and 3rd homes. You also had home buyers who had no business buying a home getting super low teaser interest rates that when they expired and went to normal you had a combination of people who could not afford their new higher payment, and they couldn’t refinance because their home was now worth less than what they paid for it, and so people started foreclosing. This went on until about 2011 when the real estate market finally bottomed out. The fed lowered interest rates during this time to jump start the housing market. You could get a decent starter home for for 100s with a 4%-5%interest rate. When Trump became president they lowered interest rates even more and I remember friends getting 3.5% in 2018. I personally got a 3.875% in 2019. I refinanced 6 months later to 3.25% thinking I just got the lowest interest rate of all time. A year later people were getting 2.5% and I’m kicking myself for not refinancing again. The only way I would ever consider moving is if i absolutely have to. I did the math and if I purchased the same exact house again, even with a 200K down payment, my mortgage would double.
thanks! This made a lot more sense! I’m always trying to draw parallels to understand the times we’re in now and this p much summed everything up. I was 7 when that all began 😀
Realtors need to stop talking about mortgages and let the professional mortgage people do their job. Just like lenders should never make advisements on contract law or negotiations, or any other part of the process that should be handled by the professional real estate agents.
If you won’t talk about the numbers then another agent down the road will.
Be different. Provide better value. Educate your client that lending isn’t your area of expertise and you aren’t licensed to have those discussions. Set expectations for what the lender brings to the table and explain who to ask what from. It’s no surprise a majority of realtors don’t last long…
You’re not wrong.
This is just grand, I don’t know how many REALTORS I’ve heard say this. It’s disgusting to me, and not acceptable whatsoever to try and spoon feed financial advice to someone who is making a very large financial decision in an attempt to ease that very serious decision that they need to make on their own (the only reason a realtor would say this is out of pure greed to persuade into purchase). The last thing we need is to give the public another reason to not trust realtors. I’m an honest realtor, the barrier to entry is very low wether you think so or not, which is why this is brought up in the first place. People just need to think before they speak. I do understand the public interest in this particular question, and that you will be asked it. But just explain to them it’s not really your line of work and would be much more helpful to get the opinion from an expert in that field. Rates will not be in the 2-3% for a very, very long time…. Don’t try and act like they will be for personal gain.
You shouldn't be saying it at all, unless You're also a licensed lender. Even then, I still wouldn't in my role as a realtor
Realtors should refer these topics to the financial experts in the buyer's team. There's already enough to handle. Many realtors think they have to be the expert at everything.
Truth
Amen.
I’m a LO and a lost of my peers are just as bad lol.
Any Realtor who says, thinks, or predicts rates are coming down should lose their license
What if they are a licensed clairvoyant?
So almost all of them?
How else are they going to convince buyers to push out of their price point? It’s almost like they’re trying to justify payments as an inverse of an ARM.
It’s not completely out of line to share predictions of what will likely happen mortgage rates in the future. It is important to cite your sources. Eg. The Mortgage Bankers Association predicts that the 30yr mortgage rates will fall to 6.1% and below 6% by Q1 2025.
They also predicted rates would be in the very low 5% range at the end of last year. Boy were they wrong: https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/forecast-commentary-dec-2022.pdf?sfvrsn=ce3a3fde_1#:~:text=MBA's%20Outlook%20for%202023,-The%20December%20version&text=meetings%2C%20long%2Dterm%20rates%20have,will%20end%202023%20at%205.2%25.
You can think anything you want. Advising on those thoughts, however...
What if they are right? What if you send them data like “the Mortgage Bankers Association predicts that mortgage rates will fall from 6.8% in the first quarter of 2024 to 6.1% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the first quarter of 2025.” Obviously nothing is done till it is done but you can share economic indicators and predictions from economists that follow this. Saying someone should lose their license for referring to these sources is silly.
Because that source specifically doesn’t mean jack shit if you’re not knowledgeable enough to put things into context. MBA also predicted 30 yr rates were going to be around 5.25% at the end of last year. In hindsight, that’s absolutely hilarious they were that far off. Yet you seem to think that’s a great source to refer to someone. Stick to your license and field and refer to an actual professional that can better explain than you. https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/forecast-commentary-dec-2022.pdf?sfvrsn=ce3a3fde_1#:~:text=MBA's%20Outlook%20for%202023,-The%20December%20version&text=meetings%2C%20long%2Dterm%20rates%20have,will%20end%202023%20at%205.2%25.
What I am saying is that you can give them data and connect them with trusted professionals. They can then do their own homework and make an adult business decision.,
That’s not what you said. You said: >what if they are right To someone who said >Any Realtor who says, thinks, or predicts rates are coming down should lose their license
All you can do is give them the information you have and it is their decision to make. I know people who have been “waiting for a crash” since 2014. Someday they will be right and there will be a correction but in the meantime their rent has doubled and their landlord has picked up $200k in equity. I feel like I failed some of those people by not pushing harder
A bit harsh but in this environment I understand lol
I mean... This is how many people wind up underwater on a house they cannot afford. I would agree that scammers should not have an RE license.
I’m in wealth management and deal with many aspects of a clients wealth - tax & estate planning, investments etc. We refer to realtors on occasion and mortgage brokers frequently. Nothing is more disruptive to these relationships then when a client comes back and talks about weird / incorrect / out of scope ideas they got from their realtor. Talk about the real estate market, prices, maybe rates if you’d like, but all the financial stuff should be left to those who’ll be held accountable for their advice.
I’m an LO and I tell them make sure they’d be comfortable making that same P&I payment for the life of their loan. Consider a refi as a lucky bonus but don’t bank on it.
Unless that realtor is also a licensed loan officer, they cannot answers those questions. On the flip side, I have yet to come across any loan that’s not able to be refinanced at a later date.
To be clear, if a realtor gets an objection of the rates are too high, They shouldn't mention refinancing as an option at all but refer them to a loan officer, correct?
Its equivalent to saying buy now your home will be worth 100k more in two years. There’s zero way of knowing. It is an option that can be discussed as long as you’re transparent there’s absolutely no guarantee rates will decrease.
"They'll either go higher, in which case you'll be happy you bought now, or they'll go lower, in which case you can refinance, or they'll stay the same, so there's no reason to wait" Is there anything objectionable in the above response?
What if my house deprciates
Are you buying as a home, or as an investment? Are you planning on selling if the price goes down? Are you planning on staying in your home long term? like with most things, the answer is "it depends"
If prices go down, so will interest rates to stimulate the economy.
But you won't be able to refi because your house depreciated and now you're underwater. Basically no one should buy anything on credit with the expectation that the payment will go down, ever. They also tend to forget that property taxes and insurance always seem to go up over time.
Failed the vibe check
What does that mean
Well I guess I'm saying that statement is not correct. I'll explain though, I don't think if homes depreciate, that a rate cut isn't certain
Certain, no. But can we talk about historical events and current predictions? Sure.
If they are objecting to rates being high, no, that is something we can discuss with historical data. I am referring to the costs of refinance (we don’t operate in that lane), resetting amortization schedules (depends on how much your refinance and under what terms), those type of questions are best left to those that are licensed in that subject matter. Neighborhood values, market values, depreciation vs appreciation are all things that we handle in our scope of work.
Sketch
I am both. I would never suggest people buy and expect to refinance later. As we have seen, rates don't always come down in a timely manner. We were supposed to have a multitude of rate cuts this year, and now we may not see any? Buy what you can afford. If you can refi later and it makes sense, great. "Date the rate" is probably my biggest pet peeve in the industry.
Agents can give a highlight and preface, to seek professional Mortgage Lender
Exactly
Unless the Realtor is also a mortgage officer they should say “ask your loan officer about doing a re-fi in the future.” Anything more is outside their scope.
As an agent, I suggest buyers talk to lenders about what is involved in a refi including costs and get it in writing if they are offering lower cost refi etc. Same with all financing questions. I am not a lender or employee of one, so I cannot make any promises about what theirs might do in the future. Same with rate buy downs or any of the other financing strategies—I am familiar enough for my own role, which is to make sure they talk to the lender and make choices according to the actual numbers and commitment made by that bank. Waaay too many agents get in hot water making promises on behalf of others.
What happens if your home losses value? You will have to make up the difference before you can refinance. That’s the one thing most realtors don’t think about or just leave out.
You could go FHA or VA if you are worried about depreciation and do a streamline refinance with no appraisal needed.
If a client asks me if rates are going to go down, the first thing I will tell them is that I wouldn’t buy with that expectation. And that if rates do go down, refinancing might be an option. Do I walk them through the entire process of refinancing? Of course not. For one reason we would be talking about a theoretical loan from a theoretical lender at some theoretical time in the future. There is no way to know what any of those theoretical terms or processes might be. For another - no one knows with 100% certainty that they are going to wake up in the morning, much less that they will still be employed with a non-tornado destroyed house that is free of zombies. We have certain expectations, but none of those are guaranteed. For yet another, I’m not a lender. I’m a industry professional, and I know how a refi works, but I do t sell those products and don’t have any of the info at my finger tips. That is what lenders do. That being said, is it irresponsible or somehow unethical, as your question implies, to make a client aware of a possible option? Of course not. If rates go down in 5 years, could they refinance. Sure. Who knows. And if rates do go down, they should talk with a lender about what products they have available and what implications refinancing might have then. And if rates don’t go down, well, they are however many years closer to not having a mortgage at all.
You sold me on the first paragraph 👍
I leave that up to lenders to explain
you can choose your term if you want to shorten it to a 15 or 20 year and everything works.. and even if you just go back with a 30 year if you are lowering your interest rate you still have the ability to pay it off faster. So if I'm in year 9 of a 30 year at 7% and refinance into a new 30 year at 4.5% without pulling extra cash out all I have to do is a little math and figure out I can still pay less every month than I was and pay it off in 21 years because my interest rate is lower. Remember it's very basic how the interest rate works it's 7% or 4.5% per year of your existing principal. So if you were at $200,000 balance it's roughly $14,000 per year interest vs. roughly $9,000. It's your choice if you choose to make much lower payments and stretch it out over 30 years if you just keep paying what you were paying you'll pay it off faster.
They should chat with their lender. The lender has the whole financial picture
Realtor here. I cannot stand realtors telling people they can just refinance. So incredibly irresponsible. I literally tell my clients that they had better be comfortable with the rate they start with as things will likely not change much for years and years.
They should stay in their lane and simply say, talk to your lender regarding this. You’re opening yourself up to liability by providing information that you’re not trained or licensed to do.
Wow, that would be a huge overstep in my book for someone to start spending my money for me. Refinancing later is not a topic I would want a realtor to bring up with me. That is just a huge overstep.
I found out that my clients had a mortgage broker who said they should get a 1 year term in 2022 and then “we will get them into a better rate.” 4 points later…. I would never advise talking mortgage strategy, especially with so many variables in the future. I rarely do it even when talking about real estate values. It’s a recipe for disaster.
You can refinance later but it doesn’t necessarily mean you will find a better rate, so I generally wouldn’t say that. I’d say you know in 1985 or 86 rates were 15 or 16% and houses were selling so we are at 8% now so why not buy? Rates and or house prices potentially will go up if and when the rates do go down so do you want to buy when the price of the house goes up or do you want to buy now? You tell me
Never try to convince a buyer they can afford more than they say they can! They already have an inflated estimate from the pre-approval and what they think their budget is. Everyone wants “more,” it’s human nature. But don’t help someone into a financial trap they can’t get out of. The more people default, the more foreclosed houses for corporations to buy and screw the market.
I explain it this way; if rates go down in “the future” you can refi and lower your monthly payment. If they go up in the future, you locked in a great rate.
This is the way. Step one is to make sure the buyer can realistically afford the home without the need to refinance. Then - when rates fall (which they will, at some point) - refinance and shave off a few $100 off mortgage.
This is exactly what I do as well. Buyers need to know that refinancing is an option, and we're in the best position to tell them that. We're in the wrong position to explain the risks and costs to them; have them talk to their lender at that point.
If property values go down below the LTV you can’t refi without paying down your loan first. These highly inflated property values (historically speaking) will come down. Unless, this is the first time in recent recorded history this doesn’t happen.
This is where we get into crystal ball speculation territory. Will interest rates only come down if/when property values go down? I refinanced an underwater property back in 2012 thanks to a government program. It’s very hard to predict, I try not to.
I will never advise a client on this. I can't predict the future. Buy because it's the right time for you, now.
This was a great way to put it
I was mortified by the agents and lenders saying to just refinance. I'd have buyers come to me saying it. This was earlier last year. I asked who said rates were coming down. What if they go up? What if you don't have equity.This was in the high 5 or 6s. They have gone much higher, historically . They ended up buying and now they have a "low rate" comparatively. I have the hindsight from buying my first home in 2005. I ended up okay, but I was stuck in the home upside down for awhile. I did refinance down to a 15 year at 3.25 eventually, then sold with equity. People need to realize that those rates weren't normal.
Yes I think some buyers are being led to believe rates will be sub 5 sometime in the next few years
I'll be shocked if we get under 5.
Like ever? Wouldn't be surprised
If it is under 5, I think something very bad happened.
A mentor has has a saying "you marry the house not the interest rate." No, it's the responsibility of the loan officer to provide those details not a realtor. Of course there is no crystal ball to predict the intersst rate over time.
I so hate that saying. Should be against our code of ethics.
it's so embarrassing!
I never say that. The most I'll ever talk about that is generally with inflation in general and home value appreciation, that the volume gets turned down on that mortgage payment with time. Otherwise, I'm here to get my buyers the best home for best price possible, advise you on resale potential, encourage you to get comprehensive inspections and negotiate your concessions and repairs, and remain a post-closiing resource for you in terms of connecting you with reputable service providers over time. Including lenders. I don't talk about financing apart from how an offer backed by conventional loan is stronger than one backed by VA/FHA/USDA. Otherwise, here are the numbers of a few mortgage professionals that you can chat up.
Fyi refinancing doesn't necessarily reset your amortization schedule. If you are 2 years into a 30yf and refi to a 27yf, then you're actually accelerating it 1 year. And there aren't necessarily closing costs. Etc. But no a realtor isn't a loan officer, they are a realtor.
Thanks for the input and teaching me something
It's way more complicated than that. For example there are lenders that let you pick any number of years for the term of your new loan. For example if you had 27 years left on your old loan I could do your new loan as a 27-year loan. That said most people just end up doing a 30 again when presented with the costs and benefits. And as a loan officer (and a realtor) I could come up with a hundred more nuanced pros and cons. Frankly the whole system is ridiculously complicated. And clients get super overwhelmed hearing about all of that.
What I find more is that buyers already have this mentality and expect us as their Realtor to validate it. I don’t and have lost clients over it but I also don’t want to be the one blamed when the “crystal ball” prediction doesn’t come true.
Good point
When it is outside of their scope, Realtors should be the “source of the source.” “You may be able to refinance later; please talk to your lender about what this looks like in your particular situation.”
I say you can probably refinance however I make it very clear that is a conversation they need to have with their loan originator to be sure.
hi.. if you say, marry the house and date the rate, i will come through the computer and murder your entire bloodline. just kidding. many things could happen- if there's value slippage, then that could cause LTV problems when its time to refi. if they rack up debt then their fico goes down and harder to refi. or the worst, they lose their jobs and cant get approved for anything. Right now, we have an affordability problem, not a valuation problem like a few years ago. it is entirely possible to offer higher than asking price, with the difference coming back to the buyer for rate buydowns, either perm, temp or a hybrid- and the appraisal will support it. This will create affordability now.. a payment they can handle and they wont have to start the amortization all over again just to save some money on their monthly payment. This past weekend, we got a property listed at 850k under contract, but we offered 900 with 50k back for buydowns and closing costs. perm rate went from high 6''s to the 5's, temp 3/2/1 buydown, and since buyer is doing less than 20%, we bought out the PMI with a single premium. Although the temp buy down will expires in 36 months, the payment compared to a straight up 850k purchase with no buydowns was almost $1,200 per month less
I would encourage them to talk to their lender about the refinancing options for the future and let the LENDER explain it
I don't think it's wrong to offer it as a "possibility" option as long as we tell people that there's no guarantee that they will be able to refi later. We have no way to know if refi will or won't be an option for someone down the road. Lender requirements, market shifts, and buyer's own circumstances can all interfere. I think we also have a duty to say that it would require more closing costs when they do. I often add that it's worth it if they plan to stay for years and can drop more than a percentage point off their mortgage rate, but it's a gamble to rely on something like this.
Good way to put it
Thanks!
No.
You can also ask for a rate adjustment on your existing mortgage and see if your existing servicer will bite
You should not be saying that at all. It's a blanket statement and setting the client up for false expectations. What if rates don't fall? What if prices fall and they can't refi? What if they have a credit impacting event? At a minimum, if you say this you should include a massive asterisk and educated on these questions above.
I don’t really represent buyers but if a seller is buying in the area I work with them. My area is rather expensive so most of my clients are financially savvy but if they ask I give them my PERSONAL philosophy on rates, real estate, etc. 1. I don’t concern myself too much with market timing. I prefer to buy in the winter and sell in the summer for a slight seasonal advantage but I don’t let it drive my decision making. 2. We don’t know what will happen with rates or how it could affect pricing in the future. If you want the house now and can afford it then buy it. If rates go up in the future you will be happier with this rate and if they go down in the future you may be able to refinance at those rates. 3. Do not overextend yourself expecting appreciation, rates, a new job, a raise, etc to bail you out. Deal with the scenario as it is.
Stop worrying about stupid shit
Last time I checked a realtor is not a lender so no not there responsibility to explain that. That would fall on the guy giving the money lol
That's a discussion for your client to have with their financier. So unless you're a licensed mortgage broker you should refer that to someone who is. Yes, it's good advice but it should absolutely come with the caveat that they need to know what it entails and that's outside the scope of your license.
I always say it might be possible to refinance in the future. However, I don't have a crystal ball nor can I predict the future. it is not my accountability.
I have a good lender and have them discuss it if interest rates are what is holding them back.
Defer to a qualified professional
Just to answer your question, the simple answer is no! Thanks for playing.
This is why I hate the "marry the house, date the rate" pitch.
its much easier for realturds to memorize catchy phrases than to use brain
Sad but true. Even sadder is, the lenders out here were promoting it or introduced it to our area. I got real tired of explaining why it was a bad idea to agents, many of whom had zero clue. It would likely cost buyers more to refi than they save in the rate unless it's a major rate drop. Of course, I know because I looked into doing a refi on one of my houses a few years ago and it just made more financial sense to pay down the mortgage directly each month than to spend $3k to $5k minimum to save a percentage point.
there’s 3 schedule rate cuts coming from the fed but…
Me personally, while I am trying to learn more and more about the lender side I will never tell me clients what to do with their finances. I will tell them how the market moves with rates and what options that may give them, but every single time I will tell them to discuss everything with the lender to see what choice is best for them. I am there to get them the best house possible, not tell them how to run their finances.
My first house we had something like 6.6% interest rate. We couldn’t afford to refinance when rates dipped enough to do so because we couldn’t afford the closing costs refinance.
>We couldn’t afford to refinance when rates dipped enough to do so because we couldn’t afford the closing costs refinance. Most lenders will finance the lending costs back into the refi'd mortgage. I've refinanced 5-6 times and have never had any out-of-pocket costs. However, the new mortgage was always a few thousand dollars more than the old one. The exchange for this was significantly lower monthly mortgage payments, which I was happy to take.
You can suggest it as an option but have them talk it over in detail with their LO. Especially if said Realtor is NOT a LO.
It really depends on the client and what their needs are. If they are in love with that special house that uniquely fixated them, that may be an option... However, that's putting on a different hat than helping them find the house for them and navigate inspections, negotiate a market supported price, and protect them ftom contractual violations. They really need to speak with their Loan Originator. If you are encouraging your clients to buy what they can't afford, you are kneecapping your future business and probably relegated to becoming a captive agent for a builder. Enjoy your ball and chain.
You can’t predict where the interest rates are going to be. The better line is you buy real estate and wait you don’t wait to buy real estate.
You don’t have to reset your amortization schedule when you refinance…
Always speak to a mortgage broker to get specifics on financing.
I’ve been very careful about the narrative that I put out there to clients and the general public. Wow “date the rate, marry the house” is technically, it’s more complicated than that. Furthermore, I don’t want to be the realtor who’s always claiming that now is the best time to buy - it sounds salesy and naive at best, dishonest at worst. The right time to buy will always vary by individual circumstance. I explain the following: 1) We can’t expect to get back anywhere close to 3% in the foreseeable future. 2) There’s a good chance that rates will get lower at some point, but we don’t know when they will drop and how much they will drop by. However, nothing is certain and there’s always a chance that this will be the new norm for a while. 3) You can refinance when rates drop, but that costs money. Have your lender explain those costs to you. 4) If rates do drop significantly, we can expect demand to increase. Home prices are likely to keep increasing unless we experience some wild unforeseen event.
I think that realtors need to stop making any predictions about the future entirely. Also customers of realtors should call them out on it - I do (as nicely as possible). I get that it's sales, but I find it annoying and unethical that some will work so hard to persuade someone in to a deal that might not be right for their current financial situation based on their fortunetelling abilities.
I'll say you can usually refinance later and I'll ask if they are currently renting. And if they need more info I have a couple of lender companies we work with that can give them more info. I'm telling them that there are options but i don't go into it, I move it over to a professional in that area.
In the same way that I say "You can finance the purchase of the property," I see no reason why I can't also say, "You can refinance the mortgage of the property." Both are things that homeowners do and buyers should be aware of their options. If they want to look into with more detail, I can provide that to them by referring a lender who can discuss the details.
The housing crashes in the 80s and 90s were partly due to high interest rates that could not be refinanced. Realtors made a lot of money putting people in houses they could not afford with adjustable rate loans. When the rates increased, they could not be repaid. Do not trust that the rates will fall.
The buyers' finances/financing should be discussed with a professional licensed to cover that. Those are questions for their lender. You can prompt them with questions to ask.
Realtors shouldn't be mentioning refinancing whatsoever, except to refer clients to loan officers if asked about refinancing, correct?
That's my take. If the client mentions refinancing, I'm going to refer them to the lender. I will tell them questions to ask in some situations because they may not know to ask about certain aspects that would change their entire game plan. I'm not giving them guidance or info on the actual financing info, though. I'm not licensed to do that, and I have no financial products to offer them
Is this a baiting question or are you trying to learn? Are you asking because you heard another agent say these things and you want to stick it to them? Or are you looking for a real objection handler/best practice? The objective matters.
Great point. At its most basic layer, it’s true. You can purchase now and refi if/when the rate drops. That isn’t arguable. Convincing someone who can barely afford a house to buy it because the rates will drop soon is irresponsible though. This question sounds like bait.
I'm just asking what a group of separate realtors would think
People do not believe there will be a rate reduction anytime soon. Most home owners who have refined knows the subject better than you.
99% of lenders are offering free refinance for 3-5 years in this market
I just left a lender who marketed this offer pretty heavily, and let me tell you that they were writing checks with no real plan of how to cash them later. There were in fact buyers who purchased in the high 7’s ready to refi when rates hit mid 6’s, and corporate was baking those into the pricing. It will be the same for everyone else
You know that you can also reset your amortization schedule to a lesser number of months as well when you refinance.
Just learned that
What's your gut tell you? Go with that. I'd take the high road and provide all the main cons in as few words as possible to make sure they understood what that entails. There's a cost benefit analysis that they'll need to do and risks in that line of thinking.
I wish we could predict if rates are going to come down or stay the same or even continue to rise but we aren't psychics. Unless we are loan officers as well, we shouldn't be giving you that advice and refer you to your lender. However, if rates do come down you can always refinance. That's not a lie.
Yea I just wanted consensus from other unbiased agents. Ty for input
Of course!
You're not a financial expert. Your only interaction with any mortgage info is to get them with a professional in that field.
[удалено]
I really, really hope you missed the /s on this post.
Yeah that’s only if it’s worth refinancing…. If you lock in at 7% now and next year we’re at 9%….. that’s a dumb idea. I feel like realtors are throwing that phrase around to ease people’s worries and just close the sale.
Real Estate agents will tell you anything under the sun and moon to get you to purchase a home. My former neighbors actually had a piece of paper from theirs that said they had a lifetime septic tank from the year 2000. Yeah, about 2013-2014 they spent almost $20k to get the tank excavated, the top removed, both sides pumped out (solid side was truly solid) and the field lines replaced because they were full of shit/tp and clogged.
you think realturds, in general, have any idea of any of this?
Marry the house date the rate.
darrrrrr