The Little-Known Secret of a Mortgage Recast, And How to Use it To Time The Real Estate Market

While over the long haul, home values will always go up due to inflationary pressure on the value of a dollar, we understand that there are times each year when homes are at a premium due to demand.  Yes, there are cycles (usually around 16 years for a complete cycle) of up-swing and down-swing on home values, but most of us can’t plan our major life events (births, deaths, job-changes, relocation, marriage, divorce, or inheritance, etc.)  around these larger market conditions.  What we can do is capitalize on the seasonal trends throughout the year we find our life demanding a change.

Generally speaking the months around the end of year holidays and the first few months of the new year see less demand for real estate than April through August.  Things like gift buying, travel for a family get-together, tax season, and just wanting to hibernate when its cold & dark outside restrict demand for most folks.  As things get warmer, brighter, and those with children see a break in the school year as an ideal time to relocate, demand and therefore prices, see a peak.

  • Buy NOW, Sell Later: If you are thinking of moving this year; and have savings to buy before you sell, you may be able to take advantage of the turning seasonal differences involving supply and demand.  You may implement a plan with your Realtor that will take advantage of buying at the tail end of when there is less demand, and selling when demand starts approaching its seasonal peak.  Depending on your current monthly payment, the average time in your neighborhood to sell, and seasonal swings anticipated in your price ranges this could save you a lot of money.
  • RECAST, don’t Refinance: There is a little known, little advertised feature of many loans backed by Fannie-Mae or Freddie Mac (Not available on FHA or VA loans)  called a “Mortgage Recast”.  What this enables you to do, is generally spend a few hundred dollars in fees to your mortgage servicing company to apply a lump sum of equity from your current home’s sale to your newly purchased home, without needing to spend thousands of dollars of fees on a more common and expensive refinance.
  • How a mortgage recast works (a hypothetical example): Your rate and term (say 30, or 15 year amortization) stay the same as they were (as will the date of your last payment) but your monthly payment will lower significantly when your amount financed is reduced by the equity you take away from your sale and apply to your purchase after the fact. For example you buy a home in February of 2020 on a 30 year conventional fixed loan (paying off in February of 2050) at 3.75%.  Your New Home costs $450,000.00 and has all the bedrooms you’ll ever need.  You put down 10% – $45,000 and have a mortgage of $405,000.00, mortgage insurance of around $101.25 until your home sells and you recast.    Your Principal, Interest, and Mortgage insurance on this loan each month = $1976.87 (you’ll have property taxes, insurance, and likely HOA dues as well, but we’re not calculating those as they are property specific and unchanged by this strategy.

You consult with your Realtor about what price your home should sell for and how long it should take.  Your current home (without enough bedrooms) should sell for $375,000.00 and sell within two months.  You currently owe $275,000.00 on it. Your Realtor creates you a Net Sheet showing your proceeds from the sale of your current home should be $72,082.00 after paying escrow, title, real estate transfer taxes, and commissions.  That $72,082.00 in profit you don’t need to pay capital gains tax on because you’ve lived there at least 2 of the last 5 years.

You take that $72,082.00, apply it to a recast of your new home’s loan, and now your loan balance went from $405,000.00 to $332,918.  Your rate stays at 3.75%, your mortgage insurance goes away because you’re now over 20% equity, and your monthly payment is calculated based on the new lower loan balance that will still pay off in February of 2050.  Running the numbers, your payment went from $1976.87 to $1541.80/month and you have a beautiful new home with all the space you’ll need. That’s a savings of $435.07 per month and it only cost you a few hundred dollars for the recast, NOT Thousands for a refinance!

You did all of this before your new $450,000.00 home went up to $461,250.00 in the peak buying season ($11,250 saved, or earned in equity).  You enabled yourself to buy with less competition and stress than trying to out-bid other buyers for your ideal home.  You were able to sell your home during the peak buying season and sold it quicker, for more money than had you sold 1st and bought second.  You took advantage of the seasonal swings in demand to make both your purchase and sale of real estate easier, and more profitable for you.  Well done.  If you have any questions, feel free to comment below & we’ll be happy to help!  As a reminder, I’m a Realtor, not a mortgage, or tax professional.  Please consult with appropriate professionals for needs specific to those areas!

 

 


Relocating to Las Vegas, NV and How to Buy A Home Out of State.

We just helped Debbie & Peter purchase a home in Spanish Trail; a gorgeous, well-established golf course community here in Las Vegas, NV. I’d spoken with Debbie, who was a referral from a friend of mine. She’s his mother & was looking to move to Las Vegas to be closer to her new grandson. Her husband also just got a relocation here with his company. There are a lot of great reasons to move to Las Vegas. Lower taxes & more affordable housing is a big one we’re seeing from many Californians making the move. For Debbie & Peter, being close to family, having the job-relocation opportunity, & being able to say goodbye to those frozen New York winters were main motivators.

We’d done all the leg work to figure out what she & Peter were looking for in a new home, had her pre-qualified with Charles Christmas at Gold Star Financial, and were prepared to make a confidant offer when the right home appeared. Something low maintenance, secure, and comfortably appointed with great amenities were all on the top of the list. Fortunately, Spanish Trail community was not only checking all these boxes, it was a short drive from family already in town.

Debbie’s son & I had walked a few properties together, using Facetime to give a live feed to Debbie and Peter, while her son gave commentary on how he thought the space & design elements would match our client’s taste & requirements. If anything caught their eye, or needed further inspection we were able to be their eyes, hands & “boots on the ground” for real-time answers to any questions.

This turned out to be a powerful combination of inputs & we were able to find the perfect home for Debbie & Peter & lock it under contract with both of them literally on the other side of the country. We made sure to make a strong offer, but with a due-diligence period that allowed Debbie to come out in person to be sure this one was just right before their earnest money deposit become non-refundable. I was able to quickly book an inspection with Home Pride Inspections the day after we got into contract, to be sure there were no major issues with the property negating the usefulness of a flight out to see it. Everything looked good.

Debbie flew out and we viewed the property for her in person. Turns out it was just perfect and “felt like home.” We arranged for a mobile notary to accommodate the signing for them in New York through Terri-Ann Peterson with Fidelity National Title. As always, no matter how complex the transaction, Terri’s team was on-point and closed the deal three days before our contract required (and 1 day before our clients left the country for a much needed vacation!)

It’s worth noting, we were very close to offering on a model-match for slightly more, that was in great shape, but hadn’t been updated AT ALL since being built over 20 years ago. On the day we were about to write that offer, using a comp-search to be sure we were making the right offer, we found this property had just been reduced about $30,000.00! It was totally rehabbed & updated with new appliances, flooring, HVAC, Tankless water heater, and floor plan remodels Debbie & Peter wanted to do anyway.. We got it under contract for $2,000.00 LESS than our initial property of interest. We wound up getting them such a good deal, our lender didn’t even require an appraisal on the property!!

Who do you know that could use service like this when looking to relocate to Las Vegas, or buying here in town? Please forward this to them & have them contact me here. Nothing makes us more satisfied than doing such a good job we earn your referrals!


Just Listed Near Durango & Sahara! 8296 Arden Ladder Place – 3 Beds, 3 baths, Pulte-Efficient Beauty!

Nestled in the quiet neighborhood of Arden Park, just over a mile from Desert Breeze Park, with it’s soccer, baseball, skateboard & aquatic community offerings, this corner lot is the largest one in the tract. It also provides even more privacy with no neighbors directly behind you & beautiful mountain views from the master suite. Pulte builds a great home & this one is very energy efficient as well, reducing your on-going costs of enjoying life every month.


Upon secured entry (Iron gate & alarmed) you’ll notice a beautiful open floor plan with ceramic tile throughout the great room, dining room, & kitchen (with island), all the way to the granite counters, reverse osmosis filter system & stainless steel appliances. Pre-wired for surround sound, the Great Room makes even more use of the 2,100 square feet offered. As you head out of the kitchen, find a convenient half-bath to your right, & an enormous walk-in, lighted pantry to your left. Continuing to the garage you’ll notice plenty of space for two cars, and a tank-less water heater promising endless hot showers.

Continuing up stairs, a good size loft dividing the master suite from the two other bedrooms appears to be the perfect spot for a home office, a craft area, or play-zone. The full bath with shower/tub combo leads the way to bedrooms 2 & 3. All bedrooms have ceiling fans & bedroom 2 has a walk-in closet for that extra stuff. Down the hall from beds 2 & 3, we find the large 19’x15′ Master Suite with beautiful mountain views to the North & West. Continuing on to the large Master Bath room, a separate Tub & Shower provide relaxation just the way you need it. Large dual sink vanity with plenty of space for everyone’s items leads you to a HUGE Walk-In Closet with not only plenty of room for everything, but two bolted safes for those very important items.

Coming back down stairs & heading out to the paver-stone patio you can take a deep breath.. no neighbor’s yard is backing up to yours. You found a little privacy in suburbia. To the right you notice a huge, efficient York A/C system & smile knowing it’s been maintained every year. To the left you see a gas-stub for that BBQ you’ve been wanting to buy & start imagining game days at home. This side yard is huge you think envisioning how well an in-ground spa would compliment the low maintenance landscaping environment.

This can all be yours, but you’d better hurry. Homes in this area are going quick & the seller already has an offer only 1 day after listing it with Stephen P Christmas of Very Vintage Vegas Realty! Nevada Licensee #S.0182878. If you’re interested in touring this home, contact me now!

To View on GLVAR MLS Click Here!


Las Vegas Home-buyers, You DON’T Need To Pay a Realtor! How We Just Saved a Buyer $19,700.00 On a $190K Purchase.

Many people are shopping for homes right now and there is a LOT that goes into buying one.  As a home buyer in Las Vegas, you do NOT need to pay your Realtor!   Whether you’re buying a pre-existing home, or new construction, the SELLER pays YOUR agent! 

Why would you not take advantage of the experience & advice of some one who lives & breathes real estate, especially if it costs you nothing?! Some agencies do charge a brokerage fee to cover the overhead of a large office, staff and the broker’s profitability.  Our brokerage operates by sharing commission between your agent (myself) and the agent’s broker rather than adding fees to your transaction.  We also operate with streamlined overhead costs so we remain profitable without needing to tack on small fees you would be required to pay for.

So now that you know you can have an agent, who’s constantly updated with market statistics, ever changing laws regarding real estate, and brings years of experience to the table at no cost to you, why would you not take advantage of this?  The seller or builder (if buying new), is paying commission to your agent.  This is a cost the seller, not the buyer will save if you don’t have representation.  Then there’s also the potential for you to loose money or buy a home it turns out is a lemon, because your contract is not written in a way that protects your unique situation.

Even in for sale by owner situations of previously owned homes, the seller is trying to save the same commission that you’re hoping to save, and now you’re both negotiating the sale of an asset with a LOT of moving parts & contractual nuances that could cost you thousands if not familiar.  Statistics show you’ll be able to get a much better deal by using a Realtor.  I’ve even heard that appraisers don’t value a home the same way if it’s sold FSBO, which can complicate the deal even more.

The Story

Let me give you an example of client’s we’re closing a purchase for today.  Let’s call them Frank and Julia.  Frank and his wife have lived here a long time and already own a home that’s bigger than they need.  The market being where it is; now is an excellent time for Frank & Julia to downsize to a condo now that their kids are moved out and self-sufficient.  They weren’t in a rush, as they have a place to live, and wanted to get a great deal on something perfect for them.  We looked at dozens of condos over 3 months & even wrote offers on two that didn’t work out for different reasons, one of which was otherwise perfect, but had POLYBUTYLENE (PB) TUBING PIPE, as found by my favorite master inspector (referrals to other phenomenal professionals is an added benefit to working with a great Realtor).  This plumbing represented a risk of pipe bursting and future flooding.  We recovered our earnest money & moved on.

($5,000.00 saved in instant equity)

Next we found a great condo, a little dated in the finishes & appliances but in the perfect neighborhood & right next to the pool & spa with a 2 car garage.  We got it under contract for $190,000.00; it appraised for $195,000.00 (we did this by analyzing the seller’s motivation against our buyer’s position & presenting our offer in a way that allowed both parties to win).  Again our master inspector found that while the A/C (27 years old) was currently working, it was likely on it’s last functional year.

($6,000.00 Saved in professional negotiation)

We brought in a quality A/C contractor for expert opinion & he agreed in writing for negotiation.  We also found the water heater was at the end of it’s life cycle, though still functioning at time of inspection.  A water heater that ruptures while you’re out of town represents much more in potential loss than just replacing the unit, that had to be accounted for as well.  The window panes were mostly in good shape, but upon close inspection the seals (glazing beads) were giving out due to age & sun exposure.  I contacted four different window companies to get an estimate of repairs for my clients.

In total to remedy these items we were able to negotiate a $6,000.00 closing credit, offsetting all of Frank & Julia’s additional costs, such as lender fees, escrow fees, title fees, recording fees, pro-rations for taxes, HOA costs, and everything else that you may not even know you need to pay to buy a home (again, a good realtor can give you estimates of what these total costs will be so you’re prepared to not just buy the home, but actually close the deal).

($8,300.00 saved in financial strategy)

Now, Frank and Julia have worked hard all their lives and are good with their finances.  They were prepared to put down 20% on their purchase, have good credit, and were planning about $18,000.00 in remodeling expenses post-closing.  As we neared close, Frank’s mortgage lender suggested putting down another 5% ($9,500.00)  to avoid the bump in his mortgage rate due to the property being a condo.  As I know Frank & Juila planned to live here for about 5 years, the difference in rate would save about $20.00/month or over the life of their loan, about $1,200.00 saved over projected 5 years of ownership for a cost of $9,500.00..  Not an ideal scenario.  I spent years as a loan officer, originating mortgages & really educating myself on returns on investments in real estate in particular over the last 3 years every. day.  I pointed out to Frank that as we’d negotiated more than we needed for closing costs in seller concessions, the best thing to do would be to buy down his rate with the remainder of the $6,000.00 and keep the $9,500.00 in his bank, especially since their plans to remodel had gotten more elaborate & expensive than initially projected.

(A bonus $400.00)

We had a problem.  A good problem.  Frank & Julia still had more money in seller concessions than we had closing costs & buyers aren’t allowed to just keep the difference for no reason.  However the remaining $400.00 or so is just about the total Frank spent on inspections & estimates.  I suggested to my client’s loan officer that since Frank had already paid these inspections & I had invoices showing payment related to closing the transaction, but paid outside of escrow; that Frank may be able to be reimbursed for these costs.  Now Frank & Julia just got their inspections paid by the seller, leaving them buying a condo for nothing more than their original 20% down payment and the cost of an appraisal.

Every transaction is unique and I can guarantee your deal won’t go exactly like this, every seller is different, every home is different, and every deal is different.   I can guarantee that given your unique situation, I will put your needs first, take care of you and your transaction to the best of my ability & capitalize on every opportunity we find in your interest.

(Total savings $5,000.00 + $6,000.00 + $8,300.00 + $400.00 = $19,700.00)

(Total Cost to Client of using a Realtor = $0.00)

In this market; wouldn’t you like to work with me?  I’d love to work with you.  Even if you’re THINKING of buying or selling and not quite ready, Call Me Today as time to prepare can only benefit your bottom line.

 


What is a SID? What is a LID? Why Is My Mortgage Payment Going Up?

SIDs and LIDs are additional taxes levied on homes that exist within a Special Improvement District, or a Local Improvement District that benefit from the improvements to that district. If you live in Mountain’s Edge Master Planned Community, your additional taxes are paying for things like Mountain’s Edge Park, and Exploration Peak Park. If you live in Summerlin, they are paying for things like Summerlin Parkway. The idea is that not all of Clark County will benefit from these expensive improvements, but the homes in the area will, so they will pay for the improvements through these taxes in addition to the regular Clark County Property taxes that fund things like our police force, firefighters, and teachers that we all benefit from.

Just like regular property taxes, SIDs and LIDs need to be paid, if they aren’t, a first priority lien can be placed on your home an you could be foreclosed upon over an unpaid bill of a few hundred dollars, usually charged twice a year until the total assessment is paid off; even if you’d been paying your mortgage and HOA dues. Many times, a SID or LID can be requested to be paid off by the existing homeowner prior to transfer to a new buyer. This, like many points of negotiation is highly variable in every real estate deal.

Take for example our most recent purchase in Mountain’s Edge. We purchased a home that didn’t include the very nice washer, dryer, and refrigerator and had a SID amount of about $2,800.00 left on the home. We asked to keep the appliances, and in return would assume the remaining SID balance. I look at it this way, the cost of replacing these appliances + interest if we put it on a credit card, even at 10% would be more than the balance of the SID, so in our case we were coming up a little over $1000.00 + the savings on interest if we chose to finance the purchase.

These payments in our situation are due June first and December first in the amount of $***.** until the balance is paid off. Many times your mortgage company may not make these payments out of your escrow account, and you would need to make a separate payment before those dates to the county assessor. Sometimes, the mortgage company will make these payments, though if they discover they haven’t included their collection into your escrow account, your payment may go up from when you initially purchase the home until the debt is paid. Remember, either way you are going to pay this tax or loose your home for a fraction of it’s worth, so be sure you know what’s required of you.

The company that auctions off your SID/LID taxes to investors in the Las Vegas area is a company called Assessmentt Management Group. You can visit their site to check your balance and payment history & be sure that if payments need to be made, someone is making them, whether it’s rolled into your mortgage payment, or you need to make payments yourself. Remember, we are not tax, or legal professionals, only sharing our experience to increase awareness. If you need to consult a professional in these areas, always be sure they’re qualified to help.


Las Vegas Economic Forecast, or “I’m going to wait until the market crashes!”

I’ve heard it from a few people. One of them is sitting on over $130,000.00 in cash. Waiting for another 2008 market collapse.  The thing is, that money under your mattress, it’s loosing value every year due to inflation. Sure, real estate goes up & down cyclically but nobody knows exactly when those cycles hit.  There were a lot of investors in 2000-2005 who cashed out, assured we were at the peak.  I’m not telling you to time the market.

What I am saying is that the devaluation of your money is non-cyclical, and certain.  Grandpa always says when he was your age a gumball was a penny, not 25 cents.  Are you planning on buying a home, moving in, making it your own & moving out next year?  Probably not.  5-7 years maybe.  Long term inflation average between 1913 & 2013 according to InflationData.com is 3.22%.  Here’s the kicker.  Inflation of 3.22% doesn’t seem that bad to those who don’t understand the power of compounding, but as the article goes on to mention, that compound effect means an actual item that cost $100 in 1914 would now cost you $2,375.00.  As we keep printing money, homes will always be built from materials, on land, the cost of both will be affected by inflation.  So, if you need 200 2×4’s, 2,000 sq ft of flooring, etc. to build a home, and then the cost of the land.. it’s total price is all affected by inflation or the compounding devaluation of the dollar.

So yes, home prices will go up, and they will go down.. and then they will go up again but buyer’s aren’t getting homes at the prices of 30 years ago. What won’t change is your need for a place to live.  If you’re currently renting a decent 3 bedroom home in Las Vegas, and say you’re paying $1,600/month.. you’re paying $19,200/year and when you move you’ll have nothing to show for it but a U-haul bill.  If over that statistical 5-7 years you’d be in the place, you could have been paying $96,000-$134,400 towards ownership of an asset that will adjust with inflation (among other factors).  Yes, there are other factors that will adjust the value of your home than inflation, however when you look at something like gold, which some say is a solid hedge against inflation… there are other factors that affect the price of gold as well (such as stock market dips and advertisements on how safe gold is); and you can’t live in your gold.

“I’m waiting for the price of homes to drop due to rising mortgage rates!”  This is another one I’ve heard.  Thing is for most primary residence buyers, if there were a direct correlation of price reduction to interest rate hikes, the result would be no change in your monthly payment.  Unfortunately for those who haven’t dug a little deeper, there is actually an inverse correlation historically.  I could explain, but there is already a good article posted here on First American’s website.

The link above references a strong economy making housing less affordable.  As we look locally, the Las Vegas area economy is seeing over 13 billion in new capital investment, and people moving here (your competition when home buying) are younger and wealthier than before.  For more of these figures and data, see research posted here at California Credit Union League’s research on Southern Nevada.

So with a growing local economy, rising interest rates, rising home prices year over year, your savings devaluing annually, and about $19,000.00 you’re paying in rent each year, tell me again why you’re waiting to buy?

As you drive around the valley, I’m sure you’ll notice a ridiculous number of apartment projects being built.  Do you think the companies pouring millions into those projects didn’t do their homework?  They know plenty of people won’t take action today, and will be mailing them checks every month so we can ‘afford’ to live and work here.  Don’t be one of those income streams for these corporations.  Call or email me today and let us help you get on a better path to financial freedom and home ownership, Las Vegas.


It May Be Cold Outside, But January is a Hot Time To Buy Las Vegas Real Estate.

This time last year, our family purchased a new home in Mountain’s Edge, a great community in the South West of Las Vegas.  We were scouring the MLS for two months looking for a perfect place to call home for an expanding family.  Our first contract was on a home a bit bigger than we needed.  It was owned by a California investor who’d let deferred maintenance pile up and was unwilling to negotiate for repairs that would be needed.  The balcony had a crack in the flooring that the inspector said may or may not be a big issue.  Luckily it rained two days before the end of our due diligence period & I was able to bring a moisture meter to check the absorption.  Turns out the entire plywood surface under the stucco had absorbed so much water it would present and un-safe structural issue.  This repair alone would total about $10,000.00.  The rest of the drywall, plumbing, and stucco repair would be about another $10,000.00!

Because of this blessing in disguise, we had already been approved by our lender’s underwriter, meaning they had checked off all of the boxes they needed to be sure they could loan us all the money we’d need.  Once we decided we weren’t going to buy a home that the seller wouldn’t concede on cost to make it fit, we canceled the contract.  What we lost was the cost of inspection, and appraisal; about $1,000.00 in total.  What we kept, by navigating our contract properly was our earnest money deposit.. and our underwriting approval.

We took both and continued our shopping.  Viewing a few more homes with more clarity on what was necessary, and what was negotiable in our wish list. We found a home more nicely appointed and certainly more well cared for in the same area.. for $40,000.00 less.  Because we’d narrowed down what we really needed and where we wanted to be, we found our new home before the sign was even up in the yard (use the MLS, not Zillow!)  We submitted an offer with prior underwriting approval from the last deal that went south.  This isn’t the same as coming in with cash, but it is a close second meaning the likelihood of our contract coming to fruition is much better than those competitors who have only a pre-qualification.

By getting the home under contract in January when competition is less than the peak season, we were able to purchase the home before the busy summer months when it had already appreciated $15-$20,000.00 due to the competition driving prices up.  By having our financing in a more secure position than many others, our seller’s agent told the 4 other offers that came in to not even bother submitting.  Assurance we CAN close can be better than even a few thousand hypothetical more dollars to the seller (it’s not always about the highest bid!).

If you’re thinking of buying a new home at any point this year, the best time to start getting a plan together is right away.  There is a lot to consider and a lot to prepare, especially for your financing if you’re not planning to buy with cash.  A good Las Vegas area Realtor can assist you with this checklist so you’re in the best position to buy, be it this month or further down the road.  I look forward to hearing from you & seeing how we can best prepare you for a great transaction, and a smooth transition to your new home.  You can contact me at SteveChristmas@gmail.com or call me at the number listed in our Contact section.


Buying a New Construction Home, The Right Way.

When you’re looking to buy a home, you have many options.  If you’re looking at a new construction home rather than a pre-existing one, you’ll be given an entire list of options, much like buying a new car.  Many of these upgrades offered by builders are places for them to maximize their profits.   By positioning themselves as a “one stop shop” they can make the process as simple as checking boxes with dollar signs next to them.  The simplicity of saying ‘I’d like quartz counter tops, this tile flooring, these cabinets, etc’ can be alluring, but you’re trading your time for top-dollar prices on materials & labor.

How many smaller items do you purchase without shopping around? If you’re furnishing your home do you walk into a store & “say I need a couch”, take what ever they bring out to your car & pay what ever they’re asking?  If you do, stop reading, I can’t help you.  These upgrades, while much smaller in price than say a car, or a home itself, can add up very quickly.  Perhaps you could assess the upgrades offered & select the ones most important to you, then buy the new home from a builder,  and get multiple bids from quality contractors that can even do a better job, with better products, for less money.  Doing this means you’ve added value to your home for less expense thereby creating net worth for yourself when it comes time to sell or refinance.

Now one more thing to keep in mind, is the idea of diminishing returns.  Meaning Read More