All Encompassing Mortgage and Real Estate Thread

[UT_OB1 2266]

On 4/13/2022 at 12:49 PM, Wulaw Horn said:

You gamble a lot, right?  So you understand risk reward in cards (and I'm sure life) pretty well. How long do you think you will be in the house?  That's a pretty big part determining what you should do.  

How high can the initial jump go to (it should be capped- my guess would be maybe even as low as 6.25%)?  How high is the lifetime cap?

@TXSooner518  the way I read your post, you have access to about $370k in capital that, even at 5%, is still cheap money. I’d find a way to get that money to earn more money. 

[Wulaw Horn 19595]

1 hour ago, UT_OB1 said:

@TXSooner518  the way I read your post, you have access to about $370k in capital that, even at 5%, is still cheap money. I’d find a way to get that money to earn more money. 

Essentially yes. We can do a loan for a well qualified buyer for 501k at a fixed rate for 10 years that then adjusts in the mid 3’s. No need to go up to the 5’s. 

[jimmyjazz 47152]

Still trying to navigate our exit from Austin . . . was hoping for this summer, not gonna happen, maybe a year from now, depending.

One option is to keep our house and rent it out.  What are the key points to be aware of as a slumlord?  If we don't purchase another house, do we lose the homestead exemption, regardless?  How would I go about finding an approximate rental rate inside Austin city limits, roughly NW Hills?  If we sell, are cap gain taxes still levied for gains above $500K (married couple)?  Other advice?

[Neonmoon 38130]

3 hours ago, jimmyjazz said:

What are the key points to be aware of as a slumlord? 

People are degenerates and will treat anything they don't own like a toilet

[Wulaw Horn 19595]

3 hours ago, jimmyjazz said:

Still trying to navigate our exit from Austin . . . was hoping for this summer, not gonna happen, maybe a year from now, depending.

One option is to keep our house and rent it out.  What are the key points to be aware of as a slumlord?  If we don't purchase another house, do we lose the homestead exemption, regardless?  How would I go about finding an approximate rental rate inside Austin city limits, roughly NW Hills?  If we sell, are cap gain taxes still levied for gains above $500K (married couple)?  Other advice?

You can sell in a delayed manner on the capital gains.  The requirement, I believe, is just that you lived there 2 of the previous 5 years and have not used your exemption on any other house sold during that time.  

Key points to be aware of as a slumlord?  People are stupid, they do stupid things, sometimes they don't pay, they won't treat your shit like it's their shit, blah blah blah.  That can be mitigated in a lot of ways but it's a thing.

Talk to an agent that has a lot of experience in your area. They should be able to give you a realistic view of what you could get for renting and what you can get for selling.  

You are supposed to lose the homestead exemption if you do not live there.  If you have no other place homesteaded as a practical matter I don't know that they will find you, but non enforcement obviously doesn't mean it's copacetic, just that you are less likely to get caught.

Figure out if you want a management company or if you are a DIY type guy.  

[Wulaw Horn 19595]

4 minutes ago, Neonmoon said:

People are degenerates and will treat anything they don't own like a toilet

Ha.  That was my point #2.  I probably buried the lead by answering the capital gains question first. 

[jimmyjazz 47152]

13 minutes ago, Wulaw Horn said:

You can sell in a delayed manner on the capital gains.  The requirement, I believe, is just that you lived there 2 of the previous 5 years and have not used your exemption on any other house sold during that time.  

What does this mean?  We have lived in this house for 7 years continuous, so we obviously meet the 2 of 5 year requirement, but I thought that just bought us the first $500K of gains as tax free.  Am I mistaken?

[Wulaw Horn 19595]

1 minute ago, jimmyjazz said:

What does this mean?  We have lived in this house for 7 years continuous, so we obviously meet the 2 of 5 year requirement, but I thought that just bought us the first $500K of gains as tax free.  Am I mistaken?

The point is this- you can move out and sell within the next 3 years and you will still be good b/c you would have lived there 2 of the previous 5 years.  If you go longer than 3 years living out side the house you will no longer honestly be able to answer that you have lived there 2 of the previous 5 years and the title company will 1099 you and you will have to deal with that on your taxes.  So, you have 3 years to sell the house from the time you move out or your deduction goes away.

Yes- it's $500,000 worth of profits on the house that is exempt. But that vanishes after moving out for 3 years and 1 day.  

[jimmyjazz 47152]

Ah, so I could park the cap gains tax on the first $500K for 3 years (minus a day) even if I rent out the house?  (Trust me, I'll clear this with my accountant, I'm just doing the initial inquiry.)  I'd still lose the right to the homestead exempation, though?  Seems like that's what I've read.

[Wulaw Horn 19595]

3 minutes ago, jimmyjazz said:

Ah, so I could park the cap gains tax on the first $500K for 3 years (minus a day) even if I rent out the house?  (Trust me, I'll clear this with my accountant, I'm just doing the initial inquiry.)  I'd still lose the right to the homestead exempation, though?  Seems like that's what I've read.

Yes, that's the takeaway from my answers.  As well as talk to your accountant of course. 

[jimmyjazz 47152]

I actually think I said that wrong.  I shouldn't ever have to pay tax on the first $500K of cap gains as I have met the 2 of 5 year requirement.  I guess the question is when would the tax on cap gains beyond $500K be due.

My accountant is currently napping for a week, as tax returns were due yesterday.  I'll ask her soon.  Thanks.

[Wulaw Horn 19595]

5 minutes ago, jimmyjazz said:

I actually think I said that wrong.  I shouldn't ever have to pay tax on the first $500K of cap gains as I have met the 2 of 5 year requirement.  I guess the question is when would the tax on cap gains beyond $500K be due.

My accountant is currently napping for a week, as tax returns were due yesterday.  I'll ask her soon.  Thanks.

Yes that's true.  Currently. I'm just bringing attention to the fact that if you convert it into a rental house into perpetuity you will give back the deduction on your capital gains taxes on the first 500k of profit. 

[mchookem 16765]

23 minutes ago, jimmyjazz said:

I actually think I said that wrong.  I shouldn't ever have to pay tax on the first $500K of cap gains as I have met the 2 of 5 year requirement.  I guess the question is when would the tax on cap gains beyond $500K be due.

My accountant is currently napping for a week, as tax returns were due yesterday.  I'll ask her soon.  Thanks.

thanks for clarifying...we're listing w/in two weeks and i was all 'park?? what do they mean PARK??' 😄😊

[jimmyjazz 47152]

5 minutes ago, mchookem said:

thanks for clarifying...we're listing w/in two weeks and i was all 'park?? what do they mean PARK??' 😄😊

DO NOT take anything I've said as gospel.  I don't know what I'm talking about.  Ask an accountant!

[Wulaw Horn 19595]

My VM from Barry

Alert to lock- we had a locking bias this morning but we just pissed away another 20 points in the last 5 minutes. Unfortunately we have 20 more basis points to the downside so see if you can get them in ahead of a lender reprice for the worse.  I'm sorry guys. I hate to be the bearer of bad news.  Keep your chin up, this will turn around for us..... eventually.

 

Alrighty then.  Glad to hear it. Thanks Barry!

[Catpfish 618]

3 hours ago, Wulaw Horn said:

Y

You are supposed to lose the homestead exemption if you do not live there.  If you have no other place homesteaded as a practical matter I don't know that they will find you, but non enforcement obviously doesn't mean it's copacetic, just that you are less likely to get caught.

 

One way people get caught is that they change the mailing address for their tax notices

[Nice Guy Eddie 13729]

What's up with the constant phone calls I receive about someone wanting to buy my Houston house, and they're 100% accurate on my address.

I don't play along with the call because I figure it's a waste of my time. As in, they make it sound like we're in the same price range but they will drastically lower their offer if we move into next steps. 

Anyone have any experience with cold call buy offers?

[Neonmoon 38130]

Buyer: I want to buy a second home, but I am not going to pay any points

Me: (Kill me)

[UTPhil2006 3930]

1 hour ago, Neonmoon said:

Buyer: I want to buy a second home, but I am not going to pay any points

Me: (Kill me)

Me: Prepare your anus

[tokamak 6687]

3 hours ago, Nice Guy Eddie said:

What's up with the constant phone calls I receive about someone wanting to buy my Houston house, and they're 100% accurate on my address.

I don't play along with the call because I figure it's a waste of my time. As in, they make it sound like we're in the same price range but they will drastically lower their offer if we move into next steps. 

Anyone have any experience with cold call buy offers?

I assume they make an "initial offer" that looks reasonable on paper, then do a walk-through and deduct $25k for each squeaky door hinge and dust bunny under the bed, while making it seem like the seller no longer has the option of telling them to fuck off.

I've been getting occasional texts for years offering to buy Miguel's house at a specific address in Fort Worth. I don't live in Fort Worth and my name is not Miguel. I've always been tempted to tell 'em to draw up the paperwork and come on over just to fuck with them, but I don't want to do that to Miguel.

[PhillyD 1315]

For the last five years, I get a call at least weekly for Miriam on Fox Street in Silver Spring, MD and I also get texts about it. They seem to come in waves.  I would start off by asking to remove the property from their database but I think they must run fresh reports every few months because the calls and texts will slow down for awhile but they will inevitably start up again.  I've tried everything to make them quit.  I looked up the house once and it was a total dump so I told them I would accept their offer for 1.2 million in the hopes they would move on.  That was a total mistake because after that the calls came pouring in with efforts to negotiate a fair price.  I use my phone for work so I often answer numbers I don't recognize when they are from a local area code.  

If I ever meet Miriam in person, I am going to kick her ass for putting in my phone number on these lists.  I wouldn't feel badly for Miguel, he probably made up a phone number like Miriam must have done.  I can't think of any other reason they would associate my number with that one. 

 

 

[MAUFRAIS 6739]

I get them for Linda and I forget where the property is but I just tell them I’m ready to go and to meet me at the McDonald’s with cash.

[closetohumping 17810]

On 4/14/2022 at 5:07 PM, UT_OB1 said:

@TXSooner518  the way I read your post, you have access to about $370k in capital that, even at 5%, is still cheap money. I’d find a way to get that money to earn more money. 

What would you do with that much money?  Other than two chicks at the same time?

[KYHorn 17614]

5 hours ago, UTPhil2006 said:

Me: Prepare your anus

To be clear, this is different than someone buying a home they will live in and then renting out their current home, correct?

[UTPhil2006 3930]

21 minutes ago, KYHorn said:

To be clear, this is different than someone buying a home they will live in and then renting out their current home, correct?

Correct. What you’re describing is still a primary residence. What these people are doing is buying a secondary residence (lake, ranch, beach house etc). Secondary residences used to be pretty similar to primary as far as rate but after Feb 1 they made secondary pricing more in line with investment property rates. 

[UT_OB1 2266]

2 hours ago, closetohumping said:

What would you do with that much money?  Other than two chicks at the same time?

Depending on the area, a 2-4 multifamily.  Or maybe two MFs at the same time. 

[UT_OB1 2266]

Weird wouldn’t let me edit first post  

@Nice Guy Eddie @tokamak

It is a marketing strategy. They go through CAD or county property records - which are all online and anyone can access - and they mass mail or text or call (last 2 require paying whitepages or similar to get phone numbers). It’s very cheap to do. They are going to throw out a lowball offer to close in cash. It is so cheap to do, if your a one person or small crew flipper, you only need one or two houses a year to hit to make it worth it.
 

There’s another group of “wholesalers” who are just trying to get the low ball offer under contract, and the they will try to find a flipper to buy it (still cheaper than a house on the market) to assign the contract to. I think the legality of that varies by state, and it can certainly lead a seller fucked in the process. If you want top dollar, sell open the market.  

[UT_OB1 2266]

2 minutes ago, UT_OB1 said:

Weird wouldn’t let me edit first post  

@Nice Guy Eddie @tokamak

It is a marketing strategy. They go through CAD or county property records - which are all online and anyone can access - and they mass mail or text or call (last 2 require paying whitepages or similar to get phone numbers). It’s very cheap to do. They are going to throw out a lowball offer to close in cash. It is so cheap to do, if your a one person or small crew flipper, you only need one or two houses a year to hit to make it worth it.
 

There’s another group of “wholesalers” who are just trying to get the low ball offer under contract, and the they will try to find a flipper to buy it (still cheaper than a house on the market) to assign the contract to.  They’re trying to wholesale several a month and make a few $k per house. I think the legality of that varies by state, and it can certainly lead a seller fucked in the process. Most I’ve listened to don’t leave any meat on the bone for the real buyer.  If you want top dollar, sell open the market.  

Wtf is going on here. 

Edited April 21, 2022 by UT_OB1

[jimmyjazz 47152]

2 hours ago, UT_OB1 said:

Wtf is going on here. 

surlybork'd

[Hefeweizen 5444]

What is crazy is how fast this market moved.  My buyers sent us their financing info and their lock was at 4.3.  That and the fact they had been looking since November explains some of the desperation. 
 

I am an optimist about a lot of things but the current housing market is not one of them.  The double whammy of higher appraisals and higher rates is going to sting badly for new buyers.

[Wulaw Horn 19595]

36 minutes ago, Hefeweizen said:

What is crazy is how fast this market moved.  My buyers sent us their financing info and their lock was at 4.3.  That and the fact they had been looking since November explains some of the desperation. 
 

I am an optimist about a lot of things but the current housing market is not one of them.  The double whammy of higher appraisals and higher rates is going to sting badly for new buyers.

New buyers are hosed beyond belief. It’s a real problem for the cities and their attempt to be liveable for younger and/or poorer people. 

i think I read somewhere that At the average savings rate it would take the average American 20+ years to save up the minimum down payment for a house. 
Homeownership is so vital to the American dream. When I see the data on despair of renters that believe they will never own it’s a bummer bc that’s implicit thought that the America we love isn’t available to them in their mind. 

[GottaB 605]

Maybe they’ll all have to move to Nw Arkansas.

[gmr548 16695]

Maybe they’ll all have to move to Nw Arkansas.

Or Ohio

[UTPhil2006 3930]

3 hours ago, Hefeweizen said:

What is crazy is how fast this market moved.  My buyers sent us their financing info and their lock was at 4.3.  That and the fact they had been looking since November explains some of the desperation. 
 

I am an optimist about a lot of things but the current housing market is not one of them.  The double whammy of higher appraisals and higher rates is going to sting badly for new buyers.

Being jumbo helps with that rate as well.

[We’reTexas 1477]

19 hours ago, UTPhil2006 said:

Correct. What you’re describing is still a primary residence. What these people are doing is buying a secondary residence (lake, ranch, beach house etc). Secondary residences used to be pretty similar to primary as far as rate but after Feb 1 they made secondary pricing more in line with investment property rates. 

How much more are secondary/investment rates looking than primaries?

[Wulaw Horn 19595]

17 minutes ago, We’reTexas said:

How much more are secondary/investment rates looking than primaries?

Credit score dependent and dependent upon how much you want to put down.  

2 big issues- at a lot of credit scores and down payment amounts you can't even get a par rate. You are just going to be paying points and that's the end of it.

We can go as low as 10% down on a lot of stuff- but the pricing is so horrific that it doesn't make sense- you really should just figure on needing at least 20%  It starts to get a little better at 25% down. 

Comparing apples to apples with good credit and 25% down? 5.0% is probably about as good as we could do on a 30 primary with no points.  5.75% on a second and investment property.

If you lowered the down payment to 20% then you are looking at something like 6% and paying 1 point (just nothing on the sheet with par pricing at 20%)

If you lowered to 15% down then something like 6 with a point and a half.  That's actually not too bad I guess. Then fairly hefty MI.

Edited April 22, 2022 by Wulaw Horn

[UTPhil2006 3930]

17 minutes ago, We’reTexas said:

How much more are secondary/investment rates looking than primaries?

Roughly 0.5% higher rate.  So like 5.25 to 5.75% (down payment, credit, etc obviously apply as well)

[Wulaw Horn 19595]

Say this- if you are looking at an arm that could move the spread higher between the 2, as we could still get 3.75% or so on certain ARMS on conventional 20% down whereas the best ARM we could do on an investment would be 5 1/8.  So that opens the spread up something like almost 1.5%  Doubles it if you are comparing- what is the lowest interest rate I could get on a 30 period. 

[We’reTexas 1477]

8 minutes ago, UTPhil2006 said:

Roughly 0.5% higher rate.  So like 5.25 to 5.75% (down payment, credit, etc obviously apply as well)

 

9 minutes ago, Wulaw Horn said:

Credit score dependent and dependent upon how much you want to put down.  

2 big issues- at a lot of credit scores and down payment amounts you can't even get a par rate. You are just going to be paying points and that's the end of it.

We can go as low as 10% down on a lot of stuff- but the pricing is so horrific that it doesn't make sense- you really should just figure on needing at least 20%  It starts to get a little better at 25% down. 

Got it, thanks both. 25-30% wouldn’t be an issue, but damn with rates right now not looking like a feasible idea. 

[Wulaw Horn 19595]

4 minutes ago, We’reTexas said:

 

Got it, thanks both. 25-30% wouldn’t be an issue, but damn with rates right now not looking like a feasible idea. 

I mean, I guess it depends upon your price point. I don't particularly remember rates being much below 4% on an investment property even when we were in high cotton.  Lets say you are buying a 400k place and putting down 100k for 300k.  You could get on that arm at 5.125% and your payment would be $1633 vs 1432 if you would have timed it to the lowest point ever.  

Lets say you wait year and that property goes up 10% (if you are buying in Austin- good luck on that!), but rates come back down to 4.5% for investment properties.  That would be a historically great investment property rate.  Your payment now is 1672. So it's $40.00 a month and $10,000 more out of pocket to buy in a year vs now- even assuming rates get better.  

Best day to buy a house is yesterday.  Next best day is today.  After that it typically just starts to continue to get more expensive.  

Just a thought as to the cost of interest rates and appreciation and how they work together. 

Also- you can always hope to get a lower interest rate in the future when conditions are more advantageous to you.  You can almost never buy tomorrow at todays pricing.  So that too militates toward doing the deal today and holding your nose on the interest rate. 

[Gatorubet 30711]

[Wulaw Horn 19595]

3 minutes ago, Gatorubet said:

Bad news Brian, this isn't going to cause a "mortgage collapse" in the sense it will make housing any more affordable.  It's just putting people in the industry out of work.  It's not lowering rates or prices.  

[UTPhil2006 3930]

That and who even uses WF for a mortgage anyway. Their apps were probably significantly down 

[Gatorubet 30711]

12 minutes ago, UTPhil2006 said:

That and who even uses WF….

fify

[Wulaw Horn 19595]

19 minutes ago, UTPhil2006 said:

That and who even uses WF for a mortgage anyway. Their apps were probably significantly down 

They probably originated like 550,000 mortgages last year.  That sounds like a lot on one hand.  On the other hand I think Quicken did like 2,000,000 last year. I'm guessing they were both up a fair bit from 2020 with those numbers, in 2021. I'm sure they are getting killed in this market. 

Edited April 22, 2022 by Wulaw Horn

[jimmyjazz 47152]

How many "mortgage processors" did WF employ?

[Wulaw Horn 19595]

Just now, jimmyjazz said:

How many "mortgage processors" did WF employ?

I was wondering the same.  Based upon where the volume is my guess would be about 2,000

Thanks

Gabe

[jimmyjazz 47152]

3 minutes ago, Wulaw Horn said:

I was wondering the same.  Based upon where the volume is my guess would be about 2,000

Then that's a pretty big layoff.

[Wulaw Horn 19595]

5 minutes ago, jimmyjazz said:

Then that's a pretty big layoff.

I'm pulling numbers out of my ass assuming every processor can handle 20 files per month. It's all the same system- that would be my expectation if I was running that particular railroad but this is me putting numbers on the back of the envelope and extrapolating what we expect vs what they expect.

Look- originations are down something like 45% YOY, so if you were right sized before it would make sense that you are laying off 25-35% of your work force.

[UTPhil2006 3930]

WF was also crappy in almost every facet of the mortgage process so no love lost here. Better for all of y’all and me.