Mortgage Heroes Update – April 14th, 2021
Client Case Study Urban to Rural – Part 1
Video Transcript:
Andy Cruz (00:00):
Hi mortgage Heroes. Andy Cruz here in Business Development. This is your weekly video newsletter. This week we’re going to talk about a real world example of a client taking advantage of the highs of a real estate sales, at the same time, moving out of a dense urban city and finding the rural land that’s going to fit them and their family. But before we do, make sure you subscribe to our YouTube channel, give this video a like, and remember to turn on that notifications bell so you get notified every time we upload a new video. Well, getting to today’s story, this is actually going to be a two part story because part one is happening right now and we wanted to tell you about it right now. When part two occurs, we’ll let you know about part two. Here’s the short story. We have a VA client who had been living in a townhome for about eight years. Now their family has grown. It’s a tri-level house, it’s in a dense little neighborhood. There’s some parking at the house, but then you got to find parking in the neighborhood.
Andy Cruz (00:56):
Their lifestyle has changed in the last couple of years. They’ve actually added a couple of horses to their family, they have goats, chickens, and all of that has to be somewhere else in town. Before this, they were actually renting ranch space somewhere else. Now, that’s nice and that keeps home separate from the hobby. What they’re really looking for is a place that will contain all of the aspects of their life that they enjoy and that they invite family to be part of. What they did is they sold their townhome now even though they have not yet found their replacement property. We’ve been talking for quite a while now about the market being tight and inventory being very, very competitive and buyers overbidding each other. When you have a property you have to sell in order to step up and buy the next one, that’s a contingent sale.
Andy Cruz (01:53):
Now, a seller who has many buyers at the same time bidding to buy their place, doesn’t necessarily have to accept a buyer’s offer when there’s a contingent sale connected to it. Meaning that that buyer has to sell their place to unlock the equity which becomes a down payment to buy the next one. What our client was able to do was actually sell their house now, untrap all that equity, keep the cash, and is now ready to go and shop and buy a rural property. Now, what we’re looking for is a property that has not only a main house big enough for all five of them, but additional land with acreage to have all the horses, have the stables, to have the goats, to have the chickens and room to park their RV. We’re actually taking all of the things that would complicate the buying transaction out of the picture. Now they’re free from the contingent sale, they have their equity, and now cash freed up.
Andy Cruz (02:54):
Now they can look for a place that will not only fit their family, but also their ranch needs for their hobbies and even better, there are many places in rural areas that have a second unit on the property. If it happens to not have that, then of course they can build an ADU with the extra cash from their sale. In any scenario, no matter which way you slice this one, whether the new property has the ADU on it, a separate unit on it or it has to be built, the buyer already has the cash for it because they unlocked the equity from the sale of their condo. The other nice thing is that they’re not under any time pressure. When you’re in a contingent sale, you’re trying to make this deal happen, but this deal could only close after this one’s closing, and they have to be this domino effect. One top pulls and then the others go in succession.
Andy Cruz (03:47):
We eliminate all that stress and all that headache and all those time pressure of trying to find a place and then closing this one and deal with all the negotiations, deal with two separate negotiations at the same time. You’d be the seller on this side, the buyer on this side, it’s actually quite stressful. But in this scenario, they actually get to take their time. They’re already freed up and liquid in their cash, so they can actually look for the proper place to bring their extended family into what their new life is going to look like moving forward.
Andy Cruz (04:14):
Now, all that being said, I understand that maybe your scenario doesn’t include some of the things I’m talking about that are circumstantial for them such as having horses, needing RV parking, and parents moving in. I wanted to tell the story today to illustrate the things that I’ve been talking about for weeks which is if you’re looking to buy a home and you’re looking to do a move up, this is a still a great time to do it. What it might look like now is probably different than in a normal real estate market, but we’re not in normal real estate market times, as we’ve been discussing. You still have cheap VA money available. Really, what’s going to happen is sellers entertaining buyer offers are going to give our client a better look because they’re ready to close, their cash is ready, and they identified already what it is they’re looking for. They can come to the table to negotiate, not only the price, but also the terms that are favorable for both parties involved.
Andy Cruz (05:05):
Lastly, sellers these days are looking for a quick close. A quick close can’t happen if there’s a contingent sale of the buyer’s other property they got to sell before closing this one. In this case, if they need to do a 21-day close, that’s going to be possible. It’s actually going to be very likely. The sellers are really going to enjoy that because guess what? That seller, they have whatever’s next for them too on the other side of closing that deal. They might end up being an out-of-state buyer or moving out of California, they might be downsizing, they may be making a lateral move somewhere else, but giving a quicker closing timeframe to the seller actually helps give our buyer an advantage against all the other people bidding and competing for that same property.
Andy Cruz (05:44):
Now, as I mentioned at the top of this video, part two is yet to come because this story is unfolding as we’re also telling it. We’re expecting in the next couple of weeks that they’ll find the property, we’ll be in Escrow and we’ll be able to come back and successfully report to you about the closing, show some pictures of the fun new house and the ranch land. If there’s an ADU, we’ll show that too. We wanted to give you part one of this and show you how some people are being creative, some people are unlocking their equity in order to use it in a different position and just cover that gap space in the middle between selling one place and buying the next. Hope this was encouraging to you, and maybe it gave you some creative ideas for those of you who have been maybe stuck on what I can do and how I can do it.
Andy Cruz (06:24):
This is just one example of how you can take advantage of this marketplace and still be a solid buyer prospect in this current market condition. Well, thank you for watching again this week. As always, please feel free to share this video with family, friends, coworkers, anyone you know who’s been talking about maybe moving, but they haven’t figured out how to do that. Maybe you can share this illustration with them and they can see how you can still be creative right now in a tight market where inventory is low and there’s a lot of people trying to buy at the same time. Have a great week. We’ll see you again next week.
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Rates & Fees Disclosure:
‡ The payment on a $300,000 30-year fixed-rate VA loan at 3.000% with a 80% loan-to-value ratio is $1,292.01 with 0 (zero) origination points due at closing. The annual percentage rate (APR) is 3.235%. Payment does not include tax and insurance premium impounds. The actual payment amount will be greater. By refinancing your existing loan, the total finance charges may be higher over the life of the loan. Some state and county maximum loan amount restrictions may apply. Appraisal fee of $600, Processing Fee of $895, Underwriting Fee of $795 included in APR calculations with borrower paying 0 (zero) loan origination points.
‡ Based on Mortgage Heroes internal data.
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