Solve the Assumption Gap: How to Close Deals Faster and Smarter with Craig O'Boyle

You're listening to Crazy Shit in Real Estate. You'll be amazed at all these wild but true situations that others have found themselves in. Because on this show, you'll hear uncensored, unbelievable stories from the world of real estate. I'm Leigh Brown. Let's dive right in. I'm Leigh Brown. This is Crazy Shit in Real Estate. Today I've got Craig O'Boyle with his very fancy red and salt beard to talk to you about a very important topic. And that's mortgage assumptions. If you're in real estate, you need the info. And if you're a consumer who's trying to figure out how to better afford a house, this is for you too. Enjoy the conversation and I'll see you on the other side. All right, Craig, nice to meet you. All right.

Nice to meet you.

I see you got a lot of salt in your beard there.

Yeah, it gets more and more. It seems to be spreading.

So you got, you just got two lines. That's interesting. Is that how your daddy's beard was?

You know what? I don't think he could grow one, actually. I think that comes from my mom's side. I'm— O'Boyle is pretty Irish, but she was Norwegian, so that must be the Viking somewhere in there.

Oh yeah, because you have Erik the Red. So that would explain the red hair more so than Ireland.

Could be. Could be.

Well, tell my audience who Craig O'Boyle is, where you're located, what you do in and around real estate. Give them a little bit of your thumbnail.

Sure. So obviously I'm Craig O'Boyle. I am a realtor since 1995. I actually was a 19-year-old kid when I got licensed, I had joined the Army to kind of pay for college. They kept me training too long and I couldn't start college. My dad was a realtor, commercial guy, and he's like, hey, you've got nothing to do. You could get a license. I never looked at real estate and I'm like, okay. But fortunately he was working on at the time the creation of what turned out to be a $50 million racetrack south of Colorado Springs here. And I got to sit in on that and I was pretty heady. I thought, okay, this is how I get rich, right? So I, I worked for him all the way through college, but then as I got out of college, I was like, wait, I probably need food with my meals, so I better go to a residential company. And I was in residential companies, well, until I opened my own shop, Aboyle Real Estate Group, about 2002. And I've worked on everything from, uh, flipping, investments. I was a huge REO agent in the downturn, or before the downturn actually, and then it got huge in the down turn and just have always been kind of moving forward with just different things out there. Because Colorado Springs is such a huge military town, I'd sat at a lot of closing tables where the topic to VA buyers would come up of the assumable nature of their VA loan. And I always said, if we ever find ourselves in a high rate climate, it would be a special asset. I didn't realize though, it would be like 25 years before that would come along.

It passes quickly, right?

Right. So obviously '22 hits and things change pretty abruptly. And so I saw the opportunity, teamed up with a partner of mine out here who owned the largest title company, and we created a company called Assumption Solutions, which is basically designed to help buyers and sellers and their agents get through and complete the mortgage assumption process with the servicer. And we decided to do it nationally. It was a slow grow. We brought in as the head of our processing department, my longtime lender, who's also a 30-year lender, Amy Cavender, to kind of lend the expertise of a lender to determining can we get this done? And we started— we started doing a ton of marketing in Colorado Springs. Of course, my partner who owns that title company also owns a big training company. And so a lot of brokerages out here send people to him to be trained. So we start running classes through there and, you know, really kind of got traction with the local agents in Colorado Springs. I actually underestimated how little agents in this business even knew this was a thing or understood it could be something that was done. So we focused a ton on training agents and we made Colorado Springs, I think, one of the most robust markets in the nation for mortgage Assumptions, and then just started spreading out from there. I'm being in business a long time. I'm connected to a lot of agents around the country, started leveraging those contacts. I started training classes via Zoom all over the place. It's gone nuts. It was slow build. 2022 was slow, '23 was decent, and the end of '23 and into '24, it's really kind of gone exponential in terms of the interest, the number of people out there. It's been a fun ride. I mean, I never set out to create an industry, but I kind of feel like we did and it's been pretty cool.

So, so for those of y'all that are consumers who watch and listen to the show, because I have a lot of consumers who dial in here, what we're talking about here is if a seller has a mortgage on their property and you want to buy that property, and if that mortgage is hopefully at a lower interest rate, so it was done when the money was much cheaper, In some instances, you, the buyer, can assume that mortgage. And of course, there's a lot of steps involved, but it has been huge in military markets in specific because the VA loan is assumable by the buyer and you don't have to be a veteran to assume it. Great information for especially our really high-cost markets. I know Hawaii has really benefited from assumable mortgages, helping people get into houses. And I'll also just point out that it's not just that agents don't pay attention when they need to learn things, which happens sometimes, but we haven't had an assumable market, as you mentioned, Craig, for, you know, 25 years. I think the last one I had done prior to the interest rate increase in '22 was in 2004. So I was almost 20 years since I'd done an assumable myself. We just didn't have a need for it when we had money behaving as though it were free. Why would you assume a 6% mortgage? You get a new one for 3%. Well, now the market has flipped, so it becomes a moment to educate all the realtors who've come into the business, especially since 2008 when rates went down. And that's the bulk of our realtor market. We also have a gap problem, and I'm hoping you can talk to this a little bit, or maybe Amy's come up with some solutions. If the house that you're buying is a million-dollar house and the seller has a $500,000 mortgage, you can assume you have to make up that difference somehow between the down payment and that $500,000. And that's been a big challenge for a lot of agents. Who's going to finance that second position? So what have you all discovered as far as providing those answers to the valuation versus mortgage?

Right. Right. So you're absolutely right on. You said, you know, about the timeline and the agents learning things. All the VA, all the FHA loans, they're all assumable. And when we— there has been a lot of changes in this since we started. Like, for example, when we started, 100% across the board, no one was allowing any financing in the assumption gap between the price and the loan assumed. And other things like investor buyers and other things have changed as well. But let's talk specifically about the gap. It became clear that there was a need for this pretty quickly. It's the most common question I get, you know, how do we deal with the gap? And up until maybe mid-'23, there wasn't even really lenders looking in this market, but then they kind of saw the potential and they started kind of trying to create products. Truth or rumor, I don't know. As things started getting going, something came out that there was word from the VA that they wanted to see if somebody was going to do a second, they wanted to see the second be assumable, which an assumable second product just did not exist.

Yeah.

Yeah. And so about 3 to 4 weeks ago now, the VA actually came out and issued some guidance that said, one, we have no problem with secondary financing, basically, as long as it doesn't mess with us being in first position., and we really have no requirement that it be assumable. So from our perspective, that's going to be huge. We have yet to process a lot at scale that are trying to finance the gap. We have 2 in process right now. I've been reached out by tons of organizations who are trying to get into this space. So I think some really good products are on the way. I don't have great stuff to deliver to you right now, but I know the organizations that have reached out to us. So it is coming. The key there, it's obviously going to likely require a cumulative loan-to-value ratio probably at 90% or less. So if you're buying that $500,000 home with a $400,000 loan, you're assuming you had a $100,000 gap. You still only likely to be able to finance $50,000 in a second. That rate will be higher, maybe somewhere in the 8 to 10 or more rate. And so that buyer is going to have to qualify with the blended rate when they're doing it. But, you know, as a key, I still like to talk about the fact that, you know, almost all of what we have processed, once you've done this, is people filling the gap with cash and they're doing it lots of ways and they're doing it on high-end homes. The biggest deal we've processed is a $2 million sale with a million-dollar gap. A lot of people that are doing this are selling homes. They've got a lot of equity coming with them and they're like, heck yeah, I'm jumping into this. And when we teach classes to agents and brokers all over the country, I do a lot of breakdown on the savings and the savings over time with interest and everything else. And it's just— it's huge. So there's a lot of growth potential in this market with the ability to finance the gap, but it's still very big even if people aren't there. I mean, people are getting gifts, people are doing all kinds of stuff.

Well, they're using their 401s and savings accounts, which have gone up as the stock market's gone up. But I did write myself a note, and y'all, you notice the Deputy Director of the VA has been on this show multiple times. So the links are over here. Make sure that you watch those, and he's going to come back on the show again next week. I'm going to ask him about this new guidance on secondary financing, Craig, so see if we can get you some inside information there directly from the VA. So let's talk a little bit about the number one benefit to a seller to have this assumable mortgage, because I know that in training you probably get a lot of questions from agents who are trying to understand it so they can help somebody. And obviously the benefits to seller are different than the benefits to buyer.

Exactly. Yeah. So when we started this, when everything changed in 2022, probably you like me, I'm actually a little surprised that values held as strong as they did. Now, I, I look back, I kind of understand why, but I started thinking, okay, right, this just gives you that extra piece to market when you're selling a home, right? You're more competitive. You have a bigger buyer pool if you have that assumable loan. What turned out, obviously the market stayed relatively strong in many markets. So what's the benefit to seller? Potentially, if the market is slow, you just have that extra pool of buyers, of course. But also potentially you have the ability to get somebody to pay a premium because oftentimes the amount of savings that somebody's going to realize versus the new higher interest rate, we see frequently where the savings is over $1,000 a month in their payment. Well, gosh, if I was saving $1,000 a month in my payment, I'd sure pay $15,000 more on a home when I was basically going to make it back in a year. Right. So I have personally marketed homes with assumables where, you know, we had the certain price because if somebody is going to get a new loan, obviously they got to get appraisal. In an assumption, they do not need an appraisal. So I would say if you want to do the assumption for the seller, we're going to expect a premium. And so just putting it out there, there's no round number as to what somebody will pay. That's kind of where the agent skill comes in. It's all negotiable. But that's a big benefit to a seller. One of the challenges I have said with agents talking this over, you know, it does take a little bit longer, although the time process is getting much, much better. But since it takes longer, I tell agents like, make it worth the seller's time. Buy that time, you know, pay for the pain that they might have to go through with it taking an extra 30 or 60 days.

So So the average process takes about 60 days, you're saying, to go through all the hoops. If it's— let's just say it's a VA assumable, just to stay in the same vein we're in.

Yeah, let's say it's getting closer to that for sure. If we were talking a year ago, I would have said the average was 90. But some of the more, let's just say, difficult servicers to work with in this process have gotten a lot better. One of the more difficult— I'm not going to name names right now, but we have the last 3 deals we got done in 45, 45, and then recently 25. Oh, okay.

So it really is improving.

It is. And the worst servicer we've got, my processor sent me an email. Oh my gosh, they're getting better. I just got one done in 90. But I would say, yeah, the average is getting closer to 60. But we have many servicers, big ones, that are definitely getting them done in 45 days.

Now, did you say there's no appraisal on an assumable? Because I did not know that. Is that across the across the board?

Is it just across the board? That loan doesn't change. And for the, for the servicer, you know, that was done when the loan was created. Now, if we start getting heavy into secondary financing, likely an appraisal is going to be part of that just for the second, but maybe even for the first to confirm. Because if you do secondary financing, it is still subject to the servicer allowing it. Like, there's no guideline forcing them to allow that.

All right. So of course, the whole show we have, we kind of ran straight down the assumption rabbit hole, but my show's been built on the interesting stories around real estate. So I'm dying to know what you've seen in all of those various angles of real estate that you landed in by accident. We can't fail to point that out because a lot of us landed in real estate because we didn't belong anywhere else. I'm dying to know what the crazy story is that you've encountered along the way that you just— you can't believe it ever happened? Still can't believe it. Good, bad, and different.

Oh, gosh, I got so many. I'll go back to my REO days.

Oh, there's always stories in that world. And it's kind of— yeah, yeah, it's funny.

I was talking to a guy who was big in that space the other day. He worked a company I did that Wells Fargo owned called Premier Asset Services, and my agent code was 00012. I was like the 12th guy in their thing, but they sent me out to a lot of properties.

I like the system, but it changed the system a million times. It's a pain now.

I don't want to get into it again. I'm good. I'll buy them as an investor. But yeah, I mean, we used to go obviously as the first guy to the door, they'd give us an assignment and it was like, first thing you do is go find out if it's occupied, right? So what I would do to do that, obviously I'd go peek. I'd call the utility company and just see was service connected and stuff like that. And I had two different scenarios that I'll tell in this. The first one I went to, it's unconnected. So we would get a locksmith out to open up the door. And I walked in. As soon as I walked in the house, I go, oh my God, where's the dead body? Right? I mean, it just overwhelming smell. So we go through the house. I'm like, I asked the locksmith, can you walk through me? And we walk into the garage. And there's the only thing in the garage is a refrigerator. I'm like, is it, could it be food? And I opened up this freezer and there was a full-size dead deer in the freezer. And the power, the power company told me the power had been off for 90 days. So what we had to do, we had to, we had to haul a trash company. What they did is they just sealed it up, got a forklift, and they took the whole thing out in a truck and, and never there.

That seems like the wisest course of action.

Yeah, there was other ones like that. You know, sometimes it's not reliable that the power was off and there was no furniture. Wells Fargo had called me and they said, we've got a property that we need you to go down to ASAP because the owner had basically spray painted their story of woe all over the house. And I'm like, okay. I went down, the utility's off, and I get the locksmith to open the door and come to find out She hadn't left. She's still living in the home. And I'm like, oh, okay, sorry. Backed out. So they had to go through their cash, what they call cash for keys process. And ultimately that didn't work and they had to go through their process to get it empty. But then they said, okay, now it's empty, go in and we don't want this home on the news with all the spray paint. The neighbors are very upset. And they said, can you find a person to paint this house within 24 hours? I called all these painters and said, Yeah, I'll do it tomorrow, but it's going to cost you an extra $5,000. The bank president was like, we don't care, we'll pay whatever it costs. We just don't want to be on the news with it. So, I mean, I got more in there. I sold 3 homes for $5,000 each.

Should have had the cash to buy them yourself. Of course, they wouldn't let us buy them ourselves. We were their agents.

Yeah, that was one. The kicker was they had a minimum commission to me of $2,500 per home.

You will never again see a 50% commission rate, Craig Goodboy. That was one time. Lord, if The New York Times finds out about this, they're going to write the nastiest article ever.

I tell you why I didn't buy them. The guy had strung— he owned a bunch of land and he just didn't permit them. He built them and he just strung utilities from one house to the next. And I was like, oh, I don't want that problem.

Like Christmas lights. I mean, but if the middle house goes out, do the other two houses have no power? Is that how that works?

The guys that bought them were contractors. They could deal with that stuff and they did really well.

So I'm sure they did. I mean, there's, there's a million stories from that time. And all I can say is if you are a consumer, you can expect to see more bank-owned properties show up over the next 18 to 24 months as the job market goes through hiccups. And if you're a real estate agent, now is a good time to start learning the vocabulary of that market and getting familiar with it because we will see some opportunities. However, Craig can also speak to this. The banks are not going to hire you as their manager of these properties as a listing agent unless you are financially secure. So there's a lot of good reasons to get your financial house in order because the banks don't hire agents that are broke.

That's true. That's true. Yeah. You had to provide all kinds of stuff to them back in the day. So, but I don't miss that world. You know, since then, I mean, I bought tons of homes, I syndicated groups, and now we, we also do development and, and stuff like that. We sort of halted with 22 on our developed kind of watch, which also gave me the time to start this. And this has been an amazing journey. I never wanted to be a speaker. I never wanted to be a trainer, but all of a sudden I found myself having to do it and get to meet great people like you.

You get to help agents help their clients. And there's a lot to be said for being useful and not— because you can make money, of course, but you can make money and be useful. That's pretty good.

You know, it's been a lot of fun. I mean, once again, yeah, I, I've always been the other guy sitting in the audience, not the guy talking to people in front of them. And it's been a lot of fun. You know, I obviously get to see you in our town here next week in Colorado Springs. So I'm looking forward to meeting you face to face.

Yeah, I love Colorado Springs. I love staying at the Antler because I'm an old person and it's always a good time. Craig, if somebody wants to follow up with you and find out more about Assumption Solutions, find out more about training that you provide and the solutions, what's the best way for them to find you?

Sure. Our website is AssumptionSolutions.com. We have tons of information there. Every time I teach a class on Zoom to somebody, I actually record it. I upload that class so it can— it's free. You can go through the whole process, which teaches you all about assumptions, all about what we do. And then I put the real estate agent hat on and I talk about getting more buyers, getting more sellers, and then properly marketing a home. Recorded a great one yesterday. I just have to edit it and get it on the site. You can email us directly through there as well. And I'm usually the guy fielding those emails so my team can focus on deals.

So, so now do you answer questions for the consumer public too, if they have questions about assumptions?

Oh yeah, absolutely. We get a lot of consumers like, how can we find these? We connect them with agents around the country because, hey, I'm still a realtor. I don't mind sending referrals. So yeah, we reach out to consumers, realtors, whoever wants to connect with us. We're here to help.

Well, there you go, friends. Make sure you visit the show notes for this episode where all of Craig's contact information is located so you can follow him online and reach out for any information at all. And if you're in real estate, do your clients a favor and get up to speed on assumptions so that you can create a better future for them. And Craig, thank you so much for what you're doing to to live in the space that's been presented to you. And hey, let's watch it grow.

I'm excited. It's been really good. And there's— people would be surprised at the size of the opportunity in this space.

And that's what it's all about, is finding the opportunity. So thank you for coming on the show. Y'all say something nice about Craig in the comments, hit the bell to subscribe and go watch some more episodes. And most importantly, come back and see us next time. As always, I'm so super thrilled that you joined in for more crazy shit. And if you are a real a realtor, investor, inspector, lender, or just a regular human being who happens to have an unbelievable story that you need to tell the world about, or frankly, you just need to one-up the story you just heard, then make sure to DM me on Instagram @leithomasbrown or tweet me @leebrown, or frankly, any social network where you hang out. I'm there. And if you had some fun, then you totally want to subscribe so you don't miss out on any future episodes.