Renee Lossia Acho on The Hardcore Mortgage Real Estate Business Show - February 5, 2022

Good morning. This is the Hardcore mortgage Business show brought to you by Capital Mortgage Funding. And that was some kind of exciting intro music we had going on there.

What is that?

Harvey goes out of town and all the rock music goes out the door.

Unbelievable.

It was pretty good, though. To my right, we have our fearless leader, Mr. Harry Glanz.

Good morning, everybody. Welcome. Welcome, Renee.

Yes, we got my fellow top 1% in all of the nation originators, Mr. John Colb.

Hey, guys. Happy Saturday. Yes.

And on my way here, right, I was thinking like, I'm glad I took that under bet on the snowstorm. Right. So in the studio, we have the one, the only, Ms. Renee Lacia Acho of Keller Williams Domain, the fearless leader of the RLA Real estate group. Welcome.

Thank you. Quite the introduction. I don't know about fearless, but definitely the leaders.

Oh, yes. It's a little bit of both. I mean, you got to be out here. You're fierce. You're all of the things. Right. So we're going to be hitting you up one hour real estate talk, business talk, life talk, goals talk. We're going to take all of your calls, 248-539-9797. We're going to be touching on a little bit of the market, the shortage. Right. A little bit of rates later on the show. I kind of want to pick Renee's brain on what buyers can do to prep for the spring market coming up. Right. But before we get into the spring market, let's dive into what's happening right now.

Yeah. So, you know, we had Renee on about two, two and a half months ago. And you know, at the end of 2021, it was, you know, no inventory shortage, multiple offers maybe. We thought things were going to change. On my way in, I was in with a father of a client of mine on the phone and he was telling me that 14 offers, Renee. 14. Here we are. We're on February 5th. This is the 5th, right. February 5th, 2022. The status of the market really hasn't changed, has it?

No, it hasn't changed. And the unfortunate part is we don't anticipate a big change happening other than interest rates going up, which we already are expecting. We've already prepped up. We know that that may shift a little bit of ability. It might shift people from one price point to another. But the reality is in every price point, 100,000 to 10 million or whatever you'll be landed between the shortages are there and they really, we don't expect a lot of inventory to hit the market for a number of reasons.

Yeah. So did you hear that everybody? Have we been saying rates aren't going down to zero for how many years now? Rates are going up. You heard it from an, a, another, an interested third party, but some different voice on a mortgage person like John or Becky or myself saying rates are going to go up in 2022.

They have to. And I think people anticipated that. They started to expect it. The real what I find to be interesting is when people think, oh my gosh, rates are going to hit 4%. And I say to them all, hello, that's still a historical low.

Yeah, thank you.

Love her.

3%, it's free money, you know, at some point and 4%, we were, you know, those of us who've been in business long enough, we were back flipping when it hit 4%. So there's still historic lows. It's going to shift a little bit of people's ability. But you are still, if you can lock in to anything even near that for a 30 year, even a 15 year, you are doing very, very well.

Yeah. I mean, it's all about perspective, right? And like you're saying like in that moment when they did drop down, if it's like, oh my God, yeah, we're finally at four and a quarter. Yay. Right? And we got a little bit of spoiled, right. For some time. And COVID 19 was that dark horse. We've talked about it, you know, as far as driving, you know, the rates down, but the rates were not gonna stay sub 3% to the end of time. And you're fooling yourself if you thought so. And here we are. And I mean, if we're just going to get right into the rates as it is right now, the reality is the Fed, all they did was just announce things that we already knew was going to happen. And we've talked about it on the podcast. All the rates are doing right now, they've actually already got in position when they talk about these things happening. Rates, just like the stock market, they do a really good job of getting in that position. So hopefully in March when it does happen, all we're going to see is just maybe even a little bit of BIP in our favorite, you know, because then the market will settle to see what really is going to happen.

Yeah, we do. We do a little bit of a knee jerk reaction when, when somebody coughs or sneezes in the Fed. Right. So now there's the, the correction is going to come back where we're going to get a little Bit back. But, you know, like Becky said, if. If they do as projected, we shouldn't see much change at all because the market's already taken that into account. And it's just. Just, you know, it's history. That's what we've done over and over and over again. It's like. Like Renee said, 4 is still a very good interest rate. 3.875. 3.75 is still a very good interest rate. We were flipping pancakes when they went from 7% to 6 and 6 and a half.

Yeah.

So, I mean, pancakes, you know. You know, it was.

The griddle was hot.

Yeah. And I tell people, because, you know, we've been doing this. We've all been doing this a long time. I tell people when they get really fed up about here in 3.875, 3 or 4%. Gosh, back in 2000, you would have hated me because I was writing mortgages at 9%. Nine and a quarter.

Right.

And I mean, I don't think we're going to get to those levels.

No.

But, you know, you got. You got to just be prepared.

I think we're there, and we're just going to now start to see the market kind of adjust to that. And so speaking of that. Right. I want to talk about. Or. Go ahead. Yeah.

Becky. This is such a great conversation because Renee and Becky, I'm so glad you're here to protect me from John. And I'm sitting kitty corner. Everybody out there. So. I love John so much. So the other day, I mean, I'm telling you, I can hear him. He's on the other side of the building.

This is going to be a good conversation. This could be another argument.

Right. He see another. So he comes rolling into my office. These rates are this. What's going on? The rates. The rates, the rates. So. So I'm telling you, when you see aggressive, angry John rolling into your office.

I live for it.

You gotta buckle. You gotta buckle in. So I had my seatbelt on, my shoulder harness on. I said, john, I wish we could control it. I really, really do. And he's telling me about a bank and this and that. Whatever. I said, listen, let's just let everything calm down, let it sort itself out, and things are going to be okay. Right. But when you're in that moment, when you're fighting, it's like, Renee, when you're fighting for your client on an offer and there are multiple offers on there, you get rolling, you get caught up. John was fighting, fired up.

I do not like to lose Clients, right. And I am always going to do the best that I can, the best rate I can. And if I have to take Harry's head off to do it, I'll do it three times in one day if I have to.

Speaking of fighting, let's we got Ron on the phone, we're talking about fighting for our clients. He's got a question about financing. Ron, how are you, where are you from and what is your question?

Hey, I'm from Brockway, Michigan to south of Yale.

Alright.

I'm looking to buy some real estate and I have great credit rating. I got, I got some money in the bank, I just refinanced my house but I got a work situation which has caused the bank to refuse me from getting a mortgage. I work, I was laid off in March, collected unemployment all year. I'm a carpenter, so I had a job for three years. He laid me off. So I went back to working on my own. So now I'm self employed. I'm also getting disability. I gave them my income from last year and they still refused me. So I want to buy, what I want to do is I want to buy some rental houses and I'm getting frustrated finding people to loan me the money and I'm just open for some suggestions here.

Yeah, let John go ahead and take that.

Well, here's the toughie, right? So you got a couple different things going on, right? You're looking at investment properties. Investment properties are a little bit trickier of a finance regardless. They're a deeper dive into underwriting. You're not going to get the leniencies that you get when you are underwriting a conventional mortgage or I'm sorry, your primary mortgage. Second thing is that you're now self employed. We cannot use self employed income unless we have a full year's worth of tax returns under our belt. Uh, and when you are just starting out more, nine out of ten times, it's more like two years most of the time. So you know, you got a little bit of a tricky situation. Now what you could possibly do if it's feasible is do you qualify with just your disability income. If we can show that your disability income is going to sustain, we could get you to qualify just on that income. But you know, depending upon how much that is each and every month and what you're looking to purchase, you also have to still qualify with your current primary residence. The good thing about buying a investment property, right is that if we do a comparable rent schedule with as part of the appraisal, we can actually, we don't have to hit you for the new debt as part of your ratios as long as the rents in the area are equivalent to what you're buying the house for. It's, it's a long detailed calculation, but that's something we could certainly look at for you.

Well, yeah, that's what I was, I was curious because I applied for a commercial loan and they, and they turned me down too.

No, you're never gonn get a commercial loan.

Yeah, yeah.

I say you're never going to get a commercial loan. Commercial loans are even harder than residential mortgages. And if you're buying one residential investment property at a time, do them with a residential loan. Flip the title into an llc. You'll have the mortgage in your name, but you'll be limited to your liability through the LLC that you put the title into.

I do have an llc and, and that's what I was, I was wondering if I'm showing on paper, if I buy this house, I put 20, 30, 40% down and the income that I'm going to get from the rentals will, you know, by more than far pay for the mortgage. That's what I understand. Why can't I get a mortgage?

I think we're gonna have to take a look at this, John.

We're definitely gonna give you a call Ron, after the show because the reality is that you're right, it does offset it, but you need to have that history.

Right.

You don't have the tax returns done yet from the sounds of it. Right. With you. Just con, you know, you're self employed and all that. So we will definitely give you a call after the show. We're going to look at your tax returns, we're going to look at your situation and just make sure you're getting in the right position for your future goals. So if 2022 is where you want to be, you're, you called the right place. We got Renee Laciacho of Keller Williams, the leader of the RLA Group joining us. We're excited. We're here to talk about everything that's real estate and all of the things. So we're talking about. We're just coming off our first giant snowstorm, right. And driving in. Here we are. And now we got these buyers in the market and they're entering it's with no signs of slowdown like we were talking about. Right. So what are we doing? 2021 is going to go down in history of one of the biggest profits for sellers. Right. And one of the Toughest markets for buyers. So here we are. We had some buyers that probably got out of the game in 2021 because they're frustrated. And now here they are. They got their pre approval shanks, right? Their weapons of choice. They're going to give everyone paper cuts because they want their offer to be accepted. But here they are and they're coming in, right. And is it just as competitive or if not more competitive right now here in the winter?

It's, it's competitive, it's going to stay competitive. Based on what we were just talking about is another point, pressure point that's going to hit the real estate market and that is interest rates going up. That is going to then launch a lot of people who maybe thought, let me wait a couple months, wait till the fall even. They are going to try to take advantage. So now you've got another level of demand that's going to put further pressure on the inventory that really is non existent and it's not, it's depleted for a number of reasons. It actually is from 2020 people who are staying in their homes. During COVID we were telling everybody, look, we're stuck in here for whatever it was, 90 days almost, let's do projects to your house, get those improvements done. People then converted their own homes to make use out of them and decided for, forget it, I'm not going to sell them, I'm going to stay. So that removed one group of homes that would have entered the market from the inventory then coming out of COVID No one anticipated the supply lines to be so backed up. The labor shortages that we've had. So the delays on another whole group of homes that did not hit the market or are slower to hit the market. The new construction, the renovation projects that traditionally would have taken four or five months are eight months, nine months, 10, 10 months out. Construction loans are now changed from 12 month minimum. A lot of them are going to 18 months because we know it's taking that much longer. So that's depleted it. That coupled though with people who now still are wanting to move, they've decided that they want to do this and they're after these houses and they're going to try to capture it before the interest rates shift. So we've had two years of depletion. We have less inventory hitting the market for a number of different reasons. And we the biggest bottleneck that we're dealing with as the agents, our countless people, clients who are saying to us, well look Renee, I'm happy to sell my house. I want to capture a 14, 15% increase in the market that my house just appreciated in less than 12 months on. But where am I going? Where are you going to put me? So the creative strategies of a licensed solid agent who's going to be able to help navigate that is crucial. And I think people are missing that opportunity because they're trying to jump directly to a listing agent or directly to the homeowner. And, and there are things that obviously in a profession we know about because we're in it, that a regular homeowner or a buyer on their own isn't going to be able to do.

Yeah. So, Renee, you just gave us the why. You gave us the why. Inventory levels are down there. Certain markets that are, that are just way down. We're at record lows right now going into 2022. We are record low inventory. So you gave us the why. And, but, but tell us how. How are we going to come out of this? Give us. What are you doing? And I know that might be the $64,000 question, but. But how are we going to go ahead and turn this around? What are you seeing that is making you realize that? Listen. Yeah. 14 offers on one home and no contingencies. And people are waiving inspections, which. Don't get me started on that. I'll get like, I'll get all John Cole on you about that. Okay. Can't do that. How are we going to help our clients?

So it's not easy. And everyone's frustrated. There's buyer fatigue, there's seller confusion. One of the things that we have, well, a few different. We have a couple different strategies that have worked nicely. And not for everybody, but for at least a group of people is most people want to buy before they sell. Now they're saying, I'm scared to sell my house because I don't know where I'm going. So if you can qualify and there are programs and you guys know, obviously, you know, you could potentially take. If you were anticipating the down payment from the sale of your home to put into a new property, maybe there's a heloc, maybe you could pull that out in an equity line, leverage that equity to purchase a house and then obviously turn around and sell. When you sell your house, clean that out, but be able to capture your new purchase prior to selling. That's one way. Another option that we're seeing a lot of are people doing rent back. So buyers who are looking in the market that say, well, I haven't sold my house yet, you can push out a closing or what you do is you close and you say rent back. We'll allow you because sellers have the same issue. I don't know where I'm going to go. So there's a win win opportunity. If you can close on the property and offer as a seller three months of staying in the property, renting back, it gives that buyer the opportunity then put their house on the market and get a little head start. So sometimes you can get the stars to align, but the flexibility of buyers and sellers is really different. What the urgency for sellers. And if you're going to in a compete situation, which 9 out of 10 times in this market you will be, you do want to offer your best foot forward, a quick closing, a tight timeline for inspection. You better do an inspection. I don't care who tells you not to. Yes, horrifying idea. I can give you a horror story, but I won't. Please do an inspection. Just make it a tight timeline. Give a good emd, make the offer clean, but then offer maybe some rent back. That's what you need to have and to win that offer to win that property. But there's, there's conversation that can take place between the listing agent and buyer's agent that might actually create a win win scenario that you might not be aware of. And not everyone's going to be in that place, but it's worth the conversation to find out.

Listen, I love when we have amazing people like you and I hope everyone is listening, taking notes. She literally just schooled everyone on what to do and a lot of it has to do with who you're working with and what they're doing for you. And that communication is tale as old as time. Picking up the phone, it sounds so wildly simple, but yet it's really hard for people to do. And speaking of picking up the phone, I want to go over to Bob, our caller. You got a little question for us. Looking forward to hearing, hearing from you, if I could speak correctly.

Hi, good morning.

Morning.

I just wanted to tell the listeners I had a really positive experience working with you guys several years back. A very old home that I had purchased. My wife and I and gutted it and was using money from a sale of a previous home and basically ran out of money. And then my wife's timeline changed and we had to get a mortgage to finish the job. I was striking out everywhere I went until I was listening to the show one morning and decided to give you guys a call. And after the show, you guys called me back and got a loan to get My house finished up and just wanted to say thank you and what a great experience it's been. I still even get birthday emails from John.

Oh, hey, what's up, Bob?

You know, he helped me in a very tough situation and just wanted the other listeners to know that you guys were very creative and came up with the loan for me and my family. And we've been in the house now for several years. Still have you guys as our lender, although we did refinance. And it's all good.

Thank you, Bob. Thanks for having me.

I really appreciate that.

Call the other listeners out there. If you're stuck in a situation, give these guys a call. They'll look for alternatives that other places won't.

Yes, thanks. Thanks.

We did not pay him to call us.

No, no, no. That was a great surprise. No, no, no.

Def John Combs brother. But just a very police customer. And, you know, when I was striking out at my credit union and everywhere else, I didn't really know where to turn and decided to call one morning and you guys helped me right away. So great.

Thank you, Bob. Thanks for the call. And hey, for everyone out there, these. But what Bob's talking about is a renovation loan, right? We. If you get halfway through a project, you get stuck. We've got the renovation loans, but you gotta, you gotta hear what Renee was saying earlier, that these renovation loans are as hard as the new construction loans because they take a little bit longer. The cost is a lot more, the labor is a lot more, the material is everything. So, you know, give us a call, we'll get you through those. But we were able to help Bob and his, him and his family are. That's one of the success stories we love to hear. So thanks so much, Bob.

Yeah, that's why we wake up and do it every day. And I'm going to tell you this right now. When Rene was talking about the market, and I'm sitting with Renee, I'm sitting with John Kolb and Becky Alley. You're talking about the top people in their profession, especially in our area. This market right now is not a market for rookies. And I'm just telling you that you have to be very experienced in putting transactions together. You have to know your stuff. And, and even then. And there's no guarantee. This is a very tough market. And the more experience, the more people you have aligned on your team, the chances for success go up greatly. So, Bob, thanks a lot. We appreciate that call. And Becky, you know, it's. It's not getting easier out there. It's, it's getting a little tougher. But I do believe that there's, you know, Sunshine Coming on April 1st. We always say we're building a bridge to April. That's going to be springtime coming up. And actually it's the end of March of spring. Remember that?

Yeah, yeah, remember that. One of my best friend's birthdays, like the first day of spring. I mean, so yeah, like you always, we build up.

April 1st is our goal. We got to get from right now the freezing cold 3 degrees when I walked the dog this morning, okay, My wife's gonna say she walked the dog while I walked the dog. Then she took the dog from me. Okay? So 3 degrees April 1st can't come soon enough for me, guys.

I can, I can see Harry walking the dog from the bedroom to the door and then Randy taking the dog outside.

That's a good one, John. You, I got you first, then you got me second. That's a good one. I like that.

Well, cold, cold or warm, you can't wait for the real estate market. We used to wait for the spring market to hit.

Michigan's a365 state.

It is. And of course, you know, you have some of the low months. But we are seeing a jump start to the spring market. And I think that people are not going to wait to that March, April warm up. That has traditionally been the start of our market because they realize that the inventory is low and people are jumping. We have two listings that we put on the last week in two totally different areas. Over 21 showings in two days. And you know, you anticipate it. So this is January when we got early February. Don't wait. Do what you can do now.

Yeah, I mean it's always time is of the essence and, and you want to make sure that you're jumping on every single solitary thing. And again, who you are aligning yourself with. The sun, the moon, the stars, all that matters. Because that's the difference between getting your offer accepted and not. Because not every pre approval is equal.

Right. And not only that, as a seller right now we're so excited. Our sellers are getting multiple offers and you have all these. All offers aren't created equal and it's not always about the number. And I think that that is the misguidance that allows you.

I'm glad you said that.

It's not and I have one. I could give an example from this weekend. We had a fantastic property. We have several offers on it and one buyer who is much higher than the rest is not qualified. She's only putting 10% down. There will be an appraisal issue on this house, there's no question about it. And an appraisal guarantee is not going to lock in, which is, again, something that if you're not savvy enough in this market to know about, you should have someone to help you, because escalation clauses and appraisal waivers are definitely something you want to be aware of. But in this case, if you're only putting 10% down, the appraisal waiver is not going to be something that's going to help because the person doesn't have the equity or the liquid cash to put on. So there you want a lender that is going to help to navigate this. And I will pick about a purchaser who's got a lender that I know.

Right? I mean, all that matters. I mean, reading the contract, having professionals in your corner that are going to help you, like you said, navigate all through that. It matters. So when we come back, we're going to dip into rates we talked about in the beginning of the show, but we are going to talk about how the raising rates does not mean the sky is falling.