March 3rd, Market Update and Mindset Call with Nikki, Cari and Angie

Everything is still looking positive in today’s mortgage landscape!  

We explore critical changes in condo financing due to evolving HOA insurance policies that can affect buyers and sellers alike. I'm going through this right now with a seller, who is also a buyer.

• Current interest rates stabilizing in the mid to high six range 
• Insurance industry changes impacting HOA coverage requirements 
• Understanding cash basis coverage and its implications for financing 

If you need help or guidance, look us up on social media or connect with us here.

Chapters

• 0:00 Welcome and Market Overview
• 1:50 The Impact of Insurance on HOAs
• 3:20 Tips for Navigating Financing Challenges

Transcript

Speaker 1: 0:37

All right, everybody, welcome to the Monday Market Update. We're live on Workplace as well in the EXP Family Tree. Hello to everyone watching the replay are live. So today Nikki is actually in Florida, so I have her text message for the Market Update and we do have a situation going on that I want to bring to everyone's attention because it's newer to me, a little bit newer to Nikki, and it's just stuff that's changing with some HOAs. So I want to definitely make sure that you as agents are available and understand exactly what's going on. So let me pull up Gosh. I have a lot of text sense this morning.

Speaker 1: 1:27

All right, so the market update Nikki's saying that we're continuing to see the interest rate and just the market in general settle down a little bit. I know for a while it was really up down, up down all around. There was a lot of news to be had, week by week, and she said it's just, you know, not much has changed. So we're still in the mid to high six range for your 30 year fixed rate. So just your standard buyer again for the newer agents out there, that's all relative. So it does depend on so many other things. So keep that in mind and always talk to either Nikki or your lender of choice to get up-to-date information as you go through the process with any of your buyers, so on the street.

Speaker 1: 2:18

So let's talk condos. Uh, it's important now as you're looking at townhomes or condos that have an HOA, an association, which 99% of them do. Stuff is happening with insurance. You're hearing all around the United States how different things like homes are getting dropped from insurance. Things are just happening. Whole states you know people, insurance agencies are backing out. So this is now trickling and affecting different HOAs and associations. So this is what we have to say.

Speaker 1: 2:58

It's important to check on the financing availability for condos as we are starting to see certain changes with HOAs that can kick the financing out of Fannie and Freddie conforming approval guidelines. Specifically, we're seeing insurance being the largest issue. So normally Fannie and Freddie require replacement cost coverage on insurance, especially for the roof coverage. Now we are seeing HOAs go to cash basis coverage to save on costs of the insurance premiums. To save on costs of the insurance premiums. Now this basically means that if the roof needs to be replaced, their insurance will cover a certain amount based on the actual cost, but any amount above and beyond the base cost is now passed on to the homeowner is now passed on to the homeowner. Now this is then paid out of pocket by the homeowners via special assessment or the use of their reserves in the HOA account. Now, this creates a greater risk to the lender for default and therefore makes a condo a non-warrantable condo, which means it cannot be approved by Fannie and Freddie. Now, when this happens, there's an alternative financing option. However, it does require a larger down payment and higher interest rates. Now it's important to watch out for this, as you're going along with your buyer looking at condos or townhomes and HOAs. Now, as always, nikki Erickson is here to help you answer any questions, and your lender can also look at things before you offer, so you can make sure you're good to go.

Speaker 1: 4:57

Now, why this is coming up is this is happening actually in my world and I'm working with Nikki. So I have a seller who we've lost two buyers out that we even got a purchase agreement, got it executed and then found out the buyer, because of their financing and down payment assistance, was not qualified and we could not get them qualified to purchase my seller's townhome. Now flip that over. I'm out looking for a townhome for my sellers because they just want to upgrade and move across town, and the one that we found and that they're very interested has a portfolio loan product. So again, this is coming up in my over 10 years over 200 buyers, many of which are with associations. There's been little things that have come up here and there, but never to this extent. So I'm actually dealing with this on both sides of the equation my seller trying to sell their townhome and trying to purchase another townhome across town. They're both having the same type of an issue. Now, what you'll want to look at and in my seller's case, again, this is having to do with the cash replacement value of the roof, and it is just for the roof. Now, this took because it's a little bit new to me hours and calls and calls to figure out exactly what's going on and be able to string this along all together. And that's why I think it's so important to share this here today, because at least in Minnesota, this is what's happening, and I imagine, with everything that's happening in the insurance industry, we're going to continue to see this and this is now starting, but I want to watch it as it morphs and maybe even becomes the norm. So we'll want to watch the different products Again.

Speaker 1: 6:53

What I appreciate about lenders and the mortgage companies in the industry in is that they do seem to respond and figure out ways to keep things moving forward. This again, to me, at least in the state of Minnesota, is just a little bit new. So we want to really make sure that we're on top of it, having the conversations maybe you know, like my buyers looking literally across town, so we're talking like 45 minutes to an hour drive each way. So, thinking about that, before you bring yourself and your buyers across town, maybe just call, look at the association, look at any notes, call the listing agent, see what they're seeing and if they're hearing anything. But again, always do your due diligence and the fiduciary duties to your buyers so if they do want to see something, you can always work that out later. But I think it's just really important because I'm all of a sudden on both ends of one deal with this exact situation and lenders are saying and other agents I'm talking to are saying that this is coming up more and more in the recent months. So With that said on the street, that you can just imagine that they have MMFI written across their forehead, just those four letters, and what that translates to is make me feel important.

Speaker 1: 8:41

So, as you are going through and talking to anyone in your life whether you're on a walk, passing a neighbor, at a grocery store, talking to a spouse or a partner or a potential client make them feel seen and heard. And I encourage you listen more than you talk, and when you ask a question, listen to understand, not to respond. Continue to come from curiosity and really want to know how they're feeling, what their goals are, so that you can craft a response. After that you understand. I often say that when you're in the discovery mode and when you're learning about someone else, you should be speaking 30% or less, and they should be speaking 70% or more of the time. And what that means from you as a real estate agent or just a curious person is, yes, first come from curiosity, but have really good questions. You should be asking really good questions and uncovering what it is that they truly desire what are their goals?

Speaker 1: 9:57

You see, many times when you're coming into contact with people, especially if maybe they're first-time homebuyers or they don't know what they don't know they don't even quite know what their goals would be, because it's almost like they have blinders on, and until you start peeling those blinders back and really giving them an understanding of what's possible, they don't even know. So this is why it's really important to be around real estate conversations, other real estate agents in masterminds, in accountability groups, on YouTube watching videos, listening to podcasts like this one. I mean you really want to be around these high level conversations and the good news for you is, if you are a newer agent or you don't have a lot of capital to invest back into your business yet, there are hundreds, if not thousands, of free resources out there that can get you the information you need and, as Nikki and I always say, we're here. So if you need help or need guidance or have a question or have a conversation that you just aren't sure which direction to take, look us up.

Speaker 1: 11:09

Look up Nikki Erickson or myself, angie Gerber. You can find us on Facebook. You can find us on any social media platform. If you're in the EXP world, angie Gerber, you can find me on Workplace. But it's really important that we start leveling up as agents and if you don't have the information, it's right at your fingertips, I promise you. So, with that said, I will keep it to about the 15 minute mark today. Let me know if you need anything at all and, as usual, we're here and happy to help and I encourage you to go sell something today. Bye.