The Mortgage Buydown Trick That Beats a 7 Percent Rate

Drew Hendricks00:24

Welcome to WeFix Real Estate. We’re sitting here nice and toasty in Southern California today. I think it was one hundred six where I was yesterday. How are you doing, Fred?

Fred Glick CADRE#0150761500:35

Hmm.

the just hating humidity. Reminds me of the East Coast. I remember how much I hate it.

Drew Hendricks00:43

the heat’s only half the story. It’s the it’s the humidity, it’s been relentless.

Fred Glick CADRE#0150761500:48

Yeah,

supposedly it will be fine tomorrow.

So, you know, the th the thing is we’ve learned from this storm is

don’t buy

ocean front property.

Drew Hendricks00:58

Yes,

that’s been crazy. The erosion. It’s just a it’s an

Fred Glick CADRE#0150761501:02

It’s it’s in

Drew Hendricks01:03

endless battle. I could wax on this forever.

if i you build too close to the the coastline’s a fluid thing. Sand shift all the time. And currently down in oceanside by where I live, they’re dredging it again. They dredge twice a year to take the sand from one place and move it back to where all the houses are. Then the waves come and it pushes it all back up into the harbor, then they rinse and repeat.

And now you’re seeing at Dana Point, houses falling into the ocean, Long Beach, even Nicolas Cage’s house fell in

Fred Glick CADRE#0150761501:35

yeah, it’s a bummer. It’s really sucks. I mean, you know, buy up on a ledge so you can see the ocean. It’s nice to see it. You don’t have to be there. I mean between the fires and the palisades that went down into

Drew Hendricks01:48

Mm-hmm.

Fred Glick CADRE#0150761501:48

Malibu right along the water. I used to rent a place there from a guy. It was just a shack.

for a hundred bucks a night, stay at the shack, but it’s right on the water. you just literally walk out there. It was cool. You know, old old places. A lot of old places in California

Drew Hendricks02:04

Yeah.

Fred Glick CADRE#0150761502:05

like that. But yeah, that w sh that probably went up in four seconds. ‘Cause it’s old and wood. And and see you later. So

Drew Hendricks02:09

Yep. yeah. And we talk a lot about fire insurance

and there’s earthquake insurance. Well yesterday, at least on all the storm footage I saw, the new the new topic is not being able to get erosion insurance in front of the ocean.

Fred Glick CADRE#0150761502:26

there you go. I mean, even if you put a cement house up, eventually it’s

Drew Hendricks02:32

Mm.

Fred Glick CADRE#0150761502:32

you know, it goes underneath the foundation. How far down can you go? So

Drew Hendricks02:36

Mm-hmm.

Fred Glick CADRE#0150761502:37

it’s it’s unfortunate, but California living, you know.

Drew Hendricks02:42

Price we pay.

Fred Glick CADRE#0150761502:44

Exactly, exactly.

Drew Hendricks02:46

Price we

pay.

So let’s see. aside from all the all the events going on here, we are talking about non exclusivity.

Fred Glick CADRE#0150761502:57

Yeah, let’s get back to general things. So you go to an open house and some nice person who’s there running the open house, not the listing agent or might be the listing agent, but

What they’re there to do,

and I’ve said this a thousand times, they’re there to try to make friends with you and and have you be their buyer broker. And what they’re gonna make you sign normally is something saying you’ll pay two and a half percent of the sale price, which is bad enough. But the second bad is they’re gonna want you to sign an exclusive contract with them, meaning

for 90 days, which is the law in California, of the maximum time contract could be, if you buy any property.

Property, with or without them, you owe them the money. And there’s actually people who have been sued for this. Even though they never did anything. They they hated the agent, they never went back to them, they tried to get out of the contract, they wouldn’t let them out of the contract. They went and bought another property and got sued. Really? For doing nothing. Zero. So here’s what we do.

When you we have a Google Meets where we talk, we go everything, we go over everything with you about what you’re interested in, and we tell you what’s going on in the market and what you need to prepare for. We get you ready to buy. And

What we do is we don’t even have people sign contracts until they’re ready to put an offer in. Because what’s the point? So then we have them signing non-exclusive contract with us for our flat fee of ninety-seven fifty and anything over that they get, it becomes theirs.

Drew Hendricks04:41

Yeah.

Fred Glick CADRE#0150761504:43

And it just works out better that way. And a lot of people don’t even know about the exclusivity clause in these contracts. Because these people kind of push it in front of you and make it sign, it’s standard. There

Drew Hendricks04:55

Yes.

Fred Glick CADRE#0150761504:55

is no standard.

Drew Hendricks04:58

so if for example you really want to go with someone that makes you want to sign exclusivity, you could make it a two week contract. Let’s try it out.

Fred Glick CADRE#0150761505:08

Yeah, it just the time period. It’s like

Drew Hendricks05:10

mm-hmm.

Fred Glick CADRE#0150761505:12

one in a billion people get married on the first date. That’s what this

Drew Hendricks05:16

Yeah.

Fred Glick CADRE#0150761505:16

is. That’s you know didn’t they have some stupid T V show about that where you y y you met somebody and married them right away and see

Drew Hendricks05:26

yeah.

Fred Glick CADRE#0150761505:26

how it works out? Yeah, I’m sure every every one of them’s divorced. I wonder if the

Drew Hendricks05:29

Awesome.

Fred Glick CADRE#0150761505:30

network paid for the divorces. That’d be interesting.

Drew Hendricks05:33

That

that’s that’s a that’s interesting. So since I always go down overthink things, so s what if somebody’s really wishy-washy, signs an exclusive contract, fires their agent, signs another contract, fires that agent, and they’ve got two co not exclusive contracts in place at the same time, and then buys a house with a third agent.

Does everyone

Fred Glick CADRE#0150761505:57

You know what?

This is the job for one of two. Either a lawyer or Claude.

Drew Hendricks06:05

Yeah.

Fred Glick CADRE#0150761506:07

And speaking of Claude.

Drew Hendricks06:08

Yes.

Fred Glick CADRE#0150761506:11

You like that, huh? I really I really got

Drew Hendricks06:12

That was a good one.

Fred Glick CADRE#0150761506:13

into it. Yeah, thanks. yeah, so we’re we’re we’re experimenting in our Slack channels. I’ve only gotten two people so far that I’ve worked on this with that clawed as part of our Slack channel now.

So when you

Drew Hendricks06:27

That’s awesome.

Fred Glick CADRE#0150761506:28

and and I’m doing it with a seller who who knows AI. Him and his wife are both like

professors of AI. So they get this stuff cold.

And we’ve been having a lot of fun. And we’ve been asking it little questions. It’s like yeah the first thing we did was summarize this entire channel and come up with the wording for the multiple listing service listing remarks.

based on everything you learned from this channel and everything we’ve talked about. And it came up with one that was pretty darn good and it was pretty close. And

Drew Hendricks07:07

Well.

Fred Glick CADRE#0150761507:07

we we we cleaned it up but used it. But it gives us other answers. Like when we put the listing up, the i in Redfin it didn’t show the video.

And then we asked Claude, well, why isn’t it showing up? And then they said it has to be a YouTube link or a Vimeo link, whereas we had a link from the photographer

Drew Hendricks07:26

Mm.

Fred Glick CADRE#0150761507:27

for Redfin. So we switched it out, we put up the YouTube link and then put that in there. So it just gives you a little minutiae of what’s going on. I mean we could be, you know, for I’m waiting for one buyer who’s really good about this stuff and to start from scratch, but eventually I’m gonna have all buyers in there.

Drew Hendricks07:45

yeah.

Fred Glick CADRE#0150761507:46

And they can just keep asking questions and it keeps looking it all up. Now I’m not using Fable five point one. That would be a little insane. It’s not, you know, curing cancer.

Drew Hendricks07:55

Yeah. You could probably even get away with Sonnet.

Fred Glick CADRE#0150761507:59

Maybe I’m using is it Opus?

Drew Hendricks08:00

So there’s Pri this is

good. Yeah.

Fred Glick CADRE#0150761508:03

Yeah, this is

good. It’s been fine. So we’re going to get eventually have the ability for it to go to the MLS, log so you put in a property, it’ll go to the MLS, it’ll pull the disclosures and the agent to agent notes and put it back in the Slack channel

Drew Hendricks08:21

Mm-hmm.

Fred Glick CADRE#0150761508:21

right where it was, hopefully, in in that thread. That’s what we’re working towards. So but anyway, it’s it’s it’s pretty darn advanced at this point.

Obviously I don’t think

there’s any other real estate agent who

This or you I’ve never talked to anyone who uses Slack who’s

Drew Hendricks08:41

Mm-hmm.

Fred Glick CADRE#0150761508:41

a real estate agent, so that’s something unique for us. And if you don’t know Slack, it’s just like sending a text. You have all those messages in there. You’re just texting with us, but it’s on a little bit of steroids. We we store documents in there, we’re able to make what are called threads. So you put a property in there, and then we put everything connected with the property, so it’s very organized and keeps everything straight, and then and now with the

addition.

Of AI with Claude, it’s just gonna be on steroids. It’s gonna make our life easier and everybody’s life easier. And it’s like sometimes I have to explain things to people that they either don’t understand or ignore. And I could say to Claude, hey Claude, take what I’ve said and explain why. Go

Drew Hendricks09:27

Mm-hmm.

Fred Glick CADRE#0150761509:28

out and search and it’ll do that. So it’ll be really comprehensive.

Drew Hendricks09:32

It’s both a it hel helps elevate the quality and it’s also a big time saver too.

Fred Glick CADRE#0150761509:38

between the two it’s fabulous. Abs abfab

Drew Hendricks09:44

Yeah, it’s become it’s become indispensable.

Fred Glick CADRE#0150761509:44

Missed that show.

Yes, it has.

Drew Hendricks09:50

I can only imagine what what’s a year from now.

Fred Glick CADRE#0150761509:55

or a week from now.

Drew Hendricks09:57

Mm-hmm.

Fred Glick CADRE#0150761509:58

It’s crazy. Like you we were talking on the pre show about, you know, the fact that OpenAI has got something better now. And it’s like, yeah, so give it a week.

Drew Hendricks10:08

Mm. Yeah,

that that Astra is it’s it’s neat. I haven’t I’ve been very happy with Claude and I’ve haven’t really done a a coding project with Astra yet, but some of the people I’ve talked to have been pretty happy with it. But next week it it’ll go back and Fable will there’ll be a new Fable.

Fred Glick CADRE#0150761510:30

Yeah, this is this is like Coke and Pepsi. You know.

Drew Hendricks10:34

Mm-hmm.

Fred Glick CADRE#0150761510:36

It’s it’s crazy.

Drew Hendricks10:38

So let’s see.

Fred Glick CADRE#0150761510:40

I think we covered everything. It’s it’s it’s too hot too hot to think.

Drew Hendricks10:42

Well it is it is kinda too hot to think,

but we were talking about some y your favorite topic, interest rates.

Fred Glick CADRE#0150761510:52

And it all right. So let me be political here. Donald Trump has a degree from Wharton

I hope he’s already used it for toilet paper because that’s exactly what it is for him. He has no idea.

What he’s doing is the oil prices are up, the bond market, the rates are up because they see inflation coming like crazy. The inflation numbers, I don’t trust them because I see real live things. I mean, things have gone up and kind of maybe stabilized a little, but they’re still up. They’re not going back down, kids. And so what does the Treasury do? He says, Well, you know, I’m in.

control here and I’m gonna just put out treasuries, I’m gonna I’m gonna sell more so that the price comes down. Well the bond market just laughed at him and now

Drew Hendricks11:44

Mm-hmm.

Fred Glick CADRE#0150761511:45

we as the American people are paying higher interest rates on our debt in the trillions of gazillions, I don’t even know what it is, and he only sold billions.

It’s like taking one hair out you know, a a 400-pound animal that’s

Drew Hendricks12:05

Mm-hmm.

Fred Glick CADRE#0150761512:05

full full all full of hair. Did nothing. Rates are gonna stay high. They are just gonna stay high. There’s no magic bullet. There’s no reason to get lower.

Let me explain simple

economics you lower interest rates when you need to stimulate an economy because you want more people to borrow so they can make things and services and then more people spend money and the economy grows. You raise interest rates if prices are going up. It’s like

The economy’s churning along okay for the people who do okay, but you have also all these people and we’ll back go back to real estate. This is not in, you know, many of our markets, but there’s people across the country trying to get rid of their houses and they can’t. And

Drew Hendricks12:57

Mm-hmm.

Fred Glick CADRE#0150761512:57

they don’t have the money to keep it. Guess what happens? They get foreclosed, their credit goes bad, banks are sitting with stuff, and eventually they’re gonna give them and sell them at a loss. So

Drew Hendricks13:08

Mm-hmm.

Fred Glick CADRE#0150761513:09

everybody loses, and then you try to put it out at higher rates.

It doesn’t work.

So absolutely, positively, without a doubt, do not take a 30-year fixed mortgage rate right now. It’s

Drew Hendricks13:21

Mm-hmm.

Fred Glick CADRE#0150761513:21

it’s ridiculous.

The differences are look into it. Well, the 10-year, 10-1 arm is going to be just as high as the 30-year fixed. Seven and five, you got a chance to get something better.

Or as I said before, you do those one-year, two-year, or three-year buy downs.

And you can buy up the rate to pay for the buydown. Long explanation of that one. But the bottom line is

if you if you’re buying something, that’s the way to do it. Even you can refinance to an arm. You

Drew Hendricks13:57

Mm-hmm.

Fred Glick CADRE#0150761513:57

can refinance to a buydown. That’s something if you really, really need relief, especially if you have equity in your property, you kind of bury the points into the loan amount and then be able to lower you know, you do maybe a two two one buydown or a two two buydown that costs four points. You get two percent under the note rate for the first two years, and you can do that.

that with an arm.

Drew Hendricks14:21

Mm.

Fred Glick CADRE#0150761514:21

I’m getting wildly out there, but the bottom line is there are some well called them tricks of the trade to be able to figure out how to get a lower rate. temporarily.

Drew Hendricks14:32

So you can buydown the rate of the

arm, so then it’s at least pretty w well locked in for two years.

Fred Glick CADRE#0150761514:38

Yeah, let’s say you get a seven year arm at six percent, just making up numbers here for no points. You could buy that down to four percent for year one and year two by paying four points, because you’re lowering it by two points each year. Two

Drew Hendricks14:52

Mm-hmm.

Fred Glick CADRE#0150761514:52

plus two is four. and it’s not an exact dollar, but it’s somewhere around there. And then you have four, four, then six for year three through seven.

But there’s no prepayment penalties on any of these. You can refinance them anytime when whenever things get better. Ha ha ha. so i it’s not much mortgage activity out there, but if you need to, there might be some solutions for you.

Drew Hendricks15:22

So

to do a pitch to Arriva, I mean if you if you’re going to a r do a mortgage, at least talk to Fred, ’cause the guy knows the tricks and he knows the different combinations. No tricks, just he knows how to navigate the complex market.

Fred Glick CADRE#0150761515:33

There you go.

Yeah. Yeah. And here’s here’s another No.

Drew Hendricks15:39

And I and I don’t think inflation’s going anywhere anytime soon, especially

if we all get five thousand dollars. Could you could you imagine every

Fred Glick CADRE#0150761515:46

that’s that is

Drew Hendricks15:48

we already saw what happened in COVID when people bought new TVs and blew the money?

Fred Glick CADRE#0150761515:54

Yeah, but also now you ha how you where are you gonna find that money? right, we have to borrow it.

So add another trillion something to our debt so that the rates are gonna go higher because there’s more debt out there. Again, Wharton degree, toilet paper.

Drew Hendricks16:14

Yeah, well.

Fred Glick CADRE#0150761516:15

I’m sorry I’m being iconoclastic with this. I had to get the word in.

Drew Hendricks16:20

Well it is the you do have the clastic brokerage.

Fred Glick CADRE#0150761516:25

We absolutely do. We

Drew Hendricks16:26

TM

Fred Glick CADRE#0150761516:27

r yeah, everybody go and Google that word and you’ll see why it applies to me and Arriva.

Anyway,

happy September, beginning of football season.

Drew Hendricks16:39

Yes.

Fred Glick CADRE#0150761516:40

hockey starting soon, basketball starting soon, that makes means Halloween. And here comes Thanksgiving. Next thing you know it’s Christmas and New Year’s and Rosh Hashanah starts tomorrow. I mean we’re in the fall. The fall has started. Even though it doesn’t officially become fall until the twentieth of September, but that’s okay. Yeah.

Drew Hendricks17:02

is that what it is? Okay.

Fred Glick CADRE#0150761517:04

It’s that solstice, whatever they call that in between summer and fall. I don’t know if it has a name.

Drew Hendricks17:09

yeah.

Summer s no, winter no, spring. A autumnal equinox?

Fred Glick CADRE#0150761517:12

No, there’s summer and winter, so I guess what do you call it? The f the aut autum

autumnal I don’t know.

Drew Hendricks17:19

Iconax

Fred Glick CADRE#0150761517:20

You know what? I don’t know. Okay, we’ll we’ll keep it at that.

Drew Hendricks17:21

We’ll we’ll we’ll put it in Claude after this.

Fred Glick CADRE#0150761517:24

Yeah, you astronomers let us know or or yeah, we’ll put it in Claude. We don’t need you guys anymore. Tell us the simple things. Go go solve the complex issues.

Drew Hendricks17:34

Mm-hmm.

I think that’s where we’re at.

Fred Glick CADRE#0150761517:37

Anyway,

yeah it’s enough for today, if you’re still hanging on. send us send us an email to t shirt at arriva.com for your free t-shirt. Let us know your size and your address. We’ll send you a t-shirt.

Drew Hendricks17:54

Absolutely for ninety seven fifty W F R E.

Fred Glick CADRE#0150761517:57

Okay, there you go.

Drew Hendricks17:57

Cause we’ve reached the end of We Fixed Real Estate.