Why Your Mortgage Rate Ignores the Fed (and What to Do About It)

Fred Glick CADRE#0150761500:26

9750 W F R E in California at Washington State.

Drew Hendricks00:34

That is a great pitchman radio voice. You’ve

Fred Glick CADRE#0150761500:37

Thank you.

Drew Hendricks00:38

reached the We Fixed Real Estate Podcast.

Fred Glick CADRE#0150761500:41

Yeah, W F R. E. But there actually is a W F R. E. So we thought we’d throw our buyer broker fee in front of it. Ninety seven fifty W F R. E. I think we need T shirts, dude. Black T shirts, of course.

Drew Hendricks00:51

smart. There you go. I like it.

Fred Glick CADRE#0150761500:56

There there you go. Yeah, I’m I have

Drew Hendricks00:58

I’m actually not

allowed to wear a black t-shirt outside of work now. My my wife

Fred Glick CADRE#0150761501:02

Really?

Drew Hendricks01:02

my my my wife put a stamp on it. This is now just officially my work clothes.

Fred Glick CADRE#0150761501:07

I was looking at my gap t shirts that I buy for on sale, seven bucks. I mean it’s the best deal in the world. They’re nice, they’re cotton. And I just remember like buying suits and spending ties

and sh it’s like I don’t miss it. That’s this is like the California uniform for work and

Drew Hendricks01:30

it is.

Fred Glick CADRE#0150761501:30

Yeah, it’s just we get it. You people back east still dressing up. Nobody cares. I dunno, but we have to keep the high end haberdasheries in business or something. Yeah, or whatever it

Drew Hendricks01:43

yeah. yeah. And it and if you wanna

see Fred in a suit, check him out on C N B C you can you can you

Fred Glick CADRE#0150761501:48

That’s right.

Drew Hendricks01:48

you can YouTube that.

Fred Glick CADRE#0150761501:49

we have to one day do a podcast and interject the little CNBC things. Th they’re actually some of them are pretty funny. w

Drew Hendricks01:57

yeah.

Fred Glick CADRE#0150761501:57

one crazy thing about that, I was arguing against a guy, or not arguing you know, debating, and he he just had this very well like weird eye thing going. I didn’t notice because I’m just talking into the camera. And it ends up

The next week a friend of mine calls me at eleven thirty at night and says, dude, turn on Letterman.

Drew Hendricks02:22

No.

Fred Glick CADRE#0150761502:22

I said, What? He says, You’re on Letterman.

Drew Hendricks02:26

Whoa.

Fred Glick CADRE#0150761502:26

So it ends up Letterman did a little bit showing me as the talking head talking and the guy next to me with the goofy eyes. So I I was on Letterman.

Drew Hendricks02:38

that’s awesome.

Fred Glick CADRE#0150761502:39

I know. That’s my my my coin fame of late night appearance.

Drew Hendricks02:42

That’s gotta be out there

somewhere.

Fred Glick CADRE#0150761502:44

Yeah, I should have my own IMDB page for that. Just just it was it was hysterical when I found it out cracked up. But yeah, you never know what happens to you when you’re on big time TV. But nowadays with the politicians by the way

I wanted to make one really important point. You know when the Fed changes rates up or down, every agent, real estate agent, and mortgage broker all over the country get on a the Fed just lowered

interest rates. You know, it’s like there’s this miracle thing, they lower rates a half a point, and you’re gonna get a half a point less in in mortgages. Well then why every day do rates change? And

It got nasty the other day because three Fed chairmen said we better raise rates now to curb inflation. And everybody else said, Hey, let’s just stay the same. these three guys aren’t stupid. There’s a reason.

There’s they’re reading the data. So

Take an arm now. Don’t even bother with the fixed rates. Don’t even look at the fixed rates. They’re ridiculous. Get a five or seven-year arm in the high fives. At some point, we’re gonna be out of this nightmare economy.

and pray.

This is what you want to go pray for something? If you’re a person who prays, this is what you pray for. Pray for the fact that the Japanese do not need to sell treasuries, okay?

The Japanese, if you nerd out on this stuff and know it, I apologize, but just the basic thing. Japan’s kind of in trouble with their yen. Their yen was just devalue, devalue. So they had to prop it up or they were gonna collapse. So the United States, what they could have done is just sold US treasuries and they would have been whole. But instead, the US made a deal with them. Look, we’ll take care of you. But the US didn’t sell treasuries.

They sold Euros that they had in their central bank. So it didn’t affect them, and it wasn’t enough to hurt the EU prices. So they prevented interest rates from going up another half a point. Okay. So that was a good thing that they did this week, but let’s pray that’s the end of it. And hopefully there’s no more bullets in the chamber if we need to to starve off economic issues. That’s Japan.

Look what’s going on in Korea. The Korean stock market dropped like a rock. And especially the chip stocks. So we all know there’s an overblown in chips and AI and all that stuff. And is it going to crash or is it going to moderately come down a little bit? Then eventually it’s obviously all gonna go back. But everybody’s trying to get in at the same time. And that’s what’s also causing housing to go down because people are I don’t know, rates are too high.

Drew Hendricks05:47

Mm-hmm.

Fred Glick CADRE#0150761505:48

But

the

strategy that people who don’t care about rates do is they take an adjustable. They take a five or seven year arm.

They take a one or two year temporary

buy down in a rate. There’s a way to solve the issues

Drew Hendricks06:03

Mm.

Fred Glick CADRE#0150761506:03

of high rates for you on a temporary, temporary meaning five to seven year basis, or could go anywhere from one to s one to seven years because the ten one arm is terrible right now.

But most people are afraid of the risk. But you’re gonna refi anyway. Look at the stats. People re-fi every seven years. You know, ’cause

Drew Hendricks06:25

Mm-hmm.

Fred Glick CADRE#0150761506:26

rates go up and rates go down. So don’t be scared about doing that. Be scared about those option arms, but that’s a whole different story, which we don’t have anymore.

Drew Hendricks06:34

What if you locked in your mortgage like a two point seven? You’re not gonna refi that.

Fred Glick CADRE#0150761506:39

muzzle tough as they would say.

yeah, but I saw a property with a client in San Diego. Well I didn’t see it, my another guy saw it. they had a 3.25% assumable VA mortgage.

Drew Hendricks06:57

Well.

Fred Glick CADRE#0150761506:58

Yeah. But remember that was it was probably for like a million eight or ri and it’s down to maybe a million five

But the price of the house was over three million. So you have to make up the difference.

Drew Hendricks07:12

Mm-hmm.

Fred Glick CADRE#0150761507:12

So in a place where values haven’t gone up or they’ve gone up and come back down, you know, you paid down a little bit of the debt. You still gotta come up with the difference in cash or a second mortgage, usually allowable up to 95% loan to value. You have to check on that. depending on the situation. But yeah, this

There’s ways to s there’s ways to squeeze it. There’s a website out there that you can go to. I don’t remember the name, but it’ll show you every house that’s listed that has an assumable mortgage on it. Doesn’t say it’s available, doesn’t say they’re gonna do it, doesn’t say it makes any sense. But any real estate agent with a brain would put that right in the description to the public. Just like three

three percent assumable mortgage balance of blah blah blah.

Drew Hendricks08:06

How does the assumable mortgage

work? I mean the person doesn’t

Fred Glick CADRE#0150761508:09

you have to qualify for the assumption. So you can’t just, you know, have seven bankruptcies walk in and take over someone’s mortgage. And by the way, there’s idiots on TikTok and say, What you do is just go in and tell the people that you’ll make your mortg their mortgage payment instead of them, and then you do this special kind of deed. No, it’s there’s what’s called a do on sale clause. Meaning once you if you sell it to anyone else, then what happens is your mortgage has to be paid off.

So they try all kinds of elaborate things with, you know, thirty twenty nine year leases with an assumption fee of a dollar or some kind of crap like that. But

Drew Hendricks08:48

That’s horrible.

Fred Glick CADRE#0150761508:49

it is. And if these characters come to your house and say, hey, I’ll buy your house for you, do this No. Use a real estate agent so you can get out in the public to everyone so they can describe your situation. Don’t listen to these wholesalers. They’re horrible.

I get these things all the time. Hey, have any off markets for me? I’ll I’ll let you list the property. Like, no, no, dude. I want to get it out in the public so that everyone can see the property. That’s the idea. More buyers, not just you, because you want to make a profit on flipping it.

boy, the coffee worked this morning.

Drew Hendricks09:29

So I I think you’ve got a mayor copa.

Fred Glick CADRE#0150761509:32

Yeah. You know how I’ve been saying

Drew Hendricks09:34

I don’t know if that’s the right word.

Fred Glick CADRE#0150761509:35

and blasting, it’s summertime, it’s slow out there, it’s dead, it’s August, everybody’s away. You have the Tour de France of X z Femmes of X Swift. We got everything going on. anyway, and that Tade Pagaccha, I mean the dude is insane. And he’s gonna be in the Volta, so all you bike freaks know what I’m talking about.

Drew Hendricks10:02

Mm-hmm.

Fred Glick CADRE#0150761510:03

anyway, yeah, so I’m thinking it’s not gonna be as crazy.

So I had these clients,

let’s start with the first one. looking to purchase

a single family, a small single family, two bedrooms, one bath in the dog patch of San Francisco. if you know, you know. but nice house, clean, nice backyard, two-car garage.

listed for you ready for this 1.399 million wow

Drew Hendricks10:38

What?

Fred Glick CADRE#0150761510:39

yeah exactly and get and guess guess what company this person works for who’s the listing agent anyway you can pretty much guess so

Drew Hendricks10:51

So it’s a waterfront

neighborhood in San Francisco between Petrero Hill and the Bay. I I need to look

Fred Glick CADRE#0150761510:56

Thank you.

Drew Hendricks10:56

that up.

Fred Glick CADRE#0150761510:57

There you go. Yeah, it’s it’s it’s a cool area and you go right up. There’s a bus that runs right into downtown. It’s it’s it’s a good location. they have a lot of cool old buildings that were converted into lofts and things like that. So anyway, we put our bid in. We put our first round bid at 1.8 with a two and a half percent buyer broker fee.

So I get a phone call from the agent. You know how much I love phone calls. And we find out she says we had eight offers. your client was in the top four. Okay, cool. and the other four were ridiculous, you know. Those are those are with people who don’t understand agents who or andor people who don’t understand the market. They weren’t getting a deal on this.

So we went round two. And on round two, my client said, all right, let’s let’s go for broke on this. I’ll do one point eight six, but I’ll waive the two and a half percent, which added basically another forty some thousand. So he basically went up a hundred grand. so he’s now at one point nine-ish.

We get the seller’s multiple counter offer. And by the way, that that second offer was after she called. She said, look, I’m meeting with the owner, you know, if you want to make a better deal. so the counteroffer comes in last night. all our terms were fine. Remember, we’re not paying a buyer broker fee, so now that’s like twenty I’m sorry, fifty thousand sixty was

So it’s a lot more money. and we come back at one point nine one. It’s like, okay, we’re done after that.

We lost. We came

Drew Hendricks13:10

Whoa.

Fred Glick CADRE#0150761513:11

in second place because she asked if we wanted to be a backup. But I don’t know if they got two million, but they might have gotten two million with two and a half percent, which still would have been a little better than ours.

I guess, or who who knows? We’ll find out. But what we end up finding out is just the sale price and who the buyer broker was. We never find out what the buyer broker fee was. And if you think about it, and I’ve complained about this to appraisers, to the appraisal world, I should say, why aren’t you separating the hard cost from the soft cost? When you do a comparable,

You got to take out 5%, if that was the amount of money that was paid for the soft cost, to get what the hard cost, what the property’s really worth,

Drew Hendricks14:01

Mm-hmm.

Fred Glick CADRE#0150761514:02

based on paying all these commissions. So if you look at it now, you’re if you buy the next house, and let’s say you buy just it’s a friend of yours, and you just decided market value, and that market value is two million. Well, you just paid for the house plus the commissions that you didn’t pay.

Drew Hendricks14:20

Mm.

Fred Glick CADRE#0150761514:21

See what I mean? That’s what the that’s the insanity about this. And I’m sure I’m gonna bitch and moan about it forever, and nothing’s ever gonna happen. But here it is, kids. Just just giving you the basic layout, the basic math.

Now, the other crazy thing, and this is another thing that blew my mind.

I had a client looking at a house a while ago, price came down, they went back to look at it.

Nothing. We waited about a week and a half, you know, figuring nothing’s going on with this house. We submit an offer.

First of all, we submit it with our title company that happens to do escrow because they’re inexpensive. I’ve talked about this before. This is in Southern California, of course. I actually put it into the contract so he has to show the seller, unless he’s smart enough to know how to take out a PDF page, but he has an Earthlink email account. I swear to God.

Drew Hendricks15:23

Okay.

Fred Glick CADRE#0150761515:24

This agent with an Earthlink account.

and he said, I don’t know, everything goes to spam. I’ll have to look for it. Just let me know it’s there.

What a system.

Drew Hendricks15:35

Yeah.

Fred Glick CADRE#0150761515:36

What a system. And people hire this guy. Yeah,

Drew Hendricks15:37

Do you have to text him or call him to tell to look in a spam folder?

Fred Glick CADRE#0150761515:40

you have to text him to tell him to look him in the spam folder. It’s just insane. Anyway, so he comes back and he and they they do a multiple counter offer.

And he first says, you know, highest and best price, which actually is the wrong thing to put in there. You you can’t put that. How is that a if I just sign that, it’s a contract. Whatever that means.

Drew Hendricks16:05

Ha ha ha.

Fred Glick CADRE#0150761516:06

It’s just they don’t understand. It’s it’s contract law. Anyway, he wanted, of course, to use his title and escrow company, especially his escrow company. He doesn’t care about title. The escrow company gets it. and you know, I s I said to him.

Let me know what their prices are and all that. I mean, or we’d really like to use Fidelity. Did you tell your seller and you see the prices? And he says, non starter.

Drew Hendricks16:31

Ha ha ha.

Fred Glick CADRE#0150761516:34

Dude, okay. So anyway, we come back with another offer from my clients. I said, I said, don’t worry about it, I’ll fix it after we get under contract. And of course, he said there were five bids. Like, where did they come from? We send in an offer with no notice, no nothing, no offer date, but all of a sudden four other bids appear. This guy BSed his way with every client who’s ever seen the place and

The price came down, but it didn’t come down that much. And we lost it. We were in second place again. So because of our terms. I don’t even know what that is. We asked for, you know, five days for inspections. That’s it. No mortgage contingency, no appraisal contingency. So I don’t even know what he’s talking about. He must have written that to somebody else but sent it to me from his Earthlink account.

I don’t know why these big companies allow this.

I mean, you y because technically every

Drew Hendricks17:33

compliance they shouldn’t.

Fred Glick CADRE#0150761517:34

every bit of email, every email you ever send that has anything to do with anything within a transaction, especially the California DRE and I’m sure in Washington I know does, you have to save every email. You have to save every text. So what what happens when somebody leaves compass?

And they’ve been using their Gmail account and then there’s a problem with with the thing and the state comes in. Guess what? You guys are you know, just dealing with things that you just ignored. The compliance is so easy. You just keep it all one place. That’s why we love Slack channels. Everything is in there. Everything. So, you know, we i if if the D R E came in, I’d just say here just

Anyway.

Drew Hendricks18:27

Ac ac

access to your Google workspace in Slack.

Fred Glick CADRE#0150761518:29

Yeah, exactly. So

so I’m wrong. And now on my listing in quarters of Paula and Morgan Hill, we’re starting to get busy.

Drew Hendricks18:40

Are you?

Fred Glick CADRE#0150761518:41

Yeah, we had like five different people on the on the weekend.

Drew Hendricks18:43

That’s that really large place, right?

Fred Glick CADRE#0150761518:45

Yeah, yeah. I love this couple. I mean they’re just so sweet and I feel bad and we all feel bad and we’re all just, you know, rockin’ and roll and trying to get it closed.

Drew Hendricks18:56

I bet it sells before the school year.

Fred Glick CADRE#0150761518:59

I hope so. I hope I hope it sells before this podcast comes out.

Drew Hendricks19:03

Ha ha ha ha.

Fred Glick CADRE#0150761519:06

So yeah, so it’s crazy. So that’s San Francisco and this was in Studio City, to give you an idea. So, you know, for two point four ish million area. So th there’s four other people who lost the house now. So it’s still busy.

But anyway.

Drew Hendricks19:25

So the summer doldrums are really can’t predict it.

Fred Glick CADRE#0150761519:29

Yeah.

Drew Hendricks19:30

Some things you can see the writing on the wall but it doesn’t always happen the minute you think it’s gonna happen

Fred Glick CADRE#0150761519:34

I know.

I I mean I think what was it like five years in a row I did a deal on Christmas Eve or Christmas Day. So

Drew Hendricks19:41

Mm-hmm.

Fred Glick CADRE#0150761519:41

you never know.

Drew Hendricks19:42

I remember that.

Fred Glick CADRE#0150761519:44

Anyway, last thing, I had a client ask me about

title insurance.

Drew Hendricks19:51

Mm.

Fred Glick CADRE#0150761519:52

who pays for it and why do I need it? So let me start with who pays for it. So in California, the way it works.

Washington State is much simpler. In California, every single county has a different situation and a different normal and r

and that people do.

There’s some places where the seller pays the escrow fee and the title insurance. There’s some that split the escrow fee, seller pays the title insurance. And some the buyer pays escrow fee and buyer pays the title insurance. And it has to do with what kind of a deed they are giving you.

I won’t even start explaining that because it’ll take hours and it’ll just get you confused. Don’t worry about it. Anyway, so the idea with real estate agents is who’s ever paying that title insurance, which is usually the largest charge, especially if they’re paying title escrow, they get to choose who the company is. So I’m going against in in Los Angeles, it’s buyer and seller split the escrow, and the seller pays the title insurance. So

I i i there we go with my arguments for all that. But anyway.

So why do you why do you actually need it? But anyway, we there’s a website called whopaysfor what dot com that you can try to go to that we’re gonna make even better soon. but just to give you an idea who pays for what, what the city taxes are. In every county, the seller pays the county tax. Washington State, by the way, the seller pays everything. So you don’t choose, they choose, everything’s fine. And these are all, you know.

Drew Hendricks21:36

That makes the that’s a

quick who pays for what page for Washington.

Fred Glick CADRE#0150761521:39

yeah, no sense in doing it.

But anyway, let me explain title insurance. The first question he asks is: if there’s already title insurance to the property, why do I have to get it? Good question. Here’s what title insurance, the effective dates of title insurance. When you buy a property, the day you close is the day you get the insurance.

That is for back in time. It’s not like car insurance where if you damage it three weeks later, they pay for it. No, this tell me anything that happened in the past because the title insurance company is guaranteeing that whoever signed the deed and transferred the property to you is the one who really owned the property. And also there’s no liens or encumbrances, no back taxes. so if some guy named Louie comes to your door and says, Hey, this was my cousin’s house.

And she gave it to me, and I have this proof. Well, go to the title company. Because you can’t just get the house. You have an insurance claim. So that’s what title insurance is for. So everything being digital, the likelihood of a claim is like 0.001. So title insurance is, I won’t call it a racket. They do work and they guarantee things, but you know, you kind of have to do it. Except.

Fannie Mae has come up with a thing when you’re doing a refinance, because the refinance title insurance is from the day you bought the the day you refinance on back to the day you purchased.

Drew Hendricks23:12

Mm-hmm.

Fred Glick CADRE#0150761523:13

And

They are using attorneys to just review the titles, the updated title reports. Because they’re not really worried about anything else, unless it gets into weird stuff like it just did a total renovation and contractors may or may not be paid because they can file a claim if they’re not paid, so there’s whole bunch of stuff like that. But anyway, it works going back in time. That’s the biggest thing I want you to realize. there are two types of policies. One is an owner’s policy.

that’s for the sale price.

Or, and then there’s a lender’s policy that you pay for for the lender that is for the loan amount. Now, I’ve had people say, you know what? I don’t want any more title insurance than the amount of the lender’s policy. You can do that.

You don’t have to pay if your purchase price is two million and your mortgage is five hundred thousand. If you want, you can pay for just five hundred thousand of owner’s coverage, or but you have to get, I’m sorry, not or but you have to get owner’s policy if there’s going to be a lender’s policy.

Drew Hendricks24:21

Mm.

Fred Glick CADRE#0150761524:22

If it’s a cash deal, you’re not required to get title insurance.

Drew Hendricks24:27

Really?

Fred Glick CADRE#0150761524:27

Yeah, but you’re taking the risk.

Drew Hendricks24:30

Yeah. Especially in older home.

Fred Glick CADRE#0150761524:31

I mean if you’re a real

estate lawyer and you know how to investigate these things and you can guarantee to your client it’s not gonna be a problem, then you know, maybe he saves X. But yeah, so that’s that’s the whole thing on title insurance. I just wanna tell you kind of the basics.

Drew Hendricks24:46

Is tit is title

insurance more expensive on an old older home that has like fifty years of history?

Fred Glick CADRE#0150761524:50

No, no, it’s it’s

there’s like five or six different companies in California and by the way, they each get licensed in every county.

And they have to file a rate card with the state of California. And this is in every state. And they’re all basically this every company is basically the same than the dollar. So and it doesn’t matter on the type of house. They’re insuring the title. They they don’t see the property. They could care less about the property itself. They have, you know, the boundary lines. Some states require a survey. Some states don’t. So title insurance doesn’t guarantee your boundary lines. That’s another big thing.

They’re just this the city said this is the legal description, or the county, this is the legal description. That’s all they go by. So they don’t do measurements.

Drew Hendricks25:40

I learned something. I would have thought that an older home that had like ten owners would require more diligence than a home purchased for the first time. I see, ’cause you tell you about

Fred Glick CADRE#0150761525:46

No, ’cause it got title insurance ten times. It’s even better.

Drew Hendricks25:52

’cause then the next title sh I I see it.

Fred Glick CADRE#0150761525:56

Yep. Yep. Yep. Yep.

Drew Hendricks25:58

But does now does the i it’s got title insurance ten times, but does each one replace the previous one, or can you go back through the the one

Fred Glick CADRE#0150761526:05

No, no, but if you think about

it, it’s it’s the time periods. You had title insurance for these two years and then sold it, and then person lives in it three years, then the new person got title insurance, it goes back forever. So just because the last one issued a title policy. And they know who issued the last policy, it’s recorded.

Drew Hendricks26:27

Well what about like somebody coming back from like nineteen sixty five that had that title’s title insurance messed up and they really did have claim to the home?

Fred Glick CADRE#0150761526:39

Okay.

Drew Hendricks26:40

That means we’ve come to the end of We Fixed

Fred Glick CADRE#0150761526:42

Yeah.

Drew Hendricks26:42

Real Estate. I’m gonna go find a life and we will talk to you next week.

Fred Glick CADRE#0150761526:46

9750 W F R E.