“Can you really help me make better decisions than I can make on my own?”… An example of buyers who locked their rate just in time.

One battle we're always fighting as buyer's agents is the perception that we don't add all that much value to the transaction.

I understand where the stigma comes from - some Realtors only sell homes as a hobby, and aren't really all that up to speed on the latest trends & issues, and therefore have a hard time giving good advice to their clients. We call this group the "weekend Realtors" group.

However, a firm that is dedicated to its client's best interests does add a LOT of value to the transaction. We can keep buyers from making mistakes that can cost them tens of thousands of dollars. Here's a good example:

We have some buyers that put an offer on a house. It was listed at $595k, and we offered $585k plus a $15k seller concession, for a "net to seller" of $570k. (I.e., the seller's true sales price is $570k because he's giving the buyers $15,000 to help them pay their closing costs). here is an image of the original offer (we just pulled out the relevant parts from the full offer for this discussion - click the photos to make them bigger):

The seller countered back at $595k (full price) but with a $15k seller credit. So already in the first round of negotiations, we'd potentially saved the buyers $15,000 off the list price. Here was his counter:

The buyers didn't want to pay it, though, so they countered at $591k with the $15k credit:

The seller didn't take it, so the deal appeared to be dead. We always counsel our buyers not to fall in love with a property so much that they get into a frenzy over a deal. Better to walk away and see if the seller changes his mind, and heck, there are so many properties out there right now that there's no lack of selection.

But the next day, this article came out, saying that jumbo rates were going to go up from the 6.5% range to the 8% range. At that point I called the buyers and told them that it would be cheaper to pay the extra $4k difference between the seller's position and their counter offer (they were at $591k and the seller was at $595k) because the impending increase in rates would hit them by the time they found another house. I.e., it's better to lock a great 30 year rate in today and pay the extra $4k than to wait and find another property where the seller may be willing to negotiate more, but you're paying an 8% interest rate. Plus, the buyers loved the house and it was truly an excellent property, so I was comfortable giving them this advice.

We ratified the contract that morning, and their lender, Richa Badami, sent the following email out later that day:

From: Richa_Badami@Countrywide.Com
Date: August 8, 2007 11:00:07 AM EDT
To: daniel@drodio.com, ØØØØØØØØØØØ
Subject: Fw: Retail/FSL 08-08-07 effective time 7:28 AM (PST): Fixed points are unchanged to up 3/8; Arms are unchanged to up 3/4. (Author: ØØØØØØ)

ØØØØØØØ !!!!!!!!!!!!! I AM SO GLAD WE LOCKED IN!!!!! Look how the rates jumped, I knew this was going to happen! This email just came out.

Richa Badami Closing Loans & Opening Doors!
Sr. Home Loan Consultant
The Badami Empower Mortgage Group
703-928-3030 Mobile
703-779-7042 Direct Office
866-409-3141 e-Fax

Winner of the Mortgage Bankers Association Silver award for excellence in mortgage banking 2006.

To apply on-line, go to:-
www.mortgageadvisors.net/richabadami

So it turns out it was a really good think we locked the buyer in and ratified the contract when we did - he got much more house for his money by locking in at a lower rate.