The Jason Theory
Jason Stratton of KlopasStratton Team, a top 20 team in the nation with over 1.5 billion sold , sits down with weekly guests to talk about becoming successful, the real estate market, and crazy stories/people we run into. Visit www.klopasstratton.com to see more!
The Jason Theory
S5 E9 - Those With the Gold Make the Rules: The Lending Changes That Could Cost You
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Condo financing is getting stricter, and we explain how new Fannie Mae and Freddie Mac condo rules can raise HOA dues, trigger do not lend status, and derail a deal over issues as small as meeting minutes. We also break down what’s really happening with mortgage rates, underwriting, and smart ways to buy in a market where contingencies are fading and competition stays intense.
• condo reviews changing by building size and why 11+ units face full scrutiny
• 2027 reserve funding shift from 10% to 15% and how it can raise HOA dues
• common do not lend triggers like structural repairs and special assessments • why jumbo loans get harder as borrowers look stronger on paper
• DSCR loans explained and when investor financing makes sense
• why big banks discount rates and still lose deals on execution
• Chicago-specific closing issues including Cook County taxes and attorney-driven processes
• affordability tied to supply, zoning, and development incentives
• why waiting for lower rates can increase competition and prices
• recasting as a buy-before-you-sell alternative to bridge loans
• practical lock and closing-date tactics that can reduce cost and stress
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Brad Bowden, 773-9835190, or just Google me.
Condo Reviews And Reserve Shock
SPEAKER_00Now, with any condo building that's 10 units and under, there's no review. So that means no budget, no condo questionnaire. If there's litigation, we don't care. The only thing they want is the master policy of insurance. Now, any condo 11 units and over, they're going to do a full review on no matter what. So they're going to get the budget. They're going to get the decks and bylaws. They're going to get a condo questionnaire. But the big change that I think is really going to affect a lot of people in Chicago because we have so many high rises and condo buildings, 11 units and more is, you know, before in the budget, every year, the HOA needed to put 10% towards reserves. So let's just give an example. You have a condo building and they're bringing in 100 grand a year in reserve income. 10% or $10,000 a year has to be a line item that it's going towards the budget for reserves. Okay. Now, starting January 1st, 2027, it's going from 10 to 15%. So that means every single HOA in America that's 11 units and more has to redo their budget. And this is probably going to make up, you know, HOA bills go higher for everyone. Yeah. And it's across the board. And if they don't have it, they're going to be on that do not lend list, and it's tough to lend in there.
SPEAKER_01What's the five P's? Do you remember it?
SPEAKER_00Proper preparation prevents poor performance.
SPEAKER_01There you go. It doesn't matter how much money we get. If we don't close, it's no money, right? So no close is no money. I'm everything that I am because of my dad's death. And I wouldn't be as successful without his death.
Meet The Lender Behind SLS
SPEAKER_01Hello and welcome to the Jason Theory. And we are here today with Brad Bowden at Select Lending Services SLS, which is housed inside Jamison Sotheby's over at 425 North Avenue. Did I get that address right? Because I don't go there.
SPEAKER_02You did.
SPEAKER_01Yes. I'm always like five something. And we're going to talk about everything that has to do with mortgages, lending money, things that you don't know about, and huge changes that are coming up on the lending. Tell us a little bit about yourself and then we'll get we'll dive right into it.
SPEAKER_00Sure. As he said, name's Brad Bowden. Been in Chicago since 2005 and been doing mortgages ever since. Grew up in Iowa and met Jason years ago when our kids went to school together, actually. Yes. Yes. Small world.
SPEAKER_01Small world. 2005. What was I had Vince Anzeloni, who I didn't know did loans beforehand. I didn't know that either. Interesting. We were talking about did you ever see The Hundred Days of Summer?
SPEAKER_00Yes.
SPEAKER_01I I love that. Before I knew Vince. No, no. No, you're talking about 500. You're talking about a different you're talking about the movie. Yes, I'm talking about the movie. What are you doing? Vince was on a reality show. Oh. Called Hundred Days of Summer. I did not see that. It's awesome.
SPEAKER_00In Chicago?
SPEAKER_01It's all about the Hundred Summer Days in Chicago and these, you know, early 30 eligible bachelors and bachelorettes and how they party and how it's I gotta go Google that. Oh my god, it's good. You can buy it for $2.99 on YouTube because I I had them and I loved that show. Me and my wife used to watch it all the time. And Vince is out of control. In his younger days. But he took the video. I it's on the podcast, it's about to drop next month or in a couple weeks. He he did the video for the for to get the role two years before they actually tapped him. Oh wow. So the things he was saying, he was engaged when they started the filming. Oh no. And they were like, hey, we need you to do this and this. Like, I can't do that anymore. And I'm single. He's like, can you go out on dates? It doesn't, you know, we don't need to. She's like, no. But dude, it when the first episode came out, they sent it to him on the D on a C D DVD. Old school. So he was watching the DVD and it's like he's like, he watches like, oh my God, this comes out. He's like, he's like, she almost left me. Oh. He's like, oh, last summer, he's like, man, I slept with 60 women. It was the greatest. Dude, it's great. Anyways, sidebar, but it's it's her foot and mouth. Yeah. Hundred days of summer.
SPEAKER_00Oh, Jesus.
SPEAKER_01It's great. I'll check. Um, all
Surviving The 2008 Mortgage Freeze
SPEAKER_01right. So let's get on to so, anyways, I was talking to Vince, and he's like, listen, he's like an 08, 09, 10, he's like, he's like, it wasn't just a slowdown, it was an absolute faucet turnoff. How did you get through those years? Vince was like, dude, I had to sell my apartments. He's like, I got rid of my car. He's like, dude, I got streamlined.
SPEAKER_00It it was crazy. It was ReFIS that got us through it. Refies. So if somebody wasn't in foreclosure, you know, the government came out and I cannot remember the name of the program, but you were allowed to refinance anyone regardless of the loan of value. So they could be completely upside down. Was that TARP?
SPEAKER_01I think it was maybe. Oh my gosh. I think TARP was the money to give to the banks to keep them solvent.
SPEAKER_00I gotta remember, but yeah, I'll have to look it up when we're out of here. But basically, I I remember it like, you know, somebody would owe $100,000 and their house would be worth $50. And you would still be able to refinance them to give them the lower rate, right? Okay. So it was there was no appraisals needed. You would just run it through the automated underwriting system. And as long as they had the credit and the income, that was it. So we we we survived under that size. It is smart, it's common sense.
SPEAKER_01Yeah. Not a lot of that. Not a lot of that. But it as a bank, it's like, do I want to get no money or some money? Because it's gonna be no money. You're gonna be holding how many assets did the bank hold that they didn't want, getting 10 cents on the dollar versus someone that's saying, hey man, I'm willing to make the payments. Let's work with me.
SPEAKER_00Yeah, because if not, it was short sale, short sale, yeah. Every purchase I did was a short sale. We'd get a purchase contract, and now you're like 30 to 45 days. We're closing. That maybe we're closing in six months, maybe we're closing in nine because you're waiting on the approval from the bank. So it was refines and short sales. Man.
SPEAKER_01That was it. When did you see like when do you think 12, 13 when you started to dig out of there? 2012 is when it started to become normal.
SPEAKER_00I remember I had a good year, 2012, there was purchases, rates were low, we had a lower refi dip again. That's when it kind of started to become normal. And that's when all the like the additional guidelines came out from Fannie and Freddie. Like, we're never gonna have this problem with the Dodd Frank though. Yeah. That came out and kind of reset everything. That's when we got rid of the good faith estimate, got the loan estimate, kind of everything changed.
Jumbo Underwriting And DSCR Loans
SPEAKER_01But don't you feel that we're kind of reverting back? It seems like not to talk we'll we'll lead into what we just talked about in terms of like, but it it it seems to me that instead of staying that course, we're going somewhat backwards, or maybe it's backwards. I know this sounds odd, and I would love your opinion on this. It seems to be harder to get a loan the more how do I say this? The more assets you have, the more successful you have, the better you are on paper, it's it seems harder to get a loan.
SPEAKER_00True. Like, for instance, jumbo loans. Jumbo loans, it's it's a hard underwrite, right? And jump jumbo loans anything over 832,750 for a loan amount, right? And they pick those people apart, right? Like, you know, they're self-employed, they send self-employed people to the ringer. But yeah, I feel like we're going back because you know, we used to do those no-doc loans. State l income, state l asset. Oh, this this waitress, you know, is making 100 grand and she got 100 grand in the bank, and you would write that on the application, and that's what would go. Now we have these DSCR loans, right? Which is debt service coverage ratio loans. So basically you can go and buy an investment property without showing any income. The only qualification is you need a credit score, and then the rental income has to meet or exceed the amount of the mortgage, taxes, insurance, the P I T I.
SPEAKER_01So they don't really care. They're they're looking at it saying, hey, this piece of property is self-sufficient. We don't really care what the person has.
SPEAKER_00Yep. Got to put 20% down.
SPEAKER_01Okay.
SPEAKER_00Right. But yeah, they're not looking, they're not even asking for tax returns. Pay stubs, not verified income.
SPEAKER_01If you put 20% down and then the building is bankrolling, basically the bank's like, I'll just take your 20% and I have the asset and I'll just sell it.
SPEAKER_00It is, and it's a higher rate too, right? So they're all setting that risk with the higher rate.
SPEAKER_01What's the rate difference on that?
SPEAKER_00Probably a percent, right? So if you're gonna say a 30 years in the mid-sixes today, I would say a DSC alarm is probably mid-7. Now, the more money you put down, the better the rate you're gonna get. You put 40 or 50% down, you're gonna be in the high sixes. So it's not terrible. No, and it's and it gets you in the game. Yep, for sure. And they'll put a lot of prepayment penalties on those, which are not common, right? They'll do like one to three years, depending on what rate you want. And it's the only type of loan that I know of that you can close in an LLC. Oh, wow. Who holds the paper? It's usually these banks. The banks, yeah. They're they're portfolio lenders, right? They're not getting sold off on the secondary market like a standard Fannie Freddie loan. Do you guys do those loans? All day long. Okay.
SPEAKER_01And then you guys hold the paper yourselves?
SPEAKER_00We will not hold the paper on those. Okay. Right? We will only hold the paper usually on like, you know, Fannie Freddie, F H A V A will service those loans.
SPEAKER_01How big is SLS?
SPEAKER_00Yeah, so SLS is part of CMG, right? That's my parent bank. Okay. They over $100 billion in servicing. So they're big. They're big. Yeah. Big. And we're privately held, which is nice. And the owner just bought two federally chartered banks out of Wisconsin. So it's going to be nice because I think he wants to compete with the big boys as Chase City on those jumbo products.
SPEAKER_01Yeah, the the jumbo from the big banks is tough, man. The rates are low.
SPEAKER_00We would destroy the banks on, you know, jumbo loans. And now, which makes sense, you think like a big bank, why would you want to lose that deal? Because if that borrower walks out the door, they most likely might take their deposits out the door too, right? So a lot of these big banks, your Chase, your city, your Bank of America, if you have accounts with them or investment accounts with them, they'll drop their pants, so to speak. They'll give you a below market rate, they'll lose money on that deal because they don't want to lose your deposits. It's a good business model.
SPEAKER_01Yeah. I have a lot of friends that like when they're looking at stuff and people that like I've reached out to you with, they're like, well, if I deposit X amount of dollars, you know, they just want me to put 20 grand or 50 grand in a checking account and I can show it. And once I show it, then I'll get the rate.
SPEAKER_00Yeah.
SPEAKER_01And then it's like, and then maybe I'll pull it out. But what are the odds of people pulling it out? They're probably like, fuck it.
SPEAKER_00Yeah, no, they're gonna leave it. They're gonna be lazy and leave it because it's there. And they probably know the stats on that. Yes, the lazy stats. Like, oh yeah. Move, you know, a lot of the times I'll see like on the bigger loads, like move 250 grand over, and that can be part of your down payment. So if you're going out and buying a one and a half million dollar place, you're gonna put down 20%. That's 300 grand. Well, you just move that over from your investment account, and all of a sudden you're a private client, then you get qualified for that quarter point discount. I know, but the service is terrible. The service is terrible. And getting the loan closed is terrible. Yeah, I'll get a lot of clients that'll come back to me after two weeks and be like, okay, can you help me now? Because it fell apart at the big bank. How do we?
SPEAKER_01I had a good discussion with somebody yesterday. How do you guys as a profession explain? Like, I I think that's one thing that people don't understand is the servicing end of it. And obviously, you know, I I know, like, hey, listen, you know, they're gonna get my thoughts on X, Y, Z on people, but how as an
Why Big Banks Lose Deals
SPEAKER_01industry do you guys say, hey, you know, you can go to Chase, you can go to B of A, but here's the difference with us.
SPEAKER_00Yeah. I think a lot of it's personal touch. Like anytime that borrower wants to talk, they're picking up the phone and they're calling me directly, right? You go to Chase one time, you're talking to three different people, and then you go back two years later to do a refi or do another purchase, you're not going back to that same person. You're getting passed around, right? So I think it's nice to have, you know, one consistent voice throughout the process. And I always tell people, you know, things always happen after closing. Guess what? Cook County, what happens? Taxes usually go up, right? So their payments gonna go up. They're gonna do that escrow analysis, the payment's gonna change. Usually, you know, you might be talking to someone, you know, overseas, trying to figure out, hey, why is my payment going up by X amount? Well, you know what? Because we service alone, you just call me. You know, I have a back door into our servicing department, I'll be able to explain it to you, help you out with, you know, kind of resetting that escrow account. I mean, there's little things like that where it's like, you know, there's a value add there.
SPEAKER_01Yeah, there totally is. I just think there's a there's gotta be a way to communicate that versus because I I mean, like for me, when someone is when someone says, hey, I'm gonna get like I'm gonna go to Chase or I'm gonna go to B of A or I'm gonna go here, first and foremost, I say, listen, just so you know, if you bring a Chase pre-approval to a clo to like if there's multiple offers, like if I'm viewing offers and there's four offers or five offers, and it's Chase, B of A, Brad Bowden, this, this. I mean, right off the bat, like you have an in.
SPEAKER_00For sure. And you know, I always say Chicago's a big small city, especially when it comes to real estate. Yeah. Right? Like you kind of know most of the main players, right? Yeah, you know the main players. And it's like, you know, I don't know how many times I've got a call from a listing agent, like, oh gosh, I saw your name across this, and you know what, we're going with you because you've closed deals with us in the past. Yeah. So I think it's a big deal. And you know, those big banks, your file gets lost, right? Like you won't get a call for two or three weeks, and then it's right before closing. It's like, oh, we need X, Y, and Z. Or, you know, we have discounted. I don't think people understand that they don't start the file to like a week before closing. Yeah, it's it's wild. And then, you know, I just know that you'll talk to that initial person up front and then you're passed off down the line. Yeah. Different people. So, you know, you're buying a home, it's a big deal. You want to feel like secure, you want to feel safe. You want to know that you know, someone's kind of holding your hand throughout the process, and then to talk to someone once and then get passed along to three other people on the team. I don't know, I would be frustrated.
SPEAKER_01Not only that, but think of like in today's day, everything has to be without a mortgage contingency to get anything.
SPEAKER_00Yeah.
SPEAKER_01So I always tell people, like, you know, you want to call Rocket, and no offense to people that work for Rocket or this or this. I'm like, whatever you do, just understand that you have five percent of you have fifty thousand. So my average sales five lies like I think one, two. So you're gonna have sixty to eighty thousand dollars unprotected. Yep. And if you miss that close date, they could be like, fuck you, give me your money. Yeah. Now it doesn't happen. They want to get the sale, and there's a whole other slew of legal stuff. But the simple fact of the matter is do you want to put yourself in that position?
SPEAKER_00Yeah, it's tough. And all over me. It's really tough.125 and rate. Yes, right? Something so small, it's like it's not gonna move the needle that much, but it's gonna be so much more stressful.
SPEAKER_01Yeah, and I have people that say, well, that's a cup of coffee or this or this. But then when it's all said and done, they're like, Who was it? I sent someone to you and they went somewhere else, and it was an absolute disaster. And the morning of the closing, I said to him, I go, I go, everything should be good as long as you got like I kind of washed my hands. I'm like, this is if anything happens on the financing end, this is on you. Yeah. The morning of the closing, they had not even sent out the CD yet. Oh, that gives me a panic attack right there. And I don't know what kind of shenanigans they pulled, like they postdated it for like Oh, Jesus. And I'm like, you didn't get any numbers or figures or anything. They're like, no. And it was some odd, like some obscure online lending. And they had no mortgage contingency.
SPEAKER_00Nor do they know the Chicago market and like the nuances of it or the Chicago tax standard. The taxes. Oh gosh, like I'll say, like, oh, well, they like right now where we, you know, taxes are late in Cook County. Go figure, right? Again. So we're holding TI, like extra money for taxes, the title companies are. Yeah. You know, and then you'll get a loan estimate from a lender out in California and they don't have that listed on there. Then the borrower's like, well, why are you charging this? Well, it's not me charging. The title company's gonna hold money to pay the tax bill when it comes out. Do the California people they don't know it. Yeah. Well, and then all of a sudden your cash and close is 10 grand higher the day before closing, and you're going, Oh my gosh, what happened?
SPEAKER_01Or they always like the California banks will like will will yell at me and be like, Well, where's where's the tax system? Like, well, they're gonna be X amount because we don't really know. Well, we'll just take the percentage of I'm like, no, it's not California. It's doesn't work like that. It doesn't work like that here. Yeah. Or they'll they'll call me up and be like, okay, where are you closing? And and can you send me the escrow late person's name? I'm like, no, no, we're we're a lawyer state. That's not how this works.
SPEAKER_02Yeah.
SPEAKER_00Yeah, a lot of states do not have attorneys. I mean, I'm licensed in multiple states. It's you really just Chicago and Illinois that really has attorneys involved. Do you know there's no title insurance in Florida? It's weird down there. I'm licensed down there. They have a ton of fraud and shit. They have tax stamps, dock stamp tax. It's like, you know, but they don't have income tax, so they got to get their money somewhere.
SPEAKER_01Somehow, yeah. But I was talking to somebody in Florida, it's like, dude, the amount of people that buy land and then go to it, and then there's someone building on it because the land's sold two or three times because there's no, there's no one, there's no, there's no one like holding title.
SPEAKER_00And that's like one of the only states where they will always require a current survey. You know, here in Illinois, they'll always use an old survey. But out in Florida, every time you close a deal, you need a survey. Well, it should be like that. Yes, it should be.
SPEAKER_01I haven't had anybody allow for an old survey. Yeah, I mean Except for a condo building, but all homes. All homes, they all want a current survey for three months.
SPEAKER_00Yeah.
SPEAKER_01UPIU probably We don't really see that side of it. No, that just goes right to title and they either But in Florida, it's like a requirement.
SPEAKER_00It's an underwriting condition. Give me that new survey.
SPEAKER_01And then the the underwriter looks at the survey.
SPEAKER_00They just want it in the file. Yeah, they don't know what the hell they're doing. Yeah. They're not they don't know about easements or anything like that. No.
SPEAKER_01No. Tell me that one this is really gonna affect a lot of people. That one new requirement that's going to send HOAs much higher.
Condo Do Not Lend List Explained
SPEAKER_00Yeah. So Fannie and Freddie just made some pretty big changes to condos, right? And everyone's hearing about condos and the the Fannie May Do Not Lend list. I'm sure you've heard of it, right? Where you just can't lend on a building until they get stuff fixed, right? So now with any condo building that's 10 units and under, there's no review. So that means no budget, no condo questionnaire. If there's litigation, we don't care. The only thing they want is the master policy of insurance. Now, any condo, 11 units and over, they're gonna do a full review on no matter what. So they're gonna get the budget, they're gonna get the decks and bylaws, they're gonna get a condo questionnaire. But the big change that I think is really gonna affect a lot of people in Chicago because we have so many high rises and and condo buildings, 11 units and more is you know, before in the budget, every year, the HOA needed to put 10% towards reserves. So let's just give an example. You have a condo building and they're bringing in 100 grand a year in reserve income. 10% or $10,000 a year has to be a line item that it's going towards the budget for reserves. Okay. Now, starting January 1st, 2027, it's going from 10 to 15%. So that means every single HOA in America, that's 11 units and more, has to redo their budget. And this is probably gonna make up, you know, HOA bills go higher for everyone. Yeah. And it's across the board. And if they don't have it, they're gonna be on that do not lend list, and it's tough to lend in there.
SPEAKER_01Man, I but has has everybody I'm just wondering if all the man's all the managed groups have to know this is coming on.
SPEAKER_00Yeah, they know it's coming on, and they usually do their like their budget approvals like in the fall. Yeah, like September, October, November. So they're all gonna have to do it. So you better believe that you know, come the first of the year, all these people in the high rises in these bigger buildings are gonna get, you know, a letter in the mail. Hey, your HOA dues are going up by X amount.
SPEAKER_01What is the biggest do not lend thing you see? Or do you just do you just see them come over?
SPEAKER_00But do you or do you see what they're the most common thing is like anything if repairs structural? Structural. Anything. You mentioned tuck pointing, you mentioned you know, on these high rises, fixing balconies. I mean, it it's just uh it's a hard stop. If they figure out that there's a current special assessment going on for anything structural, even if it's the garage, which to me didn't make sense because it's not even actual like you know, units, it's like a separate garage, but anything structural, they'll just say, hey, until that work is complete, you're done.
SPEAKER_01You know what's really interesting? I was selling a church conversion, a condo, and they on the minutes like two years ago, they mentioned just not repairing, but just fixing up there's two steps. Just the mention of it. Two steps going into the place. And the steps are from 1890.
SPEAKER_00Yeah.
SPEAKER_01And they're just worn out. So, like, hey, do we want to redo these steps at some point? That was two years ago. The they picked up on that on the minutes, and they're like, We're not funding this unless you fix the stairs or you get somebody over there that says the stairs are okay and they don't need to be fixed.
SPEAKER_00Exactly. Give me from me a written professional, like, hey, in writing, these are fine. There's there's they're sound structurally. Yeah, it's over two like two steps. Yeah. So that's crazy. Yeah, that's the biggest thing. A little bit for litigation, but not so much.
SPEAKER_01Yeah, okay.
Affordable Housing Needs More Supply
SPEAKER_01Afford before we get into the other things, because they kind of ranch into it, affordability. What are your thoughts on I have a couple ideas in my head, and they kind of go into something we talked about beforehand. What do you think how can we get forget about Chicago, but how can we get more affordable housing everywhere? And I don't think the way they're tackling it is right because the government, whatever they do, is wrong. But how we need like I don't think we need to suppress pricing. We need more supply.
SPEAKER_00More supply. 110%. Right? Like, you know, I I mentioned I'm licensed in some different states, like down in Texas and Florida, they're building like crazy. Well, there's no red tape. They probably have no uh no shortage, right? I mean, there's listings sitting out there forever. Yeah. The problem here in Chicago is you don't have a lot of space, right? So whether that be in the burbs, yeah, somebody's got to start building. Well, we could create space by create by easing space. Yes. Yeah. A lot, like you said, a lot of government here, a lot of red tape here.
SPEAKER_01Yeah. Right? So I just I'm just wondering, like, you know, in terms of of like when they're like when the government sits there and says, hey, we're going to create supply by creating more affordable units, I mean, how does that work considering somebody has to build those units? And no one goes into business for free. So how are you going to build units and have money be made? Right? Because the people that buy these units, I don't think they want to work for a deficit either.
SPEAKER_00No.
SPEAKER_01Like I think if someone's saying, hey, I I want to get an affordable unit, but where I work, uh, it's ten dollars an hour, but I've agreed to work for six. That's what these buyers are kind of saying to the builders. Hey, I want to do this, I want to do this. And builders, you know, we were I w uh this will be on uh on the the the pod I just said with Vince. Vince just sold those four homes for $4.5 million on in Wicker Park record sales. Wow. Okay, so they were supposed to build 50 units there. And and the builders like, hey, I'll do one bedroom, two bedrooms, three bedrooms, I'll do a really nice mix of different money. And the alderman's like, well, no, it's gotta be 30% affordable. The developer said, if I go 30% affordable, I lose money. I not that I get your margin. Yeah, not that I don't make money, I actually lose money. Yep. And the alderman's like, that's the rule. So I was like, well, okay, then. So instead of building 50 units, they built four 4.5 million dollar homes and sold them all like this. Which just makes the problem worse, right?
SPEAKER_00Because you could have had 50 units. 50 units. And if you wouldn't even do a third of those, okay, fine.
SPEAKER_01You know, and and Vince is like, we didn't want to build these homes. It's wild. It's like that's the only thing we could do with a massive track of land. Each each each house has 72 feet of frontage.
SPEAKER_00Oh, wow.
SPEAKER_01So it's the 70-standard city lot. Three almost. So 72, 72, and the depth was like 180. You could build a huge building. And the and the best part is it was next to the L, it was close to an L stop. So they could have made it with no parking. They could have made it one of those things where you have to use public trans. And and the city was like, the Alden was like, no. I did not know about that. Yeah. That's wild. So it's happened to it's happened to me too. It's happened to investors that I have in buildings that we've been in. And it's like the only way to really get something affordable and to provide look, you know, you know, lower prices is you have to increase the supply because the demand is there.
SPEAKER_00Yeah, demand's not going away, especially here.
SPEAKER_01Yeah. Well, you were saying
Rates Stay High And Demand Builds
SPEAKER_01talk about the you said we're the same, we're the same rate from a year ago.
SPEAKER_00So, you know, right before I was coming here, I was just kind of looking at historical trend in mortgage rates because you know, rates have gone up because of the Iran war, right? So we're probably, I think when I left the office today, the average 30-year fix was like 6.8. It is the exact same as it was in July of 25, right? Yet mortgage applications are up six percent. You know, right after COVID, I kept hearing people, oh, we're gonna wait for rates to drop, rates to drop. How'd that work out for them? Yeah, right? The whole phrase of what is it, marry the house, date the rate? Like, yeah, rates haven't gone anywhere. No, right? And I don't think they're really gonna go anywhere, right?
SPEAKER_01I think, I think once, I think, well, before we went over Tran, we were like at five, seven, five.
SPEAKER_00I think selling high fives in February, March. That's gonna be the lowest they get. And I think that'll send the market into a tizzy. Like, like, you know, people start seeing fives. It's like, wow, this is this is unbelievable. And it is unbelievable, right? Because I remember when I first got in the business in 2005, the first loan I ever sold was like 6.8.
SPEAKER_01That's normal. Yeah, my first loan was 9.75. My mom's like, that's really low.
SPEAKER_00Yeah, because they were in the teens, right?
SPEAKER_01Yeah, they were in the teens.
SPEAKER_00You're like, oh, you're under double digits? Oh, this is fantastic, right? So I think people are just getting used to the fact that these rates are kind of here to stay. We might see a little bit of movement, half a point down when the Siran war finishes. Yeah, I think you'll see what rates come down for sure.
SPEAKER_01But I but it's not but it's gonna completely be that rate's gonna be completely offset by the amount of buyers and the push up again.
SPEAKER_00Exactly. So that's why like, you know, I tell people like, you know, don't worry as much about the rate. I mean, if you're okay with the payment, what are you waiting for? Yeah. Like, you know, what's gonna happen is like you saw this spring, it was bananas. It was one of the craziest springs I had.
SPEAKER_01I've never seen anything like January to April was on was bananas, dude.
SPEAKER_00It was nuts. And I felt bad for these first-time homebuyers because you have all the you know, the parents coming in, helping the kids out. Hey, we're gonna do cash with mortgage allowed. Yeah. Right? Everyone's cutting out a bank statement. Yep. And and like you said earlier, no contingencies. No, we're gonna buy the place as is. We don't care what happened, you know, but let's go. It's and and and I don't, you know, we're gonna have that again. We are 110%. And that's why I'm saying if rates go down into the high fives and it's next spring, I can't imagine.
SPEAKER_01Somebody asks clients, like when I meet with someone for the first time, like, where do you think rates are going? I'm like, well, you're buying. Like, yeah, I go, you want them to go to 10. Yeah. And they look at less competition. I go, dude, you want to battle 20 people and pay a hundred thousand over, or do you want to just walk in and get a little bit of a discount?
SPEAKER_00Yeah. And you know, listen, you always can refinance too, right? But we that's never a guarantee, right? So you can't bank on that. But yeah, you're gonna have so much more competition. I think, you know, I read a stat, you know, earlier today, too, before I came, that you know, 29% of people that wanted to buy a home last year actually did it. Out of out of 100%. So only 29% out of a hundred, you know, were able to actually buy a home. So there's still pent-up demand. There's people sitting on the sideline.
SPEAKER_01I I mean, I don't know how, and it'd be interesting because you work with, you know, all types of realtors. How are how are young realtors and people that are just getting into the business or don't have a reputation? I want to say let's say I did let's say I did 40 sales in that in that time, which is probably about right, 40 buys. Yep. Out of those 40, 30 of them were personal, like friends of mine. And that's the only reason I got this place, is where I was like, man, you gotta help me out. Exactly.
SPEAKER_00Literally. It's it's nuts. So how do those people, how are they surviving? That and like, you know, uh they can't go over that much and ask price, like you know, these these younger buyers. But yeah, these younger agents. I mean, I I have a guy who works for me. He's my production assistant. He interned with me for two years in college and he's been with me now for two and a half years, right? And I just flat out told him like it's gonna take you three to four years for you to make money in this business. Yeah. Like, do not think you're gonna come into this business and it's all like, you know, rainbows and unicorns. You're gonna have to hustle, you know. But I mean, it's it's tough. You got to establish relationships and you know, kind of work your network, like you said, your family, your friends, but it's gotta be tough for the younger generation.
SPEAKER_01Especially with the changes they made, with this buyer's agreement required. I mean, you're walking up to somebody. What are you, you know, what why should I? Yeah, what's your value? What's your value?
SPEAKER_00Yeah, what have you sold?
SPEAKER_01Can you show me your portfolio? What's your value? What are you gonna do that no one else can do? It's gotta be someone that you know.
SPEAKER_00Yeah, or else they're not giving you a shot. They're not giving you a shot. Because it's you uh going to go against, like, for instance, like you or Sophia, and then somebody younger. They're fucked. They're going to you.
SPEAKER_01Yeah. I mean, I would too. I mean, it's so it was interesting. We were we were interviewing, Sophia and I were interviewing for a listing, and the first thing they said to me is, What is your buy-sell spread? And I said, you know, I said, for 20 years I've been 60% sell, 40% buy. This is the first year ever that I was 60% by. Really? Ever. The first year I've been over 50.1. Yeah. Well, I mean, listings are just like hard to come by. You get a listing, it's like gold. These renters that are just flooding the market. Like, do you, when you meet with the renter that's new to the market, do you sit there and be like, hey, you're paying this in rent? Like, have you thought about the tax implications and all this stuff here? Like, what do you tell those people?
SPEAKER_00Yeah, all the time. And like, you know, here in Chicago, it's the norm sometimes for these, you know, people to be paying four and five grand a month in rent, which is just wild because I always tell people, I'm like, you're paying someone else's mortgage. Yeah, right. Like you can scrape together three to five percent down, and you could be probably paying thirty five hundred dollars or even four thousand the same, and you own the place. Yeah. And then you don't have to move every year because let's face it, moving's not cheap either. No.
SPEAKER_01And and and you're you're legged into that price. Yeah. You're not gonna be going through a 30% rental increase.
SPEAKER_00Yeah. And the rents just continue to go up.
SPEAKER_01It's interesting. Like you always hear, like, I I always like when I'm scrolling, some guy will be like, oh, buying is this, you you should be renting, blah, blah, blah. And all they talk about is, you know, you got to rent. I mean, when you buy, you have HOAs, you have taxes. I'm like, okay. And they're like, and then this, this, but they never say, Oh, by the way, you know, in 10 years, the value of your property is up 30%. They don't tell you that every payment is buying down your note. Yeah, you're probably buying down. They don't tell you you write off all the interest. It's just interesting to me. It's wild. Yeah. And then
Assumable Loans And VA Myths
SPEAKER_01everyone. And the property taxes right now. Yeah, yeah. And and then that cap is gone. Yeah. So like it's just, I read the comments and I'm like, man, these people are so fucking misinformed. There's a lot of uneducated people about it, right? Yeah. And they're learning from TikTok and IG, and it's like, it's like, man, this is not how it is.
SPEAKER_00No. TikTok and IG, like I always hear you, you brought it up earlier, the assumable loans. You know, it was like this fad, like, yeah, I don't know, when when rates were high, right after COVID. Oh, you know what? You can just assume someone's loan.
unknownNo.
SPEAKER_00There's hardly any loans that are assumable out there. It's just not.
SPEAKER_01And that's point two. How much inventory would we get if the like why is the government all sitting here? We need like Democrats, Republicans, Independents, I don't care who you are. They're all sitting here and saying, We need affordable houses, we need affordable houses, we need affordable housing. You want affordable housing? Let fucking mortgages be assumable. Yes, 110%. I mean, there are really easy fixes to all this. All the R3 should be R4. Build as many multi-units as you want, and R4. Keep the FAR, get rid of the R three and the R2, which they the ultimate only down zone because people that have a ton of money tell them the down zone so they can get more money to be re-elected. And just make everything assumable.
SPEAKER_00Yeah. I mean, it's wild. You know how many boomers I'll talk to, and they want to move. They want to downsize. I want to downsize. They want to downsize, but it's going to cost them more because the rate is double what it was in COVID, right? And that's what everyone's got. And then the places went up in value, right? If you went and let that be assumable, you know how many boomers would move out of the house?
SPEAKER_01Dude, there'd be so much inventory. There'd be so much inventory. And pricing, listen, not to be not to hurt people that own properties, but pricing would just drop. I'm not saying like we all have like 50% equity now.
SPEAKER_00If you bought before if you bought it in 2020, 21, yeah.
SPEAKER_01You're just rolling. You're golden. Yeah. So, okay, you're not up 50% now. Now you're up 30. But I mean, because you know, like Nikki and I are like, okay, Lee's leaving the house. She goes, in three years, Will's gone. She's like, we don't need this big of a house. And I said, let me show you something. Here's what it's cost. I pulled up a house in Roscoe Village. I'm like, you want to live, you want to go back to Hamlin so James can just walk to Hamlin? Yeah. It's fine. Here's a house that's half the size of our house, but a third less expensive. However, is almost three times the price on a monthly. And she looked at it. I'm like, dude, welcome to welcome to rates. Yeah. This is what this is where we're at. But you're right. I mean, we would I would sell my house and buy a smaller house tomorrow.
SPEAKER_00I think a lot of people would. And it's not a hard fix, I feel like.
SPEAKER_01No. But the banks don't want it. The banks don't want it because they're making money. But and they don't want to do you think it's because they don't want to re- they want to if you're buying something, they want to restart the amortization schedule.
SPEAKER_00110%. But let's restart it at that rate then. Yeah. Yeah. Because that's what they want. They want the portable mortgage, but like that's never going to happen. I saw that going around on like TikTok and IG, a portable mortgage. No. You can't take a mortgage from one to the next. It's not feasible. No, because you're leaning up on that asset.
SPEAKER_01That makes no fucking sense. Yeah. And that was all over Instagram too. And I'm like, oh my gosh. The most ridiculous thing I've ever heard. But to like say, hey, you can assume this rate, however, you're not getting them, you know, you're not getting 10 years into the loan. We're going to reset the loan like a refi. Yep. We're going to reset the loan and you can go this way. Even if they did it like VA does, where you could only, you know, you have to assume that debt. Yep. You can't add more debt. Correct. Even that would help. Yeah. Anything. Because there's so many people that just they're stuck. Yeah. Stuck. The VA thing, the first time I ever dealt with the VA assuming a VA loan was this year. That was interesting.
SPEAKER_00Yeah, it's a different process. Wild to me that I didn't used to know until I actually started reading the guidelines years and years ago is you don't even need to be a veteran to assume that loan.
SPEAKER_01No, so it's a veteran to buy it, and then as it's passed on, it doesn't matter.
SPEAKER_00It doesn't matter.
SPEAKER_01So why doesn't everybody get VA loans? Exactly. Because VA loans aren't as common, especially around here. We don't have a big military community, right? But like if anyone can assume it, now once you assume that loan, the veteran can never get another one. Not until is that not true?
SPEAKER_00Not true. You have something called VA entitlement, right? So there's like a calculation and a spreadsheet you do, but you know, you can have two VA loans at once, but you can't do no money down. So the big thing with VA loans is you can do zero percent down. Below market rates, fantastic. No mortgage insurance. They can go buy another place, but they got to put some money down. It usually shakes out to about five or ten percent. Okay, great. That's not a big deal. No, most other people are putting five to ten percent down anyways. That's probably the average right now.
SPEAKER_01Yeah. So I just it just seems like a no, like it seems to me everything that's a no-brainer is never done. And like let's do stuff that creates other issues. It's frustrating. It is. And it's just like like, did you see that? Did you see that some of the rent, like you want to talk about rents going up? Did you see some of the rental stuff that Bozo wants to do in Chicago?
Chicago Taxes And Red Tape Costs
SPEAKER_00Oh no.
SPEAKER_01I heard about it. The tenant stuff where they have all the I mean, they already have all the rights to begin with, but if if you re-rent to someone else, you have to pay for them to move. What? I did not see that. Yeah. Oh my gosh. Did it mess? No. I mean, this this stuff is just pure, like it's pure conjecture. Yeah, it's it's it's podium politics. Yeah. It's like the most re it's more ridiculous than anything that came out of Madami's mouth. In terms of housing. I mean, he's probably he's said more ridiculous stuff, but like it's like, guys, this does not work. All it does is stop investment into real estate, and that's the one thing you don't want. It's what we need. We need more supply.
SPEAKER_00We need more people to be able to do it. Like you said earlier, if you build something, you gotta be able to make some money on it.
SPEAKER_01Yeah, I was I went to the the forum and uh Jim Letcher was there, JDL and a couple other big guys there, and and they're like, We need supply. And they're like, the problem is is you know, is that and this is not on the smaller commercial side, but uh Chicago's been blacklisted. So we've been redlined from banks because you so everything that Jim does is not through banks. All these guys it's all PE. It's all private equity, and the and it has to be big enough that private equity will get involved. Yeah, because they don't want something small.
SPEAKER_00They're not gonna do a single family home and a single family home. One Chicago is private equity.
SPEAKER_01Oh the 78 is private equity.
SPEAKER_00Okay.
SPEAKER_01The Foundry Park, yeah, private equity. Did they say why? Just because of the red tape and all the taxes?
SPEAKER_00There you go.
SPEAKER_01Literally, the property taxes, they can't underwrite. They have no idea what's happening with the property taxes, and they also, you know, we got Illinois got, I mean, and I don't know why, you know, the governor's like, I have the heart, you know, I've done this, this. We're just above junk bond. We're BB minus. Yeah. BBB minus. Look at the Chicago Bears.
SPEAKER_00They can't figure it out either with with the state, right? With the taxes.
SPEAKER_01It's like, come on. You know, like, and it was uh it was interesting. He was like, one of his one of the governor's things was uh I I'm not gonna raise taxes and tolls just for the bears. So the bears decide, okay, we're leaving, and then a week later, he passes 50 tax he's and and and he jacks up the toll tax. Yeah, the tolls are out of control. The toll's tax is supposed to be done in 1977, by the way. That was what was written. And then the all then the state legislators removed it. Oh, geez. The toll tax was only to pay for those toll roads, and that was supposed to be removed.
SPEAKER_00Now it's just paying for everything else.
SPEAKER_01Now it's just paying for every yeah. God knows where it's paying for. Gotta love Illinois. Oh my lord. Where do you see so we we both agree that rates are what they are. You may see a little bit here or there. Yeah, we may get some relief. What what do you see in terms of other products that I mean, I gotta silence this. My bad. Hold up. No worries. I always silence it and I forgot. And you know what these people are? These are all spam. And they're all, you know what they're all trying to do? They're all trying to get me to buy leads. And it's the same person. And you know how they start off? It's very interesting. They go, they go, we talked last week. That's how they start off. And I'm like, no, we didn't. And they're like, I have a good memory. They're like, yeah, we did. I'm like, are you selling leads? They're like, well, yes. I go, then we didn't talk because I don't buy leads. Gotta get you on the do not call list. I'm on it. And they still can get it? Yeah. Oh, geez. And they're really good now because they use 312s and 708s. Local numbers with local numbers with people's names.
SPEAKER_00Yes. Yeah, because I get that when they call my phone, it's a spam, but it's a local number. So I'm like, oh, well, maybe it's a new client. You gotta answer.
SPEAKER_01Gotta answer. And then if there's a five-second pause, hang up. Yep. Because that means that you got robo dialed, and then they're directing you to someone in Bangladesh. Great. Just what I need. Yeah. So you could buy leads. So what do you what what like you said, oh, let's talk about the product that you were talking about in terms of the uh buy-sell. Oh, like
Buy Before You Sell With Recast
SPEAKER_01uh if somebody needs to buy and they can't. Yeah. So the biggest problem people are having now is obviously no one will accept a contract with the sales contingency. It it I it's gonna be six years till that's accepted.
SPEAKER_00Yeah, that's not happening. For a long time.
SPEAKER_01So tell me about what leeway like what workaround you guys have.
SPEAKER_00Yeah, sure. So, you know, as you just said, you know, it's very, very difficult to get an offer accepted with the home sale contingency, right? So, you know, a lot of people need the money from the sale of their home to put down the new home, but I might say, hey, listen, if you can put 5% down, which is the minimum when you're not a first-time home buyer, let's go see if we can qualify. Yes, you're gonna have mortgage insurance, but guess what's gonna happen? You're gonna sell your place a month after we close, or probably even before that, with how competitive the market is. Then you're sitting on this pile of cash. Maybe they have a hundred or two hundred thousand dollars from the sales at home. Okay, since we service alone, we're in control from start to finish, right? So after the first payment, they're allowed to do something called a recast, which is basically we take your money, we'll re-amortize your payment, get rid of your mortgage insurance, and it's like nothing ever happened. So you have one payment, it's not a bridge. Nope.
SPEAKER_01What is the main difference between a bridge and what you just said and a recast?
SPEAKER_00So a bridge loan is like when you take a loan out against your property and you're putting a bigger down payment on the new place, right? I'm not the biggest fan of bridge loans because you're taking the equity out. Yes, you're taking the equity out of your current property and you're paying fees on it, like an absorbent amount of fees and a really high interest rate, right? For maybe only a couple of months, right? Well, instead of taking a bridge loan out, let's just do the minimum down. Okay, great. You go buy the new house, you pay one payment at that higher payment. So with the mortgage insurance and the higher principal and interest, and then we'll go take your money, we'll re-amortize it, lower your payment, drop the PMI, call today.
SPEAKER_01When you qualify people on that, are you like you have to sell the house at X amount of dollars to make it work? No, no, no. You're still qualifying. You're still qualifying for both places at once. Yeah.
SPEAKER_00So your DTIs have to You gotta mesh with both properties at once, right? That's sometimes it works, sometimes it doesn't. A lot of times we'll get a co-signer involved, mom, dad, something like that. But yeah, you gotta qualify for both places at once.
SPEAKER_01Aaron Powell, I've heard sometimes people will refinance to like a daily rate on their regular house to drop that payment.
SPEAKER_00Oh, I have not heard of that.
SPEAKER_01Yeah.
SPEAKER_00Smart though.
SPEAKER_01Yeah.
SPEAKER_00So you re-fi that to basically You almost refi it into a HELOC, so then the monthly payments interest only, just so you qualify. Yep. I haven't seen that. That's a good idea though, too.
SPEAKER_01Have you seen it like, hey, I've been doing this a while. Yeah, I've just I've like, I was this had to be 10 years ago, and someone was like, they were like, okay, we'll do this, this, and then I remember the buy the buyer telling me, okay, I I've gotta he's like, I'm refinancing the house. I'm like, really? He's like, Yeah, you you know why? I had to take it off the market. Yeah, you can't refin it when it's on the market. That's how it was. So I took the house off the market. He went from a 30-year fixed to basically like LIBOR. Yeah, like an arm. Like a total one one year, like that was it. It may have even been a floating daily rate. I mean, it was just, but his payment dropped so much, and then all of a sudden the DTIs worked. He's able to qualify.
SPEAKER_00He's all able to qualify. That's another thing that's been weird. You know, during COVID and before COVID, you know, we sold a lot of arms, a ton of arms, because there was a big spread, right? It might be at least a
ARMs And The Inverted Yield Curve
SPEAKER_00half a point lower. These days, it's gone. If you're doing a conventional loan, I have people always ask me, you know, hey, should I do an AR? No. I mean, the arms are pricing out the same or worse. The only time we're selling arms these days is on jumbo loans. Just to what's this what's the spread on the job? I mean, maybe a quarter percent. Then why? It's not much, right? That's why I always tell people I'm like, okay, you're gonna save an extra, you know, $100 a month. Is that gonna change your life? Because in the nut rates only fixed for seven years. Or five years, or whatever the term may be, right? Do you know why it happens? It's called an inverted curve. Yes. Yes. Yes.
SPEAKER_01And it's been like that for a while now. A while. Yeah. The investors are so scared of the next three years more than they're scared of 30 years from now. They would rather loan you money for 30 years in the future than the next three years. Yeah.
SPEAKER_00They're worried.
SPEAKER_01They're worried.
SPEAKER_00Conservative. They don't want to get caught with like like last time.
SPEAKER_01Yeah. Inverted curves are bizarre. Yeah. It would happen once like when I was a trader, the curve the curve would invert normally during wartime.
SPEAKER_00Yeah.
SPEAKER_01Like if like I remember when I remember when Bush Sr. went into Kuwait, it inverted. And then when Junior went in, it inverted. And then it went back to the bank. Went back. Now it's just stuck. Just stuck. It's been there for like three, four years. Which is just wild.
SPEAKER_00Yeah, because of COVID.
SPEAKER_01Yeah, and it won't go back. And now our country's in so much debt that I just don't see it going back. Yeah, when you're at like 40 trillion. And it just keeps getting worse and just keeps getting worse. And that's the other thing that's probably going to not help rates come down in the future. I was wondering if you wanted to get into that. I was actually in the shower yesterday, and I'm like, I'm like, do we get into the fact that rates won't go down because we spend $7.5 trillion and we bring in four?
SPEAKER_00You know, case in point, I was on the phone with a borrower yesterday and I gave her a pre-approval letter and she's going to put an offering. And, you know, she's like, what's the payment? I was like, oh, it's a little over $4,000. She's like, I really wanted to get the $3,500. What rate would it take? And I'm like, okay. And I put it in there and I'm like, probably sub five. I'm like, and I just don't see us getting there at all. Like, it's just not going to happen. Like you said, maybe I fives, but yeah, we have a debt problem. And, you know, mortgage rates follow the 10-year treasury. Yeah. Right. I mean, it's pretty closely correlated if you look at a graph, right? Nobody wants our debt when we are just printing money like it's left and right.
SPEAKER_01I know. I've like, I want to say like 20 or 30% of my podcasts always end up going into the fact that we're in so much debt, and that's the main problem.
SPEAKER_00It is. It is the main problem. I mean, yes, is the Iran war driving rates up right now? It sure is, right? It's inflationary. Gas prices go up, oil prices go up.
SPEAKER_01But think about the Iran war, they're saying that it's because of oil. We only use 2% of the oil from Iran. We're a net exporter. Exactly. So that's just bullshit. That's you want to know price gouging? That's price gouging. How can a war break out at 9 p.m. and then I see a guy on a ladder at 8 a.m. changing gas prices? Did the fucking gas in the ground work?
SPEAKER_00It's not change that quickly. It takes time to cycle through. But yes, it's price gouging. Oh, you even heard Trump. Like, stop price gouging gas right now. It should be coming down. Yeah.
SPEAKER_01It's not. Well, you know what a lot happened too when gas prices started to nosedive after Biden left and gas prices are nosediving, all the government I mean, I can't say all. I know for California for sure in Illinois, they just increased the tax. Yeah. So like when that spread came down, they increased the tax. So when the gas prices came back up, you now have double the tax. Plus, my my favorite thing, and this will be my favorite thing that I love when I see on people talking about is like, oh, gas prices in 2020 were were $4, now they're $4.20. You know, gas prices gone up. No, they haven't. Gas prices have gone up to a person that doesn't think, but to someone that understands that we've lost 35 to 40 percent of what the dollar is worth, $4.20 in 2026 is less than $3 a gallon in 2020. Correct. So you're incorrect. Learn your math. Yep.
SPEAKER_00It's right.
SPEAKER_01I mean it's it's worth less. It's yeah, it the the in it it's not that, it's inflation. Your dollar's not going as far. Yeah. So they they count, you know, I was talking about lowering rates. Yep. We're we bring in four trillion in taxes, we spend seven trillion, and they know for sure now that we have about one point two trillion in waste. Like like the Learning Center and this other stuff, right? Make Shirley's all on it. Yeah. So think about the fact that we're losing one point trillion in just tax money that's being that's being fraudulently taken by by groups and by people. I mean, if you like everyone was like, I can't believe that they're doing this or doing this. I'm like, listen, do you understand? The less we spend, the cheaper everything's gonna get.
SPEAKER_00Yeah, and rates will follow. Yeah. It's like it's economics.
SPEAKER_01It's like no, this is uh like they passed a law that no one can investigate fraud, the Shirley Act. It's like how bad is that? How bad is like and then Gavin Newsom, Gavin Newsom signed a law that you could not audit the homeless money, the $26 billion. It's just wild. The corruption is just you're you're gonna pass something that we can't know. And then they were talking about there's a ton of other state governments where you can go online and they have itemized every single dollar that the government spends for their state. Like, hey, this is our budget. Here's where every line item goes. And they made that illegal in California. It's just crazy. It's bananas, yeah. And they're wondering why tax like they're like, oh, the cost of living, this, this, this. Like the cost of living has to do with like, you know, it's not just about the rate. Like, like you know, you gotta say, hey, listen, this is your property tax.
SPEAKER_00Yeah.
SPEAKER_01HOADs, insurance. That's it, it all adds up. It all adds up. Yeah. You gotta think about the whole thing. And it's just like you have unstoppable property tax that keeps going up. It's like every year.
SPEAKER_00Nor can we come out with a tax bill on time here, too. That's nuts.
SPEAKER_01You know? What were the I I I kind of read some of the excuses, like it was a something about the technology technology upgrade.
SPEAKER_00Well, that was the excuse last year, but it's the same excuse this year. Is that what they used last year? It's the same. I mean, I'm on the Cook County website every day pulling tax bills for every time we get a property. It's the same website, it's the same technology. I don't know what changed behind the scenes. But can't you find the multiplier now? Can't you know what the taxes are? Yeah, but there's there's like a millage rate what we use for new construction, but it's never accurate. I mean, like Cook County will give us this millage rate, which is based, you know, you use that to base what the tax are going to be, but it's always way too high.
SPEAKER_01What about what what are banks like when you're doing new construction? Yep. What are banks asking for for a TI or for like, hey, this is what we want in reserves? Like, what is that? What does that look like? You're buying a million dollar property in Lincoln Park, if that even exists anymore.
SPEAKER_00Yep.
SPEAKER_01And, you know, and they're like, and you go to the bank, you go to you and say, hey, this is what we have to run for taxes.
SPEAKER_00Yeah. So we have a calculation, it's called the millage rate. The city comes out and gives us, hey, okay, here's the tax rate for this area of the city with this purchase price, but it always comes in like three percent of the purchase. So each each amount of the area skid is that. Like south side of Chicago and the north side of Chicago has different millage rates.
SPEAKER_01Okay.
SPEAKER_00Right. So, you know, up here on the Is that a multiplier? Yes, it's a multiplier. And so up here, you know, on the north side, it's obviously going to be higher, right? But you know, it seems like general rule of thumb to me is it's like 1.75 to 2% of purchase price is usually your tax bill, right?
SPEAKER_01North and south or just north? Just north. But here's my question for you. If the values are different, why wouldn't the multiplier be the same and just be affected by the value of the property? Why would you want to also change the multiplier?
SPEAKER_00I you know, I think a lot of it may be school districts, like for instance, Oak Park, right? Like well, now we're out of the city, all the time. Yeah, now we're out of the city. Yeah, but it's insane. Yeah, insane property taxes. Anytime somebody says that, I'm like, oh gosh, good luck. What are your taxes gonna be? Yeah. But but yeah, I mean, it there's no rhyme or reason here. I feel like it's like how do why does Oak Park have such high taxes? They they always I always hear because of the schools. Uh, but are they that great of schools?
SPEAKER_01No. Exactly. No one says I'm moving to Oak Park for the schools. I'm so sorry for Oak Park people. Yes, but I've been doing this 22 years. I've never heard that. Yeah. I heard I'm moving to Northfield and Glenview and you know, go down south to Marist or something. Like I don't hear I don't know why they're so high, but it's like they're the highest around.
SPEAKER_00Yeah, they're crazy. By far. By far. And River Forest is crazy? Yeah. I mean, it's just weird. You know, you go down the street, you have one house at 10,000, and the next house at 14,000 taxes, and they're the same house. Why is it different? Because one person contested them? I don't know. There's just it's a lot of corruption here, I feel like.
SPEAKER_01How much money do you think tax lawyers that fight taxes pay people to make sure they never find a solution?
SPEAKER_00Oh, probably a good amount. For sure. For sure. Because they want to make it convoluted. We don't want to understand it. I mean, it it's nuts.
SPEAKER_01It's nuts. It's just I got a tax bill for 80 grand on a building that I own and I had just bought it. And I was just like, I just send a letter in, and they're like, Oh, you're a real estate agent, so you knew you know you had knowledge and no no one else had that. I'm like, no, dude, it's here's the the price, and it'd been on the market for three years, blah blah blah. I hired a tax attorney, really good one, and he knows everybody. I went from 80 to 37,000.
SPEAKER_00Oh my god. It's who you know.
SPEAKER_01It's but I still had to pay him, I still had to pay him one third of some thousands, thirty-three thousand. Yeah. Which is worth it. Right? But why'd you have to do that in the first place? Why did I do it in the first place?
SPEAKER_00Yeah. Corruption, once again.
SPEAKER_01I mean, and Maria Pappas is not a bad person, but I don't I you know, I don't think she deals with that. That's the other guy who I think they're gonna can. The Zessor. The old guy Barrios was a criminal.
SPEAKER_00Yeah, what do you know? And then like you ask her, like, what do we tell people when they're buying a new construction home? Well, here in Chicago, it's kind of nice. You're not gonna have a tax bill for two years. Yeah. Right? Like somebody's then they get you. They'll come around for one full year. But like if someone's buying a new construction single family home and they're closing this month, you know, hey, when when can I expect my first tax bill? Probably, you know, August of 28.
SPEAKER_01Is there is there a is there a time of the month that's best to close for closing costs where it's more hidden in the loan versus out of pocket?
Closing Timing And Rate Lock Tactics
SPEAKER_00I get that a lot, right? So, you know, let's just say you close the 15th of the month. We're gonna hold 15 days of interest until the end of the month, right? And then whenever you close on a mortgage, you skip the first month's payment because a mortgage is paid in arrears. So you close July 15th, your first payment's not gonna be until September 1st, right? So yeah, you're gonna pay a little bit more at the closing table in interest because you're closing in the middle of the month, as opposed to if you do close on the 28th, 29th, 30th, we're only holding one or two days of interest, but your first mortgage payment's gonna be sooner, right?
SPEAKER_01So could you close like on the third and get like a closing cost credit?
SPEAKER_00You could. They allow you to go you to go up to the 10th, basically, right? And you can do like an interest credit. But yeah, if you close, let's just say August 3rd, you know, your first payment wouldn't be till October. So the Fanny Freddie rule is your note date, basically your first payment date and your note date cannot be more than 60 days apart. Okay. Right? So a lot of the times people will be like, hey, moving's not cheap. I'm coming in. What's the earliest day I can close in August and not have a payment until October? It's usually the third. So I just put in a little day calculator, figure out 60 days. It cannot exceed 60 days.
SPEAKER_01All right. That's I I always said you wanted a if you're getting a credit at closing and you want to kind of finance that first month, the best way to do it is the start of the month, the third or the fourth. Yeah, you're right. What other little nuggets do you have that are that are savings, cost savings?
SPEAKER_00Yeah, I mean, listen, if you can close quick, you're gonna get a better rate, right? Like, you know, we have something in our bank, it's a 21-day lock, right? Okay, it's gonna be probably an eighth lower than the 30-day lock. And a lot of sellers right now want to close quick.
SPEAKER_01Yeah.
SPEAKER_00Right. So if you can do a quick close and you're ready, you're gonna get a little bit better rate. Is 21 days anything earlier than that?
SPEAKER_01It's it it's no difference.
SPEAKER_00We we have a 10-day too, and then it's gonna be another eighth off of that. So if we lock on a 10 day, you know, you're gonna get a quarter point lower than a 30-day lock.
SPEAKER_01So can you can you go under contract and you feel like that rates are gonna be stable and you're like, hey, I'm closing in 20 days, and then lock 10, like nine days. You know what? Or does it does it have to be when the when you go under contract?
SPEAKER_00You do not have to lock. It's up to you. The only time you have to lock is at least three days before closing because we have to send that closing disclosure. It's C D, yeah. And then everything's got to be in. But yeah, I mean, listen, with that being these days, I'm not a fan of floating, right? Because it's just been so volatile. Yeah, you know, Trump opens his mouth, market goes up, and we're quarter point in a week, right? So I always tell people to lock because we'll always give them an option to float down, right? Now, what does that mean? It basically means that okay, we have a 30-day close. I lock you in at six and a half. And in two weeks from now, Iran war's over and all of a sudden rates come down. We'll allow you to float the rate down before closing one time for free, right? Now it usually needs to move like a pretty good clip. It can't just move 0.125. It's got to usually move move anywhere from like a quarter to a half a percent. Okay. So we're gonna protect you either way, but yeah, I'll have some people that just want to roll the dice, right? They're gamblers. Hey, you know what? I think rates are going lower. Let's wait and see what happens for a couple of days. Sometimes it works out, sometimes it doesn't, right?
SPEAKER_01Yeah. I mean, it you you go the wrong way three times faster than you go the right way.
SPEAKER_00Oh my gosh. Yeah. I mean, like, case in point, we had a terrible week in the market last week for rates, at least for mortgage rates, right? We had a huge drop. It took us three days to get back what we lost in one day. And that's usually the case. Yeah. And the banks never want to give it back all right away. It's it's much slower to get it back than they take it away. Oh. They pull the rug out quick.
SPEAKER_01Yeah.
SPEAKER_00Right? Like, oh, got price change. You're like, oh gosh.
SPEAKER_01Yeah. I used to say that when I traded, I go, I lose money three times faster than I make it. 110%. And the market now it's the reverse. The market drops, and this is historical. The market drops, the the stock market drops three times faster than it goes up. So it rockets down and it Yeah, it takes time to go back up. Because people, people want to take profits where people literally just puke. Pull the rug. Yeah. Boom. I it's like everything like that.
SPEAKER_00Everything like that. It's frustrating. It is. Because you're like, oh gosh, we were making progress on rates and then they're back up. Yeah. First time homebuyers are so sensitive about rates. And it's like,
Rent Vs Buy And Wealth Math
SPEAKER_00look at the payment. We'll worry about the rate later. Look at the payment. Are you comfortable with the payment?
SPEAKER_01But most of my I I will tell you, you know, before we wrap up, I like the reason I had so many buyers this year is because the rental market, like I had people that had two bedrooms that were paying seven grand for 1100 square feet in the north. I'm like, that's fucking nuts. You should buy, and it's probably gonna be cheaper. And most of these people are finance people. And you know what happens? Everyone's like, I'm just gonna rent and then get my feet wet, and then you get complacent. Yep. And then the and then you know they slowly jack like I love like the rental people are like, oh, that you know, you if you rent now, it's a half month free, but you but the the lease renews, this is what they do. The lease renews December 31st.
SPEAKER_00Who in the fuck is gonna move? Nobody in the middle of winter. No one, no, but and and time is money, right? And so as you know, the longer you hold something in real estate, the more it's gonna appreciate. And in Chicago, I mean, we've been pretty steady at it. You probably know more than me. I mean, what are we averaging over the last five or ten years? Probably, you know, COVID's kind of skewed that a little bit, but yeah.
SPEAKER_01I mean, the last three years we've been number one. We're at like a steady six to seven percent every year.
SPEAKER_00I I mean, you do the math on that over five years. It's like, wow.
SPEAKER_01Well, it's leveraged.
SPEAKER_00Yeah.
SPEAKER_01Which is just like, which is nuts. Like I have people like I have I I had one buyer and he was like, this is actually the guy that was shopping people for like an eighth of a point. Yep. And and he's like, it's like, well, I don't, you know, he's like, I didn't know I'm into rental. I was like, I don't really want to dip into my stocks, this and this and this. And I was like, listen, man, I said, I have a decent portfolio in stocks and I've done a ton in real estate. I go, I'm gonna tell you right now, this my stock portfolio is like for the money that I'm just like, okay, I don't care. Not gonna care, but like you don't make money there. You make money here. In real estate, 110%. I'm like, this is a I if the stock goes up a dollar, I make a dollar. If if real estate goes up one percent, you know, one dollar just made me 10.
SPEAKER_00Yeah.
SPEAKER_01I'm like, it's it's marge, it's on margin. I'm like, you can't, and you have utility. I'm like, it's it just can't. Because my financial advisor is always like, oh, you know, let's do this. I'm like, man, I I go, I get it. Let me let me do what I do. This is what I do, though. And then I'll just and I'll give you portions of what happens. Yes. I'll give you little chunks of it. I'll give you this, yeah, when when it goes through. I'm gonna go buy another building. Yeah, I mean, because it just it it it doesn't even and all the laws are are written by people that own real estate. Everyone in Congress is a gazillionaire. They're writing laws for gazillionaires. Yes, and and they all own real estate. So all the real estate, yeah.
SPEAKER_001031 exchange to the next place, rolled over, but yeah, and just gradually you die. You sell stock, you're paying you know the capital gains on that immediately. Yeah.
SPEAKER_01And how about the fact now they want to tax people on assets?
SPEAKER_00Like your portfolio. You got to be on unrealized gains. Which is like, because it could go down the next day. And wait, I just paid tax on it. But it went down.
SPEAKER_01It no sense. I just don't know if those people know that's why we fought the British. Like this whole country was based on private property ownership. Like, you know, like that's like you're you're starting to go places where it's insane. Yeah, you go a little too far.
SPEAKER_00Get the money elsewhere, or just cut the spending.
SPEAKER_01Yeah, or or yeah, or just cut the fraud. Yeah, cut the fraud. Cut the learning center. That's the learning center. Learing center. Come on, come on. That's the best.
Parenting Talk And Final Takeaways
SPEAKER_01I'm gonna buy you a shirt. Learing center. That's the best. Any any final thoughts? What do you you know?
SPEAKER_00No, I appreciate you having me on here. You know, it's been a good time.
SPEAKER_01We talked about forget about the average buyers. We know that's the the boomers, right?
SPEAKER_00The boomers. Oh, yeah. What did we say? So boomers hold 34% of all real estate. Okay. Boomers made up 42% of buyers so far this year and 53% of sellers.
SPEAKER_01What do you see though? I know that's the stats, but that may take Kansas and Nebraska and Utah. Like what because I don't see that. My average home buyer is probably 35 to 45. Yeah, that's I like I have a ton of, I have a ton, like it's really nice. I have a ton of like high 20s, low 30s.
SPEAKER_00Yeah, making good money, great credit, but yet they're a first-time homebuyer. Yeah. Which is just wild because I I know I bought my first place when I was 22. It was, you know, it was different then. It was different then. Yeah, but now people are waiting until you know, 30, 35.
SPEAKER_01I think everyone's waiting for like I think the problem with everything, and and this goes into home buying, but I'm also gonna say it goes into having a kid. Everyone's waiting like m for like manna from heaven to come down and say, now is the time. Now it's time. It's not that's not just that's not too late. Yeah, it's just you have to have a leap of faith.
SPEAKER_00Yeah. And but like you said, I think people get complacent, and a lot of the younger generation maybe gets worried about you know, being in one place for too long. They want to be able to be, you know, going from one place to the next.
SPEAKER_01Yeah, but you know what? They never fucking move. They never move, exactly.
SPEAKER_00And then their just rent just goes up every year.
SPEAKER_01Yeah, all my clients are like, you're like, oh, we're like I was to say, like the $7,000 rent. He was like, Oh, we're only gonna be here for a year or two years. And he's like, Oh my god, it's been five years.
SPEAKER_00And you just threw away how much money, all that appreciation on our property.
SPEAKER_01These are really smart, like, listen, smart guys. You're spending you're spending seven to eight thousand a month. You're making good money. You're making a quarter of a million to three hundred grand skills. Oh, eight hundred dollars. I'm like, eight hundred credit scores. I'm like, I just rented one of our buildings that I own with one of my friends on rice. It's a dump. A dump. It's nice, but it's a dump. Yep. She makes 280 grand and she has 803 credit scores, and she's paying me three grand for a two-bedroom dump. In the back of my head, I'm gonna grab her. What are you doing? I mean, thank you.
SPEAKER_00Yes, thank you. I appreciate the business. I appreciate the money. Do you want to buy next year, baby? I mean, like, I don't even dude. I'm like, I'm like, I you know what, don't even use me. Get out and get some financial freedom. It's wild. You know, I talk to people like that all the time. I'm like, wow, it's time for you to move.
SPEAKER_01Yeah, I mean, just like, and and the the amount of apps of people that make over a quarter million dollars on a three, you know what? I want to travel. I want to have, I want to order Uber Eats every night. I don't want to make you house for it, right? But I mean, just stop the Uber Eats and the $10 coffees, and like, you know, and and you don't have to buy the new iPhone every six months and buy a house.
SPEAKER_00Yeah. You'll thank yourself later.
SPEAKER_01Yeah, they're not even my clients, and I get these applications, and I'm just like, what are you like if if my mom or dad saw me do that, they'd be like, What are you doing? Like the first thing my dad and my mom said, like, you know, I left the house like I think 25, 24, 25. And I probably stayed a little longer because my dad passed at during that time. So I was like, hey, just stay in the house. My mom, blah, blah, blah. She's having a tough time. But when I left, I said, I didn't rent, I left and I bought a place.
SPEAKER_00Bought a house. Yeah. I I do see more and more parents gifting money. I'm gonna say at least 50% of my home buyers get a gift for down payment. And I don't have a problem with that. No.
SPEAKER_01I'd rather have them do that than be like, exactly, here's money and go piss it away. You know, take it and and you put it towards something tangible. Yeah, we have a I have a we have a Lee's like, I think I could graduate because Lee has my oldest is going to school, college, and he has enough APs where he's like, I think I can graduate in three years. Great. Well, yes and no. And he's like, I'm like, listen, I go, if you graduate in three years, you know, your your your student the I can't remember the name of it, where I put the money away for him. Oh, the uh the 529. 529. Yep. I said you'll have some money left over in 529. I said, you could take that money, but you can only buy a building with it. That's all you can do with it. Other than that, I'm taking it back. I said, but I said, but stay in school for four years. I said, because it's never gonna it's never gonna be better than that. It's a good time. I mean, I was I was at Pepper for six and a half years.
SPEAKER_00Oh yeah. I stretched mine out to four and a half, and then my mom's like, okay. I got the I got the call.
SPEAKER_01I got the call. I left one class that I needed, it was my most difficult class. I'm like, I'm gonna hold on to this one to the very end. And my dad was like, it's time to go. And I'm like, all right. My last year was business policy, which was a bear. You had to start your own business from start to end.
SPEAKER_00Oh, wow.
SPEAKER_01Like a bear. And my other two were life's life's Life Sciences? No, no, no. Uh Life Guard. Okay. And lifeguarding, like I learned to be a lifeguard.
SPEAKER_00Oh, oh, oh. Oh, like actual lifeguarding. Yeah.
SPEAKER_01Yeah. In the pool at Pepperdine. Yeah. Lifeguarding. And volleyball. Okay. Wasn't a bad last event. The volleyball course, never do this. Kids, I told my son, I told my son too. Never register for a class with the girl that you're dating at the time. Oh. Man, because in four months, you're not going to be dating her. It's going to be the most uncomfortable situation. It all worked out.
SPEAKER_00We got Nikki now.
SPEAKER_01Yeah. But man, that was a terrible month. Like three months. That's just good life advice. And just seeing like eyes, like who are you looking at? Who are you looking to? Or just like I hate you and everything about you every single day of my life. A little bit of break. I was like, Coach, can I transfer? And he's like, what's because of the wild bobble coach? And I'm like, why? He's like, that's my ex-girlfriend, she hates me. He's like, he started laughing. He's like, he's like, dude, this is the only class I have. Life lesson. I was like, it's a great lesson. Yeah. You you look at today, you're still talking about it. Never make plans with someone you're dating four years and four months in advance. Ever. Ever. All right, cool. I really appreciate your time. Thanks for having me. I appreciate the insight on basically the new things that are going on in terms of 11 or more on the condos. Yeah. Big deals. You know, we talked a little bit about affordability. And really the other one that I liked was being able to buy before you sell and re-recasting. Recasting the loan. Yep. Getting rid of the PMI loan. Re-amortizing the payment, lowering the payment. And and you don't one more question on the recast. You don't need to refi, you just pay some. No, you don't have to recognize. So I don't lose the rate. You don't lose the rate.
SPEAKER_00Nor do you lose, like, you know, a lot of times on the refines, the bad part about some refies is you backtrack. Yeah. Right? Like 30-year fix is primarily interest loaded those first five years. Yeah. You don't have to backtrack. You make one payment, recast, you keep the original term, the original rate, everything.
SPEAKER_01That's awesome. All right. So August, good luck the rest of the summer. And we do need school. We need school.
SPEAKER_00Get us a routine back. I know, isn't it? Suck.
SPEAKER_01Yeah, I crave it. Give it to me. What what eight what uh grades are your kids going into? Fourth and first. Fourth and first.
SPEAKER_00Yep. Good times.
SPEAKER_01Yeah.
SPEAKER_00Third summer camp right now.
SPEAKER_01Away?
SPEAKER_00Yeah. First grader too is away? He's in day camp, but my wife's up in Wisconsin with him. So just you? It's just me at the house working.
unknownOh man.
SPEAKER_00I know, right? That's nice. But do you do you miss them? Of course, 110%. Yes. Probably the first two days you don't. First two days, no. But then you're like, oh gosh. And even my my nine-year-old, oh, it's just turned 10. He's like, Dad, it's going to be seven days. I'm like, I know. You're going to be all right.
SPEAKER_01Seven days is fine. Yeah. There's people that send fourth graders away for two months. I don't want that. I love my kid. I want to see them. That's a holo discussion itself. Because that's what I always say. I'm like, what do you think Yeah, like I want to be around my kids. You're not going to see them during the school year. No. You don't see them through the summertime.
SPEAKER_00No.
SPEAKER_01I know I have to watch what I say because I have a lot of friends that do that.
SPEAKER_00And I'm just like to each his own. Yeah.
SPEAKER_01Yeah, I couldn't do it. It's just not my cup of tea. No, I couldn't do it. I would like be so bored. Yeah. I mean, I don't get a phone call now a day and I'm like bored. Yeah, like what am I doing? Yeah. All right, cool. We're gonna drop this middle of August, so in like two weeks, and hopefully rates are lower by then. They won't be. It won't be, probably not. But hopefully. All right. Thanks so much. Make sure you follow us.
Where To Find Brad Bowden
SPEAKER_01Uh, Brad, give us your information.
SPEAKER_00Brad Bowden, 773-9835190, or just Google me.
SPEAKER_01Google me. Google me. Who's the guy that said that? Marshall Falk. My name is Marshall Falk. I was a running back. I was pretty good. Y'all can Google me. Google me. Google me. Look me up. I'm the real deal. Thanks so much. Bye bye. Thanks, guys.