Do you take the Deal when it's not Ideal?

By
Services for Real Estate Pros with Auto & Home & Life Insurance throughout North Carolina

 I got a call from an old friend of mine shortly after the New Year.  He wanted to consolidate his 1st & 2nd Mortgages into one loan at a reduced term, a financially savvy decision for sure.  So, onward we went with the process.

Now, this young gent lives in a rather eclectic neighborhood with properties that tend to differ in appearance, size, & condition.  His property happens to be one of the nicer ones in the neighborhood, which tends to make its worth not as ideal as one would like.  None the less, the appraisal was done and came in at a rock solid 290K.  The comparable properties were there, all except for a less than desirable abode across the street that had sold recently for 215K.  The appraiser noted it in the report and while it hurt the value of our subject property, the 290K was still as solid as Lou Ferrigno in the movie "Pumping Iron."

Well good old Murphy's Law came into play and the lender came back with their own search saying the value was only 230K.  Holy slap in the face Batman!  After the initial fury of wanting to briskly walk a few hours and give their Appraisal Review guy an Atomic Wedgie, we stepped back and got the facts.

It seems that another property sold literally right after the appraisal was done.  It was just down the street and it sold for 240K.  Uh oh.....that's not good:-(  So, the appraiser had to re-do the appraisal making note of this new comparable property that just came into play.  We went from 290K to 260K.  It didn't kill the deal by any means but it did introduce the dreaded PMI.

While it didn't help that they sat on the appraisal way too long for my or my amigo's taste, upon hearing this he became agitated.  To a large degree, I completely understood.  His payment would be going up $78.90 and he would have that dreaded term attached to him for at least 2 years.  That said, the deal was still a no-brainer across the board, making total financial sense.  But my amigo, a smart guy but stubborn like me, was going to throw in the towel and forget the whole thing.  Our conversation on the phone was relatively brief.  Normally, with any other client, I would point out the very reasons it made perfect sense to get it done even though it wasn't as ideal as it was initially on paper.  In this case, I didn't do that.....not initially.

After getting off the phone, I noticed the error of my ways.  I then sent him the following email.....

Hey (Name witheld to protect from prank calls from other AR members)!    

Thought I would shoot you an email to summarize our conversation & the specifics of the transaction regarding the refinancing of your property:  This will prove helpful in sitting down with your wife tonight at dinner.

  • Because the appraisal of your property came in lower than initially anticipated, the loan to value ration is over 80% (88.8%) necessitating a mortgage insurance premium of $78.90. Once the balance reaches 80% of the fair market value, that premium can be removed. Approx. 24 months, an investment of $1893.60.
  • By reducing the term of your loan to twenty years, you are saving over $120,000.00 in total monthly payments over the life of the loan. Additionally, the principle reduction with each payment will far exceed what you are seeing on your current mortgages. In other words, equity in the property will be established faster than in your current mortgage situation.
  • The rate of interest is being reduced nearly 2% vs. your second mortgage, and .625% on your 1st mortgage.
  • As it stands, you are paying $167.95 on the principal each month on your Second Mortgage and $227.31 on the principal each month on your First Mortgage.  Your first payment on your new loan reduces your principal $507.40 off the bat.

As a fellow amigo, I would be doing you a disservice if I were to not outline the facts of the matter.  That's my job.  Because we're friends, I'm not pushing you as hard as I would most of my clients to have them see the proverbial light, but at the same time it is my job to look out for your best interests from a Mortgage Standpoint.   It's unfortunate that the sale of properties in your neighborhood adversely impacts the current value of your property. However, the overall savings to you afforded by this transaction far out weigh the negative impact of a 78.90 monthly payment of mortgage insurance for a couple of years. Let me know what you think.       

Sardi

I made a crucial blunder initially in not imposing my expertise to make sure he made the right decision for him and his wife.  Instead, I played the part of a buddy and not a true Mortgage Consultant.  If I hadn't stepped up to give him a piece of my expertise, I wouldn't be doing my job.  When it comes to dealing with friends, family, former clients or with anyone with whom trust is earned....part of our job is to make sure they don't make bad decisions.  No action is sometimes the worst decision of all.

We'll see what happens....

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Ambassador
508,819
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Michael - You never know....

Danny - The Great One?  You've been watching too many 'Rock' Movies I suppose:-)

Jeff Belonger - You always babble man, that's part of your charm:-)

Feb 01, 2008 10:40 PM #51
Anonymous
Anonymous
Jason,
The facts speak loud and clear and putting them in writing for your client was a prime example of taking care of your client.
Feb 02, 2008 05:49 AM #52
Rainmaker
166,629
Linda Davis
RE/MAX Realty Group - Gales Ferry, CT
It's a good lesson about dealing with friends.  I've seen agents lose a listing because they assumed their friend would list with them.  They didn't make the same presentation they would make with another client.  A good reminder.
Feb 02, 2008 09:36 AM #53
Rainmaker
182,202
Janet Guilbault
RPM Mortgage, Alamo Home Office - Walnut Creek, CA
San Francisco Bay Area Direct Mortgage Lender

Oh how I love war stories!!! Remember when I said one of my faults was not talking straight? This is always a danger when dealing with your buds, as you pointed out. Your e-mail to him was excellent, and far more appreciated than beating around the bush. I think this market has definately taught me how to give bad news and then my recommendation on the best strategy..

 By the way, is it the policy of Cakewalk Mortgage to rhyme their blog headlines??????

 Sale Pending, Praying for Lending

Get Ready to Rumble, Rates Are About to Tumble

Hey, I think I'll go write Big Girls Don't Cry And Lenders Never Lie

Feb 02, 2008 12:05 PM #54
Rainer
288,485
Diane Aurit
LKN Realty, LLC - Mooresville, NC
Lake Norman Real Estate
Jason, when it comes to family and friends it's almost better to bend over backwards to be professional and go the extra mile so that they know they have gotten the best representation possible.  Good reminder!
Feb 02, 2008 01:27 PM #55
Rainer
122,017
Christy Powers
Keller Williams Coastal Area Partners - Pooler, GA
Pooler, Savannah Real Estate Agent
It's so hard to help friends and family. You do your best but sometimes things change and you look like the bad guy.
Feb 02, 2008 03:16 PM #56
Rainer
5,320
Jessica Curtis
Sutton Group Right Way - Woodstock, ON
Good job, the info was laid out well, I'm sure he'll see that
Feb 02, 2008 03:58 PM #57
Ambassador
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Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital
If we can't help friends and family in a way that makes us feel good about what we do - no wait!  That's what it's about!  And that's why you're good at what your do.  
Feb 02, 2008 10:15 PM #58
Ambassador
2,501,829
Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital
If we can't help friends and family in a way that makes us feel good about what we do - no wait!  That's what it's about!  And that's why you're good at what your do.  
Feb 02, 2008 10:15 PM #59
Ambassador
2,501,829
Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital
If we can't help friends and family in a way that makes us feel good about what we do - no wait!  That's what it's about!  And that's why you're good at what your do.  
Feb 02, 2008 10:16 PM #60
Rainmaker
574,989
Neal Bloom
Keller Williams Properties, Weston FL - Weston, FL
Realtor CRS-Weston FL Real Estate

Jason,

I can't comment on the other post but I'll tell you I grew up with a group of people and we followed all the doors even though Morrison had already passed...loved the wiskybar! Here...you got an extra comment here for there:)

Feb 03, 2008 07:24 AM #61
Rainmaker
292,575
Kathy McGraw
CELLing Realty - White Water, CA
Riverside County CA Real Estate
Jason- Like Neal I wanted to post on your other one...so am posting here :)  I was pleased to see Andrew's name as someone with beautiful writing...and hopefully one day you will share that prose you worte....if you still believe in the words at that time :)
Feb 05, 2008 10:44 AM #62
Rainmaker
292,575
Kathy McGraw
CELLing Realty - White Water, CA
Riverside County CA Real Estate
Jason-this comment is on this Post.......friends and family deserve the same Professional Expertise, the problem comes in when they don't want to hear it.  I'm impressed you sent the email, and hopefully your Amigo listens......if this is truly in his best interests :)
Feb 05, 2008 10:48 AM #63
Ambassador
508,819
Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life

Michael - Actually, to my knowledge it didn't even hit the MLS until after the appraisal was done.  I think it was just a case of very bad timing.

Cynthia - Sometimes black & white make it easy to understand and fully digest.

Linda - True that.  I won't ever make that mistake again.

Janet - The marketing campaign of Cakewalk Mortgage will set the Industry ablaze.  Just think, our own commercial on next year's Super Bowl!

Diane - Bending over backwards is pretty much status quo at this point, there can be no other way.

Christy - Say hello to the Bad Guy:-)

Jessica - He did, it's not the time for him right now....we'll re-visit down the road.

Patricia - Thank you!  You are so right!

Neal - We have a lot in common my man.

Kathy - Perhaps someday....

Kathy - They do deserve that and I should of treated it the same as I would any other client.

Feb 05, 2008 11:13 AM #64
Rainer
55,852
Andres Munar
Semper Home Loans - State College, PA
Your 24/7 Loan Officer, Mortgages in State College&All 50 States
now that what I call a sales man....great job....sometimes you have to actually show the client how they are saving money even if they are paying a little more or the same payment but your cutting their rate and their term.....i just had a similar situatiion where their rate was going down by 2.25% and from a 30yr to a 20 yr but their payment was only going down $16 and then when i said you will be saving $88k in interest and then they said where do i sign......
Feb 06, 2008 10:42 AM #65
Ambassador
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life
Andres - Thanks Andres!  Good for you, sounds like you did a heck of job for your clients as well.
Feb 06, 2008 10:46 AM #66
Anonymous
Anonymous

Jason,

It sounds like you are a real professional. Good job in handling the unknowns.

 

Andy 

Feb 14, 2008 11:21 PM #67
Ambassador
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life
Andy - Thank you Sir, I certainly try.
Feb 15, 2008 01:09 PM #68
Rainer
5,036
Charles Dismuke
Amerifund Lending Group - Palm Springs, CA
Palm Springs Mortgage Guy

Ok Jason,

Its been 2 weeks.  What did your amigo decide to do?

Palm Springs Mortgage Guy

Feb 15, 2008 06:57 PM #69
Ambassador
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life
Charles - See above, mi amigo commented.  Holding off...
Feb 15, 2008 11:15 PM #70
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