What is an Assumable Mortgage?

An assumable mortgage allows a buyer to take over a seller’s home loan. Not all loans are assumable — typically just some FHA and VA loans are assumable.

An assumable mortgage is one that a buyer of a home can take over from the seller – often with lender approval – usually with little to no change in terms, especially interest rate. The buyer agrees to make all future payments on the loan as if they took out the original loan.

Advantages of Taking Over the Seller’s Loan

There are advantages for both the buyer and the seller when processing an assumable mortgage and taking over the seller’s loan, especially if the seller’s mortgage interest rate is much lower than the current market rates, or is lower than the rate the buyer might be able to get based on credit history.

If current market rates are at, say, 6 percent, but the buyer can assume the mortgage at a 4 percent rate, the buyer has immediate savings. View current mortgage rates on Zillow.

There are also fewer closing costs involved when one assumes a mortgage. This means savings for the buyer, but can also be valuable to a seller. If the buyer has to come up with fewer dollars to close on the home and the buyer scores a better interest rate, then there is a greater chance that the seller can make a deal closer to the fair market asking price.

The seller also benefits from using this as a marketing strategy for the home, because not all mortgages are assumable, and it could give the seller an upper hand compared to other homes on the market.

Disadvantages

A buyer who assumes a mortgage may have to take out a second mortgage or come to the table with a hefty amount of cash if the value of the home is greater than the mortgage that remains on the home.

For example, if the home is selling for $250,000 with a remaining mortgage of $100,000, then the buyer will need to come up with $150,000 to make up the difference. The buyer can do this by paying the rest in cash or taking out a loan for the difference.

If the buyer has to take out another loan, this could complicate matters as the two mortgage lenders may not want to cooperate. If the buyer defaults on either loan this could become a legal headache for the other lender. It might also not be contractually allowed in some cases. Taking out another loan also greatly reduces the benefit of having an assumable loan.

Release From Liability

A problem for the seller could arise if the paperwork is not processed in a way that clears the seller from responsibility for the loan.

If a seller remains tied to the mortgage and the buyer defaults on the assumed loan, then the seller is likely responsible for the mortgage payments or whatever the lender cannot recover. To avoid this scenario, the seller should only participate in an assumable mortgage if the seller can obtain a release from the mortgage holder that will clear them of any liability.

There are parties who participate in unauthorized assumable mortgages, without involving the lender. In such cases, the seller simply invites someone to move in and start making the mortgage payments, or have the buyer pay the seller monthly as one might with a landlord, while the seller remains the owner and continues to pay the mortgage. Such cases are not technically assumable mortgages, and are usually a bad deal for a seller, especially if the mortgage does not qualify as an assumable mortgage or if it has a “due upon sale” clause, or if the mortgage would become due if the home is no longer the primary residence of the mortgage holder. The possibilities all depend upon what is outlined in the mortgage contract, which is a legal document.

FHA and VA Assumable Loans

Loans insured by the Federal Housing Administration and VA loans guaranteed by the U.S. Department of Veterans Affairs are assumable. However, certain conditions need to be met.

VA loans closed before March 1, 1988, are assumable without conditions for the buyer. These are commonly referred to as freely assumable loans and no funding fee is assessed on these loans. It’s important to note that the seller of these loans can remain responsible for the mortgage if the buyer defaults on payments. It is strongly urged a veteran request a release of liability from the VA in these cases.  Also, this does not restore entitlement.  A veteran must request approval from the VA to have their entitlement restored to use on another VA loan.

It is not as likely that buyers will take on homes of this era as an assumable mortgage, mostly because many mortgages have been paid off already, or the amount remaining on the mortgage does not make it feasible. Mortgages remaining from the 1980s likely have double-digit interest rates that will not compare to the low rate one can get today.

For FHA loans and VA loans closed after the dates above, buyers will have to be approved by the lender, or the appropriate federal agency. For example, FHA has some stipulations on its loans, such as how long a person should have the home as their primary residence without facing a penalty. FHA also stipulates that the home is occupied by homeowners of a certain income level, or that the buyer – even the assumable borrower – meets certain creditworthiness standards.

For newer FHA loans, a buyer looking to assume the loan must meet FHA standards. In some instances, this is easy to do. Credit scores can be as low as 500 with a 10% down payment for example, for certain FHA programs. But typically FHA participating lenders want the score to be at least 620.

FHA may also deny the assumption if the buyer had a Chapter 7 bankruptcy filing within the past two years or a foreclosure in the past three years.

Regardless of price point, our team is united in their efforts to support the client, support each other, and get the job done in the best way possible. Paula Higman Real Estate is a unique team of talented and diverse individuals with a passion for success and client satisfaction.

Contact Paula Higman today and let us take this journey with you to marketing and selling your home for the best value, to the biggest luxury real estate market out there.

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What is bracketing and why should Realtors do it?

What is bracketing and why should Realtors do it?  

The method of bracketing sales is the topic I wanted to focus on today. Bracketing refers to the method of choosing sales comparables that are both inferior and superior to the subject property in various features and characteristics. For example, you may want to compare the subject to recent sales that are both bigger and smaller in square footage than the subject, not just one or the other. In addition, you could choose sales that are inferior and superior in updating or features.

The logic behind choosing comparables that are superior and inferior lies in how adjustments are made to sales. If a sale is superior to the subject property a downward adjustment is made to the sale, and if a sale is inferior to the subject property an upward adjustment is made. So let’s say you have one sale with a fireplace, while the subject does not have this feature. If the fireplace is worth $2,000 you would subtract $2,000 from the sales price of the comparable. If you have two sales that are similar to the subject in all but the two different features, one being superior and the other inferior, you can estimate the value of the subject by adjusting for the differences. In a perfect world after you adjust up on one sale, and down on the other sale, the adjusted sale price for each one would be the same, and that would be the indicated value of the subject. This is not exactly the case in the real world so there is a range in “adjusted values”.

While I usually go into such in-depth analysis as an appraiser with specific dollar adjustments, performing a simplified qualitative analysis that looks at homes that are both inferior and superior can provide a decent value estimate of the home that is based on actual market sales activity, not all realtors do. By picking a sale that is superior to the subject you know what the high end of the range is, and the inferior sale would reflect the lower end of the range. This method also lends credibility to my team and provides sales information to the appraiser. By including sales that are above and below the list or contract price I cannot be accused of trying to influence the appraiser with only the high-price sales. 

If you have any real estate-related questions you can call me at 435.602.8228, email me, or connect with me on Facebook., Twitter, or Youtube.

Regardless of price point, our team is united in their efforts to support the client, support each other, and get the job done in the best way possible. Paula Higman Real Estate is a unique team of talented and diverse individuals with a passion for success and client satisfaction.

Contact Paula Higman today and let us take this journey with you to marketing and selling your home for the best value, to the biggest luxury real estate market out there.

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Homestake development,

 

The planning commission already approved the Homestake development, which will create over 120 housing units in what ‘s now a parking lot behind the Kimball Arts Center and Boneyard Saloon. Homestake is a public-private partnership under which the developer is building on city land.

The commission was tasked last week with approving the development agreement so the project can proceed. But, several commissioners hesitated after getting new information about the Rocky Mountain Power substation next to the property.

The substation has come up in conversation throughout the project’s vetting by the city, particularly looking at electric and magnetic fields, or EMFs, that future residents could be exposed to.

A professional review of EMFs at the site found the readings to be “far below what is widely considered as harmful levels.”

However, a potential future voltage increase there has raised fresh concerns. Dave Gustafson, a project manager with the city’s engineering department, told the city council in February that the number of volts put through Rocky Mountain Power’s site could triple in the future.

“The approval was prior to that information," Frontero said at last week's meeting. "When that information was made available to me, I had some concerns.”

Commissioner Bill Johnson commended the developer, J. Fisher Companies, for researching the topic, but added that he was still uncomfortable.

“So while I don’t love it, they did a great job putting together a backup documentation that covers us somewhat," Johnson said. "I don’t like it, I don’t think it’s safe.”

Commissioner John Kenworthy said that in December, chair Laura Suesser refused to sign the final action letter on the project. That’s unusual; chairs sign such letters as a matter of procedure.

This week, Suesser recused herself from Wednesday’s discussion and did not respond to requests for comment.

The final action letter included in the development agreement is signed by chair pro tem Sarah Hall, who is second in command.

Hall didn’t express concerns about increased voltage when Kenworthy asked her about it at the most recent meeting.

“You don’t find any issue with the fact that we weren’t presented with the increase in the voltage?” Kenworthy asked. 

“Correct,” Hall replied.

Park City Municipal directed questions about the substation to Rocky Mountain Power. A spokesman for Rocky Mountain Power could not confirm that any voltage increase was going to happen at the Park City grid.

Commissioners said increased voltage could prompt more mitigation efforts by the developer, which could look like increased setbacks or infrastructure to serve as a buffer.

A majority of planning commissioners voted to delay a decision on the development until April, in order to do more research on EMFs. Hall and commissioner Christine Van Dine voted against the delay.

Regardless of price point, our team is united in their efforts to support the client, support each other, and get the job done in the best way possible. Paula Higman Real Estate is a unique team of talented and diverse individuals with a passion for success and client satisfaction.

Contact Paula Higman today and let us take this journey with you to marketing and selling your home for the best value, to the biggest luxury real estate market out there.

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Are home sellers going on strike?

 

The U.S. housing market has entered into its peak annual spring season where buyers and sellers alike get serious about their moves. 

Only this year there's something off: Not a lot of homes are going up for sale.

According to Realtor.com (see chart below), only 349,284 U.S. homes were listed for sale in March 2023. That's below the 437,270 listed in March 2022—a period that was infamous for its tight supply—and far below the 478,100 listed in March 2019.

What's going on? 

See, if someone was eager to sell their home right now in search of a new property, they'd likely be exchanging their 2% or 3% mortgage rate—one of the biggest financial perks of the pandemic—in for a 6% mortgage rate. The idea of getting a substantially larger monthly mortgage payment has a lot of would-be buyers opting to stay put. Cue fewer homes coming onto the market.

To better understand the nuances of the spring 2023 market, let's take a closer look at the latest data.

View this interactive chart on Fortune.com

That said, this pullback in new listings isn't just felt on the supply side—it's also delivering a hit to the demand side. See, if a particular homeowner decides to hold off on trading up properties, it means there is one fewer home going on the market and one fewer buyer hitting the market.

The best way to describe the housing market over the past year is a fight between tight supply and deteriorated affordability.

So do buyers or sellers have the upper hand?

Unlike the new listing total (i.e. the number of homes going on the market in a given month), the active listing total (i.e. total inventory on the market) is a better indicator for the balance in a market at any given time.

At first glance, it might be easy to assume that active listings/inventory (see chart below) is simply a measurement of supply, however, it's also very much a measurement of demand. See, if buyers pull back, and homes sit on the market longer, that can increase inventory levels (currently up 59.9% on a year-over-year basis) even if new listings (currently down 20.1% on a year-over-year basis) decline.

What's active listings/inventory telling us right now? The fact that active listings/inventory continued to decline through March suggests that sellers are once again gaining power over buyers. At least relative to the second half of 2022, when inventory was on a somewhat speedy uptick (more on that below).

View this interactive chart on Fortune.com

While buyers have seen an increase in power relative to the frenzied spring 2022 market, it doesn't mean we've shifted into a buyers' market. One of the reasons is, after all, this inventory jump hasn't taken us back to a balanced market.

In fact, we're far below pre-pandemic inventory levels: The 562,565 active listings on Realtor.com in March 2023 were 49.5% below the 1.1 million active listings in March 2019.

View this interactive chart on Fortune.com

In theory, a market with inventory above pre-pandemic levels has seen the power dynamic shift dramatically in buyers' favor. Markets with inventory levels far below pre-pandemic levels, on the other hand, have seen less of a dramatic shift.

The searchable chart below provides active listings/inventory data for the nation's 400 largest housing markets.

View this interactive chart on Fortune.com

Among the country's 400 largest housing markets, just 14 are back to pre-pandemic (i.e., 2019) inventory levels. That includes overheated markets like Idaho Falls and Logan, Utah. Meanwhile, 386 major markets are still below 2019 inventory levels.

Regardless of price point, our team is united in their efforts to support the client, support each other, and get the job done in the best way possible. Paula Higman Real Estate is a unique team of talented and diverse individuals with a passion for success and client satisfaction.

Contact Paula Higman Real Estate today and let us take this journey with you to marketing and selling your home for the best value, to the biggest luxury real estate market out there.

 

Insure that you have the best representation when buying and/or selling in Park City. Contact Paula Higman Real Estate Park City at 435-602-8228 For a property tour and more information about Heber City and the surrounding areas.

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Guide To Jordanelle Reservoir Area | Homes & Land For Sale | Paula Higman Real Estate

 

Jordanelle Reservoir —Elevation 6,166 feet

Jordanelle State Park is a beautiful reservoir only minutes from Park City. Filled primarily by the Provo River, Jordanelle recreational areas provide everything you may need for your day at the lake: an 8-lane boat ramp, personal watercraft ramp, dry storage, a marina store, and more. Jordanelle is big enough for some fast-paced boat excursions, while calming enough for a relaxing ride of bird watching. Jordanelle is one of the most beautiful areas nestled to the north of Heber Valley and the entrance fees are as little as $10 for a day pass, depending on the recreational area! This lake is one of the few locations in Utah that has real estate for sale surrounding the lake on all sides just outside of Park City, Utah. 

Deer Creek Reservoir —Elevation 5,400 feet

Though farther south, Deer Creek is a fun place for boating with its incredible views of Mount Timpanogos. Deer Creek is the main feature of the Provo River and is a common place for water activities; on a given day, one can see boating, water skiing, tubing, sailing, or windsurfing. And, with picnic areas, campsites, and pavilions, your boating day doesn’t need to end once you leave the water! It’s a popular spot for exciting activities with young families or groups, as well as a beautiful sunset location for a romantic dinner at the restaurant right on the lake. Summer day rates start at $15/vehicle on weekdays. Located within the Heber City Valley on the way to Provo. 

Rockport Reservoir —Elevation 6,000 feet

Rockport State Park is the perfect location for swimming, boating, water skiing, and even fishing! On the east side of the reservoir, the launch ramp is the best place to launch your boat. However, there are activities on all sides of the lake, from camping facilities to a 3D archery range to year-round fishing (anyone for winter ice fishing?. Rockport has a wide range of boat and toy rentals for your day at the lake. Additionally, Rockport is home to a great variety of wildlife, including deer, jackrabbits, marmots, raccoons, weasels, foxes, cottontails, and more! Daily entrance fees start at $15.

Regardless of price point, our team is united in their efforts to support the client, support each other, and get the job done in the best way possible. Paula Higman Real Estate is a unique team of talented and diverse individuals with a passion for success and client satisfaction.

Contact Paula Higman today and let us take this journey with you to marketing and selling your home for the best value, to the biggest luxury real estate market out there.

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Structures collapse at multiple residences due to heavy snow and Ice

 According to a statement from the Park City Fire District, a garage collapsed on Gorgoza Drive, and a chimney collapsed on Norfolk Avenue.

No injuries were reported at either location. The PCFD is encouraging residents to look around their homes for snow and ice buildup.

“Please be aware of roof avalanches. Don’t take chances, keep your home and surroundings safe by clearing away the snow and ice accumulation,” said Chief Pete Emery with the PCFD.

Regardless of price point, our team is united in their efforts to support the client, support each other, and get the job done in the best way possible. Paula Higman Real Estate is a unique team of talented and diverse individuals with a passion for success and client satisfaction.

Contact Paula Higman today and let us take this journey with you to marketing and selling your home for the best value, to the biggest luxury real estate market out there.

 

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