Craig O’Boyle hopes to create a company by making assumptions faster and easier. Mr. O’Boyle is a real estate agent who has been selling homes in Colorado for three decades, long enough to remember having to read through the doorstop contracts that buyers and sellers now just click through on DocuSign. He had read about the rules that certain loans were plausible and had long thought that if interest rates ever rose, those owners would suddenly discover that their debts had value.
“And then comes this shift in the interest rate market,” said Mr. O’Boyle.
Last year, he and a partner started Assumption Solutions, a consulting firm that, for a processing fee of $1,100 per transaction, helps real estate agents transfer mortgages between sellers and buyers. In his pitch to agents, Mr. O’Boyle that they impose rates below 3 percent, just like marble countertops or mountain views.
“If you put this on the market, and let’s say you compete with the house next door, your house should sell faster or for more money,” he said.
Even for the vast majority of people using a conventional non-transferable mortgage, some sort of rate offset is becoming the norm. Although house prices have fallen from their all-time highs in June last year, they have not fallen nearly enough to offset the rise in mortgage rates, and they are rising again.
To encourage new lending, mortgage lenders have begun marketing products where borrowers can “buy off” interest by paying several thousand dollars for a year or two at significantly lower interest rates. One of the more popular products is a “2/1 buydown,” in which a borrower pays for an interest rate cut of two percentage points during the first year and one percentage point in the second year.
Simply put, “Most homes are unaffordable at current rates,” said Luis Solis, a real estate agent based in Phoenix and Portland, Oregon.
A majority of Mr. Solis’ recent deals have had some form of interest compensation that is a price cut in all but name, he said. Usually it is a lump sum at closing that buyers use to temporarily purchase lower rates. Sellers with a lot of equity can cut out the middleman and finance the buyer’s purchase below the prevailing rates by acting as a lender – seller financing, it’s called.
