One in five Americans now shares their homes with adult children, parents or grandparents. In the face of soaring housing costs nationwide, multigenerational living has gained traction as a path to make living expenses more manageable and to maintain closer family bonds.

While many multigenerational families are living together under one roof, potentially leading to feelings of overcrowding, accessory dwelling units (ADUs) have emerged as a practical solution for affordable housing that allows families to stay close while maintaining some separation.

ADUs offer a detached living space where adult children or elderly family members can have their own place to call home. ADUs can help families to stay nearby, share responsibilities of caregiving, keep housing expenses in check and still enjoy privacy and personal space.

Multigenerational housing gains steam to combat affordability pressures

According to a recent survey conducted by OnePoll, 61% of homeowners cited multigenerational housing as their primary motivation for constructing an ADU.

Multigenerational housing can also provide a residence for aging parents or family members in need of additional support or caregiving. According to the same survey, one in four homeowners either house a disabled family member in their ADU or have plans to do so in the future.

Notably, accessibility was an important consideration for 73% of homeowners who have an ADU, whether for the purpose of aging in place in the future or for accommodating current residents.

Multigenerational living is not a new concept. In various parts of the world, it is deeply ingrained in the culture, and it was also common in the United States prior to the 20th century. Families in many parts of the world support one another with childcare and eldercare, fostering robust support systems that cater to all needs.

So, why does this trend appear relatively novel in the United States today?

Since the early 20th century, the American dream has historically centered around starting one’s own family and achieving enough financial success to purchase a home and build durable wealth in that home over time.

This dream was attainable in 1950 when the median home cost just $7,354 and the average family income was $3,300 (both figures not adjusted for inflation), meaning home prices were ~2.2x the typical annual family’s income, according to U.S. Census Bureau data. At the time, mortgage rates were about 4%.

However, factors such as population growth, a scarcity of new entry-level homes and rising inflation have collectively rendered housing — and especially homeownership — increasingly unaffordable and elusive for many. 

For comparison, the median home price in 2022 was $457,475 and median household income was $74,580, according to data from the Federal Reserve Bank of St. Louis and the Census Bureau. This means that home prices are now more than six times the typical annual family’s income (and today mortgage rates are north of 7%).

ADUs provide an alternative for multigenerational living

Whether it’s a young family striving to purchase their first home or a retiring couple looking to downsize, the competition for real estate is fierce, and housing costs are prohibitive for many families.

ADUs can add much-needed space to support multigenerational living and they can do this at an affordable price point for homeowners who are looking to build them.

Adding an ADU can be very cost-effective when an existing space is converted (i.e., a garage or basement) or when modern offsite construction is used to build a new structure.

We are seeing more and more homeowners look to modern offsite construction for ADUs because of the low cost, fast speed and sustainability advantages compared to traditional construction methods.

As the benefits of ADUs continue to be realized by more and more homeowners, they offer a promising solution to the challenges posed by rising housing costs and the desire to keep families close, reinforcing the idea that home is not just a place but a space that fosters love, support and togetherness.

Sean Roberts is the CEO of Villa Homes.



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Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra expects that servicing rulemaking will be issued in the coming months modeled on the lessons learned through the COVID-19 pandemic.

“I do anticipate that in 2024 we will propose some amendments to the mortgage servicing rules that are reflective of what we learned through the pandemic,” Chopra said on Monday morning to an audience of mortgage professionals. 

According to Chopra, the amendments’ “bullseye” would be to “create flexibility” to the rules, but “without undermining the core consumer protections that people have in the process of evaluating an alternative to foreclosure.”

Chopra spoke during the Mortgage Bankers Association (MBA) Annual Conference held Oct. 14-17 in Philadelphia. He answered questions raised by Bob Brokesmit, president and CEO of the MBA. 

Much of the conversation touched on the Basel III proposed rules. 

The Federal ReserveFederal Depository Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) released the proposed changes for the Basel endgame in late July, which significantly increases capital requirements for banks.

According to Chopra, the capital requirements discussions were part of the conversation even before the bank failures in the first half of 2023, including Silicon Valley Bank and Signature Bank

Chopra added that “there’s no question about the real risks it [banks collapsing] imposed on the financial system” and that it “could have impacts on the mortgage system to continue functioning day to day.”

“And it is important that we make sure that risk is small. We want to do it in the right way. But I hope we can align on the fact that let’s take the big bailout off the table because it’s disgusting for that to continue to proceed. People who are taking risks should have the downside, especially when there are very large financial — monumental failures of management.” 

Chopra’s message was that he does not want the feeling that the mortgage industry is under some special “magnifying glass.” He said, “It’s really the entire shadow banking arena, to make sure that we understand and can mitigate those risks.”  

“If you are deeply interlinked with the financial system in ways that are reminders of past crises, that’s something we have to look at.” 

The CFPB structure 

Regarding discussions on whether the funding for the CFPB coming in from the Fed is legal or not, Chopra said, “If there is legal uncertainty about all the mortgage rules that were put into place after Dodd-Frank, that’s going to just be a big bonanza for lawyers who get to litigate over all those questions.”

“My own view is that the mortgage industry and homeowners are going through a tough [moment] right now. And that I’m not really sure that there needs to be further uncertainty.”

Chopra said he’s “very hopeful” that the long-standing legal precedent involving the CFPB and the Fed will be maintained.  

For those favoring a CFPB structure similar to the FDIC, Chopra said he’s “not sure the argument makes sense because we operate in a society of majority rule.” 

The FDIC has a board with five members that make decisions, but a maximum of three can be from the same political party. 

“The way in which we regulate the financial system, there have been shifts back and forth. And that is a reflection of a lot of different factors, including some people not willing to follow the facts and not willing to reach common ground,” Chopra said.



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Your first rental property is the hardest; trust us on that. You go through SO many strategies, different markets, and emotions throughout the process. Most wannabe investors get fed up and quit before they can build any real wealth, but those with a strong reason behind their dreams of rental property ownership make it and seldom regret it. Lyrva Sanchez’s “why” was taking care of her two boys while being present as a single mom.

Shortly after her separation, Lyrva knew she didn’t want to sacrifice any quality of her children’s lives. She still wanted them to go to the best schools in the safest areas, but in Southern California, even the most basic property was pricey. She tried several strategies to get her first rental property and create extra income, but none cemented. One day, a light bulb went off, and she came up with the PERFECT first rental property strategy.

If you’re struggling with analysis paralysis and don’t know which way to turn in your investing journey, hear Lyrva out. She flew across the country just to realize what she wanted was in her own backyard. Now, she makes life-changing side income and doesn’t have to sacrifice time with her kids to get it!

Ashley:
This is Real Estate Rookie episode 331.

Lyrva:
I’ve learned a little bit about how to screen tenants, how to write up an agreement, how to enforce my own rules, how to do renovations even though they were small renovations, but that’s a big part of being an investor, getting bids, all of that. So it’s just changed my life and to where I’m confident now that if I venture out and do another deal or another project, I have confidence in myself. I do know something.

Ashley:
My name is Ashley Kehr and I’m here with my co-host, Tony J. Robinson.

Tony:
And welcome to the Real Estate Rookie podcast, where every week, twice a week, we’re bringing you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And in today’s episode, you’re going to get a healthy dose of all of that. You’re going to get a little bit of inspiration, a little bit of motivation, and a little bit of kick in the butt to really make something happen. Today’s guest is Lyrva Sanchez. And when you hear Lyrva’s story, you’re going to hear something that a lot of you’re probably struggling with, which is there’s so much information out there, there’s so many different strategies.
How do I choose one that makes the most sense for me? And you’ll get to hear Lyrva’s story of how she went on this journey of identifying the right next step for her.

Ashley:
And the way that she talks about choosing her strategy, you’ll be able to relate to it as to like, “I read this book, I listened to this podcast,” things like that. But she breaks down as to some of the reasons she ended up going with the strategy that suited her. She talks about her lifestyle, her why, just the kind of person that she is. She actually started out trying to wholesale and she will tell you one thing that happened to her that was actually going well.
If you’re a wholesaler, you’re like, “Yes, I want this to happen.” And she didn’t take action on it because it was not her and go through that explanation. But I think she makes a very valid point that if you are uncomfortable and don’t feel that this is something that really suits you and fulfills you that you may not be that successful with it. So she talks about trying to tie in what are things that are going to suit you to picking your strategy. But also we learn about sourcing deals, how she was able to find off-market properties.

Tony:
Now, before we jump into the conversation with Lyrva, I want to give a quick shout at someone by the username of DeLauro who left to a five star review on Apple podcast. This person says, “This show is great for people like me who work a full-time job, but want to learn more about investing. Real estate investing seemed overwhelming at first, but listening to Ashley and Tony every week helped me get more comfortable with all the terms being thrown around and investing in general. I’m on the BiggerPockets forums now and learning as much as I can. Thanks for all the tips, guys.”
So if you’re part of the rookie audience and you haven’t yet left a review, please do. It only takes a few minutes. And the more reviews we get, the more folks we can reach. And no, the more folks we can reach, hopefully we inspire more people to take that next step or get that first deal. So do us a favor, do someone else a favor, leave that review.
Lyrva Sanchez is a registered nurse, single mother of two boys living in Southern California. Actually not too far for where I live in SoCal. And after her separation, she spent two years chasing down the shiny object syndrome of wholesaling and a little bit of out-of-state investing. But then she doubled down on a real estate strategy that really worked for her, for her kids and learned that one property could really change her life. So Lyrva, welcome to the show.

Lyrva:
Hi. Thank you, Tony.

Tony:
Super excited to have you.

Lyrva:
Thank you. Thank you so much. Thank you.

Tony:
Excited to have you here on the show with us, but I want to get right into the nitty-gritty, Lyrva. So what would you say drove you into the world of real estate investing?

Lyrva:
So as you mentioned, I was newly separated. We have two young boys and that was a really difficult time. Actually, there were a lot of good things going on and not so great things going on. I had just paid off all of my debt. I had school debt, I had car loan. Just paid off everything.

Ashley:
That is amazing. Congratulations on that. That’s not typically an easy thing to do.

Lyrva:
Thank you. Thank you. So I was on a Dave Ramsey trip and it was just full on saving and saving, and putting everything towards the debt. So when we made this choice, this decision to separate, it was a really, really obviously difficult and difficult challenging time in my life, and it just made me shift towards working on myself. So I dove into personal development, self-help books, all of that. But part of that process, I also came across real estate investing, building wealth.
How do I still carry on with my dreams and the life that I want for my kids now that I’ve pretty much lost half of my income overnight basically. So that’s how it just came to be. It was part of that whole process of going inward and just trying to do better, be better, and have the same or better life for my kids regardless of my status.

Ashley:
So after your separation, how long was it before you actually got started into real estate and maybe give us a little bit of what your life looked like. Did you go and rent an apartment? Did you stay in your house? Were you working somewhere? Fill us in what your financial picture looked like.

Lyrva:
Financially, I was doing well because we had paid off and we had started saving, but I didn’t feel good because obviously I didn’t have access to… Previously, we had dual income. I did stay in an apartment. I moved out of the apartment that we had together and I moved to an area that I wanted to be closer to, so better schools, all of that. So I was already working at the company that I’m still at now. I’m a registered nurse, but it’s not really a traditional role, so I work from home for a health plan, and that was something that I consciously made an effort to do because I had my second child and working in a hospital, it just wasn’t going to work out for me.
So it helped out that I was working from home and living in an apartment and I really tried to minimize any expenses. Just still stay in that very savor mentality at the time. So that’s where I was at.

Ashley:
Okay. So then you started learning about real estate. I’m very curious as to in your role where you were able to work at home, do you think that played a large part in being able to become a real estate investor? What are some of the advantages if there is someone listening right now who maybe has an opportunity to work from home, what are some of the things they should be thinking about to get started in real estate and how this can actually benefit them?

Lyrva:
So I think it played a huge part because… Well, now, I have a short-term rental, and so it’s actually on the same property. And so just being on the property itself helps. I have a cleaner, so I’m not actively doing a whole lot, but just to check on things to be present there, that’s helped a lot. Also, at the time of learning and going through the process of learning what was going to work for me, I was driving neighborhoods and seeing what areas I could possibly get into.
So I would drop off my kids from school and drive neighborhoods on the way home. And driving for dollars, seeing if there was… Everything that I learned on the podcast, I was trying to implement it like, “Oh, is that a vacant home? Is that a potential property that I can pick up?” Just trying to implement the things that I heard on the podcast.

Ashley:
So you looked for vacant homes. What were some, and you said there was things you learned. What are some of the other things you learned as to houses that could be a potential property for you?

Lyrva:
So I never acted on those, but I think it was just something that I was going through the motions. I would look up property values and I would see, “Okay, this is a vacant house, really how much could it be worth?” And without seeing inside, could I even take that on. I guess I was just playing investor at the time. I don’t know if it really has to do with working from home, but just that you have a little bit more flexibility in your time too. I drop off my kids and I picked them up. And so during those times, during my breaks and stuff, I would be able to drive areas and see properties, new listings that would come up. I would go see them just drive by them as soon as they came on the market.

Tony:
Lyrva, you said something that kind of stood out to me is that you listened to a lot of the podcasts and you try to implement everything you learned. I think that’s a path that a lot of new investors go down is where they hear all these different strategies, they try and go after everything. So I do want to touch on how you were able to take all of the information you learned and implement it all at one time. But before I do, just one other question. What would your advice be to someone that is maybe in a similar situation where they’re going through this big life change?
A separation, divorce is something that’s unfortunately kind of common today, and there are a lot of folks that have these aspirations of becoming a real estate investor, but they might use this life event of a separation or a divorce as an excuse as to why they can’t invest in real estate. So just what is your advice to someone who’s in a similar situation that’s looking to get started?

Lyrva:
I think my advice is to keep hope. Somehow you can figure out a way. It’s not that you can’t, it’s just that haven’t figured out how yet. And finding a way to make it work for you and your lifestyle. I would say going through the motions, it took me a long time not giving up, trying to find information, like reading things, you’ll come across random articles, things that help you. That’s kind of how I found it play out for me. I was really tight on cash to purchase a property. Not for my expenses.
And these little clues would come up or opportunities. There was an opportunity at work for me to get a promotion and I took it I was thinking in the back of my head, real estate that’ll help me. So just try to stay motivated and don’t lose sight. The shiny object syndrome is a really big thing and it really did impact me for a good two years.

Tony:
One thing that I think is incredibly important to point out, and I love that you said hope, Lyrva, because I think that’s something a lot of people lose when they go through difficult times in their lives. But when something challenging happens to you, you can never control what life throws at you, but you can always control how you respond in those situations. And someone could take something. It could be divorce. It could be a death in the family. It could be the loss of a job, and they could take that moment and let it break them down.
Or they could take that moment and use it as motivation to become a better version of themselves. And it seems like, Lyrva, you took the second approach of using it to catapult you towards something better. So on that note, let’s talk about what you did next. So like I said, I want to go back because you said you tried to implement everything that you learned on the podcast. That sounds overwhelming almost. So I guess walk us through that process of trying to implement everything and what worked and what didn’t work from there.

Lyrva:
I started going to meetups. It was like the topic of the week. I’d get super excited about that and then look into that and try to see if that was something I wanted to get into. So I started thinking, “Well, what does everyone else do?” So I started looking at what does everyone else do where I could potentially start wholesaling?
So I looked into it, I thought, “Well, I don’t know, it doesn’t seem very genuine for me or something that I would do, but that’s kind of where it seems like everyone gets their start.” So I met one of the organizers at one of the meetups that I was at, and everyone socializes afterward. I told him what I was interested or what I thought I was interested. Everyone is really helpful at those meetups. What do you need? What are you looking for?
Everyone’s just really just sharing and everything. He was a flipper now, but he started out as a wholesaler and he had this program that he purchased that helped him wholesale. He’s like, “I can burn you a copy of the CDs if you want them, and that can get you started.” I was like, “Sure, great.” So took that home, implemented it to a tee, everything. And then I quickly realized it was just not for me. I was getting phone calls and I could not answer the phone. So it was like this feeling I can’t explain. It was just not for me.

Ashley:
What did you do to get those phone calls, I guess? Why were people even calling you? What were the steps you took before that?

Lyrva:
So the whole steps of the program, so they teach you, you get a list and they tell you about the different types of lists that you can get. And then I decided to go with letters. So I was like, “Well, I can just shoestring this together and create the letters, print them at home.” I got a case of envelopes. I did the whole stamps and everything with everything that they say, the tips about how to get your letter opened, make it a color so that it pops in the mail and just all that stuff that… I mean, there’s so many different tips.
So I just wanted to get it perfect and it took me forever to even get the letters out because I was like, “I’m going to make a mistake and no one is going to open my letter.” Well, people actually started calling and then I couldn’t even answer the phone. I was so scared to answer the phone, so these calls were going to my voicemail. I had to set up a Google number, so I knew they were calling from that specific number. And so I was like, “This feels so fake. This is not who I am.”
The letter, I’m pretty sure said something like, “I buy houses for cash,” and I did not have a buyer, and it just felt so sleazy. So it just didn’t work for me. So there were a couple other things that I can think off the top of my head. Someone did a talk on mobile homes and how they invest in mobile homes and do that. And so I bought a book and that’s as far as I got with that.
So it was just like whatever the topic was, I’d dive into it and then I’d be frustrated because I was like, “Well, that doesn’t work for me either.” And then the next thing was out-of-state investing because it was maybe the more of the price point that I thought I could actually invest in. And the one thing was that I was very torn between should I buy a home and I’ll be house poor, or should I rent and invest out of state?” It was so hard for me to decide and it felt like I can’t have the two.
So I started, “Well, let me just see what’s out there.” I looked at turnkey properties, which I didn’t feel comfortable because I felt like a lot of the numbers were being inflated at the time because I was actually doing my own analysis. I also just looked at Zillow and was trying to find on market properties. The thing is I was trying so hard to find the perfect market out of state, and now I realize there is no such thing.
So that was another thing. I probably analyzed hundreds of deals in different pockets of states, and I probably could have bought a property at that time because I had done so much analysis. So then when I was like, “Okay, I just need to maybe go for it.” A friend of mine had moved to Kansas a few years before and another girlfriend from college said, “Why don’t we go visit her?” And I said, “Okay.” And maybe I can make this also a trip where I actually go see properties out of state. Kansas is probably a good area. I looked at the area and what the job market and all of that was doing. So I was like, “Okay.” And it works because maybe I can go visit my friend while I’m out there or I have a place to stay if I ever need to go out there.
So we worked on that trip. We set it up and then I mentioned it to my friend like, “Hey, I’m going to spend a day while I’m out there. I’m going to be looking at property.” And she said, “Well, do you need a realtor?” And I said, “Well, yeah, I don’t have one yet.” And she said, “Oh, I know someone who might know someone.” So she got me the number. I reached out, got in touch. She sent me properties beforehand. This is what you might see while you’re out here. I can’t promise you that any of them will still be available when you’re here, but this is just to get an idea.
He was working only with investors at the time. It was like a hot market. It seemed like his broker had just started this investor only department. And so he was only working with investors. So I felt pretty good like, “Okay, I’m working with someone who should know what the market is and what I am looking for.” Flew out there. We saw eight to 10 properties, I think, and one day my friends were so tired. It started off with, we were all happy and excited and everything.
I was the only one that was like, “No, we have to finish the list.” Got through the whole thing. But I was starting to feel like, “Okay, these properties are…” Because of my price point, we were looking at C and maybe B minus areas and I was just feeling a little uncomfortable. It looked like the systems were probably… Maybe the major systems had to be replaced yesterday or it was just on the verge of breakdown or there was just something funky about them. There was nothing where I was like, “Oh, this is in my price point and everything is great about it.”
And just being out a state and being new, it made me really uncomfortable. But I said, “Well, it’s about the numbers.” So I just went home and I picked the top three that I could potentially go for and the numbers didn’t work for me. It was just clear. And I think the property values were from 110 to 215 between the three. I don’t remember where the one in the middle landed.

Tony:
But the numbers didn’t work.

Lyrva:
Cash on cash was less than 3%. It was just [inaudible 00:20:30]

Tony:
That’s such an important thing for you to call out, Lyrva, because I think a lot of rookies, when they invest all of this time and energy looking into a market, you fly out there, you walk a bunch of deals, you start to get this kind of emotional reaction where it’s like, “Hey, I’ve already invested so much time, energy, and effort into this. Let me maybe pat the numbers a little bit so I can feel better about it.”
But you made the decision to not do that. So it sounds like you were dipping your toes a little bit in wholesaling. You sent the mailers that didn’t work out. You went to this out-of-state market and met with agents and analyze deals, and that didn’t work out. So how did you actually land on the strategy that was right for you?

Lyrva:
Okay. Yeah, this is… Exactly. I came back from Kansas, saw the numbers. I was like, “This is still…” I’m so frustrated at this point because I feel like nothing is working for me. It’s working for everyone else but me. I was like, “Okay.” Back to, “I want a house. I don’t want to be house poor in California. It’s just doesn’t seem feasible for me, but I really, really want an investment property, an income generating property. How do I have that? How do I have the two?” And it just came to me. I have to have a property with an ADU on it.
That’s the only way I can get the two, the best of both of what I want. And it was just like, “Yeah, yeah.” I was talking like, “Yes, that’s exactly… That’s it.” And once I made that decision, it was like nothing could stop me. I was honed in like, “That’s it.” So however long it would take me, I don’t think… It actually only took a couple months after I made that decision that that was going to work for my lifestyle for my family and it took a couple months, but if it would’ve taken me even longer, I think that’s kind of what my strategy was going to be. I knew that was going to work for me.

Ashley:
Can you explain to us real quick what an ADU is?

Lyrva:
So it’s another unit, like an accessory dwelling unit that’s on a property. I mean, there are other terms for them or like guest houses, a converted garage. So I was looking at any of those types, but it had to be a separate unit like a back house where I could live separate with my children because if I had been single, I could buy a house and rent out the rooms, but it was just not an option for what I wanted. So that’s very popular now and it was already gaining some traction in ’20 that… By then it was 2019 or late 2018, beginning of 2019. But not as popular as it is today. Now, it’s like ADU booming in California, but at that time it was still gaining traction.

Tony:
The ADU strategy I think is something that, especially if your house acting can be exceptionally powerful, and I think hopefully we’ll get into a little bit later how that ADU has worked out for you, Lyrva. But I want to point something out really quickly. Your journey of finding the right strategy for yourself, it started with the educational phase of, “Hey, let me just learn as much as I can about all the different options that are out there,” which is the right thing to do. And then you kind of dipped your toes in these different strategies to understand like, “Hey, what’s the one that works for me?” You said wholesaling doesn’t quite mesh with who I am as a person. Out of state investing, I’m not quite comfortable with the idea of doing that in these other marks. I don’t understand.
But this strategy of house hacking with an ADU, that lines up perfectly with who I am and what I want out of my investments. And I point that out because if you’re a rookie that’s listening that hasn’t identified your strategy yet, I think you can follow what Lyrva did of tons of education and then testing in a small way the different strategies that are available to you. But I guess, Ash, when you think about choosing your first strategy, do you remember what steps did you take to say, “Hey, I want to focus on BRRRs in my backyard?” Did you try anything before you did that first deal?

Ashley:
I just didn’t know there was other strategies. I worked for one investor and he did long-term rentals, and that’s all I knew there was like this is real estate investing. So I was just a limited mindset and naive that that’s why I did mine. But I think too, when you’re looking at different strategies to start with is where’s your opportunity? Where do you have… And so, Lyrva, you looked at which one best suits my lifestyle and what I want to accomplish and achieve what your why is for going into real estate investing.
Some of them didn’t fit what you want to do like wholesaling. You didn’t want to be answering the phone. That would defeat the whole purpose of you becoming having some kind of time freedom and getting to that financial freedom because you were doing something you did not like to do and dreaded it. So there’s so many different things you should look at when you are choosing that strategy. So Lyrva, what were some of the things that were important to you that this is why this strategy, if for anyone listening, if they’re kind of stuck deciding, what would be your advice?

Lyrva:
Yeah. Definitely evaluating your lifestyle. My why was my kids. I didn’t want to let this separation and then eventually the divorce that was part of this whole process of that was going on in the background to really define our future and for us to have a different lifestyle. I still wanted to give them the same lifestyle. I still wanted them to live in a good area with good schools and to have that feeling of being in a home. I grew up in a home that my single mom lived in and owned. And so it was really important to me.
I just didn’t feel like I knew how, but once I figured it out, that was so important to me. It’s just something that I couldn’t give up. Once I figured out how to do that. So just figuring out your lifestyle and where your strengths are. If it’s not going to be answering a phone because you’re so scared to answer sellers, calls. Don’t do that. Just try to see what works out. What’s your zone of genius? Where you’re going to shine? And I get creative on things. And so that’s how I figured out when I finally got my property. I got creative. So that’s one of my areas. I can come up with a solution for how to make something happen. So that’s my advice. I could figure out where your talent is and kind of go with it.

Ashley:
Once you identified that you wanted to find a property within ADU, was that because you just saw a property within ADU or you learned about it and then you started searching? How did you find that first property?

Lyrva:
How did I find it? Well, I learned about them at the meetups. And like I said, this was 2018, 2019. There was already a buzz about ADUs and they were hard to come by at the time. So they come up once in a while. Usually maybe an investor is the one to buy it. So there wasn’t a whole lot on the market. And so how I found it is… Well, that’s part of my journey. So I was looking online. There wasn’t very many that would come up. I think maybe every few months maybe one would pop up.
So I knew about how much they added value to a property like if it was a two bedroom, one bath and there was an ADU on it like, “Well, how much more it would be than just a two bedroom, one bath.” So I had an idea of how much it would add to the property. But I was like, “Well, I don’t want to wait. I want to take action. I know what I want now, so I need to flush it out somehow.” I reached out to my friend who’s a big sister and she’s a realtor, and I told her my plan. I said, “Okay. And I know you’ve followed me on this journey and I’ve been talking about all these things that I’m doing, but I know what I want now.”
I said, “I want a property with an ADU like a Backhouse or a guest house and I want you to show me the property. If it comes on the market, I want you to be my realtor.” I said, “But I also want to be honest with you.” I’m going to look for properties off market. I had already a little… That my experience from wholesaling, so I knew how to get a list from ListSource, how to pull a list and what to look for. But I also asked her, because we were friends and we had that relationship, “Would you be able to get me a list from the MLS? Can you scrub a list for me with some keywords and some timeframes that I gave you?” And she agreed. She was a supporter.

Ashley:
Yeah. What were some of those you used?

Lyrva:
So I think on the MLS, you could look for backhouse. You can just free type in something [inaudible 00:30:10]

Ashley:
Mother-in-law suite or something.

Lyrva:
Mother-in-law suite was one of them. Yeah, converted garage. Any word that could potentially mean like there’s another unit on there. And then there were some timeframes I think if they had bought in the last two years then it was like remove those from the list. So I gave her some parameters and she gave me the list and I had gotten my list from ListSource and I combined that. And then I went and I searched these properties online. I was on Google Maps. Again, I drop off my kids. I’d go look at the list, I’d drive by them. I was trying to check off the ones that wouldn’t work for me and just condense it to like, “Okay. Well, I’m not going to buy up in the hills and have a four or five bedroom house. It’s just not feasible, so let’s just keep it real.”
So I brought it down to about a dozen properties. And around that time, I also came across something that was super important for me to actually be able to buy a property. I found information that you can pull $10,000 from an IRA to use it for the purchase of a new home. So if you’re a new home buyer. And so that put me in a slightly different price point because I was like, “Oh, that’s more money for closing costs.” I was so tight on the budget at that time and it made a huge difference, which I wouldn’t have been able to use out of state.
So I was like, “Oh, this is just another sign that I’m on the right path.” Actually, I’m not saying this out of order. Before I had asked my friend for the list, I found this article from a designer like a decorator and she had put out a blog post that said how to buy a property that’s not on the market. And that was really helpful because I knew about wholesaling, but it was from a different fresh perspective. It was just a regular person that wasn’t an investor and she wanted to live in a specific historic neighborhood, and they didn’t come up very often.
So she wrote a very genuine letter about why she would want to purchase in that area and she reached out to that specific area. And I was thinking, “Oh, I can do that. It’s not like that sleazy I buy houses for cash. It felt just so much more me.” And so I thought, “Oh, I can definitely do that and I think I can answer those phone calls.” So putting that together with that list, and I brought it down to a dozen and I got the letter, used her template because she put it all out there and I finessed it to my story.
So it was just about me and my kids and that we lived in that area. And the reason why I would want to purchase a home, their specific type of home. And those letters wrote in my car for about two to three weeks. I could not get them out. It was this fear of like, “Well, what if… My name is unique. What if they’re like people that go to my kids’ school, their parents, and they’re like, ‘Oh, you’re sending us this. Why do you want to buy our house?’” And I just thought what are people going to think about me? And then it just came to the point where I was like, “I don’t care what people think about me. I did this. I am going to make this work somehow.” I sent them out and I was like, “I’m done. I don’t care what people think about me. This is what I want and I’m going to go for it.”

Tony:
That’s super inspiring, Lyrva, but I just want to pause you on that because I think that fear of judgment is something that a lot of new investors struggle with is even just the idea of, “Hey, I want to own property.” And especially if you come from a background or a community where that isn’t something that’s done often to own investment properties, people might think that you’re dreaming too big or like, “Oh, it’s Lyrva and crazy dreams.” But you have to have, I think, the confidence in yourself that, “Hey, if I’ve set this goal, I’ve spent the time educating myself. I’ve built up the resources that I need to do this. Why not take that next step?”
And obviously, it turned out really well for you. So I’m assuming you finally get the courage to drop those letters in the mail. Does your phone start immediately ringing? Do you wait months on end before you hear response from someone? And then how do you actually go about negotiating with the sellers once they reach back out.

Lyrva:
I didn’t expect anything. I was like, “Well, you know what, now I’m just doing it and I’m going to move on.” But it was part of like my, “I’m doing this.” So I contacted my friend and I said, “Hey, I sent those letters out. Thanks for sending me the list, but I’m still… This is what I really want.” So there’s two that came out on the market, two properties that had ADUs about a week or so within that timeframe. And I said, “Can we make an appointment to go see them? Like I told you on market or off market, I’m going for it.” So she said, “Sure.”
We went to go see them that weekend. I think maybe a week, a week and a half had passed. When I had sent the letters out, I kind of forgot it, put it out of my mind. We went to see the properties and while I was at one of the properties, one of the owners reached out to me via email. It’s like, “Oh my God. This is actually happening.” And my friend was with me, the realtor, and I was like, “Help me formulate an answer.” And I was like, “Something is happening.” I don’t know. Whatever it is, something is happening.
I formulated a response. We went back and forth a couple times and they invited me to see the property that evening. My friend couldn’t go with me, so I got someone else to go with me. I don’t know these people. I’m going to go meet them at their house. But I was like, “But I’m going.” Because when I got the email, I recognized the name. I had stocked these properties. I knew where they were. I was like, “It’s the greenhouse on the corner. It’s so cute. I wanted to go see it.”
So I went to go that evening to meet them and super nice couple, super nice family. They took me around to their property inside, outside. They showed me the ADU. It was a little funky, and I didn’t let that scare me. I was like, “I could work with this. I could totally work with this especially if I get this at a deal. If their price isn’t out of my range, I will totally work with this.”
So of course I didn’t say that to them. We had said, “Let’s both think about this. You take your time and we’ll take our time to decide if we’re going to move forward.” They said, “Take a couple of days and reach out to us and you’ll know so that we know either way.” They did tell me a little bit about their story and why they even reached out to me. So it was a family that was trying to get into the area. Again, the schools, the whole thing, it was difficult to get into a property at that time.
So they had been there for three years. They bought it off market from friends of theirs, and they tried to make it work like a property that really wasn’t a good fit for them, but they really wanted to get into the area. So they were a family of six. They had four kids. And so it’s a small home. It’s a two bedroom, one bath. So their two older kids were living in the ADU, and it just wasn’t a good fit to have your teenagers and the ADU. So they thought, “Well, it’s a really large property. Maybe we can renovate it and extend it.”
And they went through the whole process of the planning and doing all that, but it got really expensive for them. So then they said, “Let’s just scrap this, buy a bigger house and we’ll keep this as a rental.” And so they were fixing it up at the time to fix it as a rental, and they were an escrow for another house. At the time that I reached out to them, they said they were maybe thinking that they were biting off more than they can chew. So they were thinking, “Maybe we can’t be landlords. Maybe this is too much for us. Maybe we’re making our lives difficult and we should just move on.” And there’s this person that’s reaching out to us.

Ashley:
When you were looking at this property, did you know the rehab that this was something you could take on? You were able to finish it?

Lyrva:
Yeah. So the primary residence was turnkey for me to move in with my kids. For the guest house, it was, I think small enough to where I was like, “I could work with that. I could have a small budget and it was drywall. I think that really was the major part that would need to be.” There was a funky closet in the kitchenette instead of in the bedroom. And I was like, “Well, the bedroom is right next to the kitchen, I could just flip it and leave a space and make a functional cabinet like pantry in the kitchen.” I just was like, “I could do this. I could work with this. What’s drywall cost?”

Ashley:
Can you us the numbers of this whole thing? I’ll kind of do it rapid fire at you. What was the price that they wanted or did you just offer a price?

Lyrva:
So they started out with a price, 605. They gave two prices, actually. One with a kitchen renovated and one without, and I took without because I was like, this.

Ashley:
Okay. And then is that what you ended up paying for it, the 605.

Lyrva:
I did because I knew what an ADU, a property with… So it was under market.

Ashley:
Then how did you end up funding this deal?

Lyrva:
So it was a conventional loan. I put 10% down just to make my payment doable, and I used that IRA that I had from a previous job, and I used that for the $10,000 for closing costs.

Ashley:
So you borrowed money from your IRA or did you pull it out?

Lyrva:
It’s pulled out penalty free, so I pulled it out.

Ashley:
And then how much was the rehab that you had to do in the ADU?

Lyrva:
I think I spent… I think it was maybe 35, 4,500. It was like the bare minimum, paint and do that little switchover of the closet, and I needed to do it fast.

Ashley:
Then what did you decide for rent on this property and are you long-term or short-term, or even midterm renting it?

Lyrva:
So I started off, I did that for two years. The first year it was 1375. So it’s a one bedroom, one bath. It’s a little guest house unit.

Ashley:
What was your mortgage payment on that? A month. So how much did that cover of your mortgage payment?

Lyrva:
So at the time, because I’ve refinanced a couple of times since then, it was, I want to say, it was about 3,000.

Ashley:
So a little more than a third of your mortgage payment? It covered.

Lyrva:
Yeah.

Ashley:
Okay. So then what happened? You said for a year you rented it long-term. Then what happened?

Lyrva:
So for a year, it was 1375 and then the pandemic happened, so I waited to bump up the rent and then I got it to 1425.

Ashley:
Oh, awesome.

Lyrva:
So she stayed, the tenant stayed for two years, and when she moved, I was like, “I think I want to do short-term rental.” I think I want to dabble at that. And so I had seen in the area, there were a few at the time and they had been doing it for a really long time and it was kind of like that. Maybe they just put regular furniture in there or old stuff that they had found and guest house, back house units. I’m talking about not houses.
So I thought I could do it and I could do it better. I could actually get all the new furnishing and make it match. I could tell that these were seasoned hosts that were kind of doing it, I want to say the old school way where it was just like a hobby and they just put their maybe used furniture in there. And it was working for them. But I was thinking like, “I want to do it and do it like a real business. I want to just furnish it, make it nice, and do the whole thing.”
So by then I had a budget. I had two years, been a landlord and been in this property and was a little bit more comfortable. So I did a little bit more renovation. I was like, “Well, I have to do a little bit more work in the bathroom.” I redid the flooring and added some light fixtures.

Ashley:
With doing these renovations, were you able to get a lot more as a short-term rental than you were a long-term rental?

Lyrva:
I doubled my revenue.

Tony:
Wow.

Lyrva:
It’s been pretty [inaudible 00:43:12].

Ashley:
It was worth it.

Tony:
Almost covering your entire mortgage then, it sounds like, right, with ADU?

Lyrva:
Yeah, almost.

Tony:
Yeah. That’s fantastic. I mean, to be able to live in Southern California and spend almost nothing on your mortgage is insane. It’s a very difficult thing to do. So kudos to you for figuring out a way to do that. Lyrva, I love everything about your story. I love the fact that these different elements of the strategies you tried, you were able to roll up into this one deal that made the most sense for you, right? You were so confident by sending those 12 letters because you had already dabbled in sending all the mails for the wholesaling. And the work you did of analyzing deals out of state, it helps you be more confident when it came time to analyze the property in your own backyard.
So everything you learned culminated in this one deal, and it seems like it’s turned out incredibly, incredibly well for you. So are you ready for today’s question, Lyrva?

Lyrva:
Sure.

Tony:
As you’re listening and you want to get your question featured on one of our episodes, head over to biggerpockets.com/reply, and we just might use your question. So today’s question comes from Judy Underwood and Judy says, “For those of you who have borrowed against your 401(k) to purchase a property, did you refinance your home afterwards to pay yourself back? How did you use your 401(k) funds for real estate investing? I really don’t want to withdraw other than getting a loan.” So what’s your recommendation, Lyrva, I’m sorry for Judy.

Lyrva:
So that wasn’t exactly my situation. So I had an IRA that was not with my current employer. And I feel like everyone has those because you’ve worked somewhere else before. So I would say before going to your current, your 401(k) or 403(b), whatever your current retirement is, go to see if you have a pension or some kind of retirement fund with a previous employer, and then you can roll it over into an IRA. And then those are the $10,000 penalty free that you can use towards the purchase of a home.
So I don’t know if I necessarily would borrow from my current retirement plan. I guess it just depends, but I would do that first before I would use those other funds.

Ashley:
Awesome. Thank you. Okay, we’re going to move on to our rookie exam. And the first question is, “What is one actionable thing rookies should do after listening to this episode?”

Lyrva:
I’m going to go back to evaluate your lifestyle. What is important to you? What do you want your future to look like? What’s your family life like? And use that as the stepping stone to decide what your strategy is going to be.

Tony:
All right. Question number two. What’s one tool, software app or system that you use in your business?

Lyrva:
Well, now that I have the short-term rental, I use Airbnb obviously is one of the big ones. But like I said, I’m doing it as a business, and so I’m trying to be a little bit more sophisticated. And even though I only have one, I use pricing software, which a lot of people don’t do because they think, “Well, it’s costing them money, but it’s actually making me money if I use it the right way.” So ever since I transitioned into that, I’ve surprised myself at how much more I can get for certain nights where there’s events going on and things that I wouldn’t even have thought of.

Ashley:
Okay. And our last question, I want to tailor a little bit different to you today, but how has real estate investing changed your life?

Lyrva:
Wow. It changed everything for me. I feel like this experience, this whole thing, it’s helped me teach my kids like, “This is what you can do. You make things up as you go and you figure things out.” But also just my lifestyle, I feel like it’s been able to help me have the lifestyle that I want to live in southern California in an area that I want, making really good money on the property that I live on right next door. It’s in my back versus a state or few away and just to have eyes on that and just the learning that I have made through this entire process.
I’ve learned a little bit about how to screen tenants, how to write up an agreement, how to enforce my own own rules, how to do renovations even though they were small renovations. But that’s a big part of being an investor, getting bids, all of that. So it’s just changed my life to where I’m confident now that if I venture out and do another deal or another project, I have confidence in myself. I do know something. I do know a little bit about real estate.

Tony:
Isn’t it crazy what one deal will do for your confidence? And that’s why a big purpose of the rookie show is just to give everyone that’s listening that confidence to get that first deal. Because once you get the first one, the second one is exponentially easier. There’s so much more momentum and confidence behind you. So I appreciate you sharing that, Lyrva. Before we wrap up here, I want to give a shout-out to this week’s rookie rockstar. Today’s rockstar is Aaron Nygaard. And I can’t say the last name, Nygaard without thinking about the TV show Fargo. So if you know Fargo, anyway, I love that show.
But Aaron says, “Closed on property number two through a mutual friend. I let everyone know my goal of doing real estate investing full time. My first property I acquired through handwritten direct mail.” And he gave the numbers. It’s a 105 purchase price. $20,000 for renovation, and then it appraised for 225,000. Aaron says, “Now, out for a cigar to celebrate closing on this unit.” So Aaron, congratulations brother.

Ashley:
Well, Lyrva, thank you so much for joining us today on the podcast. Can you let everyone know where they can reach out to you and find out some more information about you?

Lyrva:
Thank you. I am on lyrvasanchez.com and on Facebook also Lyrva Sanchez. And then you can check Rustic & Chic B&B on Instagram.

Ashley:
Awesome. Thank you so much. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram. Don’t forget to check out our new book at biggerpockets.com/partnerships to get a copy. We will be back on Saturday with a rookie reply.

Speaker 4:
(singing)

 

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The single-family rental (SFR) sector and its close cousin, the fix-and-flip market, are now essentially treading water in an environment of high interest rates, approaching 8%; high home prices; and a dearth of home-purchase inventory.

Still, even in this difficult-to-agonizing supply-challenged housing market, SFR and fix-and-flip investors, which both target existing-home inventory, are still finding ways to make a profit — at a thin margin in most cases, but a profit, nonetheless. That’s particularly true for mom-and-pop investors across both market segments. 

Companies and individual investors in the SFR sector focus on purchasing existing single-family homes or building them for rent. Fix-and-flip investors — who tend to be smaller entrepreneurial players — acquire, renovate and then sell existing single-family homes — and, in some cases, hold them for rent for a time, depending on market conditions.

Experts in both those housing-market sectors say smaller investors are leading the charge now in an inventory-depressed market, in part, because they have a more flexible return-on-investment threshold.

“Our data shows that home flipping activity around the United States dropped during the second quarter of 2023,” said Rob Barber, CEO of real estate analytics firm ATTOM. “… At the same time, profit margins on typical home flips jumped almost 5 percentage points, from about 22.9% in first quarter to 27.5% in the second quarter. 

“… The latest investment return (ROI) for home flips certainly isn’t great, [however]. It remained way below the 44.6% level from the second quarter of 2022 and far beneath a recent peak of 60.8% hit in the second quarter of 2021.”

Barber added that, unfortunately, the current profit-margin mark “could easily be wiped out by flipping carrying costs — mainly mortgage payments, renovation costs and property taxes.” That reality appears to have helped convert more than a few fix-and-flippers to the role of short-term landlords in the SFR market.

Although the home-flipping rate (flips as a percentage of overall home sales) dropped quarter over quarter during the first half of 2023, the actual number of home flips was up slightly over that period, according to ATTOM’s data. Total home flips jumped slightly from 82,180 in the first quarter of this year to 84,350 in the second quarter. Over the same period last year, ATTOM’s data show, total flips came in at about 130,000 per quarter.

Another real estate-analytics firm, CoreLogicissued a report in August that tracked investor home purchases in the SFR space in the second quarter of this year. It shows that home purchases by these investors declined by 90,000 year over year. CoreLogic defines an investor as an individual or corporate entity that has retained three or more properties at the same time within the past decade.

“Throughout Q2 2023, large [100 to 900 properties] and mega-investors [1,000 or more properties] showed muted activity,” the CoreLogic report states. “In April, May and June [of this year], large and mega-investors each made between 7,000 and 9,000 purchases per month [or a total of 21,000 to 27,000 in each category, which translates to a market share of between 8% to 10% each month].

“… In the case of mega-investors, this is a drastic decline from the high of 17% of all investor purchases recorded in June 2022. … Small investors [three to nine properties] made 38,000, 46,000 and 38,000 purchases [122,000 total] in April, May and June [2023], respectively.”

The CoreLogic report also notes that SFR investors are now more likely to be smaller players, operating three to nine properties. In June, the report states that this group “accounted for 47% of investor purchases, the highest level since 2011.” Still, the CoreLogic report notes, that even among the small investor group, purchase activity in the second quarter of this year represents “a big drop from 2021 and 2022.”

“Inventory levels continue to be constrained, partially because many owners are unwilling to sell and give up the low interest rates that current borrowers secured by refinancing during the pandemic,” the report continues. “This trend could potentially be behind the rise of small investor activity [in the SFR sector] in recent months, as members of this group may have chosen to rent their properties rather than sell.”

Longer hold times for fix-and-flip investors also may be contributing to the rise of mom-and-pop rentals as well.

Arvind Mohan, CEO of fix and flip lender Kiavi, said his company’s data shows that in 2019, just prior to the pandemic, 45% to 50% of homes purchased by fix-and-flip investors were sold within six months of the purchase date. Last year, that figure decreased to 33% — but jumped up to 42% as of the first quarter of this year.

“One of the inferences is that … flippers are holding onto properties for longer time,” Mohan said. “So, it’s rented out [as an SFR] or to take advantage of further HPA [home price appreciation].”

Other datapoints paint a picture of SFR and fix-and-flip sectors that remain active and opportunistic, but with deal-flow at much lower levels than last year due to high rates and low housing inventory. Sector leaders are predicting more of the same for 2024. 

Shifting market dynamics 

Brandon Lwowski, senior director of research at HouseCanary, a proptech firm that provides institutional investors, lenders and other clients with residential real estate analysis, said there are some 75 mega-SFR companies nationwide, those operating more than 1,000 single-family rentals — a figure that he said has remained fairly constant over the past three or four years. 

Lwowski added, however, that HouseCanary’s data shows a big shift in the mid-sized SFR market segment (those controlling 50 to 99 SFR properties), whose numbers have dwindled from around 700 in 2021 to fewer than 300 this year.

L.D. Salmanson, CEO of Cherre, a leading real estate data-integration and analytics platform with a focus on the SFR market, said the largest SFR players — institutional investors that now control between 3% to 5% of the SFR market — this year have shifted their strategy away from buying homes on the open market and toward build-for-rent (BFR) opportunities. 

The National Association of Home Builders estimates that 69,000 BFR homes started construction last year, up 33% year over year. That estimate includes only homes built by builders and held for rent. It excludes homes sold to another entity to be rented, which the industry group estimates may add another 5% or more single-family home starts to the total.

“They [large institutional SFR entities controlling thousands of rentals] are so thirsty for supply, they’re not only buying what’s on the market,” Salmanson said. “They’re buying future [new-home] supply [from builders], so they’re locking up future demand as well.”

He added that smaller SFR players — those with 10 or fewer properties — control 80% or more of the SFR market. At the top of the market, however, he said the largest players are buying out SFR companies in the mid-range of the market — which helps to explain HouseCanary’s data showing a reduction in mid-sized SFR operators over the past few years.

“A big strategy we see right now [for the largest institutional SFR players] is portfolio acquisitions,” Salmanson said. “So, anything between 100 and 250, or even 50 to 250 [SFR units], those are the prime portfolio [targets].”

Although the SFR market is essentially treading water now until market conditions improve and are more favorable for the sector, Salmanson remains bullish on its future long-term prospects due to market dynamics that favor renting over buying for many individuals and families.

“Out of the 110 million to 115 million or so [existing] single-family homes in the US, somewhere between 15 million to 16 million are SFRs,” he said. “That’s [SFR number is] going to double by the end of this decade….”

Rise of the mom and pops

Fred Matera, chief investment officer at Redwood Trust, which operates CoreVest, a division focused on providing business-purpose loans for investment-property purchases, said the “smaller and middle market sector of the [SFR/fix-and-flip] industry has historically been a core client base for us at CoreVest.”

“These smaller investors generally have lower return targets for their equity than the larger institutions, who are much more influenced by the global increase in [investment] return bogeys for equity investors that the market has experienced over the last 12 to 18 months,” he added. “This helps to explain why individuals and smaller investors are able to pay more for a home and tolerate a lower return than an institutional investor, at least in this current market created by the monetary-policy tightening.”

The rise of the mom-and-pop investors, then, is being propelled by their ability to tolerate tight profit margins — as inflation continues to bump up costs while strong home prices still make it possible for them to still eke out a narrow return on investment.

“Today, there are more financing alternatives available to these investors than there have been previously, which certainly facilitates the ability for mom-and-pops to purchase investment properties,” Matera added. “In particular, we are witnessing this trend in terms of the demand we are seeing for our DSCR [debt-service coverage ratio] product, … [which is] designed for these types of investors.”

Still, even for the mom-and-pops, the low levels of housing inventory in play are making for a difficult operating environment. As evidence, the number of private-label securitization (PLS) deals involving DSCR loans as part of the collateral pools [typically up to about half of the loans by count] is down considerably this year so far, compared to 2022. 

PLS data provided by Kroll Bond Rating Agency shows that year to date as of mid-October, there were some 49 PLS deals valued at $18.6 billion involving DSCR loan collateral. That compares with 90 deals last year over the same period valued at $35.1 billion. 

The securitization picture for largest institutional investors this year is even more bleak, however, with only three PLS deals issued through mid-October. Those securitizations were valued at $1.1 billion and involved collateral pools with a total of 4,346 properties. That compares with 13 deals in 2022 valued at $9.1 billion involving collateral pools with a total of 30,247 properties, KBRA data shows. (Of course, not all properties purchased by institutional investors are securitized, although securitization is a major liquidity outlet for the class.)

“You know, we’ve got a million houses on the market right now,” said Kurt Carlton, co-founder and president of New Western, a national private real-estate investment marketplace serving some 150,000 investors. “In 2006, we had 4 million houses on the market, so there’s just a tremendous lack of inventory. 

“… But remember, you have the exit of [institutional] SFR [players from the open market] and IBuyers, so close to that whole segment of the market has gone away [or is far less active as buyers], and those guys were a big part of the market. 

“I think you’ve got the independents [or mom-and-pops] taking the market share back.  … The consistent theme here, I think, is that there is still a tremendous demand for housing, and I don’t think that’s going away, so I don’t think asset values are going to plummet.”

Still, Kiavi’s Mohan is not very optimistic about the housing market and the landscape for investors in the year ahead. He said the housing market is now riding out an environment of “low inventory and high rates.” 

“I think what we see right now is a continuation of that trend, essentially,” he added. “So, we’re in a bit of a malaise now, and things are just stuck.

“And we don’t see anything impending that really drives a significant change in 2024. It’s almost kind of that transition year for the market as we work through inflation and the rate market, and the implications there.” 

Rick Sharga, CEO of CJ Patrick Co., a market intelligence and business advisory firm focused on the real estate and mortgage industries, predicts that rising financing costs, if not abated soon, are likely to fuel a “bit of a dip in home prices” in the near future. He said the large institutional players now on the sidelines in the open market “may be waiting to buy on the dip and are keeping their powder dry until they can maximize that buying opportunity.”

“I think if we’re looking at fix-and-flip investors and single-family rental property investors, things will gradually improve as we get through the end of this year and into 2024,” Sharga said. “I think the reason for overall optimism is that the numbers [including rental rates and home prices] still favor real estate investors in the long run — the math does. 

“We have millions of millennials and Gen Z individuals who are coming of age to form households. … And the overwhelming majority of them would prefer to live indoors.”



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Selling pre-foreclosure is often the best option for distressed homeowners who don’t qualify for any loss mitigation programs, but those homeowners are understandably hesitant to choose that option and often end up choosing it when time is running out. 

That makes those homeowners susceptible to predatory behavior by some buyers operating in the pre-foreclosure marketplace, behavior that has been chronicled in several prominent, recent news stories.

Given this pre-foreclosure paradox, mortgage servicers and government policymakers are forced to walk a thin line: nudging distressed homeowners toward making a choice that’s in their best interest while also arming them with the knowledge and resources they need to be protected in the pre-foreclosure marketplace.

Walking that thin line is becoming increasingly important as more distressed sales are pushed up-funnel into the pre-foreclosure marketplace — a trend that began developing about 10 years ago and has accelerated in earnest over the last two years.

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Pre-foreclosure momentum

“If you’re experiencing long-term financial hardship and cannot afford your monthly mortgage payments, selling your home may be the best option,” explains a US Bank video that walks this thin line. “Our goal is to help you avoid a foreclosure sale while protecting your credit score and preserving your equity.”

Even the Consumer Financial Protection Bureau (CFPB) has weighed in, with a January 2023 blog post titled “For many struggling mortgage borrowers with home equity, selling their home could be an alternative to foreclosure.”

In its first paragraph, the CFPB blog post encourages mortgage servicers to provide distressed homeowners with a nudge toward a pre-foreclosure sale.

“Servicers can remind homeowners that a traditional sale might be one option to avoid foreclosure. … And servicers may want to suggest homeowners contact a real estate agent if the distressed homeowner is considering selling their home.”

The pitfalls of pre-foreclosure

The CFPB blog post doesn’t touch on the potential for predatory behavior in the pre-foreclosure marketplace. Those dangers can be found in recent headlines from the New York Times and ProPublica.

A July 2022 article in The New York Times traces how one man’s New York city real estate empire was allegedly built through a practice called deed theft, often targeting homeowners facing foreclosure.

“(Prosecutors and homeowners) have accused him of fraud: offering to help homeowners facing foreclosure by arranging to pay off their mortgages, while actually tricking them into signing over their buildings at bargain-basement prices. In nearly every case, the mortgage was never paid, leaving the homeowner with no property but a pile of debt.”

A May 2023 ProPublica article details how the self-proclaimed “largest homebuyer in the United States” is training its franchises to target and sometimes take advantage of distressed homeowners who are in pain. One of those sources of pain is a “looming foreclosure.”

Myriad manifestations of fraudulent and predatory behavior emerged during the five-year slide in home prices following the 2008 crash. One prominent scheme involved unlicensed “short sale facilitators” charging upfront fees to distressed homeowners and often representing “straw buyers” with lowball offers. Ethical concerns even arose for licensed real estate agents who approached distressed homeowners to list properties even though those agents were also representing prospective buyers.

A growing pre-foreclosure market

While it’s hard to quantify the prevalence of such predatory behavior, the opportunity for it is growing as the pre-foreclosure market grows. An Auction.com analysis of public record data from ATTOM Data Solutions found more than 150,000 pre-foreclosure sales nationwide in 2021, up 37% from 2020 to the highest level since 2014. Pre-foreclosure sales were defined as properties sold via an arms-length sale where a public foreclosure notice was filed prior to the sale, excluding foreclosure auction sales.

By comparison, only 33,000 properties were sold at foreclosure auction in 2021, the lowest level since 2003. That’s not too surprising given the pandemic-triggered nationwide foreclosure moratorium on government-backed mortgages (excluding vacant properties) that was in effect through the end of 2021.

But even after the foreclosure moratorium expired, pre-foreclosure sales continued to far outpace foreclosure auction sales. In 2022, there were nearly 142,000 pre-foreclosure sales compared to about 38,000 foreclosure auction sales and about 40,000 sales of bank-owned (REO) properties. That means pre-foreclosure sales accounted for 64% of all distressed property sales in 2022, the highest share on record.

Nudges from mortgage servicers are likely contributing to the growth in pre-foreclosure sales, but proactive marketing to distressed homeowners by prospective buyers is also a likely contributor.

“Our team tries to make every effort to purchase the properties on the front side,” said Mary Tritt, managing broker at Tritt Realty, a Carrollton, Georgia-based company that buys and renovates distressed properties. “When the (foreclosure auction) list comes out, us as well as other investors are trying to knock on the door, we’re trying to speak with those homeowners to see if there is anything that we can do to purchase the property before it actually goes to foreclosure.”

Tritt said her goal is to help the homeowner avoid foreclosure while also selling the property for “top dollar.” She will offer to list the home for sale on the MLS if there is enough time before the scheduled auction. But she noted that not all investors operate this way.

“Many times, we’ll find the sellers will try to sell their properties to an investor who’s come through and offered some too-good-to-be-true number only to find out that investor doesn’t have the money to purchase it and save the property before it goes to foreclosure auction,” she said. “So, we try to advise against that. Whether or not someone sells to us or to someone else, we’re just making sure that they truly understand the process and how to save the property or sell the property before it goes to auction.“

Price realization for pre-foreclosures

A deeper dive into pre-foreclosure sale data reveals that while many of these properties may have equity on paper, most are still selling well below their estimated after-repair market value. An analysis of more than 40,000 pre-foreclosure sales that occurred between 2018 and 2023 — after previously being scheduled for foreclosure auction on the Auction.com platform — shows the properties sold for 18% below their estimated after-repair market value on average.

While some discount below market value is to be expected with these properties — many are in distressed condition due to deferred maintenance — a look at the discount by buyer type indicates that some buyers are getting a bigger discount than others.

About one-third of the pre-foreclosure sales went to buyers identified in the public record data as institutions, including companies, corporations and limited liability companies. These institutional buyers purchased pre-foreclosure properties for 30% below estimated after-repair market value on average.

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There are good reasons why institutional buyers might buy pre-foreclosure properties at a deeper discount. Institutional buyers are typically willing and able to take on more highly distressed properties in need of substantial renovation that an individual buyer may be hesitant to tackle. And institutional buyers can often provide more flexibility in terms of a graceful exit for the current occupant of a pre-foreclosure property.

Still, the opaque nature of the pre-foreclosure space may be enabling some institutional buyers to make off-market, lowball offers that distressed homeowners accept without listing the property in a transparent marketplace like the multiple listing service (MLS) or the robust foreclosure auction environment created by companies like Auction.com.

“Auction.com hinders my in-person auctions by advertising the available deals to the general public … (which) only drives up the price at auction,” wrote one buyer in response to a Auction.com survey sent out in March 2023.

Mary Tritt’s husband, Tony, has been investing in real estate in his local market west of Atlanta for more than 20 years. He’s seen the foreclosure auctions disrupted by transparent marketplaces like Auction.com, but recognizes that disruption is good for the market even if it may mean higher acquisition prices for him.

“Let’s face it, the auction industry, in general, has utilized online platforms to bring higher bidding on every widget imaginable. I’ve seen it firsthand play out in the housing market, specifically at non-judicial foreclosure sales and bank-owned REO auctions,” he said, adding that the disruption can also create efficiencies for his business. “An ideal scenario would be for all properties to land within the Auction.com platform, then I could cover more counties on foreclosure day, with far less labor!”

Democratized with transparency

Just as the previously opaque foreclosure auction marketplace has been democratized with transparency, inclusion and innovation over the past decade, so can the pre-foreclosure marketplace be democratized. The journey to a more transparent marketplace can start with mortgage servicers who go above and beyond simply suggesting a pre-foreclosure sale to distressed homeowners.

To help these vulnerable homeowners, servicers can provide them with a proven path to getting the highest and best offer for their home. In the distressed property world, that proven path involves some combination of listing the property for sale on the retail (MLS) marketplace and putting it up for auction on a competitive platform that is likely to receive multiple, competing bids from buyers who are experienced in dealing with distressed properties and distressed homeowners.

Local community developers like Mary and Tony Tritt understand that a more transparent pre-foreclosure marketplace will result in more competition from other buyers, but they also understand more competition will result in better outcomes for distressed homeowners and help winnow out bad players.

“While I realize that aggressive marketing of pre-foreclosures will inhibit our opportunities from both the pre-foreclosure perspective as well as at the foreclosure sale, I also recognize that the long-term health of our industry along with the specific outcomes for distressed owners will likely be markedly improved,” Tony said. 

Proven pre-foreclosure path

The dual-marketplace approach has produced optimal outcomes for both servicers and borrowers in a pre-foreclosure sale program created by Auction.com called the Market Validation Program (MVP). It allows servicers, in cooperation with distressed borrowers, to post properties on Auction.com that are also listed as short sales on the MLS.

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While the MLS produced the highest and best offer about 60% of the time in MVP, nearly 40% of the properties got a higher offer from the Auction.com platform. And those higher offers were often substantially higher — an average of $44,000 (19%) above the MLS offer.

That’s likely the case for two reasons: first, not all properties are promptly listed on the MLS by the listing agent. The Auction.com data shows 47% of properties in the MVP program were not yet listed in the MLS when they were referred to Auction.com. The second likely reason for the higher auction offers:  Some pre-foreclosure properties are a better fit for the local community developers using the Auction.com platform than the retail buyers dominant on the MLS.

“The last one I purchased was a short sale, which was a first for me with Auction.com,” said Karen Tyler, owner of Prodigy Realty in Virginia Beach, Viriginia, of an MVP purchase. “I didn’t even know it was a short sale listed on my own MLS because that particular property was not something I would look at for an investment property through the MLS. But if it’s an Auction.com property, I actually pay a little more attention to it.”

Uncovering hidden equity

Furthermore, 6% of the winning bids on Auction.com resulted in a full payoff of the mortgage in foreclosure. That means the property did not sell as a short sale as expected and the distressed homeowner was able to walk away with something to show for the equity uncovered by the power of dual transparency.

“Elated,” said homeowner Pam Mormino, whose home sold via the MVP program for $46,000 above the highest MLS offer and more than $40,000 above the total debt owed on the mortgage. “It really relieved so much stress on me.”

The higher offers on the Auction.com platform also stem from a more consistent level of competition in than in the retail, MLS marketplace. Competition in the retail marketplace tends to be more volatile, subject to market conditions such as rising mortgage rates. Over the past four years, 80 and 90% of all bank-owned (REO) auctions on Auction.com receive bids from multiple, competing bidders, while the share of MLS properties with multiple offers has ranged from as low as 40% to as high as 74%, according to an analysis of data from Redfin.

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Agents are moving between brokerages at a much slower pace than the post-pandemic peak seen in the summer of 2021, according to Relitix’s Agent Movement Index. The index shows the relative degree of movement between brokerages by experienced agents and is indexed to the level of mobility in January 2016.

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The graph above that, on a trailing 12-month basis, mobility hit its 10-year high in June of 2021 at an index value of 109.4. The most recent trailing 12 months shows a new low of 89.6 — representing a decline in the annualized movement of agents of over 18%. The seasonally adjusted values show a mild rebound beginning in January 2023.

Lack of recruiting activity appears to be reversing

“The lack of recruiting activity in 2023 has been profound, however, this trend appears to be reversing,” said Rob Keefe, founder and president of Relitix. “The seasonally adjusted index has been moving toward greater mobility for six months and the trailing 12-month measurement appears to have bottomed out. We can expect more recruitment after the seasonal slowdown around the holidays.”

The monthly AMI value finished at 93.1 for September with a seasonally adjusted value of 88.5.

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Trends in the relative movement of experienced real estate agents between brokerages is an important strategic consideration for brokerage and franchise leaders. The relative amount of movement fluctuates over time on a seasonal and long-term basis.

To capture these trends and report them to the industry Relitix recently developed its Agent Movement Index™. The AMI will be published monthly and feature monthly and seasonally adjusted, and 12-trailing-month values. The index is calculated using national-level data from a large sample of the nation’s most prominent MLS systems.



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Philadelphia Federal Reserve President Patrick Harker advocated for stopping interest rate hikes, noting that disinflation is under way.

“I believe that we are at the point where we can hold rates where they are,” Harker said at the 2023 Mortgage Bankers Association Annual Convention & Expo in Philadelphia on Monday. “Disinflation is under way, labor markets are coming into better balance, and economic activity continues to be resilient…By doing nothing, we are doing something. And I think we are doing quite a lot.”

He told conference attendees that inflation is pegged to drop below 3% in 2024 and level at the 2% target thereafter.

As a voting member this year on the rate-setting Federal Open Market Committee (FOMC), his words carry weight as policymakers contemplate their moves for the upcoming meeting on Oct. 31. 

The central bank has raised interest rates in the 5.25% to 5.5% range since it started its campaign to tame inflation in March 2022. Policymakers foresee one more hike by the end of the year. The bulk of central bank officials expect to have interest rates finishing the year at around 5.6%.

While the headline personal consumption expenditure (PCE) inflation remained elevated in August at 3.5% year over year, it is down 3 percentage points from this time last year. 

The PCE price index excluding food and energy — the Fed’s preferred measure — increased by 0.1% in August, marking its smallest monthly increase since 2020.

September’s consumer price index (CPI) rose 3.7% year over year, holding steady with August’s annual gain and above economists’ expectations.

Harker noted​ there can be challenges in assessing the trends in disinflation and emphasized that he will not overreact to the normal month-to-month variability of prices. 

As for future policy, Harker emphasized that rates will need to stay higher for a while.

“You may have noticed that I didn’t tell you how long rates will need to stay high (…) I  can tell you I do subscribe the moniker, ‘higher for longer.’”

Harker noted outside factors that are working in parallel to further push down on inflation include the spring banking turmoil, tighter credit conditions and the resumption of student loan payments.

Strong underpinnings for the economy

Harker made clear his views on the economy – he does not anticipate a recession.

“GDP growth is outperforming estimates from earlier this year. I do expect GDP gains to continue through the end of 2023, before pulling back slightly in 2024. But do not conflate a more moderate rate of GDP growth as a contraction,” Harker said.

He expected unemployment to end the year at about 4%, above the current 3.8%. That rate is anticipated to increase slowly over the next year to peak around 4.5% before heading toward 4% in 2025. 

Harker, however, emphasized he does not expect mass layoffs across the country.

“This path would put the unemployment figure in line with the natural rate of unemployment, or that theoretical level where labor market conditions support stable 2% inflation,” Harker said. 



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Generative artificial intelligence (AI) has tremendous potential to cut costs and improve customer experience, but regulation has not caught up to develop a governance program, industry pros said of AI’s implementation in mortgage lending.

Bias, discrimination, privacy and security concerns related to consumer information are some of the biggest risks in implementing generative AI, noted Brian Stucky, lead at Rocket Ethical AI at Rocket Mortgage

“We still do not have AI-specific regulation (…) We have to operate under the Fair Lending Act. Have we developed a model that is in fact fair? If you are using it in marketing, we need to make sure it does not infringe intellectual property,” Stucky said at an AI session at the 2023 Mortgage Bankers Association Annual Convention & Expo in Philadelphia on Monday. 

“With this rapidly evolving technology, there are a lot of risks. I think there are things that we don’t know yet and all of these risks are going to impact data privacy, cybersecurity and other concerns,” said Michele Buschman, chief information officer at American Pacific Mortgage Corporation.

The panel noted the findings of the latest Fannie Mae mortgage lender sentiment survey. More than one in four lenders (26%) considered misinformation to be the biggest risk in using AI and machine learning (ML), followed by cybersecurity (18%), bias and discrimination (16%) and privacy and security concerns related to consumer information (15%).

Lenders that adopt generative AI into the mortgage lending landscape wanted to see operational efficiency, the survey showed.

AI-based compliance review (50%), AI-based anomaly detection automation (39%) and AI-based mortgage loan offerings (32%) were noted as being the most appealing AI/ML application ideas.

Generative AI is still at an infancy stage and It’s important for lenders to experiment with what works and what doesn’t work for using generative AI, Stucky added. 

With AI expected to “lead to lasting change” unlike other technology hype cycles, enterprises will be significantly impacted whether they invest in AI or not, noted Buschman.

“Lenders will have to work with legal, risk, compliance and IT to define AI governance before implementing AI technologies,” Buschman said. 

Vendors might not be as experienced with utilizing AI, so asking due diligence questions for for data security is also key, Joseph Zeibert, vice president of FICO, pointed out. 

“There is not one playbook (in terms of implementing AI) (…) Not every problem has the same AI tool,” Zeibert noted.

Making use of data sources will be how lenders could differentiate themselves from other competitors, Felipe Millon, senior sales manager of housing finance at Amazon Web Services, said. 

“How do I start using it with other data sources we have? That is where the true value is in competitive advantage (…) How do you use that data that your competitors don’t have access to?” Millon said.  



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The market is rocky, margins are tight. And the grind may not end anytime soon, Mortgage Bankers Association President and CEO Bob Broeksmit told attendees in a fiery speech at the trade group’s annual conference this week in Philadelphia.

“Normally, I talk about the remarkable work you did over the previous year. Then I look at what we did on your behalf – the battles we fought and the victories we achieved. I close by reviewing what lies ahead – the policies we’re shaping, and the progress we hope to make,” Broeksmit said. “My tone is usually positive and upbeat. But not this year. I’m not upbeat. Frankly, I’m upset.”

Though MBA members have driven efficiencies to keep their head above the water and serve American families, there’s an enemy, he told them.

“While you’re fighting to survive, and while we’re fighting for you, Washington, D.C. is fighting against you. At a time when you and your customers need relief, you’re at risk of being hit with the most extreme overregulation. At a time when you desperately need stability, your own government is sowing the seeds of profound instability. Honestly, Washington is pushing you and our economy in the wrong direction. And no one will suffer more than American families – especially minority, low-income, and first-time homebuyers. This madness must stop before it’s too late.”

With that, Broeksmit rattled off a number of grievances against foes the Beltway.   

Mortgage rates

On the day Broeksmit addressed the crowd in Philadelphia, mortgage rates were north of 7.7% on a standard 30-year fixed-rate mortgage. Mortgage applications are at multi-decade lows, and housing inventory remains highly depressed, helping push home prices up.

The MBA, alongside several other trade groups, sent a letter to lawmakers and monetary policymakers that the government can do much more to help the housing industry while still fighting inflation. The Fed, for example, could buy mortgage-backed securities.

Housing trade groups urged Fed Chair Jerome Powell to make two clear statements — that the Fed does not contemplate further rate hikes, and the Fed will not sell off any of its MBS holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized. 

These steps will provide the market greater certainty about the Fed’s rate path and its plans for the MBS portfolio and reduce volatility for traders and investors, the organizations noted.

“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the letter read.

Spreads are widening for other, (theoretically) more controllable reasons, Broeksmit said.

“Fiscal policy and political dysfunction are contributing – the debt limit crisis, growing federal deficits, and gridlock on Capitol Hill that results in near-miss (or actual) government shutdowns. MBA is shouting this truth from the rooftops in Washington. And we’re playing offense.”

BASEL III, SIFI

Broeksmit said the so-called Basel III end-game proposal “is dangerous too.”

He said that the proposed new capital increases for banks “are a dagger aimed at the heart of the housing market.”

He added: “Washington wants banks to significantly hike the capital they hold against mortgage assets. Not just mortgages, but servicing. And warehouse lines. If this goes through, banks will pull back even further from mortgage lending and servicing, leaving consumers with less access to credit.”

The MBA’s CEO said it’s “almost like Washington wants fewer people buying homes,” and said the new capital requirements would not help close the racial homeownership gap or benefit first-time homebuyers, especially in low- and middle-income families.

“Basel III is a solution in search of a problem,” he concluded. “And it will create far more problems than it ever solves.”

He spared no venom for the Treasury Department, whose Financial Stability Oversight Council is threatening to designate non-banks as systemically important, and therefore subjecting them to even greater regulatory scrutiny.

“Put another way, they want to strangle IMBs with endless red tape,” he said. “Once again, the result will be fewer businesses lending to fewer borrowers, leading to less homeownership for those who need it. A policy of this magnitude deserves the strongest possible justification. Yet FSOC provided precisely none. It gave no proof that non-banks are systemically important. It just says so, as if the assertion is proof enough.”

MBA’s coalition-building

Broeksmit highlighted some of the group’s advocacy work over the past year, including killing the controversial adverse market refinance fee and the much-maligned DTI-based loan level price adjustments to GSE loans.

“And while this fight is even bigger, we’re shifting into overdrive,” he said. “The MBA is building diverse coalitions to take your message nationwide. We’re partnering with the NAACP and the Urban League to make clear that the Basel proposal will move the cause of equity in the wrong direction. And we’re fostering unprecedented collaboration with other industries and associations. Every day, we talk to the decision-makers at the White House and leaders in Congress. And I can already report that there’s broad and bipartisan agreement that change is needed.”

While the MBA will continue to advocate, Broeksmit called on members to be their own advocates, too.

“Policymakers don’t just need to hear just from us right now. They need to hear directly from you…With your continued partnership, we can defeat these threats. And if we keep standing together and speaking as one, we’ll come through this difficult time. We won’t just survive. We’ll rise by helping more Americans thrive – because that’s what you always do.”



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HousingWire recently spoke to Alex Elezaj, chief strategy officer at UWM, about the work independent mortgage brokers can do right now to prepare for when rates drop and how to go above and beyond for clients.

HousingWire: Why should independent mortgage brokers embrace today’s market?

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Alex Elezaj: It’s only a matter of time before rates drop, and when they do, there will be a clear difference between those who have been preparing and those who have not.

The way I see it, there are two types of people in the mortgage space right now: those who are simply waiting around for rates to drop and those who are putting in the work to better their business. The winners have spent 2023 focused on strengthening relationships with real estate agents, educating borrowers and improving their marketing strategies.

The reality is, we can’t control the rates, but we can control the service we provide and make sure we stay in front of past clients. Those who are focused on how they can get better and taking the steps to make improvements to their business are the ones who are going to come out stronger and more successful for the long term.

HW: What can independent mortgage brokers do right now to prepare for when rates drop?

AE: It’s important to leverage tools, technology and services that streamline operations and enhance your productivity now so that when volume increases, these steps are already part of the process. At UWM, we ensure our clients have a full suite of resources to help them grow their business in any market.  

For example, PA+ is an option for UWM clients to receive an additional level of loan processing support, with the goal being to ease some of the most time-consuming parts of the loan process from setup through closing. Most recently, we enhanced this service to allow brokers and their processors to choose which part or parts of the loan process they’d like a UWM loan coordinator to handle.

Not only does this give them more flexibility, control and support, allowing them to scale their business immediately, but it also offers brokers and processors additional assistance during busy times and makes them more available to have meaningful touchpoints with borrowers.

Some of UWM’s most successful clients are taking advantage of PA+ today to ensure their businesses are set up for success when rates eventually drop. Preparing is all about using the resources available to you.

HW: Providing a great client experience goes a long way when it comes to referrals and repeat business. What’s the secret to making long-lasting impressions?

AE: The reality is, nobody wants a mortgage. They want the house. This is why, as an independent mortgage broker, providing an elite client experience should be the main priority for every loan. When a borrower looks back at the homebuying process, we don’t want them to think about potentially stressful parts. We want them to remember how seamless and easy their broker made it.

To help with this, UWM recently announced Memory Maker, which allows independent mortgage brokers to send their choice of customized thank you items to borrowers and real estate agents. This includes personalized thank you emails or handwritten notes and gifts for borrowers, such as a cutting board, ice bucket or welcome mat.

It’s these types of gestures that leave a lasting impression in someone’s memory bank that can lead to repeat business down the road. On average, a person will own three homes in their lifetime. That’s a potential for three separate mortgages in addition to refinances. Believe it or not, a handwritten thank you note to a real estate agent or a customized cutting board for a borrower can go a long way in making sure that broker is top of mind when those needs arise. 

HW: We know rates will drop at some point. What will things look like in the wholesale channel when they do?

AE: The wholesale channel reached a new milestone last quarter with the broker market share achieving its highest level in over a decade. We’ve seen a massive shift in retail LOs transitioning to the wholesale channel, and we expect this trend to continue. The broker channel continues to prove it’s resilient and thrives in all market cycles, and we are prepared for the day rates tick down, just like we were prepared when the market shifted to purchases.

Brokers who are embracing this market and taking the time to improve their processes, marketing and client experience will win. It’s easy to get wrapped up in the doom and gloom surrounding the housing industry right now, but if we block out the negativity, outwork the competition and do right by every borrower we interact with, the independent mortgage broker channel will continue to dominate and be the obvious choice for consumers and real estate agents.



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