Taking a Bite Out of the Credit Crunch: How to get a great rate

Thanks Roboppy for this tasty image.

I just finalized a transaction in Campbell, California. The property was put into contract post credit crunch so it is a good estimate of the type of rate you can get on a jumbo loan if you have good credit and a stable job. Through the process of selling this home and working with this buyer, I found something I have not heard often in this market. There is a lot of opportunity floating around in all of this volatility.

The client purchased an approximately $1,200,000 home from a developer. The property was the last home the developer had to sell in this community. In fact, the home was in contract with another buyer and fell out because of financing issues due to the credit crisis. We negotiated with the developer and knocked the price down by over $100,000. We also negotiated that the seller would pay 3 points (approximately $30,000) towards buying down our buyer’s loan interest rate. Negotiations like this did not exist in our previous market. In terms of a buyers ability to negotiate, this is the best market in Campbell I have ever seen!

Well now, you may be asking, “What was the buyer’s rate?” The buyer financed approximately $1,000,000 on a 10 year fixed loan. We used the points (paid for by the seller) to buy the client’s rate down to 6.125%. This experience really made me think. My client’s rate ended up being lower then the average 10 year fixed rates (average rates were around 6.5%-6.75%) before the credit crisis.

This experience has convinced me more than ever that this is a great buyer’s market. Well qualified buyers in this market can negotiate with sellers like never before and still get great rates. It is highly uncommon in the Bay Area real estate market to get both the benefit of negotiation power and a good rate in the same transaction. Undoubtedly, you will continue to hear many news outlets speak of the crisis and how volatile the market is. But, remember the facts in this case study the next time you hear the media speculate about the national or Bay Area real estate markets. I know one thing is for sure, some buyers are using this turmoil to get tremendous deals in this market.