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022 - How To Help Your Buyers Save on Mortgage Recording Tax · The Loan Daddy Podcast

• 0:00
  SPEAKER_00: This is such a value add for a buyer.
• 0:04
  SPEAKER_00: It turns you into someone who is a step ahead of all of the other agents that are out there.
• 0:11
  SPEAKER_00: What's up everybody and welcome to the Lone Daddy Podcast, episode 22.
• 0:16
  SPEAKER_00: I was giving a presentation a week ago to a group of about 50 agents.
• 0:21
  SPEAKER_00: And at the end of the talk, an agent raised his hand and he said asked, Can you talk about purchase SEMAs?
• 0:26
  SPEAKER_00: And I was so thankful for that question because I think it's something, it's something that we talk a lot about, but as much as we talk about it, we don't talk about it enough.
• 0:34
  SPEAKER_00: There are too few agents who know what this is, and even fewer agents who actually use it.
• 0:41
  SPEAKER_00: And I think it's such an important tool to have in your toolbox to help buyers, especially at a time like this where rates are rising.
• 0:50
  SPEAKER_00: What can you do to help them save money?
• 0:53
  SPEAKER_00: This is one of those tools that you can use.
• 0:55
  SPEAKER_00: So I want to break this down.
• 0:57
  SPEAKER_00: Number one, what is a purchase SEMA?
• 0:59
  SPEAKER_00: SEMA stands for Consolidation, Extension, Modification Agreement.
• 1:04
  SPEAKER_00: So whenever you borrow money in New York, there is something called mortgage recording tax.
• 1:11
  SPEAKER_00: It is a tax on the amount that you're borrowing.
• 1:14
  SPEAKER_00: If you borrow less than$500,000, the tax is 1.8% of that loan amount.
• 1:20
  SPEAKER_00: If you borrow$500,000 or more, the tax is 1.925% of that loan.
• 1:27
  SPEAKER_00: Now, there are fees involved with this as well, and those will vary.
• 1:31
  SPEAKER_00: And that will be factored in deciding whether or not it makes sense to do this SEMA or not.
• 1:36
  SPEAKER_00: And we'll get back to that.
• 1:37
  SPEAKER_00: Let's break this down with some actual numbers.
• 1:39
  SPEAKER_00: Now, let's say someone wants to buy a home for a million dollars and they want to put 20% down and borrow the rest.
• 1:46
  SPEAKER_00: So they'll take out a loan for$800,000.
• 1:49
  SPEAKER_00: On that$800,000, they would pay mortgage tax, 1.925% of that$800,000, which would come to a fee of$15,400.
• 2:00
  SPEAKER_00: So that fee is added to their overall closing cost.
• 2:04
  SPEAKER_00: That's mortgage tax.
• 2:06
  SPEAKER_00: So what's the SEMA nonsense?
• 2:08
  SPEAKER_00: Think of a SEMA like a loophole that allows you to reduce or eliminate your mortgage tax entirely.
• 2:16
  SPEAKER_00: Here's how this works.
• 2:17
  SPEAKER_00: Let's use that same example.
• 2:19
  SPEAKER_00: Someone buying a home for a million dollars and putting 20% down and borrowing$800,000.
• 2:25
  SPEAKER_00: But in this hypothetical, let's say the seller has a mortgage on their home and the remaining balance on their mortgage is$500,000.
• 2:34
  SPEAKER_00: Now, this is where it gets a little confusing, but stay with me.
• 2:38
  SPEAKER_00: You'll get this.
• 2:39
  SPEAKER_00: The new lender will combine the debt or the balance that's on the home right now, in this case$500,000.
• 2:46
  SPEAKER_00: That's what the seller has on their mortgage.
• 2:47
  SPEAKER_00: So they'll take that$500,000 and combine it with whatever the difference is between what the buyer needs.
• 2:54
  SPEAKER_00: So again, the buyer needs a loan of$800,000.
• 2:57
  SPEAKER_00: The seller has a mortgage of$500,000 left on their property, the difference there being$300,000.
• 3:03
  SPEAKER_00: That's called the gap money, the$300,000.
• 3:06
  SPEAKER_00: So they'll take the debt that's on there plus that gap money, the$300,000, and they'll combine that into one single mortgage.
• 3:15
  SPEAKER_00: Now, here's the most important part.
• 3:17
  SPEAKER_00: Because part of the loan is transferred instead of newly created, the mortgage tax will only apply to the new portion, in this case,$300,000.
• 3:29
  SPEAKER_00: So let's break this down even further with real numbers.
• 3:32
  SPEAKER_00: Without the SEMA, right?
• 3:34
  SPEAKER_00: Someone's borrowing$800,000, they pay the 1.925%, they pay a fee of$15,400.
• 3:40
  SPEAKER_00: With the SEMA, the buyer's paying 1.8% of$300,000, which comes to$5,400.
• 3:49
  SPEAKER_00: In other words, you just saved the buyer$10,000 by proposing this to them and figuring out that they can do a purchase SEMA.
• 3:58
  SPEAKER_00: Let me say it one more time.
• 4:00
  SPEAKER_00: Scenario one, I'm borrowing$800,000, I'm paying 1.925% on that amount.
• 4:08
  SPEAKER_00: So I have a fee that gets added to closing for$15,400.
• 4:12
  SPEAKER_00: Scenario two, the seller has a balance on their mortgage.
• 4:16
  SPEAKER_00: We discover the seller has a balance on their mortgage of$500,000.
• 4:20
  SPEAKER_00: So we take the$500, we subtract it from the amount that that our buyer is looking to borrow.
• 4:27
  SPEAKER_00: In this case, we're looking to borrow$800.
• 4:29
  SPEAKER_00: We take the$500, we subtract it from that, we get$300,$300,000.
• 4:34
  SPEAKER_00: We then get to pay the mortgage tax on$300,000 as opposed to$800,000.
• 4:40
  SPEAKER_00: As we ran through the numbers, turns out in this example, they'd be saving about$10,000.
• 4:46
  SPEAKER_00: Big, big savings there.
• 4:47
  SPEAKER_00: So what should you do as an agent?
• 4:49
  SPEAKER_00: There is going to be a point in your conversations with a prospective buyer where you will go over closing costs.
• 4:56
  SPEAKER_00: When you get to that line item of mortgage recording tax, bring this up.
• 5:01
  SPEAKER_00: Mention that this is a potential way of saving money for you in a pretty big way.
• 5:09
  SPEAKER_00: Again, most agents aren't mentioning this.
• 5:12
  SPEAKER_00: Most agents aren't talking about this at all.
• 5:14
  SPEAKER_00: You don't want your buyer finding out about this by putting it into Chat GPT, for example.
• 5:19
  SPEAKER_00: And we've seen this.
• 5:20
  SPEAKER_00: Clients just typing in things, how can I save money?
• 5:23
  SPEAKER_00: I'm buying a home in New York City.
• 5:24
  SPEAKER_00: What are different tools and things I can do to save money?
• 5:28
  SPEAKER_00: This could come up.
• 5:29
  SPEAKER_00: So you being the person that brings it to them is way better than them finding it out on their own.
• 5:35
  SPEAKER_00: As an agent, you can go on Acris.
• 5:37
  SPEAKER_00: Across is the automated city register information system.
• 5:42
  SPEAKER_00: So you can go on that website or you can ask your lender or you can ask an attorney to go on that website and find out if the seller of a listing that you're targeting has a mortgage.
• 5:54
  SPEAKER_00: With that information, your lender and attorney can run a SEMA analysis to see does it make sense for the buyer to go forward with this.
• 6:04
  SPEAKER_00: Now, when when would it not make sense?
• 6:06
  SPEAKER_00: It would not make sense if the fees outweighed the savings.
• 6:12
  SPEAKER_00: You know, in some counties the fees will be more versus others.
• 6:15
  SPEAKER_00: So it's important to run that analysis ahead of time to see if it even makes sense.
• 6:19
  SPEAKER_00: And if it doesn't make sense, at least your buyer knows that you've you've taken every step possible to help them save money.
• 6:26
  SPEAKER_00: Another instance where it might not make sense is if the turntime for that SEMA is way too long.
• 6:34
  SPEAKER_00: For example, you need the lender for the seller's mortgage to cooperate with this and to produce the documentation and paperwork that's needed for this to happen.
• 6:47
  SPEAKER_00: I've been in situations before where sometimes you have a lender that can take two months, sometimes four months, and sometimes six months to get this done.
• 6:57
  SPEAKER_00: Obviously, if you're buying a home, typically you can't wait that long for something like this to come through.
• 7:04
  SPEAKER_00: So it might not be an option.
• 7:05
  SPEAKER_00: So it's important to find that out, figure out what their turn time is to see if it makes sense at all.
• 7:10
  SPEAKER_00: Again, this is such a value add for a buyer.
• 7:15
  SPEAKER_00: It turns you into someone who is a step ahead of all of the other agents that are out there.
• 7:22
  SPEAKER_00: I would venture to say that over 90% of agents don't know what this is.
• 7:26
  SPEAKER_00: And obviously, even more than that, will not even propose it, not use it, will be caught off guard if a buyer even brought it to them.
• 7:32
  SPEAKER_00: So you watching this and just knowing that is really separating you from the overwhelming majority of agents who are out there.
• 7:39
  SPEAKER_00: Please feel free to reach out to me to ask any questions you have on this.
• 7:44
  SPEAKER_00: If you have a prospective buyer right now who could benefit from a SEMA, let's talk about it.
• 7:50
  SPEAKER_00: Feel free to send me an email and uh scott.nadler at ccm.com and happy to walk you through and see if a SEMA makes sense for your buyer.
• 8:01
  SPEAKER_00: Thanks so much.
• 8:01
  SPEAKER_00: Take care.
• 8:02
  SPEAKER_00: Bye.