The Real Deal REAL ESTATE NEWS
1 in 4 residential mortgages are assumable. Who knew?
How bad are home sales? The most common number of deals closed by the 3 million real estate agents in the U.S. last year was zero.
True, not all of these folks are trying to be Ryan Serhant or Rayni Williams. Some have other jobs and don’t run around seeking clients and sales, especially when the market is slow. But the real problem is exactly that: The market is slow, and has been for a couple of years.
The primary reason is rate lock. People with low-rate mortgages — last issued in early 2022 — don’t want to give them up for nothing. Potential buyers, for their part, often can’t afford a mortgage at rates that are more than twice as high as they were four years ago.
If only sellers could package their low-rate mortgage with their house, right? It turns out, about a quarter of them can.
Mortgages from three government agencies — FHA, VA and USDA — can indeed be transferred from a seller to a buyer with a qualifying credit profile. Those three programs account for about 25 percent of all residential mortgages in the country.
But if you browse Zillow, your local MLS or any popular listing site for listings with assumable mortgages, good luck.
Last week, Raunaq Singh searched the Houston market on Zillow and found only five listings that mentioned assumable mortgages. Then he searched the same market on the website of a company called Roam and found 2,500. Rates on those mortgages ranged from 2 percent to 4 percent.
Not many buyers know to do that. For that matter, nor do most people in the industry. Singh did, because he founded and runs the startup, which is trying to turn the little-known market of assumable home mortgages into a viable business.
The New York City–based startup, which is technically a real estate brokerage, has raised $17.5 million over three funding rounds and is operating in 17 states. New York is not one of them, also Singh hopes to add it next year.
“New York is one of the hardest states to get licensed in,” he said, adding that Roam is prioritizing states with the most inventory and liquidity.
Roam is not profitable yet, but Singh said it could be if it were not focused on growth. It is trying to build market share and keep ahead of other startups in the assumable mortgage space, including RetroRate (which Redfin veteran Andy Taylor launched in 10 states in June) and Michael Lorino’s AssumeList, which opened for business in January 2024.
Roam makes money by charging buyers 1 percent of the purchase price, which Singh said is worth it for those who end up with a mortgage rate even slightly lower than they could otherwise get. Roam’s typical customer saves $700 a month, he said.
Theoretically, buyers can arrange to assume a seller’s mortgage without a third-party facilitator like Roam. Realistically, they can’t. Even if buyers know about assumable mortgages and are able to find one on a home they want, they would need to get the seller and servicer to agree, and making the arrangements would take time. Sellers don’t want to wait or to risk the buyer failing.
Roam overcomes sellers’ anxiety by guaranteeing a close within 45 days. If it takes longer, Roam pays the seller’s mortgage in the interim. Agents are often helpful in making sellers comfortable with the process, Singh said.
Another hurdle is that many buyers need a second mortgage to complete the purchase. Imagine a home selling for $400,000 packaged with the seller’s mortgage, which has a $300,000 balance. A buyer who can’t pony up $100,000 must get a new loan to close the gap.
Singh said Roam taps its network of loan brokers to find that financing. The secondary mortgage’s rate is higher than the primary loan’s, but Singh said if the blended rate is at least 50 basis points below that of a traditional mortgage, the buyer comes out ahead.
Roam also asks the brokers for the secondary loans to rebate their fees into the deal, lowering the overall rate.
The startup is not advertising to recruit customers. Instead it is reaching out to teams of agents.
Singh tells them that simply buying leads from Zillow reaches a lot of people who cannot afford to buy at today’s mortgage rates, which exceed 6 percent. But if the home’s mortgage is assumable, it yields a larger pool of buyers.
“You make better use of the money you spend on a lead,” the CEO said.