Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
You read that right; it wasn’t a typo. By now, we are all familiar with the acronym “FOMO” – the social state of mental or emotional anxiety caused by the “fear of missing out.” So what is “FOBO?” While I have seen FOBO described as the “fear of being offline,” in this case, I am talking about another common phenomenon, which is the “fear of better offers.” In truth, we are all guilty of this paralysis one way or another. It could be as simple as someone who is hesitant to commit to plans, or can get as complicated as holding off on a big purchase, hoping to find a better deal elsewhere.
I see FOBO having a significant impact in today’s real estate marketplace, from aspiring “first time home buyers” who withhold placing an offer on a home they truly want to loan shoppers who think they can get a better rate elsewhere if they just keep looking. I recognize there will always be those looking “to get a deal in any market,” and even more so in an environment where there is such uncertainty. What I am referring to, however, goes way beyond that. I often get calls from clients who are shopping around for a mortgage, and as any reader of my article knows, it is not something that I discourage. Being an informed consumer is something that can benefit everyone. There is, however, a big difference between arming yourself with information and having analysis paralysis.
This past week I received an email from someone who seemed very familiar, but I couldn’t immediately remember how. Before I had a chance to look up this person in my records, I scrolled down on the email and saw that he was replying to an email exchange we had in 2018. His email simply continued the conversation about the refinance inquiry he was making from over two years ago. Obviously, a lot happened since we spoke, and when I asked him why he hadn’t done anything since our previous conversations, he simply replied, “I was looking for the best deal.”
One might argue that his patience had proven advantageous because he is now getting close to the best rates in history. We spoke several times this week and did a lot of number crunching. During those conversations, he also admitted to shopping around several times over the past year but never “pulled the trigger” because he wasn’t sure he was getting “a good enough” deal. Needless to say, we ended our conversation with him saying that he will think about it, and get back to me with questions. I ran some quick numbers and realized that he lost between $6,000 and $10,000 over this time for not doing anything when we first spoke in 2018. Furthermore, it would still make sense for him to refinance now, even if he had refinanced back then. There was no valid or justifiable reason not to take action then or now. I look forward to hearing back from him in 2022.
There are some unique situations where FOBO can prove to be rewarding. I received a call from someone who told me that he was in the process with a bank, but his friend told him to call me. He told me the rate he was quoted, and before I could respond, he mentioned that he also paid a lock-in fee. The interest rate he was getting was.125% more than what I could offer him. Based on his loan balance, that would equate to approximately $30 a month. I was torn with what to say because I didn’t want him to feel bad about getting a worse deal elsewhere. At the same time, who was I to judge whether the $360 a year was insignificant for him and how many years he could benefit from these savings?
I decided to simply say that his deal was “fair” and that he should continue where he was. Something still wasn’t sitting well with me because it seemed like the new loan amount he was being offered was much higher than it should be. Out of curiosity, I asked how much the bank fees were, and he told me over $6,000. With that, I could not contain myself and told him that he could get a much better deal from me. The moral of the story is, there might be a better offer out there, but only if you call a person with integrity and veracity, who can help guide you with the proper analysis for your best interest.
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