REAL ESTATE INSIGHTS
Harris Real Estate Daily
By Tim & Julie Harris · December 30, 2025
Defeasance Could Unlock Listings, Mobility & Commissions
A breakthrough idea that could thaw the frozen market and get sellers moving again
If you’ve felt like the housing market is stuck, you’re not imagining it. Millions of homeowners are “rate-locked” — sitting on 2–4% mortgages and refusing to sell because buying again at 6–7% feels like a downgrade.
But what if selling didn’t require paying off the mortgage at full value?
What if there was a legal, established, finance-world mechanism that could free sellers to move without sacrificing their low rate?
There is.
It’s normal in commercial real estate.
And it may be heading for residential.
It’s called defeasance — and if implemented at scale, 2026 could be the year sellers move again, listings return, and transaction volume rebounds.
💡 What Is Defeasance? (Plain English)
Defeasance lets a homeowner replace their mortgage payoff with guaranteed payments.
Instead of paying off the full remaining balance — let’s say $400,000 — the seller funds the true current value of that low-rate loan based on today’s higher interest rates.
The old mortgage stays in place.
The payments continue — but from safe U.S. Treasuries, not the homeowner.
The seller gets to keep the difference as usable equity.
It’s a swap, not a payoff.
“Don’t kill the loan. Replace the payments.”
This gives sellers more cash to buy their next home without being punished for having a great mortgage.
📊 The Easy Math That Explains Everything
Current Home
Value: $500,000
Mortgage: $400,000 at 3% (~$1,700/mo)
New Market Reality
Today’s rates: ~6.3%
That 3% loan is no longer “worth” $400K to the market
Its real economic value: ≈ $310,000
🔴 Today’s World (No Defeasance)
Step | Amount |
|---|---|
Sell for $500K | +$500,000 |
Pay off mortgage | –$400,000 |
Cash left | $100,000 |
New loan on next home | $600,000 @ 6.3% |
Payment | ≈ $3,700/mo |
😬 Payment shock of +$2,000/mo
😬 Sellers stay put, market stays frozen
🟢 With Defeasance Logic
Step | Amount |
|---|---|
Sell for $500K | +$500,000 |
Defease loan w/ Treasuries | –$310,000 |
Cash left | $190,000 |
New loan on next home | $510,000 @ 6.3% |
Payment | ≈ $3,150/mo |
✨ Extra $90,000 unlocked
✨ ~$550/mo less payment than the standard path
✨ Suddenly selling makes sense again
This isn’t about magically getting 3% back.
It’s about freeing equity that’s currently trapped inside that 3% loan.
When sellers can move, the market moves.
❓ Does the Seller Have to Qualify?
For defeasance? No.
There’s no:
❌ Requalification
❌ Credit pull
❌ Income verification
❌ DTI testing
❌ Mortgage assumption by the buyer
Why? Because defeasance replaces the payment stream, not the borrower.
For buying the next home? Yes.
Normal underwriting applies on their new purchase loan — just like a standard move-up or downsize.
That is the key distinction.
🏦 What Types of Loans Are Most Likely to Qualify?
🚀 Most Likely First
✔️ Fannie Mae
✔️ Freddie Mac
✔️ Conforming fixed-rate 1–4 unit loans
✔️ Mortgages already in MBS (mortgage-backed securities)
These loans are already structured like bonds — making defeasance plug directly into their mechanics.
⚠️ Possible With Policy Adjustments
▫️Jumbo (case by case)
▫️Portfolio loans (depends on the bank)
▫️Credit union loans
❌ Least Likely Initially
FHA
VA
USDA
Government-backed programs would require regulatory changes and can’t move as fast.
This gives agents clarity when talking to homeowners.
🏠 What This Means for Real Estate Agents
❓ Do commissions change?
No.
This does not alter how agents get paid.
Listings = listings. Closings = closings. Commissions = normal.
❓ Does it change the deal structure?
Not for the agent.
Title and the lender handle the defeasance mechanics like a payoff alternative.
❓ Does the buyer “take over” the loan?
No.
This is not an assumption.
❓ So what actually changes?
➡️ Sellers who were frozen become viable listings again.
➡️ Inventory increases.
➡️ Transaction volume rises.
➡️ Agents get paid more because there are simply more sales to do.
💥 Why This Could Make 2026 a Breakout Year
If even a fraction of low-rate mortgages become defeasible:
More sellers list
More buyers get inventory to choose from
More offers get written
More transactions close
More commission checks land
This isn’t a rate recovery.
This is a mobility recovery.
And mobility is what drives the housing market.
📌 Quick FAQ Script (Copy & Use)
Q: Do I qualify to defease my loan?
A: You don’t have to. It isn’t a refinance. It’s a payment replacement structure.
Q: Will my buyer take over my 3% loan?
A: No. They get their own loan. The defeasance applies only to your old one.
Q: Does this mean I can afford to move again?
A: In many cases, it unlocks equity and reduces the financial penalty of moving.
Q: Is this available everywhere today?
A: Not yet — but momentum is building, and early adopters win.
🎯 What Smart Agents Should Do Right Now
✔️ Re-engage 2021–2022 leads with low rates
✔️ Add defeasance talking points to listing presentations
✔️ Build a 2026 seller “reactivation list”
✔️ Shoot a short educational video for social
✔️ Position yourself as the local mobility expert — not just a salesperson
There’s opportunity here.
Be early, not late.
🏁 Final Takeaway
Defeasance doesn’t lower rates — it removes the penalty for having a low one.
When selling stops feeling like a downgrade,
➡️ people move again
➡️ inventory returns
➡️ listings grow
➡️ transactions multiply
➡️ commissions normalize
2026 isn’t waiting on the Fed.
It’s waiting on mobility — and defeasance could be the unlock.
Written by Tim & Julie Harris
— Real Estate Coaches & eXp Partners
👉 Want alignment, support & momentum? Join us at: WhyLibertas.com/Harris
📬 Interested in Elite Coaching? Text Tim directly at 512-758-0206