The Reality of Real Estate with Chris and Bri
Brianna Lehman, the Realtor, and Christopher Lynch, the Lender, give a real take on making home ownership attainable. They break down real-life scenarios, trends in the market and give their personal tools to make homeownership not just your dream but your reality.
The Reality of Real Estate with Chris and Bri
"From Earnest Money to HUD Homes: A Comprehensive Guide to Real Estate Costs"
Ever felt like real estate expenses have a life of their own, creeping up when you least expect them? That's what we're tackling head-on with Christopher Lynch and Brianna Lehmann in our latest podcast episode. Get the lowdown on everything from earnest money deposits to the often-invisible costs like home inspections. We're all about transparency here, and you'll learn how to navigate those out-of-pocket surprises that leave many buyers reeling. Plus, we delve into regional variances that can make or break your earnest money expectations.
Join us as we break down the nuts and bolts of home inspections and closing costs, with a clear-cut discussion led by our industry experts. Chris and Brianna don't just throw numbers at you; they explain the reasoning behind the costs of additional inspections and why some fees are non-refundable, with earnest money occasionally bucking that trend. Not all lenders are created equal, and we examine the nuances of lender credits towards closing costs, alongside the ins and outs of appraisal charges that can swing wildly depending on your chosen abode. Brokerage fees—those pesky, elusive beasts—are also put under the microscope, revealing when you can negotiate or even skip them altogether.
Wrapping up this robust discussion, we shed light on the maze that is home buying programs. Qualifying can be as much a test of patience as it is of your finances, but we've got the scoop on how to navigate those waters. Hear a firsthand account of a buyer's journey through closing on a HUD home with the remarkable HUD's $100 down option, proving that government-owned properties might just be your ticket to homeownership. Don't miss out on our upcoming real estate Instagram post where we'll share a resource sheet and a blank contract—because knowledge is power, and we're here to empower you. Keep chasing that American Dream and remember, we're just an Instagram message or email away for all your real estate queries.
YouTube: https://www.youtube.com/@LucasLiveMedia
Instagram: https://www.instagram.com/realityofrealestatepodcast/
Email: Brianna Lehman- blehmanrealtor@gmail.com
Email: Christopher Lynch- Christopher.Lynch@ccm.com
Hey everyone, what's going on? Welcome to the Reality of Real Estate podcast. I am one of your hosts, Christopher Lynch, and welcome my co-host.
Speaker 2:Hey everybody, my name is Brianna Lehmann.
Speaker 1:We give you a real take on making home ownership attainable.
Speaker 2:We will be breaking down real life scenarios, trends in the current market and giving you our personal tools to make home ownership not just your dream, but your reality.
Speaker 1:Get ready to be inspired, motivated and ready to take action towards building your own empire.
Speaker 2:Because when you invest in real estate, you aren't just purchasing a home, you're investing in your future. Welcome back.
Speaker 1:Welcome, welcome. I'm just sitting here with Petty Bree, I'm not.
Speaker 2:Petty, you're Petty. I'm not even going to get into it, because we just need to jump right in. So to piggyback off of what we just talked about, like buyers being ready and not ready, all of that. One thing that I talk to buyers a lot about is out-of-pocket expenses throughout their transaction, because it's more than just down payment and closing costs.
Speaker 1:And, like I was texting you yesterday too, like yeah, speaking of Petty, I tried to help you out and then you said that you already have my own, that's, you know, branded to me.
Speaker 2:Well, you didn't tell me that and I have to hand these things out? Well, no, I don't have to. So whenever I do a buyer's consultation, it comes up like these are your out-of-pocket expenses, and I always end up writing them out for them and like it would just be so much easier for me to have something that says like here you go, and then, of course, price point is going to be different for certain things, but at least I could have it.
Speaker 1:Welcome to 2024, Granny.
Speaker 2:I can't believe that I don't make my buyers books, since I work on a team. They do them for us. You know they're uniform for a reason.
Speaker 1:Yes.
Speaker 2:But I'm like I'll just print it off for the whole team. I can't believe that we don't have them yet.
Speaker 1:Well, it's not really fair all the time because, like, if you do have a cash deal, they're going to be different or if it is, you know, like in our previous episode we talked about. You know, investors, like their costs, are going to be different, but if you're just looking for a generalization, yeah, Well, and what I did and I'll bring it in next time.
Speaker 2:It's not done yet, but it will say, for instance, home inspection, this is a general price. It's going to vary based on square footage. The type of inspections that you're going to have, same with earnest money, closing costs, down payment, like all these things, are not a set price.
Speaker 2:Correct, but I do think it would be good for us just to talk, touch base on them so that buyers have an idea of like. Okay, so if I'm going to look in the $200,000 range, I know earnest money is going to be 1% of that, so 2000 dollars, but that also just depends on the area. It does.
Speaker 1:Yeah, because, like I do quite a bit of deals in Tusk County and they don't really care about earnest money.
Speaker 2:Really. It's odd Like that is very odd, because I've done quite a few deals down there too, and that's because you are up here and it's normal for here and then just like, hey, how serious is your person?
Speaker 1:But there, like I mean, it could be a 350,000 hour house and they don't necessarily care.
Speaker 2:That's odd. So backup earnest money for those that don't know. Oh, look at you. Yeah, Because that's all. They'll look at me like what is earnest money? So earnest money is serious money.
Speaker 1:Like a good faith.
Speaker 2:Good faith is exactly what I put on my sheet, and so it's a deposit that is made at the time of acceptance of contract. However, you will see it as a credit on your settlement statement at the end. So buyers are always like so does this money? Do I not get this back? Is it like a security deposit? What is this? So it will show up as a credit, as your closing costs, on your closing costs or your down payment. I've had people, my sister, for example.
Speaker 2:she got her earnest money back at closing because she had seller concessions and she used a down payment assistant program. So again, that's case by case. Rule of thumb for me and most agents in Stark and Summit County is it's 1% of the purchase agreement price. So that could be $1,000. It could be $2,000, but it is typically 1%. I have written it less if the buyer doesn't have it.
Speaker 1:Correct.
Speaker 1:I was gonna just bring that up to say that if you have someone who is using down payment assistance and depending on the lender, sometimes the pre-approval letter will say because it'll tell you basically buying power, so max purchase price, loan amount and loan to value, so then if it is higher than what, for example, fha, if it does say loan to value is at 96 and a half, or it'll say the CLTV, which is the total loan to value, if there is down payment assistance, it might say that it's at 100 or 101.5.
Speaker 1:So that would tell you that yes, there is a down payment, but there's also a second lien there that is not technically allowing that down payment to fully be taken into account, just because there's a something second there. But if you know that going into it, it's hey, okay, do they have enough money? And again, transparency is key. So that way as a buyer you can just say, hey, I am using down payment assistance, I really don't have a lot of earnest money. That doesn't mean that I'm not a serious buyer, but I just don't have it. But that conversation is key, being transparent. And then that way it's not gonna be 1%. So if you have $250 that you can put towards, this or if it's 500, then that is what you would be doing.
Speaker 2:Absolutely, and I have done that for buyers. Our earnest money is 250 and more 500. It really comes into play. I would say when we're in very heavy multiple offers, then putting more earnest money down to a seller is more attractive because if you back out outside of the terms of your agreement you could lose it. They're gonna fight you for it and we can talk more about that later. But ways that you could get your earnest money back is if your inspections go crazy and you release or the appraisal things that are within the terms of our contract. So be prepared. I would say anywhere from like 250 to 1,000, just have it if you can.
Speaker 1:Yes.
Speaker 2:Because it is gonna always make your offer look better and make a seller feel better to know you're willing to put some skin in the game.
Speaker 1:Yes, that's essentially really what it is it's? Like it just shows that, hey, I'm a serious buyer, I want to purchase this home and I need a loan because I can't pay cash for it.
Speaker 2:Right.
Speaker 1:And.
Speaker 2:Which are most buyers?
Speaker 1:Pires, like you're human that's what it is. It's not anything crazy. But I also would tell someone, when you're trying to look at earnest money and speaking of closing costs, cash to close is that if you are only prepared or have like allotted for you say like hey, I've set aside this $1,000, $1,500, whatever that looks like. That conversation is important because you have your earnest money deposit. Are you doing any inspections?
Speaker 1:And then also your appraisal. So if you have $1,500 and that needs to be able to cover all three of those, then that means that your earnest money deposit is going to be a little bit lower because you're going to pay for your inspections at the time of inspection or some people like pay for them, like that morning or whatever.
Speaker 2:Right, yeah, so typically you do not get your inspection report until the inspection is paid for. So before or at the time.
Speaker 2:So as far as inspections go, it depends on the square footage of the home. If you're buying a much larger house they're going to be a little bit more and then the type of inspections you're having. So general home inspection is the basis. They're going to cover the whole house. Pest inspection you know that's an additional cost. Radon is an additional cost. Typically, I mean mold is an additional cost. But I usually guide my clients with a good general home inspector is going to check for those things. If they find them, that's when we're going to then pay for the additional inspection like save yourself upfront costs. So I would say a general home inspection is going to cost you anywhere from $350 to $500, depending on the size of your home and who you're using. A pest inspection is like $90 to $100 now it used to be like 50 bucks, so inflation. Radon is anywhere from one to 200. So and I broke all those down again. You know on our sheet, but well in septic.
Speaker 2:Well in septic is on there and that is typically around $500 for both, depending on County. County is a huge factor when it comes to well in septic. Portage is way different than stark and summit and Medina. Those are buyer paid inspections. Typically I have had sellers pay for well-inceptic inspections because they are part of, like, a point of sale in Northern counties. So those are done. But typically as a buyer you wanna prepare yourself and make sure that you're able to pay for them and they are non-refundable. That's the biggest piece there, whereas earnest money there is a buffer as long as it's. You know in our contract that you are able to have an inspection and if the inspection goes south you can get that back if you remove yourself. But inspections are non-refundable.
Speaker 1:Yeah, and then you have your appraisal and so like that can vary anywhere between 625, like being your primary residence, so anywhere between 625 to what is called it $700 on the high end and you only Do.
Speaker 2:they vary based on size of the home as well or area or so it actually can vary depending on like how complex the property is.
Speaker 1:And so, like I had one, I don't know, maybe two, three months ago, and there's a little two bedroom looks like little cottage you know, you know Matilda's teacher.
Speaker 2:Yeah, Miss.
Speaker 1:Honey. Yeah, Miss. Honey, it reminded you of Miss Honey's little house, and but it sat on 25 acres, and so the mineral rights that were there didn't transfer, and so their appraisal was a little bit more just because, it's trying to figure out like are any of this 25 acres, what's buildable, what's not, sort of a thing, and just kind of navigating through that.
Speaker 1:Also, like if you are buying a multifamily unit, that can change the price of it, even if it is gonna be your primary residence. That can be a factor there. But generally if it's FHA, VA, USDA, just call it 625 to 650. If it's conventional, it can be anywhere between 615 to 650.
Speaker 2:So if their deal falls apart, is that refundable?
Speaker 1:Technically no. The appraiser is a third party vendor. Right, they're being paid yeah so it's kind of the same as an inspector. The only difference is now for my team I can't speak for everyone. My team is that if a deal were to fall through, you've already paid for an appraisal. If you come back to me, I will give you some form of a lender credit to go towards your out of pocket like cash to close on the next deal.
Speaker 1:It can't give you a discount on the appraisal but, I, can give you a credit to be factored into your overall cost.
Speaker 2:You've definitely done that for my clients in the past and some lenders will not do that.
Speaker 1:Correct.
Speaker 2:I've had a buyer pay for three full appraisals in the past, which I mean they also were, you know, releasing deal after deal after deal, which is fine. They finally found what they wanted and it worked out for them. But it was hefty for them to say like, oh man, I gotta pay another $600 appraisal.
Speaker 1:That's the hard part is because you know like, yes, as a lender you order the appraisal, but the appraiser doesn't work for that lender.
Speaker 2:They are a partner or vendor and yeah, and I'm not saying they have to do that, Of course, that's not like whatever but just stating that I've seen you give credits for that, which is nice. Well thanks, you're welcome. Yeah, you're welcome, after you called me Fetty.
Speaker 1:See, even your welcome was like it, just there was Because if I was reminded that.
Speaker 2:See, I am nice and you call me Fetty.
Speaker 1:I didn't say you were mean, but anyhow.
Speaker 2:Moving on Brokerage fees.
Speaker 1:Yeah.
Speaker 2:That is something that will show up on your settlement statement and it says commission, which works me because it's not a commission to me. Everyone would be like, oh so what is this commission? And I'm like it's not, it's a brokerage fee. It's basically a compliance fee. I call it where ours is for Keller Williams, I guess it's 295. Every brokerage has their own fee and it will come.
Speaker 1:I think ours was higher.
Speaker 2:No, it was actually lower, and then we just raised it to 295. So it was 225, which was very, very cheap, because there's some brokerages that their brokerage fee is like $500 or more.
Speaker 1:I know one that is 990.
Speaker 2:Wow, wow.
Speaker 1:Oh yeah, wow.
Speaker 2:That is crazy. Yeah, now I have personally waived it in the past if they are buying, selling and like if they're buying multiple properties like last year I had somebody who was selling two properties with us and buying two properties I'm not gonna make you pay that four times, you know. So I'd work with them. But the rule of thumb is every buyer or seller has a 295 with us brokerage fee. There's a brokerage fee with every agent that you work with, so and it's usually it's listed in your contract.
Speaker 2:It is in our contract but still a lot of times it's something that I can get overlooked. As much as you explain it, buyers sometimes just click through and signed, but that shows up on the settlement statement as if you're getting your closing cost paid, though that is covered as well, typically. So.
Speaker 1:Yeah, another thing is that, like in our two episodes ago, we talked about title. So you're gonna see your title fees and you know, especially for a seller, as much as I love a net sheet, which is something that an agent can put together, if the title being used is not the title company that they use for numbers, then you can't necessarily hold on to that. So like the only other document that you would get, especially if you're financing a deal, is you're gonna go off of your loan estimate.
Speaker 1:And that loan estimate is gonna walk you through your title fees and sometimes they can be higher on there because you will get a credit for the title policy transfer, but it's gonna show you the full amount. That's one there, but title fees can vary just depending on the price of the home.
Speaker 2:Absolutely and title company.
Speaker 2:I would say to our title company that I have an ABA with affiliate business agreement for people don't know what that means is Stonemgate Title, and I have called them before and said like, hey, this seller is my buyer. Can you give me a net outsheet, an accurate one, so that I can give it to the lender and we can make this work? And they will do it. They'll send it to me that day and they will be accurate. They'll go off your closing date to say this is an estimate for taxes and pro rates and all of that as well. So having that and I know Stonemgate has matched other title company's fees because they vary as well, Just like with lenders, your fees are different based on company and Because, like when you texted me about this yesterday, for your loan cost, my loan costs are $14.90.
Speaker 1:So, that is, technically underwriting and processing.
Speaker 2:And that's part of your closing costs.
Speaker 1:Right, that's part of your closing costs as the buyer, but just separate, because, like $14.90 underwriting and processing, that pays for your loan costs with my team. Outside of that, you have your credit report fee. You have your appraisal. Even if your property is not in a flood zone, you still have to get a flood certificate, so they have to do a flood search, which is $8 or $9.
Speaker 2:Then that's very minimal actually.
Speaker 1:Yeah because if it is in a flood zone, then you have to pay for however much your flood insurance is gonna be.
Speaker 1:And then you have title, you have your recording fees with the county, which can vary, and then you'll have your prepaid, so which is gonna be what your daily interest charge, depending on when you're closing, and your taxes and insurance is part of that, and then you have what you are going to pay into escrow and then all of those total. Then you add in your down payment, but that is gonna be like your cash to close number. So it is very important that if you are someone who is looking, or you just got under contract and you're just not sure about what you're looking at, nine times out of 10, you're looking at a loan estimate or a loan summary and ask your lender to be able to walk you through it if you don't understand something.
Speaker 2:And really these are conversations I try to push to be had before we're under contract, so that there are no surprises.
Speaker 1:Yes, amen.
Speaker 2:But, sometimes a house could come up today. We go see it and it just happens. But having those conversations and I have the out of pocket expense conversation several times, from the first time that we meet until we're closing in with you too, or whoever their lender is, we rope them in. Typically, if they talk to me, some don't what. You know, I have a lender right now that has never spoke to me, not one time. I can't, even I can't, okay.
Speaker 1:Yeah.
Speaker 2:That was petty. Moving on Having those conversations, to make sure that you are very informed, I still write out like bills and stuff. Like I need to know to the dollar what my out of pocket expenses are for everything. I would drive you nuts. But, I do, I do this anyway.
Speaker 1:Yeah, so Every day. Don't really know what's new here, but it's so important because if you only feel like your lender kind of I don't know skim through that part of the process and you're not using any form of down payment assistance. You're not getting any concessions. You need to know what you're gonna be bringing to the table.
Speaker 2:Yes.
Speaker 1:Because you can't wait until a loan estimate and then you immediately have buyer's remorse, or you're trying to change things because you can't do what they're asking you to do, or you can't wait to a closing disclosure which is at the end or closer towards like your closing date to see that. And heaven forbid if you wait until anyone looks over a settlement statement.
Speaker 2:Yeah, cause that's usually send out the morning of closing. Sometimes I don't see it. Usually there have been times where I'm walking into closing reviewing it and making sure, like, okay, this is good.
Speaker 2:And I will say I just had a buyer's consultation with somebody a week ago or so and I asked her.
Speaker 2:I was like look, you don't have to talk to me about these things, but I just want to know, like, do you have any money saved or not? And when they answered I knew which way to move, like and say, okay, so these are the things that you're going to want to say for especially like the inspection and appraisal, because you can't really get away from those. We're going to talk to the lender about closing costs and down payment and earnest money. Again, that's something that will be situational, like circumstantial, I guess, is what I want to say. But knowing that, because we've had buyers in the past that after the buyer's consultation, they're so overwhelmed because all that they have saved is now wrapped up in inspection, appraisal, earnest money, and they're like this isn't going to happen for us, I'm like, no, it is. Let's loop your lender in, let's have that conversation with them too. And then I will pivot on my end of what you need and how we're going to work it out.
Speaker 1:And just like right now, since we're in tax season, if you are someone who typically gets a refund, leverage it to where, if you are someone who typically gets a refund, you want to buy a house. You don't have a lot of money saved. You can still be the traditional buyer and ask for seller concessions, you can get down payment assistance, all of that, but now you can leverage this refund to put you in a position to make it all make sense.
Speaker 1:So, if you were someone who said, hey, no, you couldn't buy a house last year even though you worked so hard, or you used last year's refund to help get your credit up, whatever the situation might be, and now you're in a position to where credit's taken care of.
Speaker 1:You don't have the savings to pay for earnest inspections, appraisal or new furniture, whatever. Now you're going to leverage that money and so you're going to hold on to it and Reach out to whoever your team is. And that's how you start navigating through this, because Now you have the funds right, so it really just kind of matters of what is your buying power, does the payment make sense for you, is it doable and Do you love the home? You're in a prime spot of the calendar year. If you are someone who typically gets a refund check to use that to put you in a position to buy a house, or If you don't qualify for down payment, assistance or anything and you get a refund, you could use that money To help you buy your next home right, maybe next time we should talk about down payment assistance programs or just other programs.
Speaker 2:I know we have talked about Some programs that you offer in the past, but maybe breaking them down a little bit more of how you can qualify or not qualify or what that looks like.
Speaker 1:Okay, I'm down because.
Speaker 2:I'm always interested in it too, because, like I know, my sister was able to use it, and then we've had buyers that are like, yeah, they just don't qualify. But I have another qualified you to.
Speaker 1:they make too much money, yeah, or their credit score isn't where, like certain programs required to be a or unfortunately that's income ratio right because what I can typically approve someone with Out down payment assistance without the additional overlays and things like that that's income ratio or in sometimes, credit score and income but then when you throw the the assistance in there, it takes them over the threshold, which is where it kind of comes back into those people. Are they someone who typically gets a refund?
Speaker 1:right where now it can be used for Putting them in a position to be able to hit and say like, say that they're ready to go forward.
Speaker 2:Yeah, okay, well, we'll talk more in depth about that, because I feel like there's so many layers to that too. Yeah talk based on. So what we can do is I can put this sheet that we made I made, and.
Speaker 1:Loop you in with it and we can post it as well for buyers to say cheating on the final.
Speaker 2:Well, I feel like with different lenders to the appraisal is a different price and that is true.
Speaker 1:Like.
Speaker 2:I've had some appraisals be $500 and then some be seven or $800 just depending on the lender. So, to wrap this up, it's time. Yeah, we talk a lot. Yeah, let's do that. I'll get that finished and then we can post it on the reality of real estate Instagram page that you can check it out and just have it as a reference point of everything that we talked about today.
Speaker 1:And then you also send me a Blank. I didn't mean to cut you off like that but will you send me a, if you're allowed a contract? Because I posted something on our Instagram page about contracts, yeah, and I was gonna ask you to send me one. But I also was like maybe we're allowed, maybe we're not allowed, but yeah, because sometimes people have never seen a contract or disclosures or anything until we're doing that, yeah.
Speaker 2:Yeah, I can send one, so we can do that. You know, we'll post the out-of-pocket expense generalization Just so that you have a reference point and if you have further questions, as always, reach out to us directly. My email is on our Instagram, so is yours, right? Yep. Or just DMS, and we're always here to help get the conversation started. Yes. You don't need a million dollars by a house like that's just, you just don't, you just don't yeah, just before we end this out, I have someone who was buying a house.
Speaker 1:they close on their deal on the 29th is on February 29th is when her deal will close and it is a HUD home, but it is actually in like a neighborhood close to mine. Mm-hmm. And so I would just say a Higher priced homes and a home that you typically would not be able to get right and Payment is beautiful, and she is bringing five hundred and sixty seven dollars to the table right and On a HUD home, which is crazy and I'll just say that this home is well over $350,000.
Speaker 2:Wow that she's purchasing it for well.
Speaker 1:Yes, but like HUD program, like we have a hundred dollar down option.
Speaker 2:Okay, we'll talk about that too, because I didn't know that you had that. Mm-hmm and so in HUD for everybody who's like. What is that? It is a government owned property. Yes, it is just a different bank owned program.
Speaker 1:So FHA is backed by HUD, yeah, so yeah, like.
Speaker 2:Housing and urban development is what it stands for.
Speaker 1:So to be in a position like that is Absolutely incredible, and it doesn't happen every day.
Speaker 2:No, but when you find it, jump on it.
Speaker 1:Take advantage of it and she is. It's the first house that she actually physically walked through and it is the first house that she said that she never felt like she needed to second guess see it, finds you.
Speaker 2:So, yeah, that's all right. Well, yeah, definitely reach out to us if you guys have further questions or you know. Just again, as always want to start the conversation, we are here to do that.
Speaker 1:Yeah, all right.
Speaker 2:Thanks guys.
Speaker 1:Toodles. All right, friends. As we close things out today, remember home ownership is more than just a roof over your head. It's a symbol of your strength, resilience and determination.
Speaker 2:Take action, embrace growth and never be discouraged about where you are in your journey.
Speaker 1:And remember to follow us on Instagram. At reality, at real estate podcast.
Speaker 2:Our emails are linked in the description below. You can reach us at Christopher Lynch at CCM comm and my email is be layman realtor at gmailcom. All right toodles.
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