Transcription
All right. Well, Nate, thank you for coming in.
Yeah. Thanks for having me.
Absolutely. So cool to meet with you and making the decision to buy buy your first house.
Yeah. Yeah. Exciting.
Yeah, it's really exciting. What made you want to buy a house? I know you've been renting for a while.
Yeah, I've been renting. Uh my my lease is up here pretty soon. I think in November.
Um so I was just looking into, you know, possibly buying some place and not renting anymore.
Yeah. Yeah, absolutely.
Um, it's a big big step in doing that.
Yeah.
Well, I've got a couple things prepared for you today. I want to kind of take you through our buying experience, what the buying process looks like. Um, we'll hit some things in there about financing. We'll talk a little bit about um what you're looking for in the house and how soon you're looking for time frame. We'll also talk about a buyer agreement, too. So, are there any questions or anything that you wanted to go through before we jump in?
Not really. No. No.
I just kind of want to learn about the like the buying process, like what what I should expect essentially.
Yeah, for sure. And that's what today's meeting is for. Um, and this is super casual conversation. So, if you see something in here, you know, have a question, just just ask right away. You don't have to wait till the end or anything like that.
Sure.
Sounds good.
All right. Well, let's jump in. Um, so first and foremost, everything that we're going to talk about today is is totally about you. And then that's our focus is to help you um accomplish your goal of buying a home. And we're going to do it all on your timeline. With that being said, I know that this is a first-time house for you. Did you know that the average net worth of a renter is $10,000 and the average net worth of a homeowner is closer to $400,000?
I did not. Interesting though.
Yeah. It's kind of a wild stat, isn't it?
Yeah.
Yeah. It's a huge path or a point of um to make sure that you buy the house that you buy a house versus renting a house so you can pay your mortgage versus somebody else's mortgage.
Yeah.
Yeah, for sure. I mean, it's huge. So, and we're all about helping people build their wealth here. That's something we're really passionate about.
Cool.
So, the way that that comes together is you've got appreciation on the property. So, historically, properties have um appreciated 4% per year historically. So, that would mean that if you're in a $200,000 property, property value goes up by 4%, you've gained $8,000 worth of equity that year. Make sense?
Yeah.
Okay. So, that's the first way that this number is different here. Second way is principal payments. So every month on the principal when you make a payment part of your payment is going to go towards principal which is your loan balance and then the other part of it is going to go towards interest that you would pay the bank. So on that principal balance is going to continue to kind of go down over time as obviously your balance is really big in the beginning. It doesn't seem like it's going down very much and then as you have less money that you owe to the bank more of your payment is going towards the principal. Um, so it's a little bit uh scary to look at it over a 30-year time period, but when you start chunking that down, five years goes by really fast. It's like, man, I've really made some some gains between appreciation in the property and then also paying down that principal.
Okay, cool.
And then you also get tax benefits with the property. So any of the interest that you've paid towards that loan, um, you get to claim that as a tax write off should you decide to do that. Um, so that's going to save you some some money there as well.
Okay.
So all of those things are happening for every year, every month. Um, and that's what's really helped in generating this this extra wealth over a long period of time.
Cool.
Yeah. Pretty neat, huh?
Yeah. Yeah.
Yeah. So, you said appreciation is 4%. Um, is that just like the average?
That's the average. That's a historical average for the United States over the last like 30 to 40 years. So, there are going to be some years like in COVID years like 2020, 2021, we were seeing like 20 plus% appreciation.
Wow.
Yeah. It's crazy. So, if you own a house, like good for you. You were hitting the lottery basically. And then there was a decade, we'll say from like 2009 to 200 19, I guess it's probably a little bit late. So maybe seven or eight years where the values really didn't change a lot because they had already taken that hit. They kind of maybe creeped up a little bit, but they weren't picking up 4% per year. So it's you're going to see some years where they're good, some years where they're bad, but the historical average is roughly 4%.
Okay, cool. So what is it in the Lafayette area right now? Do you know?
Um, I don't know that off the top of my head. I know that we are one of the hottest markets in the area. Um, ours are appreciating really well. Like there are some bigger markets right now. Um like Austin, Texas, San Francisco, Boise, Idaho, some markets in Florida where they're seeing like price reduction a little bit, maybe like two or 3%. Um we're not seeing that at all. So we're seeing just normal average appreciation our area still.
Okay, cool. Absolutely. Any other questions on that?
No.
Okay, so this next part is uh really tell me about what you're looking for housewise.
Uh, yeah. So, something in, you know, ideally Lafayette. I mean, maybe West Lafayette, but probably the Lafayette area. Um, three bedrooms, two bathrooms would be would be ideal.
I'm sorry. So, Lafayette or West Lafayette?
Yep.
Okay. Just in the county somewhere.
Mhm.
Okay. Three bedrooms, two baths, you said?
Yeah.
Okay. And if we can't, like a fencing backyard would be pretty cool. I have a dog, so fencing backyard. Would it be important to you that it's already fenced in or just that it could be fenced in?
Um, either one would be okay if we found the right place. Ideally, if it was already fenced in, that'd be a bonus because that'd be one cost I don't have to, you know, spend.
Yeah.
So,
makes sense. Now, going back to this threebedroom, two bath, what about one and a half bath? Is that acceptable to you? Or does it need to be two full baths?
Two full baths would be ideal. Okay.
I'm thinking about getting a roommate. So, I mean, if I got two separate bathrooms, that'd be pretty cool. Yeah.
I mean, we could probably share one, but
that makes sense.
So, with that that the one and a half bath is pretty much a dealbreaker. Like, we don't really really need to see a property that's one and a half bath.
Probably not.
Okay, that's fair. What about two beds? Can you go down to two or it's like, no, I really don't need to see two either.
We could look at them if it's the right place, but ideally three, but I wouldn't say that's a deal breaker.
Okay, perfect. Anything else about the that you're looking for.
I mean, that's that's really it.
School district or anything matter?
School district doesn't matter. Um, ideally, the home's like in somewhat decent condition.
Okay.
But,
are you handy?
I can be.
So, but no fix wpper.
No fix rer.
Okay. If there's a couple things I need to do, that's fine. But anything too serious? Ideally, not.
What kind of kind of things would you be willing to do?
Um, I can do, you know, regular maintenance if I got to paint a little bit. Um, I can do all of that, fixing cabinets, stuff like that. All that like easy stuff you can watch YouTube video for. I can probably do it.
Okay. So, you two can figure it out.
Yeah.
Yeah. Okay.
Um, and you got a pretty big area. Do you know roughly? Have you looked into financing at all? Have you like do you know price point where you think you might want to be?
Uh, yeah, I looked into financing already. I I think I'd be somewhere in the ballpark of like 200 250. I got approved for 280, but I don't think I want to spend that just based off the monthly payments.
Okay. And who are you pre-approved through?
CMG.
CMG. Okay.
We like that a lot.
Yeah. Pretty cool.
Yeah. Yeah, for sure. Um, perfect. So, 200 250 up to 280. Don't really want to that 280 though.
No.
Okay. Gotcha. So, you've got a pretty good um area that you're looking for and the price point's good. Um Yeah. And that's awesome. I think we can find something out there for you. There's definitely stuff that that moves. Um and then financing wise, that's great that you already have all that. Now, how far through the financing process did you go?
Um, you provided payubs and taxes and all that stuff.
Not 100%. No. He just I think he said he just did a soft pull on my credit right now. So, he just gave me a basic pre-approval.
Okay. Okay, that's good enough for us to uh start looking at houses. Um timelinewise, I know you mentioned the lease was up in November. Um is that November 1st, November 30th? What does that look like?
November 1st.
Okay. So, you got to really be in somewhere prior to that if you're going to make it work. Do you have to have like a lease renewal out? Do you have to like confirm that you're
I think so. A couple months before. Yeah.
Okay. So, we really need to know like now, right?
Yeah. And are you familiar with how the mortgage payments work um when you buy a house?
No.
Okay. So, if you were, let's say we got to have you somewhere at the very latest. You got to be moved out by November 1st. If we were to close on that property, so you've got October and then you've got September. So, we we were to close on a property in September 1st. You wouldn't actually make a mortgage payment until November 1st. Oh, really? So, it skips a month. So, you pay all the interest that you would. So, you're going to have a little bit more. Um, but it skips a month before you really do that full payment, whether we close on September 1st or September 30th.
Okay.
And if you go backwards even further than that, it's going to take us about 30 days to get that that house under contract, get you through the inspection, the appraisal process, all those things. Um, so really, you could put a house under contract today. We could shoot for September 1st closing and you could not have to make a payment until November 1st. So that way you're not doubling up payments on your leases.
Okay, that makes sense. I thought I'd have to wait until November or close to it. So
yeah. You're you're ready really now. I mean, definitely ready to find something and start working.
Cool.
Yeah, it's pretty cool. Um, perfect. Anything else that we should add to the the wish list?
I think that's I think that sums it up. Pretty simple.
Okay. What about garage? I didn't ask you about garage. You need a garage.
Garage be nice. If it doesn't have one, that's okay.
Okay. Not a deal breaker. What I'm going to do is set up a search. um in our software for you. So, I'll put all this criteria in. I'm going to set it up for twobedroom. Um I'll probably set it up just a little bit higher than 250. The market's moving pretty quick, but just in case there's some wiggle room. I don't want you to miss something that's listed at 251 um or 255 or something like that. So, I'm going to set it a little bit higher than that and I'll make sure to get those out to you uh today so you can start looking and seeing what's out there.
Okay, cool. Sounds good.
Perfect. Um just out of curiosity, uh what type of financing are you doing? I know you're pre-approved. Are you conventional or USDA or
uh FHA.
FHA. Okay. So, you're doing the three and a half% now.
Yeah.
Perfect. What kind of rate did they give you over there at CMG?
I think it was like 6.8 or something. He said it could change a little bit, but it was in that ballpark.
Yeah. Um the best time to really shop for rate is like right after you get an accepted offer because everybody can can operates now and they're going to just tell you some number, but that doesn't mean that that's actually going to be the number when you go to like, hey, I can lock it. Today's the day I know what house I'm buying.
So once you have a purchase agreement, that's the best time if you wanted to look around at rates and say, hey, what is what can somebody else do differently or better? Or maybe they can't beat it.
Um, the best time is right after we get an accepted offer like that next day.
Okay, cool.
Yeah, absolutely. Did you have any other questions or anything on the
No, process.
Okay. U, we do have an in-house mortgage company called Envoy Mortgage. So, again, not something you need to look at today, but in the event that you wanted to explore another option um once we get an accepted offer, um, they are in house. They might be able to beat this rate. They might be able to tell you, "No, that's a killer rate. Just stick with what you got and it's just a second look at it." Okay. I can connect you with him once we get to that point if that's okay.
Sure. So, with that, if I do get preapproved through CMG Mortgage, obviously that's going to
have a credit check, right?
Sure.
Um, if I go through other mortgage companies, is that going to also hit my credit multiple times?
It will hit your credit multiple times, but there's a misconception that if you have multiple credit pools that it's going to ding your credit, but there's a period of time where you're allowed to shop mortgage rates. So, it's not going to hit your credit in a negative way. Um, what really is going to kill your credit is if you go get a credit card today, you get try to get a mortgage tomorrow, get an auto loan the next day. Like, that's the kind of credit pulls where it's like, whoa, what's this person doing? Let's lower their credit score so maybe they don't get approved for so much.
Yeah.
Yeah. Okay.
Cool.
So, things to be aware of when buying a home. This is 10 things I really think you should read through them and I'm going to give you this packet that you can take take with you. The general rule of thumb though is that if you've got to give somebody other than your lender your social security number for any reason, like text me or text uh your lender first just to make sure that it's okay. like don't buy furniture, don't buy a car, don't cosign on a loan. Um, all those things will require you to give your social security number, open a new bank account, things like that. Um, just be very careful of that while we're in this loan process. And then as soon as we close, if you want to go buy a new car or a boat or whatever, you can do that. Just wait till we close. Also, don't change your employment during this time period. Um, that can definitely throw things off. I've had people switch jobs like a week before closing and then they can't buy the house because the lender said, "Oh, you switch your jobs."
Okay. So, just make sure you don't make any of those changes until after you've like physically signed and then you can do whatever you want.
Cool. Sounds good.
Okay. These are all the ways that we actually go out and help you find uh the right home. So, we're going to show you all the actively listed homes, which is the search I told you I was going to set up for you. Um, you can also go look at open houses. If you do, just and they ask if you have an agent, say yes, I'm working with Spencer. Um, most of them know who I am, so that won't be an issue there. Um, and you're welcome to any of those at any time. Now, agents are doing them through the week on the weekends. They're they're kind of all the time. Um, for sale by owners is another place that you can potentially see uh something you want to go look at. If you do, um, just message me the link and then I'll contact the owner and, um, get a showing set up for us.
Okay.
Foreclosures. Have you thought much about those?
No.
Yeah. They used to be really popular um, we'll say in like 2009, 10, 11, but there's really not a lot of foreclosures right now because People have so much equity built up in their houses that if they do start to get behind, they just sell the property and they take what extra equity they have and then they go on to back then they didn't have enough money to cover it. So then they had to go into foreclosure. So that's why we saw a lot of those.
Yeah.
So you probably won't see very many of those.
Cool.
Um offmarket home. So we do have a database of like 20,000 people that we reach out to on a regular basis. in the event that we run into a client or some communication and somebody wants to sell but maybe they don't want to put it on the market then we can reach out and uh try to connect you if that's the right property for you too.
Sure.
And then new construction um new construction will be really tough at the price point. Really got to be closer to 300,000 in our area to get to that new construction price point. So that's probably not going to be something that we would entertain. Um in the event that you decide to raise your your amount you're comfortable with or get pre-approved for a little more um you know we could exp that, but right now probably doesn't make the most sense.
Okay.
sound good?
Yeah.
Okay. Um, so this here, what I want to do is pull up um, area pro and show you a little bit about what our market's looking like at your price point. So if we go here to typ county, we have this really cool tool. patches into our MLS system. So, we can see everything that's going on marketwise. So, if you look at houses that are similar to what you're looking at in this 200 to 250, there's 41 houses currently on the market. The average days on market for those houses is 41 and then there's 20 of them pending. So, what that means is we have 2.1 months worth of inventory on the market right now. So every two months, everything that you're seeing right now in that price point is going to be cycled through and there'll be a whole another set of properties.
Okay.
does that make sense? In theory.
Um the other thing to notice on this here too is that the percentage of list price that houses are selling for is 100%. So we shouldn't be going into properties and offering $10,000 or $20,000 less because we're just probably not going to get it. U we need to be pretty aggressive if it's a house that you like. Okay. Any questions on that?
No, not really.
Okay. And then the way that we try to look at comparables, so when we find the house that you're looking at and you're like, "Yeah, this is what I'm thinking about making an offer on." Then I'll go back and I'll start to look for properties that match um that price point. So, I'll look for five active properties, five pending properties, and five properties that have sold. And then I'll match those together to try to come up with to make sure um the house that you're buying is reasonable in price.
Okay. Sound good?
Yeah. Yeah.
So, this here is a team that we work with. Um, you're not just working with me, although I am your main point of contact through this entire process. So, I'm your lead agent. I'm also your client concierge. Occasionally, I might need some help on a showing. I might have something going on with another client or personally that I just can't get you into a property that you need to. So, I can always have another agent on the team step in and help out and just show you the property and then I can work with you on writing an offer or whatever we need to do. Once we have the house under contract and you have an accepted offer, we have a transaction coordinator named Sarah. She's going to get everything sent uh to the lender to the title company, make sure the other agent has all the information they need. You'll hear a little bit from her. Um, but you probably won't ever meet her in person, but she's a huge part of our team and what we do here.
Okay.
Um, you also have the lender, which you have picked out at this you know who that is. Um Sarah will send you a list of home inspectors that we work with. Um you're welcome to work with whomever. There's probably 30 in town, 40 in town, so you can pick any of them, but we have a list of five or six that we work with all the time. And you know, you can work with whomever you'd like. And then escro title officer. A lot of times the seller is picking that. If you wanted to pick the title company, we can put that in the offer that you'd like to pick it. But most of the time the seller picks it.
Okay.
Any questions on any of that?
No.
Okay. Um, so this is your buying experience here. Um, which says consult with an agent. Um, start to look at properties. You'll get an accepted offer. You'll put earnest money down. They're going to do a title search on the property. You're going to get home owners insurance. We're going to do an inspection on the property. The bank's going to do an appraisal. Uh, you're going to do a final walk through. And then on the day of closing, a wire transfer, you're three and a half% down. Then we'll go to closing and sign paperwork.
Okay.
So, that's a very high overview. You can things in there. Um, I don't want to bore you with all the boxes though.
Sure.
So, the cost to you, this is always an important section. What are the costs to you when you actually go to buy a house? Um, the first cost you're going to have is earnest money. So, that's generally going to be 1% of whatever the purchase price is. So, for 200,000 or 250, it's probably going to be $2,000 or $2,500 that you would put down. Now, that money is money that you're giving to the seller, saying, "I'm serious about buying the property. take the house off the market and stop showing it to other buyers because I'm going to go through my my process with it here. In the event that I get cold feet and change my mind, you can keep that earnest money.
Okay.
does that make sense?
Yeah.
Once you complete the sale, that money goes towards your down payment at closing cost. So, it's not like you lose it and it's the seller forever. You get that um as less down payment money you would have.
Okay. You're also going to have home inspection costs, which that can range depending on the inspector you work with, maybe 400 all the way up to 7800. It just depends on what kind of inspections you'd like to do. Um but generally plan for $500 to $600 on that.
Okay.
The appraisal process um the lender is going to order that. That is separate than the home inspection. So the home inspection is something that you're paying for. The appraisal is something that the bank is paying for to verify that the value is accurate within market conditions. Um so you still pay for the appraisal and that's usually around 7 to 800. Um, sometimes the lender will make you pay for that upfront. Sometimes they'll carry that through and then you just pay it at the time of closing. Okay. And then your down payment, which you already know is the three and a half% um less any earnest money that you put down. And then buyer agent compensation. Um, so are you familiar with how the rules changed um last summer in regards to real estate commissions?
No.
So previously um for years and years the other agent and the listing agent would say okay I charge X commission and this is how much my commission is going to be and this portion of it is going to go to whatever agent brings the buyer for the property. The Department of Justice said because of a lawsuit that they don't like the way that that's done. So now they want the buyer and the buyer agent to be able to negotiate their commission and then if they want to ask the seller to pay for it, they can. So, how this looks is we charge um x percentage do uh x percentage uh for the buyer agent compensation and this is what we charge for that. We're going to ask the seller to compensate that on your behalf for us in the event that the seller is unwilling or unable to do that. Then you'll you'll know and we'll have that conversation and you can decide whether or not you want to move forward with that property.
Does that make sense?
Yeah, sounds good.
Pretty transparent. Uh so on closing day, this is a lot of boxes for you're going to documents, some money's going to come in, you're going to be super excited, and then you're going to go to your house. So, cool. Pretty cool. Um, and then lastly is our promise to you. So, in the event that uh you decide you don't want to buy a house or you decide that we're not the right agent for you, then we'll let you out of the agreement that we work together. We want you to have a good experience. The last thing we want is you to have a bad experience and tell everybody about that. Um, so we'll let you out of that agreement and u, you know, we're pretty straight forward about that with no cost. We don't paid unless you actually close on the property. That's when we could get paid commission.
Okay, makes sense.
Yep, sounds good.
Okay, cool. Uh, so the last thing we need to go through is the actual state buyer contract. And so it has today's date here, my name, Keller Williams, and then we have a contract and date of six months. So, we're agreeing to work together in in that six months. In the event that you buy a property within six months, I'll be the agent representing you on that property. Um, here scope of property. So, we're looking at any properties um in Typ County or any other additional properties that I would show you.
Okay.
Does that make sense?
Yeah.
Um, broker's commit compensation or commission. Um, retainer fee, we don't charge any sort of retainer fee there. Our commission is X. Um, and then here we should be entitled to the commission. We earned it if we close on the sale and you buy a house. Basically, if you were to buy, so here we put 90 days. So, in the event that I were to show you a house and then you go buy a house after our contract's expired or if you decide to fire me, um, then I could claim commission on that if I've shown you the property and work with you on it, even though you bought it outside of the contract. Does that make sense?
Sure.
Okay. Agency disclosures. what our duties are to you as your agent. Be fair and honest and have your best interest to mind at all times. Limited agency authorization. So, in the event that we're representing the seller, we'll be representing them as the seller, you as the buyer. I can't tell them your situation. I can't tell you their situation. Just have to let you guys negotiate.
Okay.
Um, so if you authorize limited agency, um, we'll check that box. And this says, you understand that I represent other buyers. So, there could a situation where I am showing you a property and then I'm showing another buyer the same property. Again, I can't tell them, oh, this is what my other client offered. I can't tell you this is what they offered. Just have to let you guys offer separately and then see what happens.
Okay.
This says that you're aware that there could be recordings of the property and the seller can use those recordings against you. If you say something about what you love or don't love, they are recording at the property. Fair housing, so we can't discriminate. And wire fraud. Don't ever accept wire instructions from us via email. We won't ever send them. If you get something weird, just check with me and I can make sure that it's legit. And that's it. So, I'm going to sign and you'll sign. Any questions or anything there?
Nope.
All right. Cool. Well, thanks for coming in today, man. I'm super excited. Thanks for explaining everything.
Absolutely. Yeah.