23. HOME LOAN 101 – FIRST STEPS AFTER CONTRACT

SUMMARY KEYWORDS

appraisal, lender, inspection, people, loan, pay, lending, loan officer, appraiser, money, closing, contract, day, dialed, payment, rate, home, insurance, company, clients

SPEAKERS

Rob, Intro, Adrian

Intro  00:02

Welcome to the get rich, slow podcast. This is the stuff we and our expert guests wish we knew a decade ago to get the most out of our financial life will provide you with insight into wealth building activities and practices that can expand your net worth exponentially. get insight from top professionals who will reveal how to build wealth the long way, work smarter, not harder and identify your financial blind spots. With over 25 plus years of experience as licensed real estate professionals and a long track record of winning for their clients. Robin Adrian will teach you what it takes to be an everyday real estate millionaire.

Adrian  00:43

Hello, future millionaires and welcome back to the get rich, slow podcast. I’m your co-host, Adrian Shermer joined here by the famous Robert Delavan.

Rob  00:52

I don’t know about famous, but good morning. Anyway,

Adrian  00:54

we’ll work our way up there. Today, we’re going to continue a little sort of mini-series we’re doing about really just our period of expertise here, the home lending process. In a previous episode, we started this off by talking about preapproval, how important it is to just dive into that process as early as possible. pre-approval, as I had mentioned is really, it’s it’s half education, at least the way I do it. So, if you want to learn about owning a home, applying to own a home, even if you’re not air quotes ready is a great way to get into it. Because that application is more of a consultative process than a, you know, like a credit card where they go, no, yes, here’s our offer, you know, $300 secured, take it or leave it by you got you have 30 days to it. Preapprovals do expire, don’t get me wrong, but especially in lending generally, we tend to work with people for a really long period of time in certain situations. Sometimes it’s instant. Sometimes I’ve worked with people for years. So, get in there and try it. But let’s move to the next step. Right.

Rob  01:59

So, your approval,

Adrian  02:01

here you go, Rob, the reason is pre-approved for this payment, send me some properties.

Rob  02:06

So, we do so let’s say we do our thing, right on the real estate side. And we are now in contract. All right, hurray,

Adrian  02:14

we made your offer you got it accepted, masterfully negotiated. There you

Rob  02:19

go. All of those things. Now, we’re in contract. And inspection period started today, because we got into contract yesterday, day zero. So, what’s next? Now we’re going to negotiate and do all of our things. And that’s the different episodes. But from a lending standpoint, okay, you’re in contract, the contract says three business days, you have to have an application. Even though you’ve already done a quasi-application through the preapproval process, you have to apply for the loan that you’re going to purchase for that house. When I say that houses now, we know the price. Now that we know the earnest money, now we know the down payment, we’re going to continue to negotiate through inspections. But now we know the terms of the loan at least basic terms of the loan. So okay, let’s start over again.

Adrian  03:16

First step, go first step. So, when you guys get the contract, of course, you send it to me, and you send it to title and simultaneously. A number of processes begin. And you mentioned it as an aside, I an inspection is not typically required by anyone. But I would highly, highly recommend that we’ve talked about this so much. I’m just gonna say your opinion for you, Rob. Because yes, thank you. we’re firm believers, I believe you should get an inspection if you buy even a car, let alone you know, a six figure, piece of asset a property, you know, especially as much as you can pay for a home, you should definitely spend a few 100 bucks making sure that an expert looks it over. So that’ll get ordered on my side in the lending department. A bunch of extremely talented people who I rely on are going to dial in. So, we had an application where it was a lot of hypotheticals and what ifs were estimating what taxes and insurance are going to be based on averages. Maybe we’re dialing into a specific property to run numbers, but now we have a contract in front of us. The figures are very certain. And we’re going to put that all together and send you what really makes it a triggered as we say application, just like you’re saying we got that three-day window from the from proceeding contract to dial everything in and then send you what is very large packet of disclosures. It’s over 100 pages and it can get very confusing and overwhelming. When that hits your door. Most of this stuff gets signed electronically. And the document package breaks down into a few different subcategories. A lot of it is boilerplate. Cover your or we cover your butt.

Rob  04:58

Okay, we’re purge we’re PG 13. Governor a

Adrian  05:03

lot of CYA, it’s a lot of letting you know rights that if we were as a lender to violate, we’d get shut down so quickly. For example, one of the pieces of paper lets you know, as a consumer that it’s your right to receive a copy of your appraisal. I don’t see any reason why a lender wouldn’t provide this to you. But we have to have it in there because someone’s screwed up in the past. And now this is a system. Same thing about your rights, you have a right to choose your own insurance company. Honestly, a lot of people put this off day one, you should be calling up insurance, it’s going to have an impact on your payment. I am in this industry. And I have a rough estimate that I use, I use a quarter percent of the purchase price as a yearly premium. But then in my own house, I mentioned this all the time, the emergency room is right there. So, my premium ended up being way less than that. I mean, I can eat a fifth of that. Yeah, you’re right. So, you know, you want to get it dialed in, because it’s going to impact your monthly payment and your cash flow. No matter what kind of loan you’re doing. Even if you’re paying insurance and taxes out of pocket. Obviously, it’s an expense that you need to factor for. So, we get everything dialed in. And then I think the most important part of that disclosure package. And if you breeze through all of the I mean, there’s so many words in there, it’s like an apple terms contract times 10. You know, there’s a lot of stuff. And I think that that’s one of the faults in the system is that it’s so much data, that people kind of gloss over about page five, and then just burn through it, you know, click, click, click, especially with sign, it’s so easy. Slow down for the loan estimate that is at this point, this is the rough draft of your loan, there’s still plenty of room to move around and change the terms in there. What you’re seeing there is not final version, necessarily, but it’s going to quote you for fees, and there’s a tolerance, those can only change by a certain amount, a lot of the title fees and stuff. And then it’s also going to start with a rate. And it’s going to build out a payment based on that rate. But it’s not necessarily going to show what the charge or credit is for that rate. And that gets into kind of structuring your loan, which may or may not be another episode that we can kind of really peel into all of these, you know, layers of options. It’s a matrix, sometimes it’s difficult to even communicate to clients, just how many options there are out there. But that’s our job as a loan officer is to simplify that, hopefully into three or four more logical choices, you know, there’s some that are going to be not really make any sense. And then there’s some that are gonna be a matter of choice. And the biggest one, just for kind of the broad view on it is that you can pay more money, when you do a real estate transaction. Most of the time, you can pay more money to buy a lower interest rate. Or you can pay less money or even get a credit towards your closing costs to get a higher interest rate. And that strategy really just depends on how long you’re going to own the home. If this is a five-year deal for you, you probably don’t want to spend a lot of money buying a lower rate, because you may not get that money back in monthly payments savings. If this is the forever home. And I’ve had this conversation with a lot of people who are moving, you know, from their four-bedroom house, they raise their kids into that single family, you know, or single floor rather, you know, one- or two-bedroom, little retirement house. Payment is everything because it’s all about cash flow. So, we want to try to drive that rate down. And we want to kind of secure the most stable and low-priced monthly payment. So, your mileage may vary. Obviously, like a lot of things we talk about, situationally, we’re going to make decisions. But bear that in mind, especially at the beginning there, a lot of people sometimes think this is the time to go back out shopping for a lender or for rate, you are putting yourself back against the wall when you do that, because 30 days sounds like a lot of time to close. We are typical closing; we usually book about 30 days. There’s a lot that has to happen in that time, though. So, if you’re going to shop, you better do it really early, and you better hit the ground running, if you switch the company that you’re with, usually you can at that point without really causing some chaos. But legally, you do have a right to still switch lenders at that point. It’s a good thing. Because if the person that you were talking to turns out to be lying, and they want to charge you have an exorbitantly high rate or high cost forgiven rate. You still have the ability to sidestep but

Rob  09:22

right, it really needs to be done in those first two, three days, which is doable. The caution I would have. And this goes back to the whole concept of you know, our her our project here, right is you want to have relationships. Well, if you’re out shopping and you have three days to do it. Hey, I got 72 hours to go shopping. Well, are you going to be able to build relationships with any other anybody else other than, you know, Shyster salespeople in 3d? You might I mean there’s some good ones out there don’t get me wrong, but you have to be able to build a relation Ship in three days, well, when’s the last time you build a relationship? You know, in talking to somebody for 10 minutes, maybe three times, if you had a

Adrian  10:08

chance. And at that point, you’re the sale. So, it’s, this is one of the hardest things about it too, is there are a lot of empty promises that are offered upfront. When I did my house, I decided that I would play the, you know, completely ignorant consumer who has no idea what’s going on, I jumped on all the big sites, I put my name and my information in, and I just let these people absolutely bomb me. And really, the strategies that were used kind of blew my mind, I mean, I have an ethical standard that I set for myself, and I, you know, I’m hard on myself with those rule sets, to listen to the things that people were telling me to be lied to. And to be almost pseudo manipulated, or attempted to be manipulated was, at least for me, a fascinating process, but it really woke me up to the idea that there is a lot of misinformation out there, unfortunately, and someone will treat you like you’re very, very important, right up until they have your business, and then some of those people will just walk away, because then you’re not going to make them more money you’re already in, you’re stuck, we already ordered this, that and the other thing, you’re not going to go away. So, I’m gonna go move on to the new business that I can generate. So yeah, having a relationship and especially ideally, if your realtor and your lender can have if they have a back-end relationship, that is really nice, because it means they can communicate in your best interests as our mutual client. And you have conversations like that all the time. Right, Rob?

Rob  11:31

Right. And the key there is, there’s relationships, because there’s a higher level of accountability between you and I broker, you know, real estate writer and right lending broker and mortgage broker versus somebody, I dropped the ball on one lion, I could lose you forever. Right, exactly. And we’re going to share, you know, 50 clients a year or more, yeah, and we have to be accountable for the next one, the next one and the next one, versus, you know, the client out there this listening the buyer, or in this case, the buyer, usually, because it’s a lender involved, but they have to, you know, okay, they’re gonna be a client again in five years, right? Yeah, oftentimes, Now, oftentimes, it’s sooner than that. But the average, you know, five to seven years is how often people buy and sell homes. Yeah. So there just isn’t that ability to get as deep as often as we can. So, you’re relying on the strength of our relationship. So, they’ve settled on the lender? Yep. Obviously, you’re

Adrian  12:38

back to that day one is good. Yeah. And usually, we’re gonna lock the interest rate within that initial period there as well. So just to kind of 10,000-foot view of this concept, when we lock, we’re effectively hedging the money that you’re going to be using to borrow. So, if, on that particular day, 3.25% is a rate that has not cost, no credit, it’s called the par rate. At that point, when we lock you into that rate, we’re locking you into all the rates that were available that day. That means that even if you change your mind a few days later and say, hey, I remember you told me I could get down to 3%, for 1.1% of the loan amount, which is this is just an example. It’s going to be different every day. It’s a, it’s a moving market, this gap, you know, I’m not saying that you can get a quarter percent lower for a point, it could be that one day, it could be two points the next day, it could just depend on which rate you’re going between, but there’s a whole grid out there. And you’d have the ability to move between those options and make other choices like whether or not you want to have monthly mortgage insurance, or you want to pay the larger single premium cost to do one and done a big lump sum at closing, and then not have the monthly mortgage insurance be part of your payment, which you can usually do with like a conventional loan, but not with, for example, an FHA loan, typically, a lot of sub options here. And there’s unique loan products that will always sort of fill the void, depending on people’s pain points. But knowing and understanding how this stuff works at a higher level can help you avoid, I got to say one of the pitfalls I see is that it is important to have goals in mind. But I have watched people pay more because they didn’t, for example, understand mortgage insurance, so they want a loan that doesn’t have it. So, they’ll get one that has a much higher interest rate. Well, the rate is there for 30 years, the mortgage insurance is there for five, maybe, yeah, if your house has low appreciation, maybe less. We used an example just a couple episodes ago about you know, in three years from 5%, down having 20% equity. So that’s another episode though. We talked about mortgage insurance in another episode, so I’m gonna go down that rabbit hole, but in this initial period, there’s a lot to be done. So, you’re gonna be doing your inspection with your realtor. In my opinion, for smart, you’re going to call at least two insurance companies right out of the bat. Same thing here if you got someone with a relationship, that’s great. We want People who are going to react to we’re gonna get the documents that are needed for the lender quickly and be able to get you qualified for the insurance rate that they’re quoting you initially. But I do recommend going to a few different companies, I say the same for any type of insurance really. Auto insurance is also the same way. Most people when they’re younger, they’ll end up with what progressive or GEICO but then as you get older companies like am fam and farmers and you know, a bunch of other companies, they cross paths, the premiums, cross paths. And the reason is because those companies are targeting specific demographics, progressive and Geico, their bread and butter is young drivers. So, they are cheaper for young drivers. You go quote, and fam, I mean, I experienced anyway, if it’s something like four or five times as much, they have to give, they have to quote something. So, they quote something ridiculous. And if you happen to book it, then that offsets the risk for them, but most have their own niche in the market. And homeowners’ insurance is no different. So, some companies may be exorbitantly high, because if property is risky, maybe it’s got like a pool, let’s say we’re another company, that might be what they do day to day, so they’re able to have a lower risk threshold. So

Rob  16:08

right and grab your quotes mentioned, it’s important to take care of these types of things like insurance ahead of time. Yeah, in the sense that we’re doing this and we’re not doing this for days before close and asking an insurance agent to put together a policy, we’re doing this right, a day after contract. And yes, there’s a risk that everybody’s going to do all this work. And the contract isn’t going to fulfill or go through or whatever. But at the end of the day, we’d rather do the work up front and call that collateral damage. Yeah, on this time wasted, then get three days before closing and say, you know, oh, shit, when we don’t have a, you know, an insurance policy or binder, as we call it in the industry. Yeah, we don’t have an insurance policy in place. Therefore, we can’t finish the loan because the lender, of course, to do a loan on a real bummer of

Adrian  17:05

a way to lose days off closing. Yeah. But I’ve seen it dozens and dozens of times before it takes two to three weeks to get that actual quote. We had one recently where the insurance agent wasn’t able to insure the property, which is extraordinarily rare. But banking on that not happening isn’t worth the risk. Just want to take care of this stuff as quickly as you can upfront. So, when I or at least you know, when your loan officer or their assistant reaches out to you, and that initial disclosure package comes out, they’re also gonna be asking for updated documents, you pre-qualified with pay stubs that are probably already too old. So, you want to you know, if you really wanted to jump ahead and be a superstar, when you got that contract coming in, go get those pay stubs that cover the most recent 30 days, make sure that you know if you sent me, June and July, but it’s already September, send me your August bank statement. Because I need the two most recent when we enter underwriting, and we really want to hit the ideal is when we hit underwriting within that first week. That’s the sweet spot for me, I love that because then we got all our you know, underwriting is going to review your loan, it’s always going to be a conditional approval, because they’re still going to need the appraisal, they’re still going to need other documents, stuff from title stuff in the insurance company as they’re building that binder for you. But by getting this all started in that day one, regardless of what lending company you’re working with, you will set yourself on the right path to at the very least uncover problems early. So, you still have two weeks to solve them, instead of being back up against the wall if something pops up. Because I’ve been there with clients when they didn’t provide documents right? When something was harder to get. And then it’s just frustrating because it’s hard to set the timescale after that much better than they’ve done early.

Rob  18:48

So, you’ve the other thing is right at that same time, so we’ve done the application. you’ve updated all of your documents and application disclosures. You’ve sent your earnest money into title Yes, everything’s earnest money with title is going to happen within the first three days typically write and talk to your insurance, your insurance agent to get the new insurance policy and then you’re ordering the appraisal. And this is super important. And interesting piece we will do an entire episode on appraisals whether they come in at value or above value or below value and what all that means. Yeah, but you’re ordering the appraisal. Now here’s the thing, you’re typically paying for that appraisal upfront.

Adrian  19:36

Yet lenders gonna ask for a credit card most lenders are gonna ask for a credit card and then they may charge or in a lot of cases the company will put just a hold on there. Right and then if we get to closing that becomes or continues to be part of the closing costs, whether that’s paid with the seller credit or paid as part of your money out of pocket. Remember closing costs are separate from down payments. They got to be paid by us Someone you can work with seller credit into your contract so that the seller will pay for some or all of it. Or you can expect it to be a big chunk of your money. Because we’re a national podcast here, I don’t want to necessarily quote figures, I know that for me in the Portland metro area, and in Washington, 4500 bucks plus a year’s worth of taxes would generally give you what closing costs, were going to be a really rough estimate, just to kind of like if you’re on the fly looking at 30 properties, and you want to just get rough numbers. But there’s a huge variance there. And I mean, there’s a lot of factors, the difference between closing on the fifth of the month and the 30th of a month on a property could literally be a four figure difference in how much you have to pay at closing because of rated numbers that you’re going to pay prorated tax, though, yeah, and you got to pay all that all that cost is it’s the title costs, its state and government recording fees, it’s paying the seller back for taxes that they’ve already paid through the end of the year, putting enough money in an escrow account so that you have money to pay taxes when they’re due. Coming up at the end of that period, paying your first year of homeowners insurance, and then also having a buffer in there, all these escrow accounts, they’re built with a buffer of a couple months’ worth of taxes and insurance. Because we know that when you go to renew insurance, and when you go to pay taxes again, more often than not, the number is gonna be higher than it was the year previous. So that buffer is built in so that you don’t have a giant shock and payment jumping up the next year to compensate for you know, now not having enough money and having to compensate for the future taxes going up. So, there’s a lot of moving parts in that there,

Rob  21:36

Hoa reserves, HOA fees, we have in certain counties in in Oregon, we have like transfer taxes, you know, it’s usually a few $100 For a typical home. Just there’s a lot of different things that go into that. And then of course, the whole concept of hey, if you’re buying down rate and you want closing costs to be higher, so that your payment is lower, then so be it and all of that. So, it can easily it can easily oftentimes be if you’re aggressive and trying to get a lower rate, it can easily be $10,000 for a five $500,000 purchase. Yeah. I mean, it happens 2%, you know, sometimes 3%. There’s also limits on that, which we could probably talk about some different scenarios where we’ve got a ton of concessions in the past, and we literally spent every dime we possibly could. Yeah. Because we supersets for money to play with. So, there’s just there’s a lot of different things and it’s based on the scenario of that loan.

Adrian  22:39

But in terms of out of pocket, at least, right? Earnest money is a refundable in theory deposit. So, if you have like a financing fail or you can’t come to terms, there’s an appraisal issue and you can’t come to terms on how you’re going to solve that problem. You should be getting that money back that earnest money then usually rolls in and becomes the down payment. When you go to closing instead of them refunding you that money, they just have you bring the difference, you know, between that and whatever’s needed for closing costs and down payment. Usually, that’s 1% of the sale price, would you say it’s like the most typical, earnest money what

Rob  23:11

you know, one to 2% on the lower price points, it can be, you know, more like to bid higher, higher price points, it would be, you know, typically 1% You know, $750,000 house 7500 bucks, no big deal, but you know, $200,000 home 2000 bucks, maybe isn’t enough, so we’ll bump it up to four, you know, different things like that. But it all goes towards the closing your down payment and so on. And there’s different strategies there if you were trying to put together a deal that is more attractive than the next guy’s if it’s competitive.

Adrian  23:48

Yeah. And then you got inspection, what’s the average inspection cost?

Rob  23:52

is gonna be anywhere between 600 and 1000 bucks typically, on the higher end of expense, if you’re dealing with like, say, an on-site, sewage system, like a septic system or a well, city water, which you don’t necessarily have to test. You know, so there’s different things like that that can

Adrian  24:15

send you up or down on that sort of thing. The general rule of thumb is even if it’s 1000 bucks, 1200 bucks, whatever it is, that is very cheap insurance versus Hey, the well sucks for a million different reasons. Yeah, you got to do a new well, or we got to connect or going to interview our favorite inspector but it’s I mean, we could go on radon Testing is it’s all over my mind. Go just Google radon if you don’t know what it is. It will blow your mind that it’s even optional. I mean, it’s surreal what it can do to people, and we’ve got right we’ve heard horror stories about people who realize their house was effectively radioactive

Rob  24:56

as they were selling because someone actually took the time to do the testing. Right, and now they’ve managed to negotiate the seller is gonna pay for a RADON Mitigation, because that’s not something that is expected to be a problem in the house. So, it can be in the 1000s. It’s worth it. Yeah. Right. Yeah. So, it’s worth mentioning at this point, this, this starts to become the point of no return for a lot of clients. Yeah. And the reason for that is because they have to pay for that appraisal, you know, which can between 600 and 1000 bucks, depending on the area, and what type of home it is, and all that

Adrian  25:30

sometimes that’s sometimes more there are, this is rare, but there are appraisals that we get back where it’s two or even $3,000. And that’s because of house being potentially very remote or being very difficult to appraise appraisals, are more expensive than they’ve ever been. There was a time when three foreigners within my career appraisals were well less than half of what they cost now. But they have gotten more complicated in certain ways. And appraisals are really easy. Like if I’ve got to not really easily it’s a difficult job, don’t get me wrong, but if I got a house, and it’s in a cul-de-sac of 120 houses that were all built, no, not a cul-de-sac in a community, that’d be big, old, you know, a community that was built all at the same time and the same specs, and it’s just little variances in rooms and square footages. That’s easy, there’s going to be recent sales in that neighborhood that the appraiser is gonna be able to use and go, I just had to adjust the square footage by a little bit. But if you got like a geodesic dome in the middle of a forest, it’s going to take a real expert to figure out what that house is worth. Right. And that’s a unique problem. Those of you signing in here asking about geodesic domes. Just call me up, we’ll do a

Rob  26:40

Friday. Yeah, exactly, we’ll do something, you know,

Adrian  26:43

for the most part, they still probably, they’re getting close to 1000 bucks, I think it’ll be about $1,000, you know, in the next five years or so.

Rob  26:51

But layer that on top of, you know, the 1000 bucks for an appraisal and then layer that on top of an inspection. Yep, so a couple 1000 bucks in. And this is a house that you haven’t necessarily, you know, guaranteed to buy at this point. So, this is where we start having those conversations of, you know, this is the risk of getting into contract of a home, you’re not going to get reimbursed for this. So, you make sure you know, there’s multiple points where we’re going through the lending process, making sure that everything is dialed in there, you’ve given every chance for that underwriter to say hold on, I want that document, I want this, that whatever. That’s why you want these things done at the front end. Also, you want to know, that’s why we do the insurance upfront, we want to know if this is a typical insurance policy or oh shoot, you know, there’s some flood insurance requirements or yeah, different things that cost five times the amount,

Adrian  27:50

I’ve watched that surprise, double the insurance cost just overnight, because there’s a little stream in the corner of the property. Right. And it’s

Rob  27:57

easy, you know, it can easily happen. And granted, it happens less often with professionals like us who have seen it 1000 times. But they’re still we want to unearth those surprises, you’re a couple $1,000 In between inspection and appraisal. So, we’re just we’re having you know, buying a home Yes, going through the due diligence process will

Adrian  28:18

lighten me up man. Love it. It’s not if you can take one takeaway from this entire conversation, it is gotten everything done as early as you possibly can, right? If you’ve got a lender who does a pre-approval that’s more advanced, where they actually run you through underwriting. That’s fantastic. That’s getting some check marks out of the way. But either way, you know that stuff is great. It’s great from a marketing perspective, but it is non promissory, there’s a lot of boilerplates in there that says hey, we’re not actually qualifying you for a loan, though at the end of the day, you still got to come back and do that. Because hey, if you lost your job a week before closing, obviously, we couldn’t do the loan. So, there’s a lot of caveats in there to cover ass again. But you know, the big thing is that especially once you hit contract, you’re gonna go back to underwriting no matter what company you’re at, make sure that you get them everything and that it’s accurate. And if you’re in pre qual, and you’ve got a lender who’s asking you for stuff, you know, I’ve had people kickback on me hard. I’ve had to even argue with people about it, because they feel like they’re being investigated. Well, you are, you’re going to be borrowing six figures probably, you know, in multiples here, likely. So be ready for that. And don’t feel offended when someone questions something. If there’s a one in 100 chance that that deposit is, you know, not even one and 101 in a million chance that that deposit is money that you made by selling missiles to the Russians instead of you know, selling some gold bullion or your bicycle or whatever it is, then we have to investigate that we have to get a bill of sale. We cannot. There’s no part of the lending process where the federal government’s like, if you’re pretty sure you can assume whatever you want. That’s not in the cards. We have to be a assuming the worst, honestly, to a degree, because that’s our job is to find the worst, we need to find those red flags were tasked with that by the government. So, and by our companies, so expect that and come into it with that idea of I’m gonna get everything really upfront. Insurance is a great example we’ve had insurance option problems potentially even crash and burn a transaction. And if the appraisals already happened, that person that appraiser is a contract employee, they have to be by design. There are no appraisers who work, you know, for the lender, otherwise, they’d be on my payroll. And I would say, I want everything to come out the way that I want it to, because I want to fund loans, it’s in my best interest, if I get the appraised value we don’t like under appraisal, as a lender, which is why the government stepped in and said, Cool, appraisers now have to work for a different company. Right? So, the appraiser has to get paid, you can end up out your inspection and out your appraisal cost. And then find out that your loan won’t go through if you don’t really take the ball and run with it right at the beginning.

Rob  31:02

Right, which is again, I guess this is the third time around. Yeah, get everything done upfront, provide everything that’s requested, and then some and have that top notch professional that is going to, you know, look out for your best interest in the sense that they’re also looking out for their best interests. Yeah, nobody gets paid until we close right? Nobody makes a living until we close

Adrian  31:29

and although we don’t get paid, I don’t get paid directly by my clients. In theory, I don’t you know, no one hands me a check from for my services directly. But we do get compensated on the back end. As these transactions close. there’s money to be made, obviously, paying interest on a loan the size. So don’t be afraid to call your lender don’t be afraid to ask questions twice or three times. I would rather hear the same stupid question three times than watch a client make a stupid mistake. And I have unfortunately watched people make stupid mistakes I’ve watched right? Oh, I didn’t want to buy you a $700 truck payment show up when we do that last credit check. Yes, we do. recheck your credit right before closing? Yes, we call your employer. This is one of my favorite anecdotes is kind of a sad story. But I used to work at a lending company. And you know, as we do right before closing one of my coworkers a loan officer, his you know, back-end team processor calls up to the company. And they go, hey, it’s Jeff still works there. And they go No. Just been let go. So, the word gets back to the loan officer, and he calls the guy up. He’s like, Hey, Jeff, Dude, what the hell, man? This is over. Like, why didn’t you tell me you lost your job? And he goes, what do you mean? And it turns out that HR had it logged that this guy was going to be let go. But management hadn’t actually had the conversation with him yet. So, the loan officer inadvertently told this guy, he’d lost his job. And sure enough, yes, the transaction failed out because you still got to be employed, at least on the day of closing, if you get laid off the day after? That’s the worry phone business. No worries, no worries, Yeah,

Rob  33:02

you’re good, the ink is dry, right?

Adrian  33:05

It’s your house, for better or worse. But that’s the thing you got to you got to just keep on this ravenously. And especially if you are going to be one of these people who tries to save money, like I so stupidly did myself because I thought I was clever. And go with one of these Fly by Night internet companies that’s probably run out of some guy’s garage, and he’s just brokering, and you know, just trying to get transactions in the door and has no resources, you’re gonna have to stay on top of them. I had to teach my loan officer, the down payment program that I was trying to do, I had to explain to him that I did qualify for this program, and why which is insane. But that person is licensed and out there doing business. Unfortunately, there’s not like a secret shopper program going on where someone’s making sure all the lenders actually know the rules. Sometimes they can think that they’re qualifying you for something send you up to underwriting and get denied. It is super, super shitty, but it’s the reality of our industry. And it’s one of those things that shows the deep importance of working with professionals with experience. And ideally with a company that backs them that’s, you know, got a positive reputation in the area. Right? Yep.

Rob  34:13

I love it. Um, so the next, the next episode in this series will be we’re going to dive deep into appraisals.

Adrian  34:21

Yep. That’s what we’re start back off where the appraisal hits the desk and what they mean.

Rob  34:26

And what happens when it doesn’t work out the way we want it to hang out or we do them and then and then we’ll take you through to close. The last thing that I would mention here is just this concept of there’s a bridge here between inspections and appraisal as the next step. Yeah. Generally speaking, we figure out whatever we’re going to negotiate for as a result of inspections and conditions. That’s not Something that we don’t want to send an inspection to a lender. Now he’s Portland or an insurance agent, or an insurance agent.

Adrian  35:07

Yeah. So, we better argue with you where your real estate agent should say, Yeah, I guess we need to release it like that’s you need to be backed into a corner to send that info. That’s your data you paid for it, keep it your inspection isn’t

Rob  35:18

really. And the concept there is just because and the reason why is because just because it shows up in an inspection, that an inspection inspector who’s licensed bonded and insured says, there might be a problem with this and these other 50 items in the home. What happens is insurance companies and lenders would say, oh, well, you have to fix those 50 items, when really there was a problem with two things. And there was a watch list or a deferred maintenance list for the other 38 things. Right, right. And that’s the piece that you know, there is mistakes made from time to time. Obviously not in an experienced brokerage team as well as a lending brokerage team. Those conversations will be had back and forth. And they’ll work through that process. But

Adrian  36:14

we’re done. That’s why you do the inspection nice and early to I think it’s worth mentioning too, because we’re at right now we’re in a time where the lag time because of the volume that’s going through appraisals are taking two to three weeks. Right, we’re right now we’re ordering those right at beginning of the transaction because you want it right, again, we want to have that data. Really, one at least if not two weeks before closing, we want to have all our data points in right in the middle of the transaction and to have all our data together, right. So, when appraisal turn times are faster, we actually wait to order the appraisal typically like a week, because what we’re really wanting is that the appraiser doesn’t visit before the inspector visits and then returns the report. Because if the inspector says, hey, the roofs about to fall off, and the seller says, I don’t give a crap, I’m not fixing that. There’s no point in having the appraisal, it’s time to get out of that transaction. That’s not it’s not going to work, we know lending is going to kick back on that. So, by doing things in order like that, but doing them quickly, you can avoid this extraneous cost of well, I paid for an appraisal on a place that the inspection told me I knew I already knew I wasn’t gonna buy it. So, I needed to walk What a waste of time, you know, or sometimes we’ve seen it too, right where the inspector will call certain stuff out. And there’s simple fixes. So, they do the simple fixes before the appraiser gets there. I’m talking like double strapping the water heater is a super common one missing smoke detectors. an appraiser will literally park a transaction and wait for you to do that stuff and revisit to make sure it’s been done. If there is something like that, that is a code violation. You got to in our state at least you got to strap put straps on your water heater, it’s dangerous. So, you’d have earthquake would fall over. And there’s a number of little fiddly things like that, that, you know, good agents should catch before inspection as well. But at the end of the day, there’s a lot of moving parts and it is easy to miss something. So, it’s worth making sure that you do these things in order.

Rob  38:00

Right. Awesome. Well, I love it. Hopefully, you got some good information today. appraisals will be next. I’m sure you guys are all salivating can’t wait for us to just close on the edge of your seat listening, right?

Adrian  38:16

Absolutely. Thank you so much for your time today, guys, and good luck out there. We’ll catch you next time. All right, thank you all.

Intro  38:24

Thank you for listening to the get rich, slow podcast. If you like what you learned, please subscribe, rate and review so we can grow wealth for even more families.