Tune in to learn about the importance of finding the right real estate agent for you! In today's real estate world it is so important to find someone that truly has your best interest in mind. Ron is here from Eagle Home Mortgage to talk about The good, the bad and the ugly...of home loans. Do you know what the difference is between a home inspection and an appraisal? Thom and Dave are here to help you out with that!
Dave Burnett: This is the Idaho Real Estate Buzz with Thom Dallman of Core Group Realty. CoreGroupRealty.com, give a call today 208-933-7777 find out why they say, "You always get more with Core."
This is the Idaho Real Estate Buzz with Thom Dallman the co-owner, designate broker of Core Group Realty. Core Group Realty, CoreGroupRealty.com the website, give them a call right now, 208-933-7777.
Thom Dallman: Please Do.
Dave Burnett: Even through the weekend there are agents that got you coming.
Thom Dallman: We've got agents standing by, and people ready to help you for whatever you need.
Dave Burnett: As we begin to wind down summer, headed toward the school year you might be thinking, I kind of want to get settled in, still plenty of time to get that home bought, get settled in by the time school gets very far underway.
Thom Dallman: Exactly, still a great time, still a crazy marketplace.
Dave Burnett: It's been hot. You've sold quite a few homes here in the past week, and ...
Thom Dallman: Everything that we get listed is going quickly, and getting under contract right away, so that's always a good sign.
Dave Burnett: It truly is, if somebody is thinking about down-sizing now's the perfect time to get that house sold, get downsized, find something a little smaller.
Thom Dallman: It's a great time for it and that's what we're seeing a lot of is those baby boomers who are just kind of in that process of kind of downsizing and moving into smaller spaces and stuff like that to you know, not have big roaming houses.
Dave Burnett: Well, you know, I mean I look at it from my perspective, I don't really need a four bedroom home anymore.
Thom Dallman: Exactly.
Dave Burnett: I could go to a three bedroom and reduce several hundred feet off my square footage and cut a reduced cost. So, perfect time to do it.
Thom Dallman: Exactly. Reduced costs on your mortgage, reduce costs on electricity, and utilities and so forth, so yeah, it's a great time to do it. I mean our home prices are still continuing to climb, we're still at all-time highs for home prices. I just did some numbers this morning looking at the first half of the year compared to last year and so I've got some of those numbers to share with everybody.
In Ada County for single family homes, this is just strictly single family homes we had an eight percent increase from last year in sales. So we went from 5,002 sales last year in the first half of the year to 5,409 this year so a pretty good, pretty good increase.
Dave Burnett: Considering how tight the market was. That is real good.
Thom Dallman: Exactly. The interesting part of that was that last year we were roughly around that 25% of the sales were new construction, this first half of this year, we averaged 30%.
Dave Burnett: Wow.
Thom Dallman: Thirty percent of the homes were new construction properties that were sold. That's crazy, you know, we look at the market place right now, with that low inventory shortage that we had for so long, there's just so much new construction out there, and so much opportunity out there. In Ada County alone when you look at the active listings right now, new construction represents about 47%. Forty seven percent, almost half of the listings that are out there right now are new construction in Ada County.
Dave Burnett: It is amazing. Especially as you get out of the Boise city limits because there's just, there's not a whole lot of available properties unless you're tearing something down, but if you head out toward Middleton, out toward north of Nampa, out north of Caldwell the construction ... and I haven't been south of those cities to see what's going on.
Thom Dallman: Canyon County, similar numbers, 22% last year vs. 24% of sales were new construction this year. But they had an increase of 14% in sales from last year to this year. First half of last year to the first half of this year. So, much more growth going on there, much more activity as far as properties for sale and stuff like that. So, yeah, that's where people are moving.
Dave Burnett: It's just, I mean it's almost frightening, I mean I was listening to somebody talk earlier this week about how quickly the Treasure Valley's growing, and they were making comparisons of where we'll be in 10, 15 years and the biggest problem in infrastructure, which is going to be tough to do. For those who are moving in from out of the area, if they're moving in from California, or Seattle or Portland, there's no thought what so ever to commuting 30 minutes on the freeway.
Thom Dallman: Oh no, they're so use to it. They're actually happy to have a 30 minute commute because it's not an hour and a half like what they are used to.
Dave Burnett: That's not bad at all. Now for me, for an old timer, if it takes me more than 15 minutes, I'm grumpy. I'm just grumpy.
Thom Dallman: Exactly.
Dave Burnett: But for those who are new and settling to the area 30 or 40 minute commute, no big deal.
Thom Dallman: No big deal at all. That's how I felt when I moved here from Chicago, many, many moons ago. It was nice.
Dave Burnett: Now you're like me, 15 minutes, you get grumpy.
Thom Dallman: Well, I'm at 20 minutes.
Dave Burnett: But there is just incredible growth going on in the real estate business.
Thom Dallman: And we saw the same numbers pretty much in July. You know 26% of the sales in July were new construction as well. So with that increase in new construction of course is the increase in the median sales price. You know we jump up total median sales prices in Ada County went up from $255,000 to $299,000 so almost $300,000 for the median sales price right now for Ada Country for single family homes. New construction median home price was $355,000 up from $319,000 last year.
Dave Burnett: We've talk about it. But I think we've seen the end of any homes in Boise City being under $200,000.
Thom Dallman: Exactly. It's really difficulty to find. If you find it, it's usually something that, something that might need a little bit of work.
Dave Burnett: Or a lot of work.
Thom Dallman: Or a lot of work, in some cases. It's been an interesting ... that's actually something that we can talk a little bit about because it's been an interesting endeavor for those people who are qualified for loans under $200,000. You know, the regulations around, you know, what you can purchase as far as the safety and soundness of the home it's difficult, if it's a fixer upper, to get your loan and appraisal. So, it's yeah, it's difficult, so you've got to be really super careful of what house you're looking at and what house you go to put an offer in.
Dave Burnett: Which again comes back to making sure you get a qualified real estate, that is somebody who's trained, that's in the know, much like you have here at Core Group Realty that the agents just aren't out willy-nilly saying, "Hey's there's a for sale sign out, let's do it." You know, making sure that it's something that is credit worthy.
Thom Dallman: Once again, interview, interview, interview. Make sure that you're getting that trusted advisor that can, you know, guide you in the right direction.
Dave Burnett: Has your best interest at heart.
Thom Dallman: Exactly, exactly, so ... make sure, making sure that you're not paying too much for a house, you know, there's a lot of agents out there, not a lot, I'm not going to say that, I should take that back, I apologize. There's a few agents out there who are not as focused on what's best for the buyer, let's just say that, and more what's best for their pocketbook. You know, it's really important, and lenders too, it's important to have that trusted lender, that trusted real estate and title company looking out for your best interest.
Dave Burnett: It's kind of the mantra of this show that this is the biggest transaction you will make, unless you own a business. It's the biggest one you'll ever make, so it's important you get people around you that you feel comfortable with. Somebody you feel you can call and ask questions and feel comfortable with the answers you get.
Thom Dallman: Exactly, you want to make sure that you've got that person who's going to help you out, be there for you.
Dave Burnett: I wish you had your crystal ball.
Thom Dallman: So we could know what's happening.
Dave Burnett: So we could know what's happening because ...
Thom Dallman: That's going to happen, it's a tough ...
Dave Burnett: Will it continue to grow? Will it not? I mean.
Thom Dallman: I will say that the experts out there are divided 50/50. There are some people who say we'll have a couple more years of growth still, and there's 50% of them who say we're heading for a crash. So it's a tough market right now.
Dave Burnett: Well, I mean, that bearing in mind shows the importance of buying now, getting that property now, and have that security that, because there's a financial security in that physical property. That you have that physical property, it's not some sort of a certificate, somewhere off in the sky saying that.
Thom Dallman: Exactly, yeah. Real estate is one of those long term investments, you want to go into it knowing that you're going to keep it for at least five to ten years to get that investment back and to, you know, get that equity built in the property and stuff like that. The years of, the time of like living in a house for a year or two and then flipping it and making a huge profit, just is not necessarily happening. People are getting equity obviously if they bought a house two years ago because of the prices going up so quickly and stuff, so there is some of that happening, but not as much as it used to be. It was before the crash in 2008.
Dave Burnett: If the kinds of questions we have raised in this conversation over the past few minutes is something that you're wondering about, you can get a hold of the folks here at Core Group Realty and they'll sit down and talk with you honestly about, you know, here's this section of town, here's what's happening here. Because really from various sections of town or county, it kind of changes a little.
Thom Dallman: It changes, yeah.
Dave Burnett: That way you have somebody that their more than willing to sit down and talk with you, even if you're not looking to buy right now. If you're just looking at in interest, kind of kicking tires as it were, they are more than happy to talk with you here at Core Group Realty.
This is the Idaho Real Estate Buzz being brought to you by the folks at Eagle Home Mortgage and of course Core Group Realty. By the way we'll talk to Ron coming up in just a few minutes with the Eagle Home Mortgage to find out more what's out there. The good, the bad and the ugly as it were. So we'll be talking about that as well. CoreGroupRealty.com that's the website. Find out why they say, "You get more with Core."
Dave Burnett: This is the Idaho Real Estate Buzz with Thom Dallman, the co-owner, designated broker of Core Group Realty. CoreGroupRealty.com is the website. Give them a call: 208-933-7777. Or, you can go to the website: CoreGroupRealty.com. We get a chance to Ron with Eagle Home Mortgage each and every week.
Thom Dallman: Every week.
Dave Burnett: He told us during the break he wants to talk about the good, the bad, and the ugly, which that was a great Clint Eastwood movie, but somehow I don't think you're talking about Clint Eastwood.
Ron Wieczorek: No. I'm talking about this room right now.
Dave Burnett: Oh, wait a minute, there's three of us.
Thom Dallman: There are three of us.
Ron Wieczorek: Fight it out on what's what.
Dave Burnett: Well, when you want to talk about good, bad, and ugly, we're talking about regulations and the changes that took places after the downturn. The government clamped down on banks. They took their mirrors away that they used to give a loan with. You know? "Oh, look, steam on the mirror. You get a loan."
Ron Wieczorek: Exactly. In 2008, the market crashed. Then shortly after, there was a lot of regulations that, like you said, clamped down on the market. A lot of it was good. Some of it was bad. Then some was ugly. That's what I kind of wanted to touch on today. I'll start with the good, because they were needed, right? It was wild, wild, west. There was a lot of bad lenders doing bad things, and a lot of good lenders that were getting clumped in with bad lenders. The heavier regulations led all lenders to be held to higher standard, which is good.
Dave Burnett: It is a very good thing.
Ron Wieczorek: Along with that, it made everyone more accountable. Now we had to all have some accountability for our actions if you were in that group of bad.
Dave Burnett: Just to remind people, because sometimes we forget very quickly. There were loans being given out to people who really did not qualify.
Ron Wieczorek: Not even close to qualifying.
Dave Burnett: Yeah. So, when the economy turned around, those people wound up defaulting on those loans. The banks suddenly had properties, and it just turned into a mess.
Ron Wieczorek: It was a house of cards, really. It was just supported by ... At least right now with the market booming and the increased values in homes, they're based off people that have what we call the ability to repay. We can all lose our job tomorrow, so you can never get away from that. But, you can set people up to succeed rather than fail. Pre-2008, because the market was going up, they were like, "Well, if the market keeps going up, then we have no problem, so we'll just give everyone a loan." Lo and behold, when the market caught up to what they were really financing, a lot of bad things happened which led to these regulations and the more accountability.
Part of the accountability were fines. Fines are being dealt left and ... still to this day, for what happened almost 10 years ago. You hear the big names of the big banks that have been fined. Some go under the radar, but there's been a lot of fines that have been handed out. And, a lot of big numbers. I mean, to the billion dollar mark of fines for the bigger players in the market. That's good, still. That's still part of my good is that they had to be accountable. They were doing things that they shouldn't have been doing.
Even following guidelines at that time, the wild, wild, west, they were even breaking some of those guidelines to do worse things. It wasn't just that they were playing by the rules that they had. They were breaking the rules that they had to ... and, there was emails and there was correspondence back and forth basically saying, "Don't worry about it. We're good," from high-level, high-ranking people that you would normally trust to make the right decisions. There's some negativity that goes with that and think, "Well, they were the CEO of this company, they must know what they're doing," right?
Dave Burnett: Some of that clearance to behave that way came actually from presidents past administrations.
Ron Wieczorek: Absolutely. Presidents past and competition. "Well, they're doing these loans. We can't miss out on these loans if ... We can't be the only ones not doing it. We're supposed to be a big player in this, so we're going to do these loans."
Dave Burnett: Right.
Ron Wieczorek: That presses it a lot. So, the good is we're all more uniform now. The procedures, you have your three-day rules, your seven-day rules, and I won't bore you with those. Now everyone has kind of the slate. You have to get a closing disclosure out to the client three days ahead of time, so they can see the numbers, be comfortable with the numbers. A lot of times, what's happening before that, your costs went up two, three grand at the closing table, and it was basically, "Yeah. Do you want to close or not?" So, they had to. That doesn't happen anymore.
Dave Burnett: That's some of the good things that have happened. What are some of the bad things that have come about from this?
Ron Wieczorek: Some of the bad things are now that it's beefed up the cost to originate mortgages. It's now more expensive, because you've had to hire more staff, which is good. But, it's bad for the cost of each loan. The cost of each loan to originate is higher and higher. You have these compliance staffs that have to make sure that everyone's hitting all their marks, doing everything compliant, everything out there that's representing their company is compliant. That costs money. Every chair that's filled costs an additional ... It's different for every company, depending on the size, what X is.
Dave Burnett: Just a basic step in Economics 101: when it costs a company more money, it's passed on to you the consumer.
Ron Wieczorek: That's the next bullet point on my back. It is passed on. I mean, interest rates have being going up because the market's been going up. But, they went up a lot across the board, because the cost to originate a mortgage is higher. That fixed rate to originate a mortgage has become higher, so the costs are being passed on the borrowers. The interest rate is blended into that, so that's being passed on to borrowers. It's only the bigger are surviving when it comes down to that. Not only did ... The good part of this regulation, it kicked out some of the bad guys, but the bad part is it's kicking out some of the good guys, too, because they can't afford to play. Pay to play and if you have a small operation, it's really hard to stay afloat with all the compliance, because you have to set in place these compliance offices, which is good. But, if you only have a three-man shop, that compliance office is too expensive now.
Dave Burnett: Yeah, exactly.
Ron Wieczorek: Now you have to stay competitive with the interest rate. The only way to do that is to maybe lose money, and that's not a good option.
Dave Burnett: Nope.
Ron Wieczorek: Those are some of the bad. Another one of the bad is ... and, this is one that I really, really hate. It's easy to target the big guys. I don't work for one of the big guys, but you kind of feel for some of the fines they had to pay. Because the CFBB, our governing body, basically fined you based off what you can afford. Imagine if you got pulled over by a cop for speeding, and he said, "Let me see your net worth. Okay, this is your ticket." That's not how it should work, but that's how they were doling out a lot of these fines is, "You're worth $X billion. This is your fine." The same violation happened to a smaller bank, "Let me see your books. Looks like you can only afford 10,000. Your fine is 10,000." "You fined my ..." That big guy's like, "You fined me multi-millions for the same infraction, and it was one infraction." They were really taking advantage of that system. That, to me, is a bad when you're pretty arbitrary about the fines that you hand out.
Dave Burnett: Okay. We had good. We had bad. What's the ugly?
Ron Wieczorek: The ugly is it's caused discrimination. Fair lending would probably have a heart attack hearing the discrimination that's gone on in the market because of these tighter restrictions.
Dave Burnett: Explain yourself.
Thom Dallman: Yeah. What's that about?
Ron Wieczorek: If you have a loan that's under $70,000, it's hard to get it ... you have restrictions on how much you can charge, but the fixed cost of each loan is up. So, whether it's a $400,000 loan or a $70,000 loan, your fixed costs are the same. The denial percentage is ... and, this is global. This is in the United States ... is 18% denial rate, despite the credit worthiness of the borrower. You could be a high-qualifying client, and you're going to get denied that loan. It's not a ... I'm painting a broad brush, but these are actual numbers that came out that loans are getting denied at a higher rate if you're under 70,000 with the same exact credit profile as somebody from 70 to 150 double. Double the rate.
Dave Burnett: Because the lending institution can make more money. Is that it?
Ron Wieczorek: Well, it's not so much to make more money, it's they lose money. They're losing way too much money.
Dave Burnett: They're losing less money.
Ron Wieczorek: Right, on the 70 to 150. Under 70,000, they're so far in the negative that they can't originate some of these loans because of the fixed rate to originate the loan. It's caused discrimination, because if I'm the same credit worthiness, just because I can't afford less, doesn't mean I shouldn't be able to get a loan. You're seeing more cash on those properties. Keeping some of the lower to moderate income families renting when they should be afforded the opportunity to own a home, because of these regulations are in place. I don't know the fix for that, but that's something that's very prevalent in our world.
Thom Dallman: That's interesting.
Dave Burnett: Yeah. That's something I was going to ask you. What do you do to fix that? Because I understand, as a business, you can be nice and help people out, or you can run a tight business and go, "It doesn't fit our profile to go out and lose money." It's hard to stay in business. But as a family, if you qualify, but just because you don't make ... I don't make as much money as you do, Ron, they're not going to approve me, but they'll go ahead and approve you. I get ... What's the answer?
Thom Dallman: Right?
Ron Wieczorek: Well, it's double the percentage of denials. That doesn't mean nobody's doing the loans. It goes to finding the right lender. I've never shut the door on anybody that was under 70,000. It opened my eyes to see that that's happening wholesale in our market. Unfortunately, I'll do a loan that's under 70,000 all day long. We just don't have a lot of them in our valley anyway. So, that's not happening too much, so it's probably not a problem in the valley as much as it is in, probably, Detroit and areas where-
Dave Burnett: Where some property is almost giving away.
Ron Wieczorek: Right. You have depressed areas, but you still have that need for home ownership. They're probably getting parts of Arkansas, Alabama. It' not so much in the valley that has homes that are $70,000 right now, so it's probably not a big problem here, but it's on the radar.
Dave Burnett: If you had a home that was only $70,000 here ... Tom, you might back this up ... it's probably falling down and [inaudible 00:11:01] a loan on it anyway. But in some of these inner cities in particular, there are homes there are just ... they're just depressed values.
Ron Wieczorek: Right. I think that's where ... I think once this becomes more prevalent, and I just read it last week in a mortgage article, or a couple days ago, actually. I think once it gets legs, I think you'll see some government interaction on that, because you can't have that. The economy can't grow as a whole if you're not reaching out or catering to credit worthy clients that should be homeowners and saying, "No, we just can't do your loan." That's disgusting.
Dave Burnett: If somebody wants to get hold of you to talk about getting qualified for a loan, to talk about what's available, how do they get hold of you?
Ron Wieczorek: Call my cell phone. It's always nearby. I think it's vibrating right now. It's 208-869-9154.
Dave Burnett: Okay. Eagle Home Mortgage, which of course, is an equal opportunity lender. Going to that point, that is something that you do is you are equal opportunity in lending.
Ron Wieczorek: Absolutely.
Dave Burnett: Perfect. We'll continue. This is the Idaho Real Estate Buzz being brought to you by in part by Eagle Home Mortgage and by Core Group Realty. Call them today: 208-933-7777. If you don't remember Ron's number, you can always call and get that information or get it at CoreGroupRealty.com. Find out why they say, "You get more with Core."
Dave Burnett: This is the Idaho Real Estate Buzz with Thom Dallman, the co-owner, designated broker of CORE Group Realty. CoreGroupRealty.com, the website for you to go to to find out all things real estate, whether you're looking for properties. Of course, there's blogs on there. There's talking about different things happening around about in the area. One of the conversations, we have had this in the past, but it's been awhile, and a question that comes up when it comes to inspections, appraisals.
Thom Dallman: Oh, that just came up this week with a client of mine.
Dave Burnett: I mean, these are-
Thom Dallman: They were assuming that their inspection was the same as the appraisal.
Dave Burnett: But you know what? It's a mistake that can be made unless you deal with it day in and day out like you guys do here at Core.
Thom Dallman: Exactly. Exactly. It's one of the most ... Well, not one of, but one of the most misunderstood parts of the process that people don't understand. They think that it's just one inspection or one appraisal that they get done, or that they appraisal's gonna be similar to an inspection and stuff like that, so we have to educate buyers and let them know that it is two separate items, and they do have separate costs associated with them. Depending on how your contract to purchase is, you can get some of that cost paid for on the appraisal side of things from sellers. It's kind of typical in the Boise area, unlike the rest of the United States, for sellers to pay for appraisals. In the rest of the United States, everybody else, the buyer pays for it because it's a lender cost.
Dave Burnett: Why would you think that is different here?
Thom Dallman: I don't know. Some trends started way back when, and it just carried on, and it's always been something the sellers have paid for.
Dave Burnett: Is that something for you and your agents when they deal with somebody from out of state who's buying, do they go, "What?"
Thom Dallman: "What? They're gonna pay for it? That's awesome." Yeah. Buyers from out of state are excited because they're not used to that.
Dave Burnett: That's interesting.
Thom Dallman: But yeah, that's an interesting little fact, and I'm sure there's pockets of areas in other states that probably have the same thing going on.
Dave Burnett: Interesting.
Thom Dallman: It's kind of an interesting phenomenon for us.
Dave Burnett: Let's get some clarification.
Thom Dallman: Sure.
Dave Burnett: Let's talk about appraisals. I'm getting my house appraised. What does that mean?
Thom Dallman: An appraisal is the lender's vehicle for determining a couple things: A) the current market value of the house compared to the loan.
Dave Burnett: Which, by the way, is not-
Thom Dallman: So, that they're not over lending on a house.
Dave Burnett: It's not a tax evaluation.
Thom Dallman: Nope. That's a whole different assessment.
Dave Burnett: That's something different. That's gonna be a different number.
Thom Dallman: Exactly. That's a good point to make out because I can't tell you how many times I've heard people call me up and say, "Oh, I'm thinking about listing my house. The tax assessor says it's worth this much, so that's what I'm thinking the house is worth." It's like, "Not quite. Let's talk about this." So, yeah, that's totally different, and we could probably do a whole segment on tax assessments and stuff like that. But no, the appraisal is looking at the three months of sales in and around that property. Usually they start on the street, and then they go out to the subdivision, and then they go out to a one-mile radius, looking at homes very similar to it, and come up with a value to make sure that, once again, that the lender is not over loaning, or overpaying, I guess, so that the buyer isn't overpaying on a property and that they're lending the accurate amount for that property.
Dave Burnett: So really, the reason for the appraisal is to protect the lender in that sense?
Thom Dallman: To protect the lender in that sense, yes.
Dave Burnett: That they're not gonna buy, so to speak.
Thom Dallman: Exactly. The secondary purpose of the appraisal is to check the safety and soundness of the house to make sure that you're not buying a house that's gonna fall apart, and then you're gonna not wanna pay your mortgage on it and let it go into default. So, they're looking for things that will cause the house to deteriorate, such as exposed wood on the exterior of the house if the paint's been chipped off or scraped off at any point. A lot of lenders, especially for FHA and VA loans, government-backed loans, they're really particular about that. Really particular about the exposed wood as well as any kind of exposed wiring. Obviously, safety hazard there if you have exposed wiring. All the way down to little things like if you don't have an electrical outlet cover, they'll say, "Nope. We can't loan on this until there's a cover on there."
Dave Burnett: They'll give you a checklist?
Thom Dallman: Yeah. They will. A lot of times that's the purpose of the inspection is to kind of-
Dave Burnett: Is that where the confusion comes in?
Thom Dallman: Kind of get around to make sure that stuff's taken care of.
Dave Burnett: But is that were the confusion comes in? Because an inspection is very similar in that aspect.
Thom Dallman: It's very similar in the fact that it is looking for the safety and soundness issues of the house, but the inspector crawls up into the attic and down into the crawlspace. They climb up on the roof. They check all the flashings. Appraisers just walk through the house, take a glance, and just look in it. They stick their head down in a crawlspace, but they don't go and crawl around and check things out. So, that's the biggest difference between and inspection and the appraisal is the inspection is early on in the process for the buyer, and is for the buyer to know that they are getting a safe and sound house and what all the little things that might not meet code or might need to be fixed before the appraiser gets out there because nobody wants to have to pay a reappraisal fee because the appraisers do charge if they have to run back out and call things out to be fixed. That's what the inspection is for is for the buyer to make sure that there's nothing that needs to be fixed, again, for the appraiser. That's how I look at it.
Dave Burnett: Then I would assume, then, the inspection is done before the appraisal?
Thom Dallman: Correct.
Dave Burnett: Okay.
Thom Dallman: So, process is, you make an offer on a house, it gets accepted, the timeframe for the inspection begins depending on what is on the contract, anywhere from five days to ten days to get an inspector in there, and do all your inspections. This is your timeframe to not just have an inspector check the house. If you're concerned about the school districts. If you're concerned about crime rates in that area, this is all your timeframe to do all that inspection stuff. If you're concerned about the field out in back. Is planning and zoning planning on putting a road behind your house? Things like that. That's all stuff that you do during this inspection timeframe. It's not just the inspector inspecting the house.
We now have the ability to do separate timeframes for if you have a house with a wells or a septic tank because you want inspections on those as well and stuff like that. So, our contracts are now designed to allow two different timeframes if we want to cover those items as well. So, it's really that timeframe for the buyer to dig in deep and make sure this is the house they want.
Dave Burnett: Who typically pays for the inspection?
Thom Dallman: The inspection's paid by the buyer because it is a purely buyer's cost.
Dave Burnett: It's protecting me buying the house.
Thom Dallman: It's protecting the buyer, yep, to make sure that they know what they're getting into. Now, that's within reason. The inspector doesn't crawl into the walls and can't see through the walls and stuff, but it's what they can visually see crawling through the crawlspaces.
Dave Burnett: So, let's say I'm buying a house from you, your house, so I get an inspection done on it. There's a list of 15 things that are wrong. Is that given to you or is it given to both of us, and who's responsible for fixing it?
Thom Dallman: The report will go to both of us, and then we will sit down and discuss what exactly is stuff that would prohibit the appraiser or appraisal, and then what is cosmetic. What is just minor things that, yeah, it'd be nice if they fixed it, but it's not necessary to get it fixed because it's just a cosmetic issue. So, we'll go through that list together, and then we'll create that list that we'll then put in front of the sellers and ask the sellers to fix things.
Dave Burnett: Okay. Again, I come back to this. This is where a good agent who is representing you is a good thing. It keeps you from having a face-to-face conflict with the owner of the home.
Thom Dallman: Exactly.
Dave Burnett: Saying, "Hey, pal. Fix those gutters and fix that deck." That way the agent can go to the-
Thom Dallman: That's what the agents are gonna negotiate that stuff on your behalf. So, we work on it together on our part. The listing agent works with the sellers on their part. We basically come to terms. We try to figure out what it is the sellers are willing to do. They get three days to do bids, find how much it will cost and stuff like that to get things fixed and decide if they wanna do it. There's a trend going on right now with sellers not really wanting to do repairs, and so they're offering price drops or credits towards closing costs. There's other options, too, in lieu of having repairs done. Now with that being said, if it's an FHA or VA loan and it's a repair that needs to be done to get the loan appraised, then the sellers don't really have a choice.
Dave Burnett: I assume this is also in the inspection that the inspector will say, "Okay. This repair is going to keep it from getting an appraisal."
Thom Dallman: The inspectors are not really-
Dave Burnett: They don't do that?
Thom Dallman: They really don't do that. They just tell you what's wrong with the house. Some of the inspectors. Some of the inspectors do know, are very knowledgeable about what would hold up a....
Dave Burnett: So, that'd be the real estate agent then who will say, "Hey, this is something that's gonna keep you from getting approved."
Thom Dallman: Yeah. That's what we're well-versed in and work a lot with our lenders to make sure that we're doing the right things to get the right things done and fixed.
Dave Burnett: So, the inspection's done.
Thom Dallman: Inspection's done. We're waiting for the sellers to do repairs. As soon as we get notified that the repairs are done, the buyer gets to do a walkthrough and make sure the repairs are done to satisfaction, I guess you could say, and then at that point, we can call the lender and have them order the appraiser. The lender's are the ones that order the appraisal, and they don't get to pick the appraiser. They don't get to say, "Oh, Sam's my best friend. I know he'll appraise my value for this loan." They actually have to put their thing into a pool and it automatically gets assigned to a random appraiser, so they never know who the appraiser's gonna be.
Dave Burnett: The hope is, at that point for both buyer and seller, that the appraiser goes through and says, "Nope. Everything's good."
Thom Dallman: Yep. That's typically what will happen. Every once in a while, especially with this rapid increase in home prices that we've encountered in the past, you have problems with appraisers saying, "I just can't justify this price. This price is just out of whack with what's going on in the neighborhood," and so at that point, then we have to go back and renegotiate with the sellers, typically. We're seeing a lot of ... with the multiple offers that we were going through on properties and offers going way above list price, we've been seeing a lot of sellers responding back to higher-priced offers saying, putting in verbiage that says along the lines of, "Buyer agrees to pay for the difference if appraisal comes in under what the contract price is." So, we're seeing that popping up a lot in the contracts and stuff. It's all things a listing agent will help the sellers negotiate and think about.
Dave Burnett: Again, a good reason to have a good agent.
Thom Dallman: Correct.
Dave Burnett: It truly is. If you'd like to talk to somebody at CORE Group Realty about appraisals, about inspections, or anything that has to do with real estate, they're here to help out and no obligation to come in and chat with them and get a little bit of council and find out how CORE Group can help you either to buy or sell a home. This is the Idaho Real Estate Buzz being brought to you by Eagle Home Mortgage and by the folks at CORE Group Realty. CoreGroupRealty.com. Find out why they say you get more with CORE.
Dave Burnett: This is the Idaho Real Estate Buzz. He is Thom Dallman, the co-owner designated broker of Core Group Realty, CoreGroupRealty.com, the website for you to go to. Give them a call at (208) 933-7777. You can call that number and get in touch with somebody, to just get you more information about the website or to get you in touch with an agent, answer the questions you have, at Core Group Realty. I feel like I should be playing the theme to Dragnet, the old cop show.
Thom Dallman: How does that theme go?
Dave Burnett: (singing).
Thom Dallman: Oh yeah.
Dave Burnett: That would be the one. That's going back in the files a little bit. Okay, there was a movie not too long ago, but we want to talk about scams.
Thom Dallman: That's happening. Be on the lookout.
Dave Burnett: You were the victim of one recently-
Thom Dallman: Yeah, I was.
Dave Burnett: ... even with real estate.
Thom Dallman: I was. So, the scenario is that I have a couple of clients that were selling their home and purchasing another one. I had sent them an email confirming that our signing, our close date, was scheduled for a couple days later. Happened to call him just right after that, to confirm on the phone as well, because I like to make sure my clients are well-informed.
When I was on the phone with him, he was like, "Why did you just send me this email, to give you my wiring instructions, my bank account information and stuff?" I'm like, "I did not send that email."
Dave Burnett: Warning bells.
Thom Dallman: Yup, I'm like, "Do not respond to it. That is a scam." It was weird, because it was literally right after I had sent that email that they got this new email, with my name, but then the email address was completely odd, weird email address. So, someone had either hacked my emails or hacked their emails and knew that they were in the process of buying a home.
Dave Burnett: That is frightening.
Thom Dallman: That is super frightening, you know, with information being so readily available. Tax records show a homeowner's names, so people go in there, find a homeowner's name. They go look them up on Facebook. They start kind of getting into hacking their systems and stuff. It's very easy for people to get access to other people's information right now, and they're looking, they're looking for those people who are going to close, so that they can somehow get that money.
Dave Burnett: Well, as a consumer, and I can say this, I had my loan refinanced here about a year ago, and there is so much communication, so much, we need this, we need that, we need this, we need this.
Thom Dallman: Especially with the lenders.
Dave Burnett: Yeah, I mean it's easy to suddenly go, 'Oh, okay, I'll just send that off, too, because I don't know who that is, but it's got to be part of it." It's easy to do that.
Thom Dallman: So easy to just get caught up in sending those emails and stuff. So, if you're in the middle of a transaction, you ever get an email requesting banking and routing information, never do title companies send emails for that stuff. They usually try to do that face-to-face, at the signing table. It's never via email. So if you get something like that, contact your real estate agent, contact the escrow company.
If you're here visiting from a state that has lawyers, make sure you contact your lawyer, but make sure your lawyer's a real lawyer. That's one of the scams.
Dave Burnett: Oh, is it really?
Thom Dallman: I just read this article this week that said that there's a scam where people are pretending to be lawyers in the states where lawyers are required to go over contracts and stuff like that. So, they're pretending to be lawyers and having people wire their escrow money to the law agency, because I guess, apparently, they can hold the money there, and yeah, confiscating the money and taking off with it.
Dave Burnett: Unbelievable.
Thom Dallman: Yeah.
Dave Burnett: Would your advice then be the old, the old adage, trust, but verify?
Thom Dallman: Trust, but verify, yeah. Make sure that you are using people that you've verified, that you've gone to their offices, that you validated their licenses. If it's a real estate agent, make sure you check with the real estate commission, because oddly enough, there's people out there pretending to be real estate agents. They're out there, pretending to be a real estate agent. "Hey, you know, go look at that house, come back, I'll write a contract for you. Here, write the earnest money check to this company," or whatever company they're pretending to be at and taking that earnest money and running away. When earnest monies are upwards of $3,000 to $5,000, it's so easy for people to want to try to get in there and get that money out. So, there's some really good actors out there.
Dave Burnett: I guess that's the other thing that I've heard about in the past and seeing, not personally, but on TV where there'll be somebody who poses a real estate agent, who will then go show homes and then can become physical with the person they're showing a home to. You need to verify that the agent is who they say are.
Thom Dallman: Exactly. Exactly. Yeah. Especially right now, where people just call on Zillow and stuff like that. Now Zillow does a pretty good job of vetting agents and stuff that they show on their website and stuff like that. That doesn't happen as much, but yeah, you've just got to be super careful, especially if you're looking at homes on Craigslist. Craigslist is like one of the biggest scam spots.
Dave Burnett: For buying or renting.
Thom Dallman: For buying or renting, yeah. There's so many different scams that are going on right now with Craigslist. It's so important to verify that any information that you get on Craigslist, for sale by owner properties, or websites and stuff like that. You need to verify, just verify, verify, verify and be on the lookout. Don't write checks to people that you have not verified their information on. Don't write checks on apartments that seem too good to be true.
That's one of the rental scams that that's happening right now is, from my understanding, there's people kind of pretending to be real estate agents, once again, because you have to be real estate agents in some states to even be able to get rentals going. They're sending people to the rental properties saying, "Hey, meet me at this rental property. You know, it's a great property for you. You're gonna love it."
Right as you're going to the apartment or to the house, they call up and say, "Oh, something came up and I can't meet you, I believe the seller's there, or the owner's there, so you can just talk to them. But don't sign any paperwork with them. Call me after you're done with them, and we'll do the paperwork and everything, and I'll negotiate a better rent for you."
So people go through the house. They don't deal with the landlord. They call the agent. The agent says, "Okay, we're going to do this. I just need you to send me a check for $2,000, for the first two months rent, and then we'll get this negotiated for you. I've already got the landlord saying that they'll take the price, the rent price and stuff. All I need is that two months rent." People are falling for it, and they're writing those checks.
Dave Burnett: And the last time you will ever hear from them.
Thom Dallman: Right? Exactly. They go to moving day, they show up and there's someone else already living in the house or moving into the house.
Dave Burnett: In closing, let me ask you this question. I know the answer to it already, but I want to pose the question.
Thom Dallman: All right.
Dave Burnett: If somebody is afraid of being that pain in the rear end that, "I'm going to call there again, just to verify," you have no issue with somebody calling two, three times to verify.
Thom Dallman: Oh no, not at all. Yeah, no. If they're trying to verify one of my agents, call us. Please do, and go to IREC, irec.idaho.gov, is our real estate commission website. There's a spot there where you can actually do a licensee look up, where you can plug in their name and look them and make sure that they're an active licensee, a real estate agent with IREC.
Dave Burnett: Very good.
Thom Dallman: Idaho Real Estate Commission.
Dave Burnett: Trust but verify.
Thom Dallman: verify.
Dave Burnett: That's the thing to do. Just keep your eyes open, and don't allow yourself in this area or any other area to be fooled. There are people that are very good at it, and they wouldn't do it if they weren't being successful.
Thom Dallman: Exactly.
Dave Burnett: Very good. Tom Dallman, the co-owner, designated broker of Core Group Realty, with the Idaho Real Estate Buzz, being brought to you by the folks at Eagle Home Mortgage, and of course, Core Group Realty. Give them a call, (208) 933-7777, or you could always go to their website, CoreGroupRealty.com. Find out why they say you get more with Core.
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