Thom explains what ‘escrow’ is and the process of home buying in today’s episode. Ron from Eagle Home Mortgage is in the studio to share his wealth of knowledge on home loans and the current real estate market.
We have some amazing homes for sale right now, listen in to hear all about them, then give us a call to go see them in person!
Dave Burnett: This is the Idaho Real Estate Buzz, he is Thom Dallman, the CEO of Core Group at eXp Realty, one of the associate brokers at Core Group. Thom, it's another beautiful Saturday and a great day to get out and look at some real estate.
Thom Dallman: Yes, please do. Get out there, give us a call if you need someone to get you into some of these homes. There's options out there, and it's a great day to kind of look around.
Dave Burnett: It is. There's no BSU football game this weekend, they've got a bye, so there's no reason to say that. Not a lot of activities, it really would be a good time, and that's the nice thing with Core Group. You call right now and they get you hooked up with an agent to go take a look at some properties, and if you want to do a little research on your own beforehand, you can go to CoreGroupRealty.com. Have to remember the website.
Thom Dallman: I'll help you out there.
Dave Burnett: So CoreGroupRealty.com and-
Thom Dallman: Website hasn't changed. Name may have changed, but the website hasn't.
Dave Burnett: The website's still the same.
Thom Dallman: Exactly.
Dave Burnett: Some of those homes that you may find on the website?
Thom Dallman: Yeah, yeah, I've got a couple that I'd like to kind of highlight a little bit, our own listings. The first one is at 7400 West Colt Drive. This 3 bedroom, 2 bathroom, 1468 square foot house is right there off of Cole-
Dave Burnett: South of the freeway.
Thom Dallman: South of the freeway, just past Amity. You go up to Colt and take, I guess that would be a right, and head west. Great area, I just love that, everything south of the freeway. I just love that whole area, but this one particular is on 0.41 of an acre, so almost a half an acre, on a property that has no HOAs. You have lots of yard space to do whatever you want. It's got a great little gazebo in the back, as well as great access for RV parking with hook-ups and everything. It's just right there off of Cole Road, and just not too far from that, I think it's called Indian Lakes Golf Club, out there. So if you're an avid golfer, great area to live in, to be able to just pop right over and golf nine holes and so forth.
This is listed at $260,000, so right below the median price point of Ada County. Great option, at 1400 square feet and almost a half an acre of land. To get in there, it has granite countertops and oak flooring throughout the house. The master has a jetted tub in it, a skylight and so on. It's a great option for anybody who's looking. 7400 West Colt Drive is the address again. Great property for people to check out.
Dave Burnett: And I think that property around the house, that really is a selling feature. You have a little bit of elbow room out there.
Thom Dallman: Yeah, a little bit of elbow room, your neighbors aren't right on top of you. Yeah, 0.41 of an acre, that's pretty good acreage for being in Boise proper.
Dave Burnett: And that area's great, if you want to jump on the freeway, head over to Micron, if you work over there, access either way, east or west bound on the freeway.
Thom Dallman: Oh yeah, super easy access to everything. And not to mention, my favorite store, Costco. Yes, I am a frequent shopper at Costco.
Dave Burnett: Are you really?
Thom Dallman: At least once a week.
Dave Burnett: I saw a t-shirt I should have bought. It said, "I went to Costco and spent under $100."
Thom Dallman: Oh my gosh, that's impossible to do.
Dave Burnett: That's impossible to do.
So if you're looking to go south of the freeway in that South Cole Road area, a great one for you to look up today.
Thom Dallman: Great opportunity to check us out. We're still working on our featured listings page. I think it's working now, we still kind of go back and forth, some of them are showing up and some of them aren't. Check it out. If not, just go to the home search site and type in 7400 West Colt Drive and it'll come up.
Dave Burnett: All right, what else do you have for us?
Thom Dallman: And then we've got a second one. This house is on 3502 South Zion. We've talked about it before, but the owners had taken it off the market for a couple of weeks so that they could do some touching up, paint touch-ups and stuff like that, kind of updated the kitchen and stuff like that.
Dave Burnett: Yeah, we've talked about that in the past, how important it is to get everything in line and ready to go. So they decided, "You know what, this could be ... " I guess that's one of those things where people stop and go, "Well, I like it other than this." So they took it off the market.
Thom Dallman: They took some of the feedback that they've heard. We're very big about being open and honest when we get feedback from other agents that have shown the property, letting our clients know what that feedback is. They took the advice and did some of the touch-ups and stuff.
Dave Burnett: Nice.
Thom Dallman: Check it out, it's 3502 South Zion. It's a 4 bedroom, 2.5 bath, two story house, 2572 square feet. So a nice big house. Also has a three-car garage and RV parking, so you have ample space for your RV, which is hard to find these days. It's on Victory and Cloverdale, just off of Victory and Cloverdale, so once again, south of the freeway. Great access to the freeway and a great little option for those wanting to be a little bit further out of town.
It's 0.22 of an acre, so almost a quarter acre. It's on a cul-de-sac in a small subdivision, so not a lot of road traffic coming by your house. It's got new flooring. It does have an office downstairs that can be converted into a fifth bedroom, if you have a need for a fifth bedroom.
Great yard with mature landscaping and a white picket fence.
Dave Burnett: Can I make a statement for cul-de-sacs?
Thom Dallman: Yes, please do.
Dave Burnett: I live on one, I love it.
Thom Dallman: Yeah?
Dave Burnett: What we do, we used to live on one where it was just a through street, very busy all the time. Our cul-de-sac, I mean for the most part, 90% of the time, it's just our neighbors that come and go. And that really is nice, especially if you have small kids and they're out playing in the front yard or maybe riding their bikes, man, cul-de-sac is the way to go.
Thom Dallman: Cul-de-sac's great, yeah.
Dave Burnett: It is awesome.
Thom Dallman: I've never lived on a cul-de-sac, but the house that I currently live in is on, technically kind of a dead-end street, so kind of like being on a cul-de-sac. Which yeah, same thing. Not very much traffic. We're on the foothills, so we actually get some wildlife that come through down off the hillsides and stuff.
Dave Burnett: Oh, nice.
Thom Dallman: Because they don't have the traffic to worry about. So yes, I can attest to that, cul-de-sac and that lack of traffic coming through is nice.
Dave Burnett: With 4 bedrooms, if you have kids, on a cul-de-sac, that is great. Three car garage and a spot for your RV.
Thom Dallman: Even if you don't have kids and you just don't want to deal with traffic and headlights coming in your windows in the middle of the night and stuff.
Dave Burnett: Yeah, and the noises coming and going.
Thom Dallman: Exactly. So this is 3502 South Zion. Once again, 2572 square feet, 4 bedroom, 2.5 bath, listed at $349,000, so great price point for being in south Boise for a big house.
Dave Burnett: Check that out.
Thom Dallman: Check it out.
Dave Burnett: CoreGroupRealty.com, that is the website for you to go to if you want to look at these homes. And then again, as we mentioned, if you're interested in looking at them, just give Core a call at (208)933-7777. That is the phone number to call, and they can get you set up with an agent to go take a look at those properties. The nice thing is that they can work as well, saying, "Okay, if this is what you want to pay and this is the area, we'll show you what's available."
Thom Dallman: We'll get you what you need. We won't get you what you can afford, we'll get you what you want.
Dave Burnett: You know, and that's a big deal, it really is.
Thom Dallman: Yep, it is.
Dave Burnett: There's nothing more frustrating than saying, "I want to pay $250,000," and a real estate agent is showing me $325,000.
Thom Dallman: Exactly.
Dave Burnett: That's not what I said. Listen to what I say. And at Core Group, I know, Thom, you work really hard to get agents that do that. They sit, they listen, they take your word and counsel back and forth and come up with a plan to either buy or sell your home, and it really is important.
Thom Dallman: It's super important that you have that trusted advisor that's going to look out for your best interests and what you want.
Dave Burnett: Core Group at eXp Realty is the website, CoreGroupRealty.com is the website, and (208)933-7777, that is the phone number for you to call to get a hold of the folks at Core. As a matter of fact, we're going to be talking to Ron with Eagle Home Mortgage, one of the sponsors of the program, in just a couple of minutes, and we want to encourage you as well to go to the website and find out why they say you get more with Core.
Dave Burnett: This is the Idaho Real Estate Buzz. He is Thom Dallman, the CEO of Core Group at eXp Realty. As we get ready for another weekend of real estate talk, and I'll tell you, Thom, it's a great time to get out there and buy a home.
Thom Dallman: It really is. There's options out there right now, inventory has kind of crept up a little bit, so there's more options for people, and interest rates are still hopefully low historically. But Ron is here from Eagle Home Mortgage and can confirm that or deny it, or neither of them.
Ron Wieczorek: Neither on the interest rates because we've seen a little bit of swell over the last couple of years. But historically is what I'm going to dwell on because-
Thom Dallman: That's what I like to talk about.
Ron Wieczorek: ... it's still very excellent. We're kind of spoiled, myself included, for what we've seen interest rates, really over the past 17 years, 18 years, anything sub 7%, and it just shot down after 9/11. But long story short, it's still great time and there's a lot of benefits.
Dave Burnett: Let's go back 10 years ago. We were talking about this during the break. You brought up a name of a bill which I said, "Oh, I remember that. What is it?" That's a Dodd-Frank bill.
Ron Wieczorek: The Dodd-Frank bill. Now we're 10 years removed from Dodd-Frank, or maybe a little less than 10 years.
Dave Burnett: Well, refresh us. What was a Dodd-Frank bill? Because I had forgotten.
Ron Wieczorek: After the market crashed, all the legislators in Washington, D.C. had scrambled and said, "We have to reform consumer protection acts. We have to reform the way the mortgage industry, the way Wall Street operates." I think it was with good intentions and expanded powers and new mandates all combined, and a lot of different minds combined on what to do and how to lay it out. Those good intentions didn't always equal smart policy decisions, and that's what we're kind of seeing in the aftermath right now. I will say this. One thing that was great for our industry that unraveled was that it wasn't if you have a pulse, you get a loan. That was happening in 2005, 2006.
Dave Burnett: It really didn't take much.
Ron Wieczorek: Didn't take much at all. So that, and what they call ... There's two terms we use in the mortgage industry, QM, which is qualified mortgage, and ATR, which is the ability to repay. Before, you didn't even have to show the ability to repay. You could just say, "I have the assets to pay this off if I need to. I don't really have income streams, but I'll be fine."
Dave Burnett: Okay, here's your money.
Ron Wieczorek: Here's your mortgage. The problem with that is, on normal cases, you're right. But when the market crashes like it did, and you owe now, let's say, $200,000 on something that's worth $150, there was a lot of folks that had that money. They don't have that money by accident because they're investors, and they say, "I'm going to make another investment decision. I'm going to let this go. I have the money to pay it if I need it, but I'm going to let it go."
That wasn't wholesale. Most people, most Americans that did let their home go, it was because they had to. Maybe they lost their job, maybe their wages were cut back, maybe they were already in over their head, maybe they were counting on equity to build on their house like we do a lot, to pay other bills off. And when that all came crashing down, they just didn't have the ability to get out of that. I don't want to say everybody was just making a financial decision to not pay their mortgage, but a lot of that went on.
The ability to repay is a big one because you have to show those income streams. Now, I could lose my job tomorrow. We could all lose our jobs tomorrow, and we no longer have that ability to repay. The market always kind of calculates that into their figures of acceptable risk, right? So no matter how good the economy is doing, you're going to have some sectors that are suffering because the economy is doing really well or some businesses move on and some good employees have been with the companies for 20 years and maybe they're an aging workforce and they can't find a job. There's a lot of factors for that, so that happens and that's an acceptable risk.
The second piece of that was the qualified mortgage. What does that mean? I talked about that ratios in the past, meaning how much income you have coming in to how much you can pay out. We put a ratio on that, and the ratio is usually anything under 50%. As long as your total debt, including your house, is 50% of your gross income, you're considered to be in a good spot. Now, that scares me.
Dave Burnett: That's a lot.
Ron Wieczorek: That's a lot. That's scary. We're talking gross income, so you have to pay taxes. You have to eat, you have to pay your cell phone bill, you have to pay your cable bill-
Dave Burnett: Electric.
Ron Wieczorek: Yeah. So there's things that pop up on the credit report that don't go into that number. 50% is considered okay and acceptable still, and when they rolled it out they had 43 in mind and they had a timetable to tailor it back to that because they know that we weren't, as a society, to that point yet. So those were the two good things that came out of it.
Dave Burnett: What is it now? What is that debt ratio? What is acceptable now?
Ron Wieczorek: We're still at 50, and even FHA will go a little bit higher than that, and VA will go even a little bit higher than that. So it's still aggressive. And I guess it depends where you live as far as income is concerned. If you live-
Dave Burnett: Yeah, that's true. If you live in the Bay Area, you're going to have a bigger chunk of your income going to your mortgage.
Ron Wieczorek: Right, and that's proven. I have numbers on that, but that's another show.
Thom Dallman: That's a whole 'nother show.
Ron Wieczorek: It also depends where your income is. If you make $500,000 a year and your debt to income ratio is 45 or 50, you still have more disposable income, right?
Dave Burnett: Right.
Ron Wieczorek: As opposed to if you make $2,000 a month and your payment's $1,000 a month, that doesn't give you a lot of wiggle room. Not all 45 to 50% debt ratios are created equal, so that goes into play as well. That probably speaks to the Bay Area. Here in the Valley, we're probably in the lower end of that spectrum. In the Bay Area, that number can be higher because of disposable income that's there. It looks bad on paper but when you do the numbers, this number minus this number, that's still a good number. You still have enough money to get by.
Dave Burnett: 10 years later, is Dodd-Frank relevant? Is it still good for us? What do you think?
Ron Wieczorek: Those two pieces I just talked to are still good.
Dave Burnett: But ...
Ron Wieczorek: Everything else ... What prompted me to talk about this is a Columbia professor gave a full dissertation and report on his thoughts of Dodd-Frank 10 years later. It reaffirmed my thoughts on how it has failed. There's just too many hands in the cookie jar right now. Every lender has a huge compliance department, so they're triple, quadruple, maybe even infinity size greater than previous because some didn't even have compliance departments before.
Thom Dallman: You didn't have to comply.
Ron Wieczorek: I've always been with safer lenders that have, so I've been fortunate. But all those costs are mounting up and what they're policing is to the rule, to the letter of the law, and a lot of that's not relevant anymore. Because risky behavior's coming back into our market as far as lending, it's not where it was before, but it's creeping back into the industry so some of the things they're policing are things that are just costing the community money, costing ... Because it's passed on to the clients. So the higher that your compliance departments cost each lender, it costs consumers.
Dave Burnett: Because they pass that expense on.
Ron Wieczorek: And that's what's going on industry-wide. Because the rates have gone up a little bit, our industry has shrank 18% over past year. So that's what our business has done. A lot of that isn't what you see on a daily basis due to people buying homes. It has more to do with refinances. When the rates were going down, a lot of people were tapping that equity or getting a lower rate or getting out of their private mortgage insurance, so they're refinancing it at a greater clip.
Right now they're not. All those shops that were heavily reliant on refinances to help pay off that compliance department don't exist anymore, so the clients are paying more and the industry's shrinking, where before, when the policy was laid out, the bad guys got out of the industry. It kind of vetted them out, so that was great. Now, there's a lot of good guys being downsized because they just can't compete anymore, so that hurts.
Dave Burnett: Because the marketplace just doesn't exist.
Ron Wieczorek: Yes.
Thom Dallman: That's interesting that the refinances have gone down so much, considering the fact that people are in such a great equity position right now with their homes. There's so much equity to be had with the house prices being at all-time highs.
Ron Wieczorek: That's a great point, Thom. What's happening with that is if you're sitting on a mortgage and you're paying 3.5% on it and you owe $200,000 and you see $100,000 that you can tap, or maybe $50,000 equity, you're not going to touch that $200,000 mortgage. What you're going to do is go out and get a home equity line of credit, a second lien on the house that you can pay off at a faster rate and maybe dollar cost average yourself in a better position instead of paying 4.5% on the whole thing, because that's a big pill to chew, right?
Thom Dallman: That makes sense. Yeah.
Ron Wieczorek: That's what happening with that tappable equity, because we do have-
Thom Dallman: We're tapping into the home equity lines.
Ron Wieczorek: Yeah, absolutely.
Dave Burnett: Then, tax law changes in the past year, that has affected that refinance market as well.
Ron Wieczorek: It has, it has. And it really hasn't ... In the value we don't have ... I think that's hitting the higher end than it is the lower end, so I haven't seen that as much as I've seen the interest rates being a cause of that.
Dave Burnett: Yeah. Well, check with your tax accountant. And I can only speak for myself. I got rid of my second I had, rolled it all into first because of that and the lack of ability to write that off. So it does make a bit of a difference. I guess I'm one of those high rollers.
Ron Wieczorek: I've never thought anything different.
Dave Burnett: Of course not.
Ron Wieczorek: One of the good things ... I'm probably running out of time already-
Dave Burnett: We've got a couple minutes here.
Ron Wieczorek: ... but I really think you're going to see a lot more talk about peeling back those layers. You hear news about the CFPB that is the governing body that is over our industry, and the administration has talked a lot about repealing a lot of that. A lot of that talk is actually going to be beneficial if that happens for our industry, just to cut a lot of the fat, because there is a lot of, lot of fat right now. But on the good side, what it's forced lenders to do is we've already had a flight to automate and try to stay competitive by automating a lot of our systems. By accelerating that, because the margin compression, it's cheaper to do that in the long run.
So what we've seen, and what we've done, if you want to do a mortgage pre-approval, odds are I can send you a link to my website. That's one of the choices I give you and you'll choose, and that lowers the cost. One of the reasons it lowers the cost is because it improves the data. If I'm pulled off to the side of the road and I'm taking your mortgage application and I hear S instead of F for a middle name and I submit it in and then I let it go and then you get the paperwork in front of you, I go, "That's not right." Someone's got to go behind that, correct that, and send it out again. That's a very minor example, but those add up. We get audited after the fact, and sometimes if it's done by myself or anybody else, a human being, I should say, the data integrity is not always 100% accurate. If you're uploading everything right through the system, that improves that integrity.
Dave Burnett: Eagle Home Mortgage, of course, an equal opportunity lender. If somebody wants to get a hold of you, you talked about the fact that your cell phone's always on, but how do they do that?
Ron Wieczorek: Call my cell phone. It's 208-869-9154.
Dave Burnett: If you're looking to get a loan, if you're looking to refinance, if you're looking to do any of that, they can take care of you at Eagle Home Mortgage. This is the Idaho Real Estate Buzz being brought to you by the folks at Eagle Home Mortgage and at Core Group at eXp Realty. Find out why they say you get more with Core.
Dave Burnett: This is the Idaho Real Estate Buzz, he is Thom Dallman, the CEO of Core Group at eXp Realty. We get a chance to talk about, well, not just buying and selling homes, but some of the things that go into a home, and we talked about some different terms in our last show. One of the terms, and it kind of caught my attention, we were talking during the break, we were talking about escrow.
Thom Dallman: Escrow. The escrow process.
Dave Burnett: And that is a word that you don't use it outside of real estate, but it is a word. So I looked it up at dictionary.com, it means "a bond, a deed, or other document kept in the custody of a third party."
Thom Dallman: Yep.
Dave Burnett: And that's exactly what happens. I guess you could use the word outside of real estate if you wanted to.
Thom Dallman: Yeah, there's so many different ways of looking at escrow. It stands for several different things. One of the things that it is, also to escrow is when the lender sets up for your insurance and your taxes, they set up an escrow account where they put money aside and they pay your insurance and taxes. So there's the escrow process, there's escrow held by lenders. Escrow is used in a wide variety of ways in the real estate transaction.
Dave Burnett: But primarily that word is, that's all I ever hear it used with it. So let's talk a little bit about escrow.
Thom Dallman: Yeah, the escrow process. Sure. Let's start with just the title company. They're basically the third party that we kind of reference in this transaction where they're a biased third party that is going to research the property, make sure all the bills are paid, make sure all the leans are paid off on the property, and ensure that a buyer is actually buying a house free and clear and have all the rights of ownership to it.
Dave Burnett: If you didn't get your house that way, you wouldn't be happy whatsoever.
Thom Dallman: Oh, no, no, no. I've had numerous times where they've caught tax leans or medical leans that were on a property that people didn't know had been put towards their property and stuff like that. Yeah, they catch a lot. They catch a lot, and they also are responsible for sending out what we call CC&Rs, the covenants, restrictions, and regulations for homeowners associations so that people know, "Hey, you can't have a pink house in this neighborhood."
Dave Burnett: Can't have a roof other than approved, or the colors of paint you want to use.
Thom Dallman: Exactly, exactly.
Dave Burnett: That's a big deal.
Thom Dallman: Yeah, it is. It's a huge deal, and it's important to some people to be able to ... One of the biggest things that I always encourage people to read is about RVs, we talk about RVs all the time. There's a lot of CC&Rs that exist that say no RV parking that's visible from the street. And so yeah, it's important to people, so they have to read those rules and regulations. It can be daunting, getting that big thick packet of CC&Rs.
Dave Burnett: In the process of buying a home, when does escrow come into play first?
Thom Dallman: They come into play almost immediately, as soon as we have a ratified contract. And by ratified contract, I mean both parties have signed off and agreed to all the terms and conditions. Once we come to an actual agreed upon contract, I, as a buyer's agent or listing agent, will send it directly to title and get the ball rolling. I'll get them looking in and starting to investigate and starting to send me the title report, send me the CC&Rs so that I can forward those to my client.
Dave Burnett: Now, I always hear about you put down earnest money. Is that earnest money put in escrow? Is that part of the deal?
Thom Dallman: Yeah, we, as a company, it goes into a trust account. We're required to get it into some form of a trust account. At Core Group and eXp, we don't have trust accounts, we let the escrow company hold onto it. So the title company holds onto the earnest money and applies it towards the closing costs and fees at the end when you close. So they hold it in their trust account and hold it for us, so yes.
Dave Burnett: Okay. That way, Core Group is not responsible for, in other words, what happened to that money.
Thom Dallman: If we're representing the buyers and we have put our broker down as the responsible broker, we still are responsible for making sure that the title company holds it, making sure that if something happens, it gets released to the right party and so forth. So we are still responsible for it, we just don't actually have it in our bank account.
Dave Burnett: That's why you're the broker, you know these things.
Thom Dallman: Exactly, exactly.
Dave Burnett: Okay, so we have earnest money which is put into escrow, and then-
Thom Dallman: Title reports.
Dave Burnett: You talked about all of the different information that comes out with escrow and how that works. How does that play in?
Thom Dallman: As far as the-
Dave Burnett: As far as for me as a consumer, what does ... I get the earnest money, what's the rest?
Thom Dallman: So yeah, what we're going to send you is a title report. That's the history of the house and any leans that are applied to the house. We're going to see if there's any, once again, like I said, tax leans. We're going to see if there's any-
Dave Burnett: A big one here in the area is irrigation companies.
Thom Dallman: Yes, yes.
Dave Burnett: Because some people don't realize, they've still got to pay the fees on that.
Thom Dallman: Exactly. And so yeah, they'll work on making sure that the irrigation gets notified and depending on the title company, most title companies will make sure that irrigation gets transferred over and city services get transferred over and stuff like that, or let the buyer know if they need to contact certain services to get transferred over. A lot of times, they will prorate and make sure that those bills are paid on behalf of the seller out of the proceeds, so that we know going in as a buyer, that everything's been paid, everything's been caught up. We'll talk about prorations, everything gets prorated on that closing date. That date that you actually get the keys and that funds and records, everything is prorated up to that date, including taxes.
Dave Burnett: Okay, so escrow really is kind of the function of making sure that you're getting a clean house. Not clean as far as with a broom and a vacuum, but as far as-
Thom Dallman: Title.
Dave Burnett: As far as all the legally clean.
Thom Dallman: Exactly, exactly. What I like to tell people is, they are the people that, from the point of close going backwards in time, make sure that the sellers own the property, they have a right to sell the property, that there's no leans or encumbrances on the property that are going to block you. They're going to send us that report that shows any easements or anything like that that may be of concern. So they kind of look at it backwards in time, going backwards in time and do the research. That's what they're responsible for is doing the research on the property.
Dave Burnett: And there's a lot to look at there.
Thom Dallman: Yeah, there is, there is.
Dave Burnett: It's something that-
Thom Dallman: Especially for older homes that have been around for a hundred years. Stuff to go through.
Dave Burnett: You may be surprised, the electric company or the water company may have rights to the property running between you and your neighbor for whatever reason. You need to know that going in.
Thom Dallman: Exactly, exactly. They'll find, like, we've sold acreage properties where there's easements for neighbors to get access to their properties and stuff like that. Those easements tend to stay with the property and move on to the new owners and stuff, so things like that have to be identified and the buyers need to know about those things. That's what we have the title companies for, that's what they're experts at.
And then another part of that is for the lenders. The escrow company is the ones that basically apply the lean. They have what's known as the lenders policy, title insurance for the lenders. Which actually, they make sure that the lender gets put on the loan and has first rights to any proceeds if you decide to sell it and so forth. So all other leans become subordinate to that, if there are any that apply afterwards. But yeah, they make sure that the lender is on there, and that's how the lenders can then do the notice of default if you don't make your payments and they foreclose on you. So it gives them the ability to foreclose.
Dave Burnett: Okay. So whoever you're borrowing the money from, it's through escrow that that then gets put in place that they have rights to the money.
Thom Dallman: Exactly.
Dave Burnett: See, this is some of the ... For somebody who's in the business, like for you or for Ron with Eagle Home Mortgage, this is stuff that's just every day. But for me, all I hear is, "Oh, it's in escrow." What does that mean?
Thom Dallman: What in the heck does that mean?
Dave Burnett: So this is good, to kind of sift some of this out.
Thom Dallman: Exactly.
Dave Burnett: Another thing we talked about during the break is title insurance. Title and title insurance. What exactly is that?
Thom Dallman: There's the standard owners policy, so the current owner of the property gets that title insurance and has to pay for that research. That research to make sure that they can sell the property.
There's the lender policy that we just talked about, title insurance lender policy, that they do all the work for the lender. And then there's also extended policy insurance policy for the buyers, which goes from the point of closing date forward in time to ensure that if anything pops up, any disputes, any disputes, that title will step in and will handle the problem.
Dave Burnett: Okay, see, that was the question I was going to ask. Let's say you bought a hundred year old home and then moved in, and suddenly something odd creeps out of it saying, "Oh, no, we have rights to this," and it wasn't in the original title. That's where that is handled.
Thom Dallman: Exactly. That's where ... As long as you have purchased, and it's a fraction of the costs, I don't know the number right off the top of my head of the cost, but for a fraction of the cost, that insurance policy will cover you going forward in time and make sure the title company will step in. It's happened in the past that I have actually had clients that have to use that policy. It was an error of the title company, but because they had the policy in place, the title company didn't even dispute it, they just went ahead and paid.
The long story short is that they bought a rental property, very clearly defined on all the paperwork that it was a rental property. When the CC&Rs were sent, the title company had missed an addendum that added that said that was a homeowners only subdivision, and so they couldn't rent. So the day that they put a sign up in the yard for rent, the homeowners association came knocking on the door and said, "Nope, you can't rent in this neighborhood."
So we went back to the title company, they found the error, and they paid, actually, I think it was up to $35,000 to my clients because we had to then put the house back on the market, sell it, and go find another one. So they paid for the costs that they had put into the house fixing it up, the cost of rent that they missed for the couple months going through this transaction and getting a new property and stuff like that. If we didn't have the title insurance, I'm not quite sure that ... It might have been more of a legal battle for my buyers to get the money out of that. But because we had the title insurance, they took care of everything.
Dave Burnett: Is it something for me when I'm in the middle of a transaction, is it given to me as an option, you can buy title insurance or not? Or is it ... ?
Thom Dallman: It's always an option for buyers.
Dave Burnett: It is. So I could say no, but that would be a dumb gamble.
Thom Dallman: Exactly. When I sit down with my clients, I explain the benefits of the title insurance and try to at least get the cost so they know how much it is before we close and stuff. So let them know they have the option and the benefits of it. I usually tell that story and a couple others, but it is their option to buy it. I highly recommend it, and I usually will put it on the contracts and say, "Let's put it on the contract for now, we'll get more information, we'll get the costs and then at closing, let's make that decision." But I think it's worthwhile to have on there.
Dave Burnett: Thom Dallman, of course, who is the CEO and one of the associate brokers with Core Group at eXp Realty. If you want some of that peace of mind as you're stepping through the process and doing these things, you can give Thom a call, or any one of the agents at Core Group at eXp Realty. (208)933-7777, that is the phone number to call. Core Group, of course, one of the sponsors of the program, along with Eagle Home Mortgage. Why don't you do this, go to CoreGroupRealty.com, the website. Check it out and find out why they say you get more with Core.
Dave Burnett: This is the Idaho Real Estate Buzz. He is Thom Dallman, the CEO of Core Group at eXp Realty, one of the associate brokers as well at Core Group at eXp.
Thom I want to tread into this lightly, or carefully I should say, because a lot of people are out there saying the bubble is going to burst, the world's going to come to an end again. Okay, maybe they're not quite-
Thom Dallman: It's so funny.
Dave Burnett: Putting it that way.
Thom Dallman: It's so funny you should say that, 'cause I feel like every time ... If people listen to the show they know that I kind of go to conferences every so often and chat with other people. Now that we've joined the eXp I'm also networked in with 13000 other agents and stuff, so I'm always curious to hear people's view points and stuff. And I swear to God 50%, it's half and half, half the people believe there's a crash coming in the next year or two, half the people are like no there's no way. There's no indication of a crash. So, it's like-
Dave Burnett: Could it be our country is 50/50 politically divided too?
Thom Dallman: Could be. Could be. Maybe all the people who go one way think it is going to crash-
Dave Burnett: It's this way, and then-
Thom Dallman: and people on the other go another way think it's not, but-
Dave Burnett: And this isn't a show about politics, but when President Obama was in office everyone is saying it's the end of the world. Now that President Trump is in office those other people are now saying it's the end of the world. So, they go back and forth.
And earlier we talked to Ron, and we talked about the fact that even in the lending industry things are set up more secure than they were 10 years ago, eight years ago when we went through that economic crisis when the bubble did pop. Things are set on more solid ground now, so that maybe a slow downs coming. Maybe it's all cyclical. It happened.
Thom Dallman: Now my personal belief is this: We're going to eventually have to ... We have to get to a slow down point. We have to get to a point where things are going to even out. Maybe with this lack of inventory, if people start having confidence in selling again, and the market gets flooded with inventory we might see that decrease in the home prices. 'Cause as supply grows, everyone knows ... And demand stays equal, everyone knows that prices drop.
So, we may see a slow down, or even a decline in pricing if people start getting confident again and start selling their houses-
Dave Burnett: Well, I-
Thom Dallman: Our lack of inventory for the last couple of years is really what's driving these prices up.
Dave Burnett: I think in part, too, the economies been so good, jobs have been so good, people aren't moving. I'm going to stay with my job, I got a raise, I don't really want to move to North Dakota. I don't want to do that. So, people have been content to stay put, so-
Thom Dallman: Yeah. People are staying ... The statistics show that people are staying in their houses a lot longer. It used to be five to seven years now it's seven to 10 years.
Dave Burnett: What are you hearing out there though? As you go to different conferences, what are you hearing as far as what are some of the signs if a bubble is coming and about to pop? What are some of the signs?
Thom Dallman: Oh, gosh there's numerous different signs. One of them, new construction. New construction price drops when you start seeing a lot of the builders, especially the process builders, if you would, like the Corey Barton's and Hubble's and stuff like that. When they do mass price drops then there might be an indication of something-
Dave Burnett: Of slow-
Thom Dallman: Going on. A slow down. So, new construction. Notice of defaults or foreclosures. If the market ... You start seeing a lot more foreclosures and stuff in the marketplace that could be an indication that somethings happening.
Dave Burnett: What's happening there?
Thom Dallman: Actually, we're at an all-time low. When I ran the math earlier this week we were at 1.08% this year. 1.08%. So one percent of our inventory that sold was in a distress situation of some sort.
Dave Burnett: That's not very much.
Thom Dallman: That's not very much. Last year it was 1.9. Of all the total sales that we sold last year was 1.9%, so almost two percent. So, we're down almost one percent.
Dave Burnett: Nationally is that similar?
Thom Dallman: Nationally, let me remember. I think nationally it was three percent. Yeah, three percent lower than the year before, and that was in July. That was July's numbers.
Dave Burnett: Economically that's a good sign.
Thom Dallman: Yeah. That's a good sign. Once again, no indication there that we're going to ... We're nearing the bubble, or nearing this big collapse-
Dave Burnett: Cycle.
Thom Dallman: That everybody's afraid of. Exactly.
A lot of the charts that I've seen kind of show the increase in sales and increase in home prices from the original crash to where it is now, and when you look at the charts, and the way that the graph goes, right before the crash it went up so quickly over just a couple of years. Whereas, the gradual increase that we've had now has been going on for five years plus. So, it's a more slow gradual increase, a more natural increase, is what they're saying, because our economy has turned around and is really doing well now. More people are employed, more people are working. Our unemployment rates at some of the lowest numbers right now.
So, once again there's just ... There's no indicating factors-
Dave Burnett: I haven't-
Thom Dallman: Especially here in the Treasure Valley-
Dave Burnett: The Treasure Valley, yeah.
Thom Dallman: There's nothing to indicate that we're going to have that crash anytime soon. More and more people are moving into town, escaping the bigger cities. I think we're going to see the bigger cities have issues, because people are getting priced out, people are getting fed up. The congestion, the traffic, all that stuff-
Dave Burnett: Crowds.
Thom Dallman: So, we're seeing ... You're seeing people coming in, because, once again, we're rated most affordable, we're rated best living-
Dave Burnett: Environment. Blah, blah, blah.
Thom Dallman: They're still projecting a doubling in size by 2025 for the Treasure Valley.
Dave Burnett: I heard an economist explain the interest rate, and the interest rate climbing in this way: It has to go back up-
Thom Dallman: It has to.
Dave Burnett: When the economy crashed they lowered the interest rate to almost free money. If we're going to go through that cycle again and the interest rate isn't up they can do that again-
Thom Dallman: Exactly.
Dave Burnett: So, they've got to get it back up again so that they can play with it and manipulate it down.
Thom Dallman: Yeah. So, that might be another factor in a slow down of the rise in pricing, or even a turn down in the rise of pricing, because as interest rates go up the affordability goes down for people. Especially for those entry level people, and that's medium price range, it's harder for them to afford more money when the interest rates goes up. And so, they can afford less and less and less, which if prices keep going up there's no inventory for the lesser people. So, people are getting priced out. People that could afford x amount last year are now maybe 15 ... 10000, 15000 dollars less this year because of just the rise in interest.
Dave Burnett: Which doesn't sound like much, but over a course of two/three years that does add up, and makes a difference there.
Thom Dallman: Exactly.
Dave Burnett: So, at this point there does not appear to be anything on the horizon, at least for Treasure Valley. And, again, Treasure Valley may be a little exempt this time. I heard somebody saying that Idaho and Treasure Valley may be similar to the way Texas in the last turn down. Not exempt from it, but not impacted as hard from the change in the cycle.
Thom Dallman: Once again, this is just my personal opinion on the matter, I don't see anything that's ... Any indication that we're going to ... It's going to happen any time soon. So, I don't see anything. Several agents that I've talked to are saying the same thing. I've talked to numerous lenders out there, including Ron and he's saying the same thing. There's no indication whatsoever in the Treasure Valley that we're going to have that crash anytime soon. So, it's still a great time to sell. It's still a great time to buy. But without a crystal ball we don't know. It may crash next year. Something may happen. We may have a war that happens. There's unpredictable things that could happen that would cause it.
Dave Burnett: Anything from natural disasters to man made catastrophes can happen-
Thom Dallman: Correct.
Dave Burnett: But you can't live your life in fear. I mean, you really can't. You can't live your life with the expectation, you just plan. You play smart. You live within your means. You buy the house that you can afford, not necessarily the house you want, but the one you can afford, and get in and live comfortably, and enjoy life.
Thom Dallman: Exactly.
Dave Burnett: And I guess that's why the Treasure Valley is so nice.
Thom Dallman: Right?
Dave Burnett: You have a beautiful day like today. You have lots of activities, things you can do. One of the things you can do, and we've talked about, you can get out and take a look at a home today.
Thom Dallman: Yeah. Give us a call. Let's go look at some houses.
Dave Burnett: 208-933-7777 that is the number to call for Core Group at eXp Realty, and, of course, CoreGroupRealty.com is the website.
And it really is. I mean, the Treasure Valley ... I've had an opportunity to move to San Diego. I've had an opportunity to move to Seattle. I didn't want to do either one. Just a part, because, I mean, San Diego beautiful weather. Seattle beautiful views. But really when you come right down to it the livability here in the Treasure Valley is incredible.
Thom Dallman: It is. It's ... Yeah. I mean, it's great.
Dave Burnett: You can't-
Thom Dallman: I can't ... I love living here. So, I've lived here for 16 years now, and I just love the Greenbelt, love swimming in Quinn's Pond. We've talked about that at break. I love going up to Bogus Basin, and hiking around up there. Now they've got the new roller coaster ride, which is a lot of fun-
Dave Burnett: Have you done that?
Thom Dallman: I tried that out. Yep. Tried that out a couple of weeks ago, and it was awesome.
Dave Burnett: Wow.
Thom Dallman: It was like what's up.
Dave Burnett: I saw it, haven't done it yet.
Thom Dallman: So, we have a lot of stuff to offer. Lucky Peak. I love boating up at Lucky Peak, and there's just so much.
Dave Burnett: If you have somebody moving to the area, and they want to sit down and council they can do that. They can go look at Core Group Realty even before they move to town. Start getting all of that information set up so we can get them the house that they really are looking for
Thom Dallman: Exactly.
Dave Burnett: No better way to live than to live in your own home, and to enjoy life that way.
Core Group at eXp Realty is the name of the company. 208-933-7777 that is the phone number to call, and, of course, CoreGroupRealty.com that is the website.
The Idaho Real Estate Buzz brought to you by the folks at Eagle Home Mortgage and Core Group at eXp Realty.
Why don't you do this? Get on the phone give Core Group a call, 208-933-7777, and find out why they say you get more with Core.