EPISODE 36: Navigating First-Time Homebuying: Expert Insights With A Realtor
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THE LOWDOWN
In this inaugural guest episode, I bring on my friend Anna, a seasoned realtor from Minnesota, to delve into the intricate process of buying a house. We discuss the key steps and financial considerations for first-time homebuyers, covering topics like down payment, earnest money, inspection costs, and closing fees. Anna shares her journey from education to real estate, her experiences during the COVID pandemic, and how market shifts have altered buying dynamics.
We also explore the nuances of working with lenders and realtors, negotiating commissions, and the importance of understanding homeowner association (HOA) fees and regulations. This episode provides essential guidance and practical tips for anyone looking to buy a home.
MENTIONED IN SHOW:
Connect with Anna Broadrick: https://www.facebook.com/AnnaBroadrickRE
Website: www.lovealwaysjess.com/getstarted
Instagram: https://www.instagram.com/love.always.jess
SHOW NOTES:
Episode begins at [00:00:54]
TRANSCRIPT:
Jessica Trapp: [00:00:00] everyone. I hope that your day is off to a great start. Today is [00:01:00] actually a unique kind of episode for us. I have a dear friend on with me. So this is our first guest podcast, which I'm really excited about. And my friend that I have on her name is Anna and she is a realtor in Minnesota. And I brought her on here for selfish reasons, but also because I love her, but I am in the process of.
wanting to buy a house, which I have talked about a million times on this episode, or not this episode, this podcast. And I just wanted to bring her on, pick her brain, get some ideas, , and also provide all of you food for thought when it comes to buying a house if you are a first time home buyer like myself.
Hi Anna, thank you for being on. Would you like to share some of yourself with the listeners?
Anna Broadrick: Yeah. Hi. Thank you for having me. I'm excited. , so like you said, I'm a licensed real estate agent in Minnesota. I [00:02:00] am not licensed in any other state at this time, but there is a such thing as dual or multiple The licenses I got into real estate January, 2020. So right before all the excitement happened and, , it's been,
Jessica Trapp: more about that.
Anna Broadrick: yeah.
So I, , left the world of education. I have my master's degree in deaf education and, I was an adjunct professor for a while. I worked at a local school district and, , in 2019, I was just. So I left teaching and, , fumbled around for a little bit as a research assistant and was trying to figure out what to do.
And I saw an ad to become a realtor and I was like let's check that out. Let's see what happens. And , September 2019, I met with, my broker at the time and he was really nice and answered a lot of my questions. And I really didn't have a clear understanding of what I was getting into, but I was committed because it was going to give me flexible hours, or so I thought.
, [00:03:00] And then I dragged my feet. It was rather slow at getting licensed. I finally got everything done. All the classes done,, January 2020. And I was going to the office like four or five days a week. And I was participating in all the meetings and all that. And then. Come November, come March 2020, COVID happened, everything got shut down, , and real estate was still able to function.
, we were very lucky with that. And it was because most of our work is done one on one with people. And so we were able to still show houses, still provide guidance discuss contracts and everything like that, put in offers because then everything just switched over to zoom. It was a learning curve for me in a couple of different ways, but the nice thing was, is that I did not have to break any old habits to be able to comfortably fit into the new world of real estate.
Cause I [00:04:00] was brand new. So it worked out well.
Jessica Trapp: Cool. And with it, with you only being a brand new like real estate agent three months before COVID happened, when COVID started, did you feel like a big change in this like style of how you were being a realtor? Or was it so pretty new for you at the time that you were like, okay, we're just going to roll with the punches.
This is just happening.
Anna Broadrick: Yeah, it was. It was definitely just I was still so new to it, but I didn't even know the process of what was to be expected. And so I did have clients Almost right off the bat, I think I signed my first client in February and they closed end of March, early April. And that's pretty rare for real estate agents.
Usually it takes them a little while to get up and going. And for me, I just, that was my first closing, but it was under the new rules of COVID. And so I didn't go to the closing table. I didn't meet in person in very many places. I [00:05:00] didn't have to. schmooze and take people out to restaurants and say, Hey, yeah, let's meet over a cup of coffee or let's meet over dinner or something like that.
It was just, it was very much everything's done separate and apart. And it was actually when COVID restrictions were lifting that I was having a hard time adjusting to, um, some of the old standards for real estate. And I stretched my business and changed it and I just said that this is the way I'm going to run my business because it was so efficient.
But I do know that some agents were really excited to go back to the way things were after a while.
Jessica Trapp: And would you say that things have gone back to the old way of things in general, or would you say that it's like 50 50 depending upon how the realtors are feeling surrounding how they want their business?
Anna Broadrick: I would say that things tremendously changed. So for example, with closings at the title company, it used to be that the sellers and buyers would sign paperwork the same [00:06:00] day. So they would be at the same table. They would be able to ask questions about the house. They would exchange keys or not exchange, but the seller would provide keys to the buyers.
It was more of a intimate process. And I talked to one of my favorite title guys, his name is Eric. And he said that it's. It took a lot longer because people would be chatting and things it and by doing it the way we're doing it now, which is where everyone closes on their own time.
It's definitely faster. It's more efficient, but it takes away all the human aspects of it. , that's one way that the industry has definitely changed. And then, , another way that it's changed is that the, , open houses actually just this past. spring and summer, I would say the open houses really started to become popular again.
, but for the longest time, open houses were still very quiet. People were very cautious about, going to open houses. , but also sellers were very cautious about [00:07:00] having people in their house. , At such large numbers, having an open house means anybody can show up within the time frame and walk through where if you have a showing, it's with an agent, it's private, it's just the agent and their clients, so you can monitor how many people are going in and out.
Jessica Trapp: That makes sense. I was just about to ask that if like the open house dynamic actually has been impacted.
Anna Broadrick: Yeah. And one of the reasons too that we saw a decline in open house participation is because we were, the houses would sell so quickly that there wouldn't even be time to hold an open house. There would be showing scheduled throughout the day. And then say you go on market on Thursday and you have an open house scheduled for Saturday.
The things we're selling so quickly that you maybe have 10, 15, 20 offers by Friday afternoon. And your sellers might say, you know what, we don't even want to do the open house. Let's just pick an offer from what we've got.[00:08:00]
Jessica Trapp: And would you say that because I know lot of buyers right now are feeling discouraged by how quickly things are selling and they're having to look at 20, 30, 40 homes before they can find one, or they risk the fact that their offer isn't accepted, and they might be in a time crunch. So would you say that is shifting back to things aren't selling as fast, there is more houses on the market to choose from, offers are kind COVID we did definitely see offers were going 20, 30, 40 thousand dollars above asking. Just to be competitive, and so that also prices people out of their price point, because they're like, hey, I can only afford 500, 000, and for you listeners, I'm talking Minnesota prices. They're a lot cheaper than California. Maybe in Minnesota, it's more like 200, 000.
Anna Broadrick: Wow. That's a pretty good size house.
Jessica Trapp: But you did have [00:09:00] buyers who were like, Hey, I can only afford this per the bank. But then when I go to this house that I can actually afford based on the listing price, but the offers are coming in competitively higher. And that just throws me out of the, the what's it called? I'm
Anna Broadrick: Competition out of the
Jessica Trapp: The competition. Yeah. The pool. The pool. Cool.
Anna Broadrick: Yeah. Thankfully the market is shifting a little bit, not a whole lot. It definitely depends on, there's so many factors when it comes to listing a house and determining price that the same factors come into play. Also, when people are buying. And for example there's certain areas in Minnesota that sell faster than others.
It could be because of the location is it's like in the suburbs, but you've got a lot of nature around you. It could be that the school district is a high demand school district, so often we'll see those areas sell really quickly before September, which is when our students go back to school. It really depends.
And I would [00:10:00] say that the market has slowed down in some areas a little bit, but I do know that at that either move up buyers or those higher and first time homes, , people don't lose your mind over here, but so for example, a home that was listed for four four 85, which is, , is a modest, it's an expensive, it's an expensive starter home, but it's a very modest move up home.
And a move up home is where you've been in a starter home. You're selling that when you're taking the equity from that sale and you're putting it towards a bigger property or a more expensive property or, whatever. That is that you're looking for. So when they're doing so, for example, the house that was listed at 485.
ended up selling for five, I think it was 565 or something. And it is in those moments because it was a high demand area. They had, I think eight to 10 offers. They had a [00:11:00] dozen showings, a whole bunch of them. , When you see that price increase so much, that is when you do feel bad for those buyers who maybe have that price cap at 500, 000.
And when it ends up selling for 65, 000 over their price cap, they feel frustrated. And so anytime realtors work with their buyers, we do a lot of coaching around okay, what is your max price? What is your comfortable price? And Then we talk about okay, we'll look in this price point. And it, again, it all depends on where they're looking to buy and what's moving in that area.
Jessica Trapp: gotcha. And I want to spin that a little bit, too, is obviously we want people to stay within their means, and we don't want them to offer too much over because it is a competitive market, and they're like, oh my god, I really want that house. I don't know if you watch House Hunters or any of those HGTV
Anna Broadrick: No,
Jessica Trapp: shows.
I know there's [00:12:00] it's, it's a show it's scripted, all that kind of stuff. But you often do hear people being like, I really love the house, I'm going to make it work. I will pay the extra thousand dollars in mortgage or whatever, or rent, or whatever they're trying to get into.
Anna Broadrick: Yeah.
Jessica Trapp: It, we want to try to be mindful. Obviously my podcast is about finances. We want to try to be mindful to stick within our means and we don't want to over commit ourselves to something that we actually can't afford. So how does that conversation go with you as a realtor to your clients when they are seeing those houses going substantially over what the asking price is for?
And then they're like should I just. make it work? Should I just find it in my income to work? What do you suggest?
Anna Broadrick: Oh man. That, so that's a conversation that I have with my clients all the time and it truly depends on the client and their, Flexible of [00:13:00] their flexibility with their finances. For example, if I have a client who has 20 percent down, who has a significant amount of money in stocks, so their money is not liquid, but it could be.
, it could be liquid. , perhaps they've got a very, healthy retirement fund, something like that. If they tell me they have a budget of 375, but then they fall in love with a house at 425 and we end up offering at 450, I'm concerned about them because I know that they would be able to move their finances around.
And, excuse me, I do have honest conversations and very transparent conversations with, The finances and the budget, but also know that as a realtor, we'll do some of that, but I do a lot of that with my team who's a lender. And so the lenders, the ones, they're the ones that look at all of your numbers.
They look at all of the details of what you have and what you don't have. My role as [00:14:00] the realtor is I kind of work off of what the lender says yeah, this will work. And then I also talk. Very bluntly with my clients as to how comfortable they are with the new price point., And then, for example, like on the flip side, say there's somebody who's getting down payment assistance, they only have 3 percent down, , so we'll say that they only have 3, 000, we'll say they have 5, 000, that's still a lot of money for some of my clients to use toward the transaction, that 5, 000 has to get split up into multiple people.
pools of what would be needed to buy the house and if they're like, Oh, but I love this house and it's 10, 000 over their asking price. 10, 000 in mortgage land, , will change your monthly mortgage by five percent. Eight to 12 bucks or something like that. , but I know that also is [00:15:00] already pushing my client's budget, and then that's again, where you have a blunt conversation of say okay, let's do your budget. Let's talk through these numbers. What, where are you stuck? Where can you wiggle? And if you can't wiggle, then we need to decrease the max price point that we're looking at and get back down into a comfortable zone.
Jessica Trapp: Okay, and would you say that's very common for lenders and realtors to do with their clients or is that something that you, because I personally know you and I know that you like to be very mindful of your money and so for you, budgeting is just we have to look at our budgets and I know you have literally sat at the table with your clients and been like, what do you spend your money on,
Anna Broadrick: yeah. Like, where is this money going?
Yeah, I would say it's not too common as realtors. We are not licensed financial advisors. And that is something that I do remind all of my clients. And so I appreciate it. I do know because of my teaching background though, [00:16:00] and working with middle schoolers and high schoolers and knowing Minnesota state standards and education, I know that financial literacy is not taught to adults or students.
And so I do to anybody like at all. So I do go through the process of Making sure there's very explicit understanding and thorough details reviewed with their budget.
Jessica Trapp: so talking about the lender side the lender is the person and correct me if I'm completely wrong the lender is the person who at the end of the day is Providing the mortgage to the client.
Anna Broadrick: Correct. Yeah, they're facilitating it. They might, if they're, yeah, if they're a mortgage broker, then they would be working through, , Whichever loan, , company can provide the best deal. But yeah they facilitate the loan. Yep.
Jessica Trapp: and before I guess I don't know truly the whole real estate process. Like I know you and I have briefly talked [00:17:00] but do people tend to seek out realtors and they connect them with a lender do people go to lenders first? What is the process if you're like, you know what i'm tired of living at home with my parents or renting an apartment?
and You know, like in my case, I'm getting ready to start looking for a house within the next few months to a year depending upon where my finances are. And what is the process since I'm a first time homebuyer? Do I go to a lender and say, what is my, what can I actually afford? Here are all my finances.
Tell me what I can do. Or do I seek out a realtor first? What would you suggest people, the order of operations do?
Anna Broadrick: I love when people come to me first and then I can refer them to my trusted lenders. , people really need to understand that it is illegal for realtors to get any sort of kickback. From any sort of company or a program. So when I have trusted lenders, it's not [00:18:00] because they're giving me money. I have trusted lenders because I've seen them work successfully through complex lending situations, and we still get the house to close, and so I like when buyers come to me first and they say, Hey, I'm just starting the process. What do I do? It puts me as the point person and then I can help guide through the process. I do have a hard time sometimes when clients come to me with their own lender. Because sometimes it's just something they filled out online and they have no rapport with the person.
Sometimes it's Their mom's brother's cousin's uncle who isn't available on weekends. And that's when we write offers. And so that can be frustrating. And sometimes they come to me with a lender and I find a new lender that I really liked. And that actually happened to me in March. A couple came to me and they're like, Hey, we've got this lender.
We want to work with you. What do we do next? And that lender thoroughly impressed me. [00:19:00] And so I added her to my list of people I recommend. Ideally if you're starting the process to like long story short, if you're starting the process, you want to start with somebody that you feel most comfortable asking questions to.
So if you have a mortgage person in your life, Start with them. They'll get you connected with one of their trusted realtors. If you have a trusted friend who worked with a realtor and really enjoyed them then start there because The whole point is you want somebody who can be your point person that you feel comfortable and you can trust guiding through the process
Jessica Trapp: That makes sense. And I do think that is important because this is something that you're, it's a huge investment
And you're going to hopefully be living in it or you're going to, if you're renting it out, you're going to have other people be living in it. And so you don't want to get something that is, you're going to regret down the road.
Anna Broadrick: right. And the main thing is that everybody knows everybody like [00:20:00] everybody knows a realtor or knows somebody who knows a realtor. And so the biggest thing is to just make sure you're working with somebody that you're comfortable with. And not everybody's going to be comfortable with everyone. I'm not everybody's cup of tea.
And not Every buyer is going to be my cup of tea, and that's totally fine. And again, you just want to work with somebody because you spend a lot of time with these people, specifically the realtor. And interview your lenders, do comparisons with lenders, ask them, how do I get a hold of you on weekends?
What is your availability? And do the same thing with realtors. How do you handle multiple offers? How quickly, what's your schedule like? Are we able to see houses the same day or are we supposed to get something set up, a few days in advance? These are all questions that you should be asking the realtors that you're interviewing
Jessica Trapp: Awesome. I like that suggestion to interview and don't just go with the first person.
So starting out the process. What should people consider when it comes to their finances? Because I think a lot of [00:21:00] people, at least for me, I think down payment. Okay. Do I want a 20 percent down or do I want to, do a lower, take advantage of FHAs and do a 3%, 5 percent have the interest and stuff.
But are there other costs that play into real estate that we should be considering? Before buying a house, because I literally, I'm like, Okay, I have 3 percent down payment, I can go buy a house now.
Anna Broadrick: and it's no you can't
Jessica Trapp: Yeah, I'm pretty sure you said that to me the other day. Hold on, don't go look at the house yet, because do you actually have the money to buy it?
Anna Broadrick: Right because people think oh, I've got okay, maybe give me some California numbers So we'll say a house is a million dollars, right?
Jessica Trapp: Yes, if you want a house with a roof on it, you're looking at 700 to a million.
Anna Broadrick: Okay, let's do a million because that's going to be like an easy number to do mental math for You know, i'm not going to be the one doing the mental math. So what would be three percent down for a million dollars?
Jessica Trapp: 30, 000,
Anna Broadrick: Okay
Jessica Trapp: Hold on. [00:22:00] Sorry, my br
Anna Broadrick: maybe you got to do the math. I know we're in interview mode. We're not in math mode
Jessica Trapp: No, you're good. 300, 000 is, yeah, 30, 000.
Anna Broadrick: okay. So how much thirty thousand or
Jessica Trapp: Yeah, 3%.
Anna Broadrick: Okay, thirty thousand dollars Okay, so you've got thirty thousand dollars in the bank people need to understand that is just covering the down payment. There are closing fees, appraisal fees what's my list? I've got a list, earnest money earnest money is part of your down payment, so we're not going to cover that one, inspection costs, there's all sorts of things to keep in mind.
So just because you have that cute, 3%. It's not going to get you to the house because there's other fees. Okay.
Jessica Trapp: Sorry, really quick. Are all those other fees that you listed out things that we have to pay out of pocket at the time of closing, or does it get baked into our mortgage?
Anna Broadrick: At the time at the time of closing and out of pocket before closing.
Jessica Trapp: Okay, because I know the down payment [00:23:00] has to be out of pocket, like that is a check you are writing to the bank or the lender, whoever, and that is coming directly out of your check in your savings.
Anna Broadrick: correct. You will, and you will get a cashier's check from The from your bank to the title company or you can do a direct wire to do yes. So should I go through my list? I texted you my list. Okay, so you've got your down payment. And that is what everybody hears about and people there are still some people that think you should have 20 percent down.
And the reason 20 percent down is nice to have is because it gives you a lot more flexibility and it's a stronger offer if you have more cash. People just feel comfortable because your financing is less likely to fall through should something happen last minute. So we'll just, okay. So starting with a down payment, if you have 20 percent down, it means that you're not going to need to pay PMI, which is private mortgage insurance.[00:24:00]
If you have less than 20 percent down, sometimes less than 15 percent down, then you will have to pay a PMI. And these are all questions that you should ask your lender. Okay. So we'll say you're doing the 3 percent down. So you've got 30, 000 For a down payment, most lenders or mortgage providers will say, how much money do you have to use toward the transaction?
Because if you say, how much money do you have for the down payment as a lender? We're like, okay, they've got 30, 000 and then they have to have another 15, 000 for the other fees, right? But if the lender says, how much money do you have toward the transaction? And just you say, I have 30, 000. then the lender can do the math and say, Oh, okay.
So they really have 2. 5 percent and we'll be, maneuvering things around.
Jessica Trapp: Okay, because you have the other 0. 5 percent is going to cover the other costs that are due on signing.
Anna Broadrick: correct.[00:25:00]
Jessica Trapp: Okay,
Anna Broadrick: Yeah. And again, California numbers are going to throw me way off because they're very different than Minnesota numbers. So if I fall back into saying Oh, you only need 5, 000, like just triple it. Okay. All you Californian folks. Just triple whatever number I say, and that's probably going to reflect what it is
Jessica Trapp: Basically, at the end of the day, make sure you talk to your lender about this because as Anna said, she's in Minnesota. She knows Minnesota market the best. I'm in California. We probably have listeners in, Nevada or Maine or wherever. So these numbers are not going to be, Hey, Anna and Jessica said on the podcast that I'd only be spending 5, 000.
No.
Anna Broadrick: Exactly. Exactly. I'll try to use percentages as much as possible because that seems to be pretty standard across the board. But yeah, if I say a number, don't, it's not set in stone. Okay. A down payment that is paid at closing and that is also where you hear a lot of information about down payment assistant [00:26:00] programs and getting a grant or getting a loan, a second loan on the property or.
Those kinds of things. So always check your area for down payment assistant programs. Minnesota has quite a few and then some of them are also city and county specific. So check your area, talk to your lender. If you're talking to your lender and they're like, oh, we don't use down payment assistant programs, go find a new lender because you never know what you qualify for.
And there's always going to be different requirements, different qualifications, but you never know what you qualify for unless you're like of a trillionaire and then
Jessica Trapp: And then you
Anna Broadrick: you don't need down payment assistance anyway. Right. Okay. So another thing that you need that comes out of your down payment.
So just, you have 30, 000, then the money that comes out of the down payment is called earnest money. And I I'm fluent in American Sign Language, so I sign your commitment money or your [00:27:00] promise money. And the earnest money is paid two days after, two business days after your accepted offer in Minnesota.
Might be different in other states, but that is, the earnest money is the money that you pay up front as soon as your offer is accepted. And that is usually one to three percent of the cost of the house.
Jessica Trapp: And does that get returned to you if things fall through and you don't end up going with the house?
Anna Broadrick: Yes, great question. So that does, if you are still in one of your contingencies. So when you write an offer, you can write an offer to have an inspection done, and then you get an inspection window. Usually in Minnesota, it's five to seven days, but we do sometimes go all the way up to 10 days. And if you cancel within that timeframe, then you will get your earnest money back.
Jessica Trapp: Okay.
Anna Broadrick: However, if you cancel after that timeframe, then you do not get your earnest money back. [00:28:00] And then also sometimes there's different ways to write it in the contract or maybe your state already has contract language for it, but if something happens to financing, you can also say that the earnest money is refunded to the buyer and it's not retained by the seller.
Jessica Trapp: Okay.
Anna Broadrick: So that is the getting your money, getting your earnest money back. That is on a case by case basis. But the biggest thing to note for earnest money in Minnesota, so it might be pop, might be the same in other states, is when I give the accepted offer to your lender, They'll look at how much money you're already paying for earnest money And that earnest money is considered credit toward your purchase So you don't have to do earnest money and then on top of that more for your down payment It is part of your down payment
Jessica Trapp: Okay. So like we're talking on, say we go with the million dollar example, thirty thousand dollars down, one to three percent has earned his money, let's say three percent, [00:29:00] that's three thousand. When you go to pay the cashier's check at the end of the month or however longer I forget, oh my god, my brain is blanking on the
Anna Broadrick: However long the
Jessica Trapp: ask, yeah, the purchases, then you only pay twenty seven thousand dollars instead of the thirty.
Anna Broadrick: correct.
Jessica Trapp: Okay.
Anna Broadrick: Yep. And it's 1 percent of the purchase price, not 1 percent of your down payment.
Jessica Trapp: Okay.
Anna Broadrick: numbers will be a little different.
Jessica Trapp: Okay, cool.
Anna Broadrick: So then earnest money comes. Yeah, so earnest money, and then the inspection. So you get an offer accepted. You've paid the earnest money. Also, in that time frame, you want to find an inspector, because I do think it's important to have your home inspected unless you can inspect it yourself, because you are a contractor or a subcontractor and you do a lot of work on houses you should definitely hire an inspector.
In Minnesota, there is no specified license or certificate to become an inspector. And To go [00:30:00] with like the reputation of other companies reputation of companies and Google reviews and things like that. So check your state requirements to to see what they require for inspectors. But an inspection, you can have you would do a general house inspection.
In Minnesota, those range anywhere from 350 to 550 350 to 550. It depends on the size of the house. We do sewer scopes here in Minnesota because sometimes tree roots get into the sewer lines. And so we do a sewer scope that costs about 200. And then here in Minnesota, we also do what's called radon testing.
And it's a. odorless colorless gas and a radon test is about 200 too. So if it's 56789, so you're looking at another about 1000 that you'll need for the inspection.
Jessica Trapp: And is that always on the buyer's side or can that be negotiated where [00:31:00] the seller pays for that?
Anna Broadrick: You could try to get the seller to pay for it, but it's gonna always be, I'm gonna say it's gonna always be on the buyer's side right now, in this market. Yeah.
Jessica Trapp: And I'm assuming that's out of pocket, right when you have to pay for it. So if you are putting offers on hundreds of homes, you know, try to not fall out of your contingency period or whatever.
Anna Broadrick: right.
Jessica Trapp: that's something that you have to pay out of pocket.
Anna Broadrick: Yeah. So the inspection is not related to how do I say this? So yeah, you will only put an offer on a home one at a time.
Jessica Trapp: No, I get that, but if you fall out of it you're like, Oh, I actually don't want this house. Let me go look at something else. You don't want to continuously do that because you're going to have to pay for that kind of stuff out of pocket.
Anna Broadrick: Yes. Yeah. So if you like, if you're like, Oh, I really like this house. And then you pay for the inspection. You don't get that money back if you don't buy the house, because it's like getting your hair [00:32:00] cut. You have to pay the person who does the job and you pay the inspector and it doesn't matter. The one thing to keep in mind though, is that you do own that inspection.
So say you cancel the purchase agreement and you get your money back and you're moving forward. If the seller Of that house that you originally wanted it goes. Hey, could we just look at your inspection report or could we have your inspection report? Always charge them always try to get your money back with that inspection sometimes you can offer it up and say hey if you know, we're canceling the purchase agreement But if you want to purchase our inspection for and give it a discount or whatever 400 instead of 500.
Like you can do that. It's just a nice way of having an opportunity to get your money back a little bit. It doesn't always happen. It doesn't always work, but. Never hurts to try. And then the thing that comes through from your lender is going to be what's called an appraisal fee. And that is if [00:33:00] you're less than 20 percent and you can't waive the appraisal.
So the appraisal fee in Minnesota is oh man, where does it at now? I think it's 700 or something. When I first started, it was like 350. So in four and a half years, it's gone up. By a lot. Yeah, exactly. It's almost, it's more than doubled. So the appraisal fee is all dependent on whichever lender you're working with.
But in, because it's not a set fee across the state. It changes. Yeah. And then the last, and so the inspection, the appraisal fee and the earnest money, that is all due within two weeks of your accepted offer. So if somebody has a closing in 60 days and they're like, Ooh, I'll get four more paychecks before closing.
So I'll have enough money for this and that. They have to keep in mind that your earnest money, your inspection costs [00:34:00] and your appraisal fee, that's all going to be coming out of one paycheck. Yeah.
Jessica Trapp: That's good to know.
Anna Broadrick: Yeah. Or your savings account or, whatever. But in that timeframe, it'll be really
Jessica Trapp: So you are writing checks outside of the down payment between the day you give the offer and the actual day you get the keys to the house.
Anna Broadrick: correct.
Jessica Trapp: Okay.
Anna Broadrick: Yep. And then closing costs. That's something else that comes up. Closing costs are paid at closing because they're closing costs. And those are all like taxes and fees, filing paperwork with the county, transferring of the deed, yada, title fees, because the title company is the one that handles the transaction, so we have to pay those guys too.
So there's a fee there for using the title company. And the title company, you can compare prices of different title companies. There's a handful here in Minnesota, and I am trying to think if [00:35:00] I've had I've worked occasionally with other title closers, but generally once you find You click with who communicates well and can get it done.
You just stick with that person. But I do always remind my clients that they can compare if they choose to prices range, maybe 100 to 200. It's really not
Jessica Trapp: that expensive.
Anna Broadrick: Yeah. When you're buying a house. Yeah. It's the 100, 200 for their title fees is really not. going to be that impactful to your bottom line?
Jessica Trapp: And none of these closing costs are baked into your mortgage payment, correct? Okay.
Anna Broadrick: It's different if you're a vet, a veteran and you're using a VA loan. Some of those can get rolled in, they call it but essentially, but no, it's usually considered in the calculations of the category called cash needed to close.
Jessica Trapp: Okay. Also included in closing costs are, I don't recall if you said it [00:36:00] and I apologize if you did, but did you say anything about like the commissions to the realtor?
Anna Broadrick: Oh yes, so I did not talk about that because that law has changed. And for the longest time, , I'm trying to think of the best way to go about this. It's changed nationwide because it was NAR, the national area of realtors that was part of a lawsuit. And the n na NAR. It's for the whole United States.
And then we each have our own little state branches and our own little city things as well. But anyways the law now states, okay, I'm going to try not to get on my soapbox for this, but I need everyone to understand that people have always had the opportunity to negotiate commissions always. Before the law change, those commissions were explicit [00:37:00] on the MLS and on other websites that pull from the MLS, such as Dillow or realtor.
com where you can see the commission payout. Part of the lawsuit and part of the law change is that those commission payouts are no longer on the MLS because for some reason within the lawsuit, they said that was like setting the standard or unifying it and that was taking advantage of consumers.
And so now they've removed that commission information from online, so no longer can it be viewed everywhere. And you are now supposed to negotiate within the contract of purchasing the house how the buyer's agent will get paid. So
Jessica Trapp: is that, you can negotiate the rate as well, or is it strictly who pays, whether it's the seller or the buyer paying the buyer agent?
Anna Broadrick: Yeah, this [00:38:00] is where it gets complicated. I can't, I just say, yeah, because it's, this is where it gets complicated. The buyer, so when a seller signs a contract with a realtor to exclusively sell their house before the seller would say, or the seller in the realtor would negotiate the percentage.
And then that would include a commission cut that goes to the buyer's realtor, and that would be negotiated prior to putting the home on the market, and then the buyers would not have to worry about who pays the realtor. The realtor is always paid through the seller and it was always something that we as realtors could negotiate more if there was a lower payout Or we could tell our buyers and say, Hey, you know what?
This seller for some reason is doing a lower payout and we are going to negotiate for 0. 5 percent more or whatever. Now what it is that the [00:39:00] buyer and the buyer's realtor have to have a communication and say, Hey, just so you know, if you're looking at these houses, if they don't do a buyer payout, you are going to have to pay me through closing and that is going to impact what you're pre approved for.
And so far we're still seeing sellers paying for the buyer's realtor because That gets them as many client customers as possible to view their house. But there might be a shift coming. We don't know, but if that shift does happen, it will dramatically decrease the amount of buyers who are able to look at specific houses, because if you just think of the terms of money.
A seller who's selling a house is getting an equity, a significant amount of money from selling their home and the buyer is the one bringing the money to buy their house. [00:40:00] They don't have extra money to buy the house to also then pay their realtor because
Jessica Trapp: percent down for my down payment, but then I also have to pay my buyer's agent. Okay. 3 percent of the house commission as well. I'm basically doubling what I have to pay for my down payment. It's, or am I overthinking that?
Anna Broadrick: you could be overthinking it. But yeah, yeah, you're not wrong, though. It just depends on what is negotiated between you and your seller or between you and your realtor. And then also between the realtor and the this purchase.
Jessica Trapp: Okay. Yeah, because I'm thinking, okay, if I have 3 percent down on a million dollar home, I have to have 30 percent down, or 30, 000 for a down payment. But then if I negotiate with my agent that they want 3 percent commission, I also have to come up with another 30, 000 to pay them.
Anna Broadrick: Correct.
Jessica Trapp: And I might not have that, so that is severely going to limit the houses that I could look at.
Anna Broadrick: Correct. Because then you'll only [00:41:00] look at houses that are offering a commission payout.
Jessica Trapp: Correct.
Anna Broadrick: And that's the part where you'll hear a lot of people express frustration in their own corners, their own rooms. Circles about this new lawsuit, because when you look at how it's going to essentially impact the process and the purchase and sale, you can tell that whomever was driving the lawsuit didn't really have a full understanding of the process as it currently is, because the thing that I can foresee happening is realtors now taking advantage of the fact that the in the commission payout is no longer online, and so they could negotiate aggressively for a good payout from the seller, but then they could also turn around and say, but I'm not going to give any of that commission to a buyer's [00:42:00] agent.
Jessica Trapp: Oh, and then they take say it is 6%, it would normally be split 3 3 they could take the full 6%, and then the buyer's agent has to figure out how to get paid themselves.
Anna Broadrick: Correct.
Jessica Trapp: Gotcha. And obviously they have a less chance, a lower chance of getting a higher commission split because it's harder for the buyer to come up with that money versus the seller agent.
Sellers are able to come up with the money a lot easier.
Anna Broadrick: Correct. And a lot of people are saying that they'll write the, that we're supposed to negotiate and write it into the offer because they've added new language in Minnesota, but I'm sure in other states as well that says like we we're asking the seller to contribute 2. 7 percent toward buyers commission, buyer agent commission, buyer broker commission.
Something like that. And so that's written in the offer, but they're hoping that with a competitive market still where we're seeing multiple offers, they're hoping that people will try to give a [00:43:00] discount and say, Oh, we're gonna, we're gonna only ask for 2 percent because they're saving 0. 7%.
And so our offer is going to get Look stronger, but the part that's missing is that the agreement between the seller and the seller's realtor happens before the home even goes on market. So if you are offering a payout of 2.7%, but the contract that comes in is only asking for 2%, that 0.7%. isn't guaranteed to go back to the seller.
It's just going to get added to the realtor's pocket.
Jessica Trapp: Gotcha.
Anna Broadrick: And that's the part that I'm curious to see how the market's going to shake out and what new rules and implementations are going to be put into place to ensure that it is truly benefiting the seller and not just sending more money into a realtor's pocket.
Jessica Trapp: Okay, and just, I [00:44:00] have two questions on that. One since this is no longer on the websites like Zillow and your MLS and stuff like that, does that create more work for real estate agents to do? Yeah. to have these conversations and these negotiations before even like having a client go and look at a house?
Do you have to call up the seller's agent and be like, Hey, what is the commission split? Because my person can't afford that. And so I'm wondering what you're willing to do. Do you have to do that front loaded work now, because it's no longer on the website for you to view.
Anna Broadrick: yes. Yep, we do. And it's frustrating for me so far. I haven't had any issues. Things have gone pretty smoothly for the most part. So that's been fine. But yes, the people have been calling and then not hearing back from agents and then they miss the showing because it's like we're not going to show a house that the buyers can't afford.
So yeah, it is creating a lot more [00:45:00] need for communication, which isn't always a bad thing, but it can be challenging when you're setting up four to five showings in one day, and then you find out that, oh, actually, we can only go see two of these houses because the others aren't doing a payout.
Jessica Trapp: Got it. Okay. And then my second question is, and maybe this is stuff that's gonna implement as, this kind of rolls out more, but with these buyers not being able to come up with necessarily I wouldn't be able to come up with another 30, 000 to pay a buyer's agent. Would they be able to roll that into your mortgage cost so that the buyer's agent can still get their fee?
Or is that something that right now is completely separate and there is no leeway to roll that into your mortgage?
Anna Broadrick: That I'm not sure about. I think it depends on the lender. But one thing that a lot of people should keep in mind is that anytime someone says, Oh, we can just add this to the mortgage. Understand that's [00:46:00] adding money stretched out over 30 years.
Jessica Trapp: With the interest on top of that and
Anna Broadrick: Exactly. And so anytime that you can find a way to pay for something without rolling it into your mortgage, try to do that
Jessica Trapp: Okay. Yeah, because I, obviously that's like the better answer to try to pay for it, upfront instead of, prolong it and pay interest on top of it. But for people who are in a tough space where, either negotiate with the buyer's agent to only pay a smaller amount, but that would suck for the buyer's agent.
Or, I, that's the only other option sometimes, is you have to do the recurring monthly payments instead of right up front.
Anna Broadrick: Yep. And so the way we see that is by offering more for the house. And then that's how it's getting rolled in.
Jessica Trapp: Okay.
Anna Broadrick: I think everyone should find a realtor who's comfortable negotiating for their worth. And that they aren't going to shy away from [00:47:00] somebody who says we're not offering a payout, send us an offer and we'll consider, oh, we're not going to share what the payout is, send us an offer.
And have that buyer being an aggressive negotiator, cause it's, sellers are going to want, it's always going to come down to bottom line and if the sellers don't have the offers that they want to see. They'll start to realize that, Oh, maybe I should offer commission towards the buyer's agent so that we can start seeing those numbers that I want to see.
Cause yeah, it makes a
Jessica Trapp: that could also play into the seller's benefit, too, where they can put the house, above asking price or something they can be, like, a million dollars when it's really worth 9. 50. And then instead of reducing, maybe, the payment to become more competitive in the market for themselves, they can then be like, oh, we're gonna do a commission split to make themselves look better, it gives a little bit of added benefit to the seller for Wiggle Room.
Anna Broadrick: yeah, it adds to the marketing. And so that's the other thing [00:48:00] people should keep in mind too, is that. Just for like marketing purposes is the realtor can share private or like publicly on their own pages of hey, we're doing a commission payout for this one, that can be done.
It just can't be tied to the MLS.
Jessica Trapp: got it. Okay. So as long as it's not written into online documents for the house.
Anna Broadrick: Correct?
Jessica Trapp: Okay, cool. That's good to know. Alright thank you for walking us through those fees. I know one of the other biggest fees that people don't take into consideration is HOA fees. Can you
Anna Broadrick: Oh, yeah.
Jessica Trapp: a little bit?
Anna Broadrick: Yeah. So homeowners associations, HOAs are becoming more prevalent, more popular around the United States. Some areas more than others are seeing greater expansions of HOAs. What is it like in California? Do you guys have a lot of associations or?
Jessica Trapp: I would say, I don't know the true split, but I [00:49:00] would say now that we're building more and more communities, Where you have like the community pools or the community parks or hey, we're building like this group of brand new homes, you're gonna start, we are starting to see more and more HOA fees become popular.
Anna Broadrick: Yep. Okay. So yeah, the, we're seeing the same growth here with the neighborhoods. The, it's a neighborhood pool, it's a community pickleball court. It's that kind of stuff. Yeah. We're seeing the same thing. So with HOA fees, those can range anywhere. are from 200 to 1, 200 a month. Some of them are still quarterly because maybe it's just for maintenance of a small park.
And so it's only 60 a quarter. It really depends. But if you're looking at a house with an H away, You are going to have another contingency once your offer is accepted in Minnesota. It might be different in other states, but the contingency here is that you get 10 days to review all of the HOA documents.[00:50:00]
You can call the HOA representatives. You can ask as many questions as you want. And within those 10 days, if you decide that, Hey, the HOA is doing something scary with their finances or the HOA has really strict rules that I can't adhere to. You can choose to back out and then you would still get your earnest money back.
Jessica Trapp: Okay.
Anna Broadrick: So things to keep in mind when buying in an HOA is that when you move in, there's also going to be a move in fee. Not every HOA requires that, but some do. And then that ranges anywhere from a hundred to three hundred dollars in Minnesota. It might be different in California. I can't triple it.
Who knows? I don't know. But then also to keep in mind when you're selling is you are supposed to get what's called a resale disclosure document. And that is from the HOA. And that fee has gone up significantly. Those This used to be like 80, 100. And now those documents range anywhere from [00:51:00] 300 to 800.
And all it is paperwork from the HOA. It's literally a saved document that somebody spends five minutes that puts together and then sends it out. So
Jessica Trapp: does that do? Does it just say, yeah, this house can be sold?
Anna Broadrick: Essentially, but the HOA the resale disclosure the actual resale disclosure form, there's a full packet, but the form itself says the home can be sold, there's no outstanding tax liens or pending assessments from the government there's no other financial issues.
And then it also includes information about the HOA, such as this is our insurance policy. This is what the kind of coverage you're going to need for homeowners insurance. It will also include information about any. Pending projects that are coming up. So for example, if the HOA knows that it's going to be repaving the driveway, it will include that information.
And then [00:52:00] maybe it'll say we don't have bids yet. So just be prepared that it might be coming in the next few years. And then, so that's the resale disclosure, specifically that document, and then within that whole packet that they send you, you'll also get the HOA rules and regulations, the bylaws, and the articles of incorporation.
Jessica Trapp: okay. So what I'm hearing is if you're looking at a house in an HOA area and you put in an offer, actually look into the HOA because you don't want to be taken by surprise. You don't want to be like, I didn't know this was a guideline because you didn't read the frickin documents.
Anna Broadrick: For example, I've had past clients that got a warning and then a fine from the HOA because they left a rugs hanging on their deck after they had washed their rugs. And and they left them out overnight. And so then they were still wet from the dew in the morning. And so then they left them out for another day [00:53:00] and they got a fine for that.
I think that's rather ridiculous, I think, but the whole point is that some HOAs have a strict image that they're trying to maintain. And you just want to make sure that you can adhere to all the rules that are within that HOA. And it's so important to go to your HOA meetings if they have them, because then you do know what's going on and you'll have a right to vote.
Some HOAs have Have a clause in their bylaws that state if the you are if you are not present at the annual meeting, your vote is not needed it. They might still ask for your vote, but your vote may not be required. Pass laws.
Jessica Trapp: okay. So if you guys are living in an area that has an HOA or if you are looking at houses that are in an HOA please be participatory. in everything HOA related
Anna Broadrick: Yes,
Jessica Trapp: affect you.[00:54:00]
Anna Broadrick: and don't just trust your realtor to read the paperwork and tell you, Oh, I'm concerned about this like you as a human being need to be responsible for what you're purchasing. And so you read all the paperwork and know what you're signing.
Jessica Trapp: You mean I can't just call you up and be like you didn't tell me this five years after you sold the house to me? I can't?
Anna Broadrick: no, you cannot. You could try. Good luck, but I've got a legal team that will support me. And in, in most of your buyer rep contracts, most of them are going to have an arbitration agreement which will prevent you from, taking me to court. So
Jessica Trapp: Okay,
Anna Broadrick: keep that in mind if you think you want to sue your realtor.
Oh, can I add, I want to add one more thing because I know we're almost done. This is not financial related. This is safety related. Please be respectful to realtors if they ask to meet. Before actually showing you houses. For example, for [00:55:00] me, I meet with my clients on the phone, on a video call, and then in a public space before I show them a house, unless I personally know them.
And Realtors will also ask to see your ID. Realtors are also asked to see your ID. They will ask who, how did you get my name? Where did where did you hear about me? That kind of thing. Please be respectful. So when we ask for that, I know that the people listening to this podcast are probably already like really respectful human beings, but remind, remind your brothers, cousins, uncle, remind the dudes in your life and the women in your life that we are going to ask these questions because it's important for us to be safe.
And we're not trying to be snobby or anything like that. We're just trying to make sure that we are protecting ourselves.
Jessica Trapp: Makes sense and you would think that it would be reasonable But as you said there are people out there who get annoyed with the smallest of things. Yeah Thank you for sharing [00:56:00] that. Is there anything else? That you want to share in regards to like first time home buying? I don't know if you want to say anything quickly from a seller's perspective but yeah before we wrap this up
Anna Broadrick: Yeah, I think for first time homebuyers, just remember that this is going to be a process. You may not find your dream home right away, or you might find your dream home right away. It's it really, it all depends. And I think the biggest thing that I ask my clients to do is if you're going to be looking in an area that you are not familiar with, You need to go and drive that area by yourself or with your partner or your parents or whomever is helping you with the purchase and see if you actually like it.
I cannot tell you the number of times that I've set up showings for clients in the past and then as we're pulling up to the house, they say, we don't need to go inside. I don't like the area. That is a huge waste of time for not only the realtor, [00:57:00] which is not that big of a deal because that's our job, but it's a big emotional waste of time for you as the client because you get invested in, oh, I like the way this window is with the kitchen and I like this, I like that.
Don't get invested into a house if you haven't driven through the area yet.
Jessica Trapp: that's a good point.
Anna Broadrick: Yeah. And then and just know that you might look at a hundred houses and you might look at four houses and both options are okay, but go walk through open houses to get an idea of what you like and what you don't like.
Because the pictures online don't always match what you see when you walk into the house.
Jessica Trapp: you don't necessarily always truly get a feel for the layout from the pictures because they're all in different orders on the MLS, and you don't get to see the flow of the house. And also, Anna, I know that you're an energetic person just like me, you don't get to feel the energy of the house.
Anna Broadrick: Yep.
Jessica Trapp: And that's I'm a huge proponent for going and sitting on [00:58:00] couches before you buy a couch, or laying on a bed before you buy a bed, and not just buying like something random off online, because you're going to be sitting on it, you're going to be sleeping on it, you want to feel good. So when you go in and buy a house, you want to feel good.
So don't just buy something off of Zillow because it looked pretty. Go and feel the neighborhood, go and feel the
Anna Broadrick: would do that. Yeah. Yeah. And to think about what your lifestyle is and think about what's important to you. I had a client who said going to the coffee shop on Saturdays was It's really important to her. And so I said, okay, go park in the neighborhood for this house that you want to go see and walk to the coffee shop.
Does that feel good? And she did it. And she goes, you know what, Anna, there wasn't a sidewalk for a whole block and a half. I didn't like that at all. And go put yourself in these moments. And I know sometimes when the housing market is fast, you feel like you don't have that kind of time, but if you do the work ahead of time, so you know, which areas and neighborhoods you want to look in.
Then you won't feel so [00:59:00] unsure when you're putting in those offers on the houses, when they come available.
Jessica Trapp: Cool. I love those points. Put yourself in the experience. Because
Anna Broadrick: Drive home from work to the house you want to buy. See what the traffic's like California traffic. There's always traffic, but in Minnesota, like there's rush hour times that, some freeways are way worse than others.
So yeah, live your lifestyle to those neighborhoods and see if it matches and if it feels right.
Jessica Trapp: And maybe the house that you want to buy only has a left turn out of the neighborhood towards your work or whatever. Or towards Target. And you hate left turns. And it's not a stoplight, so you're sitting there for 10 minutes waiting for the opportunity.
Anna Broadrick: Yes, yeah, or you know that intersection has a bunch of Car accidents or something because of that. Oh my gosh. Yes, that's the other thing. Your realtor is not going to tell you if it's a good area or a bad area. We are legally not allowed to say Oh, this neighborhood is [01:00:00] fantastic because of this and that.
That's not okay. It is up to you as the buyer to do the research on the area. And then this also includes crime statistics and inmates who, what am I trying to say, people who are no longer in prison former inmates so look that up in your area, especially if you're really worried about it and call the police department and say, hey, I'm thinking about buying a house in this neighborhood, what can you tell me about it?
And gather information because your realtor is not allowed to do that for you.
Jessica Trapp: Okay. That's good to know.
Anna Broadrick: Yeah. I know we could talk for hours about, about all these things. So I'm glad we could keep to the bullet points this time. That was good.
Jessica Trapp: Me too. And I appreciate the fact that like, was a learning experience for me. I took away some, great pointers, and I'm excited to apply it to my, home buying experience. But also at the end of the day, it I think a lot of things have changed since [01:01:00] COVID in the real estate market.
So it's not just for first time home buyers, it's for Buyers of homes in general, because we are, the boomer generation, they are starting to retire and they are starting to sell their houses and downgrade and, buy something smaller because their children have moved out and they don't need to necessarily have the four or five bedrooms at home.
And so this is going to be beneficial to a lot of people who are going to be buying houses. So I appreciate you taking the time and it wasn't. Strictly focused on Minnesota real estate.
Anna Broadrick: Tried not to.
Jessica Trapp: so I appreciate all the pointers.
Anna Broadrick: Yeah. I hope it's helpful. And I hope the people that listen to this feel more empowered and more excited to make a big purchase because it can be scary, but it can also be really beneficial. And maybe sometime I can come on about using your home as a second income. And we can talk about investment properties or short term [01:02:00] rentals, things like that.
Jessica Trapp: I would love that. And, we didn't get to the seller side, which is fine, but we can also talk about selling your house. But at the end of the day, home buying, this is my opinion, and you might agree or disagree. I'm gonna let you share if you agree or disagree, but Homebuying is supposed to be fun because this is supposed to be the place that you are living the rest of your life or a majority of your life.
This is the place that you go home to at the end of the workday. This is the place that you raise family in or you make it your own. So have fun with the process. Don't get caught up in the finances. Don't get caught up in the ins and outs of, inspections and the contingency and stuff.
Yes, it's important. And yes, you want to make sure that you're protecting yourself, but have fun with it too, and dream up a space. If you walk into a space and you're like, Oh, that's hot pink wall. I don't like it. Okay. What would you turn it into?
Anna Broadrick: right.
Jessica Trapp: Have fun with it.
Anna Broadrick: You can always remodel the home. You can never [01:03:00] well you can pick up the home but you can't change the location of the home. So that is key. And people do get worried about Oh that's going to be a lot of work and this and that. And it's but do you love the location?
Do you love the yard? Do you love, yada in Minnesota? It's do you love the trees around us? You Californians
Jessica Trapp: thing, too, that is changeable is you can refinance.
Anna Broadrick: Yeah. Yeah. Yeah. So interest rates, if people are scared about interest rates and if they can swing it in their budget for a couple of years of this higher interest Percentage. Yeah, then you can refinance and you're in a more comfortable spot.
Jessica Trapp: so awesome. Thank you. Thank you for this time. I love you as a person and as a friend just so you guys know I've known Anna since we were in diapers. So we have a long history together. We are stuck together whether we like it or not.
Anna Broadrick: exactly. Yes. Yeah. Thank you for having me [01:04:00] on. And it was fun to, to talk about this side of my life. That's I appreciate it. And I'm looking forward to watching you from afar as you embark on this adventure.
Jessica Trapp: Thank you. And I look forward to continuing to watch you too and celebrating you. All right. Have a wonderful rest of your day, everybody. I hope that you took some stuff away from this episode. Just thank you for being here and listening. And I look forward to being in your ears next week. Love you all.
Bye. [01:05:00]
