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Full Video Transcript

Kevin:

Hey guys Kevin here coming to you live from DC. And we don’t do this often. Well, if you’re in Adam, you know that I do coffee with Kevin videos. Usually every week, you’ll see one pop up in the Facebook group. But what I wanted to do was do some interview style stuff, because I’m sure most of you are sick of hearing me talk. You’re sick of looking at my stupid face. Now you have two other faces to look at, and those faces are our own ADPi ICC agents. Wynn Martin and Pat Wilver out of Savannah, Georgia, they’re my agents. They’re my team. I trust them with my life. And they both went to West Point, despite Pat’s beard. He did in fact go to West Point and they’re crushing it in Savannah. Their, their, their whole operation is growing and just exploding there in the market as they do really, really good business.

Kevin:

But what we’re here to talk about today as we you know, sip our coffees is closing costs. I’ve had a lot of questions in the group come to me privately, or, or, or, or just in the group, Hey, what what’s all involved in closing costs. I hear closing costs are like the worst thing ever. Well, I wanted to bring some agents on and I wanted to bring some ADPi certified agents on to talk about closing costs, what they are and why you shouldn’t necessarily be afraid of them, especially if you plan to VA house hack. And, and I say, ADPi certified agent, what does that mean? So over the last 12 months now, ADPi has been going through, finding agents, and vetting them and, and making sure that they are the best agents in that market to talk to veterans. They have to have a military affiliation.

Kevin:

You know, these, these two gentlemen have been to West Point and, and, and they’re veterans themselves, and they have to know what it means to invest. And these two gentlemen are investors themselves. So they know investments, they are qualified agents and have a military affiliation. So they, we, we, we just don’t want agents just like spewing crap about the VA loan that they just think they heard from their cousin’s, you know, brother, who’s a lender, you know. We wanted to talk to the real deal, so Wynn and Pat, thank you for your time. And let’s talk closing costs.

Pat:

Sure. Pleasure. Yeah.

Kevin:

So closing costs. So the biggest thing that I, I, the question that I get is I wanna use my VA loan. Does that mean I don’t have to pay closing costs? What do you guys say about that?

Pat:

Well, well, you do have to pay closing costs, but you can ask the seller to pay for up to 4% of the the purchase price of your house and closing costs. So generally you can get the seller to cover most, if not all, of your closing costs. But there is still closing costs. Somebody’s got to pay for them.

Kevin:

Okay. So, so what, what are these, what are these closing costs? Like, I have all this, you know, I’m paying, so, so that’s a good tidbit because you said up to 4%. So that means that, you know, if your house is $100,000, I mean, shoot man, you can get $4,000 paid for by the seller if you negotiate right. Is that math right?

Wynn:

Yes. When when you’re writing a contract, make sure that your agent is asking for an appropriate amount of closing costs, maximum amount, if you can. The last probably 10 or 11, we’ve done VA loans. The buyers have actually gotten money back. We’ve asked, we’ve negotiated for a good amount of money. Typically closing costs are three or three and a half percent on a VA loan in our market. So if you ask for 4%, you, you know, they pay too much, you get a little bit back and it’s nice to buy a house no money down and get a check back for, you know, like $1,500. Can’t beat that.

Kevin:

Sure. Can’t so you’re getting paid to buy your investment property.

Wynn:

A lot of times you can.

Kevin:

Whoa. That’s wild. So what, when, when these closing costs break out, what, who’s getting paid? How much are they getting paid typically? And like, why?

Pat:

Well, I mean, first you have an attorney, right? You got your closing attorney, some states, I don’t believe you use attorney we’re we’re in Georgia. So any kind of, you know, anything we talk about is gonna be specific to Georgia. Some things may be different. In Georgia, we have a closing attorney. Their take is usually attorney-related closing costs usually like $2k-$2,500. And that includes a big line of things. I’m holding up an ALTA settlement statement right here. So under the line on, you know, title charges and escrow settlement charges, you have title insurance for the owner and for the lender. In this case this, this particular example, this is about a $200,000 purchase price 100% loan to value VA. In this case, title insurance total was about $1,000 for the lender’s policy and the owner’s policy. Attorney fees in this case are $645. You have some associated, some, some assorted title-related fees, $45, $20, $195 for, for a binder, another $150. There’s a bunch of little,

Kevin:

But it’s kind of all like attorney-related.

Pat:

This is attorney-related stuff. And this isn’t really, this, this is gonna this is gonna change attorney to attorney. There’s so many closing attorneys that they have to be kind of competitive. But that’s, that’s, what’s involved that usually comes out to between $2k and $2,500.

Kevin:

And then title insurance itself correct me if I I’m wrong here, but that is, you know, you’re getting insurance on the title of the property to make sure that the title is coming from Joe, who’s selling the property and Joe is who he says he is. And he actually owns the property, giving it to, to you or transferring it to you and making sure that you own it.

Wynn:

Correct. And every, every state’s different some states don’t require deeds to be recorded in the courthouse. And so they could have a deed in a safety deposit box or buried in the backyard from long time ago. They could present it to a judge and say, this is legally my land. And so what title insurance does, it just prevents you know, it ensures both lender and the owner that that won’t happen. And if it does this title insurance company will go to bat for you.

Kevin:

Right. Okay.

Pat:

Do you want us to get into like what title insurance is, or?

Kevin:

No, no, no, no. Just kind of 30,000-foot overview. I think for our, for our, that’s

Pat:

A good discussion for another time though. I think,

Kevin:

Yeah, we got, Hey, there’s plenty of coffee, man. We got lots of coffee. Yeah.

Wynn:

Now another, another thing in the closing statement, besides the attorney’s fees are gonna be escrow, all VA loans have to have escrow. And that is basically your mortgage company is going to pay your taxes and insurance is what that is. So you’re gonna get a, a monthly statement for say, $1,000 a month. $800 is going to go towards a principle and interest. And then the mortgage company’s gonna set aside a little pot of $200 each month to go in a separate bank account. So when your annual taxes and insurances are due, they’ll pay them on your behalf. What they do at a closing is they collect, you know, normally, you know, three, four months worth of a escrow charges, which is taxes and insurance to kind of prime the pump. They, they take that out on the settlement statement, put it in a bank account to get started. And that’s your starting balance. And then every month in this example, $200 will go towards that. So when tax time comes, you’re covered, so that’s gonna be on the settlement statement also.

Kevin:

Yeah. And, and that’s a really good point, Wynn, because I, I remember Wynn, you know, two, two and a half years ago giving me this same exact speech, because I had so many questions on, on my lending statement. I was like, why am I giving a thousand or whatever it was dollars to escrow? Who is escrow? And but you know, I, I figured it out when that tax bill came and they were like oh your taxes have been deducted from your escrow account. And I was like, oh, so I don’t have to worry about calling the city and paying them? You know, it’s like, Nope, it’s all taken care of.

Pat:

Yep. Lender, lender does it. The, and you’re also paying your first year homeowners insurance also. So that’s in addition to the escrow you’re paying your first year homeowners, insurance premium you’re paying your escrow. This, this statement is two months of property taxes and three months of homeowner, it kind of varies

Kevin:

Yeah

Pat:

How much you’re actually gonna pay the escrow. And you also, we’re talking taxes and insurance. You’re gonna pay your part of the year’s property tax bill at closing. So that’s also gonna show up on your statement.

Kevin:

Yep. Yeah, absolutely.

Wynn:

One of the biggest dollar amounts that you’re gonna see on a VA settlement statement is gonna be under loan charges and it’s all gonna be different depending on the, you know, the state and the, the lender. You’re gonna have appraisals, credit, credit reports, flood certifications, e-recording fees, and then a VA funding fee. VA funding fee you can’t get away from. Now that will vary depending on your eligibility and if you’re disabled and what percent you are disabled. So fees talk to a talk to a, you know, an ADPi lender to see what those fees will be for each specific person. But those, those fees get rolled. The VA funding fee gets rolled into your loan more than likely I would recommend that it would. But that’s also gonna be on the settlement statement. You’re gonna see a whole chunk of loan items origination fees lender credits, all that kind of stuff will be, be on the settlement statement.

Kevin:

Yeah. And, and we call that we, we call that wrapping it into your loan, like, like Wynn was saying, and for those of you who are analyzing a property right now and you thinking, oh, I might might wanna use a VA VA house hacking calculator, a ADPi’s VA house hacking calculator the the base Excel spreadsheet that you have access to in operation Adam right now on the Facebook group, click on files, click on ADPi house hacking calculator that will let you, it gives you the option to roll all of your closing costs into the loan, not just your VA, but you can roll everything that you want and customize that, that property and that analysis the way you want it. So make sure you, you guys are using those products because they’re super helpful. What other fees are we talking about?

Pat:

Right? So we got the funding fee. We talked about, so we talked about taxes, there’s different kind of taxes. So of course there’s your property tax you pay to the city and the county, but whenever you purchase a property, you have taxes related to transfer of the deed, basically. In the state of Georgia you’ll have transfer tax and an intangible tax. Transfer tax is always paid anytime anybody buys a property, even if you buy in cash, you’re paying transfer tax. In Georgia, that’s $1 per thousand dollars of purchase price, right? So in the case of this property that sold for $197,000, that was $197, right. And tangible tax is something you only pay when you take out a loan and you pay that it’s $1.50 per $500 of loan amount in the state of Georgia, alright. This is gonna be different anywhere. Most states have similar taxes, but that’s the state of Georgia in this case $197 of transfer tax, $600 of intangible tax. And then you have court recording fees that’s $70 that’s kind of yep. You know, whatever yep.

Kevin:

Cost of doing business. Yep.

Pat:

Yep.

Kevin:

Yeah. Okay. What about what about realtor fees?

Wynn:

Right? Yep. Realtor fees and commissions. For all the hard work that the realtors do on both sides, it’s gonna vary from state to state. In Georgia, that’s a seller cost, so that’s not gonna be on the buyer at all. When you’re buying a house and you’re working with a realtor, you’ll probably be signing a, a, a buyer brokerage agreement, whether it be exclusive or non-exclusive. And then there’s a little checkbox somewhere that says you know, the, the realtor’s entitled to an X percent commission. If the seller doesn’t pay it, the buyer will or will not be responsible for any difference that is. You know, Trophy Point Realty here, we, we always say not responsible. We never have a buyer be responsible for anything. If we don’t get paid, we don’t get paid. But the, in, in the state of Georgia, sellers pay the commissions. So hopefully,

Kevin:

Yeah,

Wynn:

Most states they can negotiate to, to not have any commissions come out of the buyer’s side.

Kevin:

Yeah. And that’s, that’s really clutch because when you’re buying a property, you know, you’re kind of focused on analyzing the deal and making sure, and we’re talking investment property here, you wanna make sure it cash flows and you don’t wanna be, you know, totally stabbed with these hidden, oh, by the way you owe a 3% commission. No, that comes out of the seller’s end. But that also, you also need to understand that when you’re negotiating with sellers, know that they’re either, they either know or they’re being advised that, Hey, you’re gonna, you know, as a seller, you’re gonna have to pay 6% you know, in commissions, 3% to the agent that you’re working with 3% to people like, you know, that are representing the, the incoming buyer, guys like you. And you know, so you got to know what they’re, you know, when you’re, you’re buying a property or trying to figure out, okay, what’s, what’s the seller’s bottom line, you know?

Kevin:

Well, make sure you add 6%, if it’s on the market and it’s been listed and they’re working with agents because you know, that’s, that’s gonna be something you have to cut into. That’s why we always try to say, find for sale by owner (FSBO) listings, or find off-market listings. And maybe they’re not working with an agent. Maybe you can, or maybe the seller can, save 3% and then pass those savings on to you as the buyer. That’s why, you know, when, when we’re looking, if you’re looking for investment properties, always try to look off-market.

Pat:

We, yeah. We work a lot of, in the nature of our business, we work with a lot of investors. So we’re looking at a lot of off market deals. And you know, of course we wanna get paid. We try to work some, some payment in for ourselves, but

Kevin:

Of course yeah. Finder’s fee or, or something like that. Yeah.

Pat:

Yeah. But, you know, we, we try to make the deal work for both ends. We’d rather not get paid a whole lot and get a deal to work, you know, than… Some money’s better than no money

Kevin:

Because that investor’s gonna come back to you over and over and over again. Yeah.

Pat:

So it, it generally it’s gonna come back to us, you know, one way or another. But yep, absolutely.

Kevin:

Yeah

Wynn:

And then the last part of our settlement statement here in Georgia is miscellaneous. There’s a big spot for miscellaneous charges. That’s going to be home warranties, termite bonds, HOA fees, any liens that need to be paid off. Your upfront homeowner’s insurance, that’s gonna be down there in the miscellaneous

Kevin:

Home warranties,

Wynn:

Home warranties. Exactly. You can do a, a one year like an Old Republic or American Home Shield home warranty. That’ll be down here termite, bonds, termite letters, any of that stuff can be in miscellaneous. So, you know, it’s gonna be a couple pages. It’s you know, usually three pages, it’s like three pages and it’s, you know, it’s a whole bunch of nickel and dime stuff, but definitely have, have your lender go over it.

Pat:

We didn’t get prepaid interest yet.

Wynn:

Um yeah. And have your, your realtor will help you understand what everything is.

Pat:

Yeah. Pre prepaid interest. So if you close on a property, this is June, right? So you close on a property on June 15th. You’re gonna owe the lender, at closing, interest from, you know, the day you buy the, the property until the end of the month.

Kevin:

Kind of like a prorated. Like if you’re renting, you have to pay prorated rent. If you move in the 15th.

Pat:

Yep. Just interest though. Not, not premium. You’re just paying interest, but your first mortgage payment won’t actually be until the end of the first full month. So if you buy on June 15th, you’re not gonna have a payment on July 1st. You’re gonna have a payment on August 1st. So there’s, there’s some, there’s some ways that you can kind of, you know, play the timing game. I, I mean, I kind of like if you buy a property at the beginning of a month, you almost have two free months.

Kevin:

Yeah. Almost of, of like free mortgage. Yeah. And especially if that, if you have a tenant in there or you can quickly get a tenant in, if we’re talking an investment property here, you know, you’re, you might be able to bank an extra month of cashflow. Right. You’re not, you know,

Pat:

And that’s, that makes a big difference. Yeah. Yeah, we just did a refi on on a duplex that we’re house hacking, and, you know, we timed it pretty well. We’re not paying a mortgage this month, but we’re still getting the rent. I mean, that’s pretty cool. So

Kevin:

Can’t beat that. Yeah. Alright guys. Well, thanks. I think I think we covered most of it and, and like Wynn said, there’s a lot of, it appears like there’s a lot of nickel and diming and like everyone’s trying to get their end, but also remember, in the real estate industry, everyone, the, the entire industry is built around helping buyers find a home. So everyone is working for you. The lender is working for you, your lawyer is working for you, your agent’s working for you, the title company is working for you. All of these players, they all come together and yeah, they all need their little piece of the pie, but ultimately you know, the way the system is set up is that they want people to buy and own homes in America. Like they, they, they want people to, you know, the government and everyone, the system wants people to, to own homes.

Kevin:

So if you can go in and buy smart, we always say, buy smart upfront, buy right upfront, you can use all of these subsidiary services to help you. And honestly it does make your life a lot easier. I mean, especially if you’re an out-of-state investor like me, I rely on guys like Wynn and Pat to do a lot of the hard negotiating for me, I mean, I give them parameters and stuff, but they do the negotiations. They go and walk properties for me, they send me videos. Well, I can’t fly down to Georgia to go look at a quadplex, you know, but these guys can drive, you know, five minutes away, but of course they’re gonna get their end, you know, or whether it’s finder’s fees, or, or commissions or whatever, but you just it’s right on that end. So if y’all have any other questions you know, Pat and Wynn, Pat, where can, where can our viewers find you or get in contact with you?

Pat:

Yeah, so, so we’re on Facebook and Instagram at Trophy Point Realty, we don’t trying to get better at content creation and putting more stuff out there. Usually we’re too busy hunting deals to post on our pages. We got a website, TrophyPointRealty.com. Okay. We got a little blog on there that, you know, I try to write on a decent amount. Again, we get busy but look us up.

Kevin:

Cool. Yeah. Trophy Point Realty Wynn Martin, Pat Wilver. These guys are crushing it in Savannah. So if you’re interested in Savannah, first reach out to me because I can hook you up with all of the market analysis that you need. And then I will send you directly to Wynn and Pat to help you get some investment properties. There’s a lot of cashflowing going on down in the south and you should get on it while the gettin’s good as they say. So thanks guys. Thanks for, for taking the time. And I hope that we can continue working with you guys and maybe do some more of these coffee with Kevin’s in the future.

Pat:

Right, right on. Anytime. Thanks. Talk to you soon.

Kevin:

Thanks man.
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