All Forum Posts by: Eddy Dumire

@Mark F. Thanks so much!  Your info about the retirement account really saved me lots of headaches.  Most of my personal accounts have been corrupted by quite a few months of moving large sums of money around to buy my last 2 properties.  As a result I was scrambling to figure out how I would document adequate closing funds for a new purchase I'm trying to make.  I was going to have to ask mom for gift funds until you came through with the retirement account info.  Thanks again.

Oh, and I should mention -- what I've stated above is what I retained from over 15 years ago working in the industry.  It's been a long time and some things have changed.  I also was a lowly peon paper pusher so it's entirely possible I learned some detail not exactly right.  Please verify everything above before acting on it.

It's worth noting that in the example provided by Shawn, all the 700's items are being paid to your realtor (if a purchase).  You would negotiate these fees with them (beforehand hopefully).  These are usually paid on the seller side.

The 800's lines are fees associated with the loan itself.  These are negotiated with the bank providing the mortgage.  An "Origination Fee" is money you're paying just for the privilege of getting a loan from that bank.  Some won't charge this.  Next is the loan discount.  This is additional fees that you pay in order to have the rate lowered from whatever the day's par (or breakeven) rate is.  It's worth noting that these points are deductible but can only be deducted over the life of the property (27.5 years, like depreciation).   The administrative fee is a junk fee that they charge, just because they can.  It's negotiable and can and should be comparison shopped.  The flood cert and flood monitoring fees are pretty typical and I don't think they can be negotiated (technically everything is negotiable though right?)

The 900's are "prepaids"  These are items that you have to buy before they'll let you close.  You have to pay interest for the days left in the current month -- therefore it's cheaper to close later in the month.  You'll also have to prepay for hazard insurance and mortgage insurance (if applicable).

The 1000's are your initial escrow funding.  You'll pay catchup at closing to make sure your escrow account has enough money in it so that it can make all it's payments on time.

The 1100's are all fees associated with settling the loan.  Settlement fees, document preparation fees, title insurance fees, etc are all paid to the settlement company.  Good ones can really help make sure things go smoothly.  Bad ones screw up your title.  It's worth getting to know a good one and paying to use them.  Know that title insurance is really a profit center for the settlement company.  Some say the risk outweighs the cost though so think it through and decide if it's worth it.  I personally get really annoyed when I see garbage here like "internet retrieval fee" and other BS like that.  My last closing I had a fee for "Scanning Fee" paid to Pagestream... WTF is that but BS garbage fees.  It's really worth it to choose your settlement fee even if the seller is offering free title insurance to use their settlement company --- as they do with the auction sites.

1200's are government taxes, recording fees, etc.  These are negotiable on election days only with your state and local government officials.

1300's are other fees paid to other people like termite inspections, surveys, buyers premium fees paid to auction sites, etc.

To Summarize....

Negotiate the 700's with your sales agent before you even start shopping for a house.  Focus on negotiating and comparison shopping the 800's with your lender.  Focus on negotiating and comparison shopping the 1100's with your settlement company.  Minimize the hazard insurance by comparison shopping your insurance policy.  Minimize the interest prepaids by closing late in the month.  None of the other items are very negotiable.

Final note... if you're getting a conventional (not portfolio) loan, your lender will probably be selling your loan to the secondary market.  They will likely sell it for more than it's worth -- i.e. 102% of the value.  This is basically a kickback to the loan originator of 2% in exchange for getting your loan.  The higher the rate they sell you, the more they get for your loan on the secondary market.  Similarly, if they give you a really low rate, they may only get 98% for your loan... this is when you'd pay discount points.

Bottom line is that your lender is making more money than is likely indicated on the settlement statement.

I hope this helps.  I worked for a mortgage insurance company when I was much younger and learned a whole lot there.  I also recreationally review settlement statements and find items to dispute for family and friends :)  Some have suggested I open a business and charge for the service.

@Carrie Giordano You should start by breaking down the costs and figuring out which are negotiable or variable and which aren't.  When you say the "Bank Charges $1195" that to me means origination costs.  There are also settlement costs, title insurance costs, title search fees, tax stamp fees, recording fees.  This is at least what is involved in Virginia.  $3600 wouldn't surprise me here, but I'm not sure what standard costs are in your area.  Check out other sites like amerisave.com for their costs.  I have no affiliation with them but I have sent some business their way.  They list all fees very clearly on their site when you give them some limited information.  This should be a good way for you to compare costs.

@Mark F. thanks very much for such specific information.

I was aware of most, but I didn't know that retirement accounts could be used as reserves. That really changes a lot of my scenario right now. Do you know if that's true of FHA underwriting or just conventional?

Sorry to derail the thread from the original topic.

@Mark F. Thanks for your comments Mark.  I was thinking to myself that I should create a tabbed binder with sections for tax returns, bank statements, and a section for each property but I thought it may be a waste of time because everything is electronic.  Maybe I should instead create a flash drive or something with all the documents organized in some sort of folder structure.

I'd love to hear from processors/originators/underwriters on how you'd like to see something like this.

I have a separate bank account for each of my rental properties.  Should the bank statements for each property go in the property folder (to verify reserves) or should it be lumped in with all the other bank statements (to verify assets)?

Is the entire industry plagued by people who think they're entitled to a chunk of every deal without working for it or being responsive to customer needs?

I called a mortgage company that is capable of doing 203k loans.  I explained every detail of my mortgage circumstances, which are admittedly complicated.  I told them that I had made an offer that was being held up until I had a lender letter in hand and that it was very urgent.  He tried to sell me on using his contractors for the rehab phase. He tried to sell me on using his wife as my accountant. I filled out their application and literally sent a dozen emails with over 70 pages attached. 

I called the broker about half a dozen times and went to voicemail every time. I went over 24 hours without a single response from them. Yet I'm sure when I get the GFE there will be an origination point, discount points, and I'm certain a yield spread premium in there for them too.

Similarly, my agent told me that there was a competing offer on the property I'm bidding on and that I needed to hurry and get the lender letter over to him.  I sent it first thing this morning asking for him to reply to the message to confirm receipt.  Two hours have gone by with nothing -- during normal east coast business hours.  I called him and went directly to voicemail.  I texted him and didn't get a response.  And he made me sign an exclusive right to represent in ALL transactions through mid December -- even if he does absolutely no work in bringing the deal, researching the deal, coordinating the deal, or apparently even answering his phone.  -- Update. I guess it worked, he finally replied to my email.

I applied for a HELOC with TD Bank. It literally took over 120 days to get through underwriting and go to closing and they literally lost the entire loan package and didn't even notice for 30 of those days.

And then of course, there's the contractors who feel that they can show up whenever they feel like it.

I own a small business providing IT repair and consulting services.  I wouldn't dream of treating my customers like this.  I answer the phone 80% of the time and send it to voicemail 20% of the time.  I give them honest estimates of completion times.  I tell them when I have no idea how long it's going to take.  And, I do it for a fair price.  Why does the real estate industry in general think each segment is entitled to thousands of dollars for really crappy customer service?

I would think if anyone really is so busy that they can't answer their phone at least 50% of the time or reply to an email within an hour that they should hire a knowledgeable, empowered assistant to do their work for them.

So -- am I being unreasonable?  What is a reasonable percentage of time to answer your phone vs sending a call to voicemail?  How long should I wait for an email reply on something both sides know is urgent?

@Therese V.

I try to go to the Rappahannock REIA meetings the first Monday of the month. You can find them on meetup.

I hope so too!

@Randy E. I've already got the wheels turning to get the unit back into shape.  In less than a week it won't be "almost uninhabitable" anymore, but your point is taken.

Eddy

Today my wife and I went to the county courthouse to observe unlawful detainers in action.  Our courthouse is only about 10 minutes from my house and they bundle them up into a single hour on Monday mornings so it seemed like a really good investment of an hour in our education.

It seems that 90% of the time, the tenants don't show up and immediate possession is awarded back to the landlord who may then file for a sheriff's eviction that will typically happen within a week or so.

In the other 10%, the judge asked if the tenant agreed that they were behind on payments.  90% of those agreed that they were behind.  Because they showed up to court, the judge didn't award immediate possession, but the tenant got 10 days before possession was awarded and the landlord could file for sheriff's eviction.

Notably, a few people asked the judge if they could have 30 days or until the end of the month.  The judge replied it was out of his control and that after 10 days, the landlord could file the appropriate eviction with the sheriff.  He stated a few times that he thought most landlords really didn't want to evict, only pressure the tenants to pay and that they could likely work something out.

For the remaining 10% of the 10% (one person today) they disagreed that they were behind in payments because they said there was some alternate agreement that had been made between landlord and tenant that they could subtract costs from the rent payments because the unit was uninhabitable.  In this circumstance, the tenant was ordered to pay the rent into the court and trial was set for a few weeks from now.

From the outside looking in, this seemed like a really easy process in a really landlord friendly jurisdiction.  It surprised me a little that more landlords weren't there bringing their own cases forward.  I didn't see a single landlord there the entire time (only one property manager).  All cases were brought and argued by counsel.  In contrast, not a single tenant was represented by counsel.

I know that there are dozens of little nuanced wording and process tripwires that could derail the eviction, but if I can win without a lawyer 99% of the time, isn't it worth the risk to try to do this on your own?  If you screw something up, you could get back on the docket in a few weeks and try again.  I imagine counsel would probably cost me at least $500 - $1000.