17 Nov Ep. 4: Facebook Group, Reset CDOM, & Credit Union Loans

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In this episode, Adam talks about the upcoming Hermann London company retreat and how realtors can use the Hermann London Facebook group to find buyers & sellers. Adam also answers questions about why it’s great to list in December & how to reset a listing’s concurrent days on market or CDOM. Realtor Harley Coleman of Team Coleman shares his deals of the week & John Charlton of Midwest Mortgage Capital explains how credit unions deal with loans and what those shady radio & internet interest rate ads are actually saying.

Email Questions To: PODCAST@HERMANNLONDON.COM

Host – Adam Kruse https://hermannlondon.com/realtor/adam-kruse/

Guests – Harley Coleman and John Charlton

ITUNES-http://goo.gl/rs1q9X

Blog-https://hermannlondon.com/podcasts/

Website http://hermannlondon.com/

Facebook – https://www.facebook.com/HermannLondon/

Twitter – https://twitter.com/HermannLondon

Instagram – https://www.instagram.com/hermannlondonrealtors/

Address – 7350 Manchester Rd, St. Louis, MO 63143

Phone Number – 314-802-0797

Search For Homes on http://www.wizah.com/

Producer – Joey Vosevich

Theme Song by Trastornobeats

WHAT’S INSIDE

1:00-The Hermann London business planning retreat

2:22-The perks of using the Hermann London Facebook group page

3:41-Listener asked for an update on 2 houses in Webster Groves, Missouri

4:28-What is The Cashflow Boardgame created by Robert Kiyosaki

7:20-Why doesn’t reducing the sales price of a house help the buyer like it helps the seller

10:28-Why is December not a bad month for real estate

11:57-How can I reset my CDOM or DOM

14:05-Introducing Harley Coleman of Team Coleman and his deal of the week

24:20-Introducing John Charlton of Midwest Mortgage Capital

24:45-What is the difference between a correspondant bank, a credit union, and a regular bank

30:50-What’s the deal with those shady seeming low interest rate websites and radio ads

32:24-How a buyer can compare loans by getting a good faith estimate and looking for the truth in lending document and APR

35:30-How to get in contact with John Charlton of GSF Mortgage

TRANSCRIPTION

Segment 1 All right, well, welcome to the Hermann London Real Estate Group Podcast! This is podcast number 4, I believe. We are going to go through this week’s agenda real quick. We are going to have some updates. I’m going to ask John Charlton, everyone’s favorite lender, a few questions. We are going to have one of our agents, Harley from Team Coleman, in here, and he’s going to tell us about his deal of the week. I’m going to go through some of the questions that people have asked. Finally we will have a conclusion. Maybe we will make it a quick week. It’s the holiday here. First of all, I’m going to go through some updates. We have our business planning retreat coming up. It’s on November 21st. It’s an all day company event. Most of our realtors are going to make it. I want to say that if you are not a realtor now is really a good time for you to start planning out your business for the next year. Take time to reflect. Think about what you want to do. Where do you want your business to be? Where do you want your finances to be? How do you want your life to look? All that kind of stuff. This is the good time of the year to be doing that. Also, for our business planning retreat, I’ve been working on making some career guides for the different realtor paths. We have a lot of realtors here at our company and almost every single one of them has their own path based on how they want their life to look and feel and how much money they want to make and that kind of thing so I’m breaking down a few of those paths and giving some people ideas on where they can go, maybe their path to growth or their path to become a broker or their path to own a Hermann London Office. I’m also going to unveil this case study that I’ve been working on for quite some time. It is a case study of a top producing agent who sells more than ten million dollars in real estate in a year every single year and I’m breaking down a case study of that person that I’m going to share with our agents. I’m excited for that for our business planning retreat. I know Trey has been preparing a lot of stuff too. If you are realtor and you are considering joining Hermann London, now is the time so you can make it in time for our retreat which is in ten days. The only other update I really wanted to go over is that there is still low inventory. We have a Facebook group with something like 500 realtors on there and we’re always posting new listings, coming soons, and buyer needs. Every single day these agents are posting on there, for example, buyer needs 3 bed/2 bath/Webster. Buyer need 1 bed/this or that/Oakville–whatever. These realtors have these buyers out there that are looking for properties. They can’t find them. They say, “We’ve seen everything on the MLS, we don’t like like it, and we’re looking for something else.” There is low inventory. There are buyers out there. This, for me and for some of our agents, this is one of the busiest times of the year, so if you are considering selling your home, I encourage you not to just wait until spring like everybody else and be one of the twenty five other homes in your subdivision that is putting their home on the market. Get it on the market now. You will have less random people tromping through your house and you will have more serious buyers. Give us a call 314-802-0797. Let’s get your home listed so you can have it sold by the holidays. Next up I’m going to through the questions that people have asked. I’m just going to go through the questions and try to give the answers. We had Nancy–shout out to Nancy–she asked me about two homes that are available for sale on Geyer. She lives on Geyer and there is one home being built at 1306 N. Geyer and believe it or not it is listed already and it is listed for $399,000. It is about 2400 square feet or so. There is another rehab that I know Nancy has been watching up the street from her and it sold for $132,000 prior to the rehab. That may seem like a low number for that area but I know they put so much work into that house. I think they might have added another story, a garage, refinished the foundation, and all that kind of stuff. How much is the house on Geyer? How about that! I gave you two for the price of one. What is the Cash-Flow Board-Game and how does it relate to real estate? Some people, I guess, have seen my posts on Facebook. I’m always talking about how we are always playing this Cash-Flow Board-Game and why do we play it and what the heck does this have to do with anything in the first place? Basically The Cash-Flow Board-Game is a board-game that was made by Robert Kiyosaki, who if you don’t know who that is, you’ve probably read his book Rich Day Poor Dad, or you’ve at least heard of it. Robert Kiyosaki made this board-game to basically get across the point of how different people see money, deal with money, treat money, and how they get out of what he calls the rat race. Basically if you can get out the rat race you can win this board-game. The whole point is that some people start out as a doctor, janitor, or nurse, and you literally have spreadsheets and you need to bring a calculator and a pencil to play this game. You might find it interesting that the doctor may have tons of income but in this game they also have tons of expenses. The best examples I can give is that if the doctor has a car then they probably have a Mercedes and their payment is $500 a month instead of buying a Camry and having a $200 a month payment. If they are buying a son a shirt is it probably a Polo instead of being from Wal-Mart. Even the doctor has to keep working and living for that next paycheck. The point of the game and how it relates to real estate is that it shows that if you buy real estate you can make passive income and if you make enough passive income to cover your expenses then you are out of the rat race and you can live on that income. You can keep working but you don’t have to. You can go on vacation or you can visit your family or do whatever you want to. You are no longer tied to having this job, earn your next paycheck, make your next payment, or whatever. The game gives you opportunities to buy a 3 bed/2 bath house that is going to cash-flow $400 a month. You can try to buy that real estate or not. It is interesting to watch different people play it and the decisions they make. It makes for some interesting conversations on how to invest and how different people like to invest and how they make money. For me, my big goal is to have enough passive income to get out of the rat race so I can sit here and do these podcasts for fun and have my investment real estate make me enough money to pay all my bills. Next question: Why doesn’t reducing the sales price by $5,000 help the buyer like it helps the seller? I need granite! A lot of times when we are working with a buyer we are looking at a house and they say, “We want to update this house. We need granite. We want new counters. We want to add ceiling fans to every bedroom. We need to redo the deck.” Let’s say the home is listed at $350,000, why doesn’t reducing the price to $345,000 allow them to use that $5,000 on the granite? They can’t because they are not getting that $5,000. The lender is not giving them a loan for $350,000 and letting them keep the $5,000. Their new loan will be for the $345,000. By reducing the sales the price by $5,000 they are effectively lowering their monthly burden by roughly $33. Talk to your lender or call John Charlton for more specific numbers. When the buyer is buying a property, reducing the price helps lower their monthly payment but it does not put any money into their pocket to do any updates. If it is a small amount of money that they need for updates, we can talk about getting closing costs covered or if it is a large amount of updates, listen to our previous podcast about getting an FHA loan to get 10, 20, 30 thousand dollars to put in all new granite, update the bathroom, put on a new deck, and all those sorts of things. Reducing the sales price by $5,000 or raising the sales the price by $5,000 does affect the seller directly because that is money that will directly go into their pocket at the closing. Let’s say they owe $300,000 on the house, if it sells for $305,000, they are literally going to get a check for $5,000, all other costs and variables being ignored in this situation and assuming they have no loan. If we raise the sales price that money does go directly to the seller and in a lot of cases it is interesting to me that when we are doing these real estate deals the buyer will say, “It’s only $1,000. It is only $2,000.” It is funny to see the same person that doesn’t upsize their fries at McDonalds because it is an extra dollar will put this perspective onto things. When you are buying a house I guess it is only $1,000 or it is only a couple dollars a month on your monthly payment. When you are selling that house that $1,000 is literally $1,000. You can get $1,000 more when you sell your house that you can use to put a down payment on your next property, buy granite for your next house, or upsize your fries for the next year and a half or whatever you want to do. That is why reducing the sales prices doesn’t necessarily directly help the buyer to rehab their property but it does help the seller. Why is December not a bad month for real estate? I talk a lot about to people that say they want to put their home on the market and they want to wait until spring. There are a few things that are happening at the end of the year. A: the buyers that are out there are serious. If you are going to be looking at properties a couple days before the holidays and trudging through the snow–like I’ve literally shown homes where every single house we had to get out of the car, step into a foot of virgin snow and get it all in our shoes to get into the house, these are serious buyers. Anyone would rather be at home drinking hot chocolate but instead we are out looking for homes. This is a serious buyer. Another thing, if you are going to buy a home that is a builder’s home or maybe an inventory home of a builder, they want to sell their homes by the end of the year. Why? Just because they would like to get it off their books. In general there is less competition in the winter time. In theory, there are less homes that are for sale. For certain there are less buyers out there looking for real estate but the buyers that are out there are serious. In the summertime you get a lot of the people that just like looking at houses and think it is really neat. I see a lot of those people that are kind of snoops or nosy. They want to see what’s going on. This is a seller’s question. How can I reset my CDOM or DOM or in this case you might be wondering what in the heck is CDOM or DOM? If you are searching for real estate on certain websites you might see something that says DCOM or DOM and that stands for days on market or concurrent days on market. If you have your home listed with a realtor, at least in St. Louis on MARIS, and you want your days on market to go back down because they are getting up there and it is around 150 days or so, you actually to take your home off the market for 60 days. The listing has to be in cancelled status and then you can re-list it 61 days later and it will restart at 1. If you have your listing with one realtor and you are at 100 days on market, then you take it off the market for 2 weeks, and then you list it with me and I put it on the market right then, the CDOM is going to start at 114 days because that is concurrent days on the market without being off the market for 60 days. That is the long answer to a question we actually get a lot. That is one of the most visited pages on our website from people Googling how that can reset their CDOM or what is CDOM. That is what it is; days on market. How long has this home been for sale? Why it matters is because once a home has been listed for 100 or 150 days a lot of buyers are wondering what is wrong with this house. That is one of the problems that we see with people that list their home for too high of a price. You get a lot of buyers in there, a lot of buyers are coming through, they are not buying, and next thing you know our days on market is at 150. If someone comes through and they are interested they may be skeptical and wondering what is wrong with this house, why has no one bought it, and what should I be concerned with. That might scare them away. Up next we are going to bring in Harley Coleman with Team Coleman who recently joined the Hermann London Real Estate Group. They are our South County experts. We are going to bring Harley in to talk about the deal of the week and I’m going to hit him with a couple questions as well.  Here comes Harley. Segment 2 Adam-All right, guys. Up next we’ve got Harley Coleman with Team Coleman here at the Hermann London Real Estate Group and Harley is going to tell us about the deal of the week. Harley, you have a listing, right? Harley-Yes. Adam-And it is a hot deal? Harley-Hot deal! Adam-Tell me all about it. Harley-Back on the market! Fell through due to buyer financing. Adam-The buyer couldn’t get a loan. Harley-The buyer couldn’t get a loan. Adam-They couldn’t a loan? Didn’t they have to sell their and they couldn’t get their house sold? Harley-Yeah. That was part of the contingency. They had a contingency on their home. They had to sell theirs before they could buy our. Adam-Okay. I just wanted to make sure that there is nothing weird about this house that makes it non-livable. Harley-Oh god no. It passed county inspection already. Gas inspection. Adam-It already passed its inspections? Where is it? Harley-Oakville area right off Christopher Drive. It is actually at 136 Chistopher Place. Adam-How much is it? Harley-It is listed right now at $339,900. Adam-That is one of the things that I love about real estate deals is that a lot of people think of deals or investors buying these $15,000 houses. They don’t have to. This isn’t necessarily an investor house is it? Harley-Oh god no. It is move in ready. It is only 12 years old. It is a beautiful home. Adam-Why do you say oh god no? You don’t think an investor could buy it, rent it out, and make money? Harley-Typically that is now what they are looking for. Adam-You are just not picturing and investor wanting to do that. Harley-No. Not at all. Usually they are looking for something like a foreclosure or bank owned. A HUD home or something like that. Adam-Harley, are you telling me I have to buy a foreclosure to get a good deal on a piece of real estate? Harley-Gosh no. This is a great one. Adam-How is this house’s condition? Is it good? Harley-Beautiful condition. Adam-Move in ready? Harley-Move in ready. She meticulously kept up on the home. It is in great shape. Adam-Okay. It is $339,900. How large is it? Harley-3100 square feet and that doesn’t include the finished basement. Adam-Oh, a finished basement. Okay. Can I put a pool table down there? Harley-Yes. It has a big ping pong table down there right now but a pool table would work. Adam-We’ll have to put that in the trash. Would you move that? If I were to buy this house would you be willing to get the ping pong table out of there for me? Harley-I would throw it on my back and move it out there. Adam-How many bedrooms and bathrooms? Harley-Six bedrooms and 3.5 baths. Adam-Talking to you a little bit ahead of time before we had our podcast here in our green room you told me you had a few listings coming. Can you give me an update on any hot listings coming that you know about? Harley-I’ve got about five, well four I know for sure, the other one we have a listing appointment for next week. Adam-I don’t need addresses, just give me the gist; where they are, price ranges, and that kind of thing. Harley-Sure. I got one 3 bed/1.5 bath 1400 square feet two story in the the new Cherokee district that is kind of up and coming. Adam-Yeah. Absolutely. It is kind of a hipster place over there. Harley-That’s going to be going on the market probably in the next month or two right around the $100,000 mark. We also have a 2 bed/2bath in the next month or two as well in the St. Louis Hills/Carondelet Park area. Adam-A popular area these days. Harley-Yes, and that one will probably be listed for about $130,000 to $140ish. Adam-Have you been there yet? Harley-Yes. Adam-Is it updated or does it need work? Harley-No. It is pretty well updated. Adam-What else you have coming up? Harley-We have a 3 bedroom/1.5 bath. Another 1.5 bath two story in South County. I sold to them last year. Their family has grown considerably so their situation has changed and they need a bigger house so we are going to be selling that. They have to get it ready. They put an addition on and they are in the middle of that so as soon as they get that done we are going to put it on the market. Adam-I like that. You are our South County experts. I’m glad to see you coming at me with some South County–a little bit of South City… Harley-Yeah, a little South City/South County. Adam-What else you got? Harley-I don’t if you consider Arnold South County or not… Adam-I sure do. Harley-I kind of do. It’s right there on the border. We have a 3 bedroom–now this is the listing appointment we have next week–it is a 3 bed/2 bath 1500 square feet. I don’t know all the specifics yet but my guess is that it may be priced around $150,000 to $160,000. Adam-So we should wait before we send our full price, all cash, as-is offers directly to you? Harley-Exactly. Adam-We will wait on that Harley-We have one more. It is actually way out of our area but I sold to this investor earlier this year and she is flipping this house. She got it really really cheap. Originally she was going to fix it up and rent it out but now she is just going to flip it, sell it, and try to break even. Adam-So you helped her get a good buy on it? Harley-Yeah, I did. It is a 2 bedroom/1 bath 1100 square feet. For a 2 bedroom that is pretty good. It would be a good rental property. It is up in North County. Adam-If she bought it so low why does she need to barely break even on it? Harley-I would say she put too many update in it. Over updated it for the area for what things are selling for. Adam-Okay. Okay. Any other properties you want to tell us about that are coming up? Harley-That, as far as listings, that’s all I have. I got a lot of buyers coming up here, about a half a dozen buyers. Adam-So if you have a home to sell, call you. Where are your buyers? All over? Just South County? Where are they? Harley-Are buyers are in South County, Jefferson County, and maybe one in St. Charles. I do have buyers from all over because we have a pretty big database of people. Adam-What have you and your wife Jessica–let’s give a shout out to Jessica. I’m sure she will be listening. Harley-Hey, honey. Adam-What have you guys been working on? I see you coming in and out of the office. We just mailed all those postcards out. You’ve got all these listings coming up. What else have you guys been doing? Harley-A lot of prospecting with former clients; people that we’ve worked with before. Adam-Keeping in touch with your past clients. Harley-If there’s been a one year anniversary on a sale we give them a call and wish them a happy anniversary and ask them how things are going and we always tell them to keep us in mind if they know anybody. We are also doing a lot more networking now and going to networking events and spending a lot of time just shaking hands. Adam-Well, you know how I’m going to want you to answer this question but I’m going to ask it anyway. Do you see the market slowing down because it is the holidays or winter time? Harley-Last winter I sold the most amount of houses in December and January. Buyers do not slow down. We have the more serious buyers during that time because most people looking for real estate in those months are serious and they need to move. Adam-You know that’s what I wanted you to say because that is kind of my exact situation. I’ve always had December be some of my biggest months. Harley-I sold 10 homes in December and January last year combined. Like 4 in December and 6 in January. Adam-I guess if you are out looking at real estate the day before Thanksgiving or out looking at real estate a couple of days before Christmas Eve you are probably pretty serious, and I hope so if I’m going to take my time the day before Thanksgiving to be out showing you properties instead of making my green beans for Aunt Marsey’s Thanksgiving party. One last question. We had Trey on to our podcast a couple weeks ago and I’m curious from you, and I know I didn’t tell you that I was going to ask you this, but what has Trey done for your business, Team Coleman? Harley-Trey has given us a new vision, a new outlook, on the way we should be handling people, treating people, and just getting out there…I don’t know. It’s just not about sales, it is about people. Adam-It used to be, for you, more about sales and kind of transnational. Harley-Getting people through the door. Transactional. Get them under contract. Pass them off to the transaction coordinator. Next. It would be like, next. Adam-So he’s taught you to make it more about relationship? Harley-Building relationships and really treating people a lot better. You know, our last broker, and I don’t want to bring this up too much, but she was more transactional, get them through, pass them on, and let’s go to the next one. Adam-I guess you can judge if you get invited to more holiday parties this year than last year, let’s say you are doing something right. Now if you go to those parties, you are really doing something right. Harley-We got invited to three Halloween parties. Adam-That’s good. That should just be from being out there talking to people. Harley-Exactly Adam-Anything else you want to tell us about, Harley? Harley-We’re the best. Team Coleman! Adam-Team Coleman! Go get them! South County experts! You are sponsoring a poker tournament tonight, right? You got to get to that? Harley-Yeah, I’ve got to go here in a few moments. Adam-Thanks for coming in, Harley, and we will see you on the flip side. Harley-Thank you. Adam-Take care. Next up we are going to bring in John Charlton, our favorite lender, and I’ve got a couple questions I want to ask him, put him on the spot a little bit, and see if I can’t make him squirm. Let me go get John and bring him on in.                   Segment 3 Adam-All right, everybody! Up next we’ve got Mr. John Charlton, everybody’s favorite local lender from Midwest Mortgage Capital. He came all the way from the office right next door to mine. Hi, John. John-Long walk. Adam-Long walk. You could hear me call you name, couldn’t you? John-I could. Adam-This week I’ve got a couple questions for you. I’m hoping to make you squirm. John-Okay. Squirm. Adam-I know you won’t because you always have the answers to everything. Tell me this, what is the difference between you and a credit union and a bank? Let’s start with what’s the difference between you and a credit union. John-Within that let me give you a definition for what we are. We are what’s called a correspondent bank. What that basically means is that we underwrite and fund loans that ultimately we are going to be selling the servicing rights to nationwide providers like Chase, Wells Fargo, U.S. Bank, etc. The key differentiation between a correspondent bank and regular banks is typically banks will pay money for somebody else to do the underwriting processing–all the hard work–then all they have to do is service the loan and that is really easy for them. That is usually the way in which we will price better because we don’t have the overhead that a bank has with the loan. The same thing goes with a credit union. A credit union is typically going to price a little worse than us as far as interest rate goes because they are funding, doing all the loan work themselves, and they are not just buying the servicing rights of the loan. Adam-What about the credit unions that say they are not for profit? What does that even mean? John-I could say it means not for profit but that would be… Adam-Oh, that clears it up. Thanks so much. Appreciate that. John-Hey, no problem. It’s the soup du jour which is the soup of the day. Adam-Are they not making any money? What are they doing? John-What that means is that they don’t have shareholders that are earning money from the business. Usually a non for profit credit union is going to be a credit union that is going to be owned by all the people who put money into the depository. They are not looking to pull a profit for investors on the work and the loans that they do. That’s what it would mean to be non for profit. Adam-Just enough to pay interest on those checking accounts? John-Just enough to basically make it viable and keep the lights on. Usually they are very profitable in a sense that ultimately they have lots of reserves that they are not paying out to shareholders. Adam-Do you guys ever sell your loans to credit unions? John-We don’t. I mean, there are some exceptions like certain loan products that we are not able to do. This is going to be stuff that is short term balloons, land loans, and things like that that a credit union may be able to do that we wouldn’t. We would partner with that credit union but we wouldn’t necessarily do the loan. Adam-Does the credit union always service their own loans or are they selling to Chase too? John-Good question. Some credit unions do 100% shelf loans meaning that they don’t sell the paper. They don’t sell the debt on the loan at all. Most credit unions now days are hybrids so they do some Fanny or Freddy. They never do any FHA paper or government loans or USDA. They will do loans that they could sell if they needed to make the credit union solvent. Adam-You said shelf loan. Is that the same as portfolio loan? John-Absolutely. Shelving the loan just means that you are actually giving somebody money to do something. You are holding that debt and it is on your bottom line. If you sell the debt then obviously somebody else is paying the amount of the debt so that they are solvent. Adam-Okay. So if I’m working with a buyer that is pre-approved from a credit union then I shouldn’t assume that they have the best deal in town and I shouldn’t even bother with having them call you. John-No. A credit union is a great place to go if you can’t get a correspondent loan. If you can’t get a Fanny/Freddy loan, a one off, or a self-employed borrower. Relationships are what’s good about credit unions. They might have a long relationship with somebody that is going to play a roll in their ability to get financing, but in general, if it is a person that could qualify for a loan with a correspondent bank, they are going to get a better deal, lower interest rate, and lower closing costs than they are going to get from a credit union. Adam-One of my clients that I am working with now was pre-approved by a credit union and I just haven’t talked to you today, do you have any information? Do you know the rate that they were getting there and how it compares to the rate you are getting or their fees or any of that kind of stuff? John-I don’t know all the details of the quote that they got from the credit union but in general I know what I’m matched up against when I have someone who is working with a credit union. The main thing with a credit union is that they are very stringent. They have a loan that they offer. They are going to offer to all their members based on some sort of criterion credit score debt-to-income what have you, but they are not going to be able to vary from whatever the pricing is. They are what they are, whereas we have a lot more flexibility with the loan, the type of loan, the terms of the loan, and what have you. They are going to be pretty much straight up. In the case of the person that you are talking about, my hunch is that their interest rate is going to be higher with a credit union and I think that was absolutely the case. Adam-Higher interest rate and lower fees up front, or what? John-Typically, no. Typically the fees are going to be about the same. So why would somebody ever use a credit union? Because there are some loans that can’t be done Fanny or Freddy. There are a lot of them. Adam-For someone that needs a loan that is basically going to become a portfolio loan, maybe that is a good place to turn to? John-Absolutely. The best way to know that is if you apply for a loan with me and I can’t do it, well I know people that can as far as credit unions or what have you that I could refer you to. Adam-You mean if I call you and I needed a loan and you can’t do it you are not going to just tell that I can’t get a loan? John-No. I’m going to do whatever I can to make sure you exhaust possibility if it is something that you want to do. Adam-What a sweet guy. Next question, Mr. John. I pulled up a website and I saw a huge flashing ad, I think it might have had a monkey moving back and forth on it, and it said I could basically get a free set of steak knives and a low low interest rate. It was basically just a web only company. I’m curious, are they tricking me? How are they going to trick me? Basically I’m assuming that they are trying to trick me and it’s not going to end up being this great great deal that they are talking about. John-I’m on the internet as well. Everyday I see banner ads all the time offering interest rates in the 2’s and etc. I guess a great example of that is there… Adam-2’s! It’s not January. What are they thinking? John-That’s right. There is a ad on the radio right now where somebody is basically advertising a 2.875% interest rate but then you wait until the very end and they say it is a 15 year FHA loan with an APR up over 4%, so what are they really selling you? They are selling you the idea of a really low interest rate when in all reality they are gouging you in costs. Adam-So you have to bring a bunch of money up front? John-Yeah or you have to finance that cost that they are building into the loan. They want to trigger your response by saying something in the 2’s. 2.875%, right? But when you get to the APR and it is 4.04, really it is not that great of a deal. Adam-That kind of makes me want to ask you this, and I’ve always sort of told buyers, “If we want to compare apples to apples…” and the buyer says, “Well, I’m talking to this guy and to this guy and this guy. This bank, this lady, and this whatever.”, and I was thinking, “Hey, you want to compare apples to apples? get a good faith estimate from each one of the.” John-Good faith estimate is a great tool for that. I would say that there is an even better tool within the RESPA package. It is called the TIL or the truth in lending document. It is going to dumb down the good faith because there are a lot lines in the good faith and there are a lot of costs there. What a TIL says is what is your APR. Adam-The APR is the apple to compare? John-That is correct because if you have two banks that are offering you a 3.5% and one of them has an APR of 4% and one of them is a 4.5%, the bank that is giving you less closing costs is the 4% APR. APR is a way that the government has decided is a good and simple way for people to compare quotes and that is all it really is meant to be. It is not effective interest of the loan that you are doing it is just expressing the cost of the loan as a percentage so you can compare easily. Adam-The only thing that I don’t like about any of these solutions is let’s say that I’m talking to you and you quote my buyer that their home owner’s insurance is going to be $800 a month and then they call someone off the internet and they say the cost is going to be $300. John-There is a difference between the APR fees and the non-APR for that exact reason. Non-APR fees would include things that are home owner’s insurance and taxes that somebody could grossly underestimate but it is not affecting the APR. Adam-We can still look at the APR or are you saying that there is something we need to look at called non-APR fees? John-You don’t even have to look at the non-APR fees because what you owe for taxes is what you owe. What your insurance costs is what your insurance costs. Adam-Oh, those fees are non-included in the APR. John-Correct. They are non-APR fees. Adam-So we could look at the APR. John-What a bank is held is if they give you a quote with the TIL, truth in lending document, and basically they’re quoting in that the APR fees would include any bank costs, any processing costs, appraisal fees, title fees, which is a key one because in years past people would really misquote what a title cost would be and surprise the borrower with the actual costs… Adam-And then say, “Oh, I’m sorry. I didn’t have any control over that.” John-Right. That is true, you didn’t have any control over it, but at this point, the way banks produce in truth in lending documents, they are held to what they are actually quoting for those costs which are APR fees. Adam-You are one smart cookie. John-Sometimes. Adam-Thank you, Mr. Charlton. John-No problem. Adam-Please, if anyone has any questions, submit through our Facebook or PODCAST@HermannLondon.com. If you have any direct questions for Mr. John Charlton, give him a call. Here is his number. John-314-744-7851 Adam-And you always smile when I ask this… John-NMLS number 188910. Adam-There is that smile. Thanks, John, and we will see you in a couple weeks. John-All right. Thank you. Adam-Thanks for listening to our podcast again. This is podcast four. I think it went pretty well. Joey Vosevich is in the studio here on the Hermann London Real Estate Group roof. It’s getting a little cold out here, Joey. I just want to encourage everyone to go to as many holiday parties as you possible can. Everyone would love to see you. Everyone would love to have you there. If anyone has a wood-splitter let me know. I need to borrow a wood-splitter. Thanks again for listening and we will see you in a couple weeks. Take care.