Hey welcome back buying a home just got A little bit more complicated as of a Week and a half ago and in today's video We're going to talk about how this is Impacting current home buyers right now Which is the new Nar settlement and all These changes that are affecting our Housing market and um How We Buy Houses Uh in the United States and I'm joined By Jim Black thank you for joining us Today thanks Jason thanks for having me On I'm excited to talk about this topic It's complicated but once you explain it It can be really simple so looking Forward to Absolutely so yeah I get some comments On the channel regarding like how is This going to impact your housing market You know if you're looking to buy a House you know what changes are in play Right now and there's really like two Major changes that just got enacted About a week and a half ago on August 17th and those two are um me I'm Ally an Agent here in Sacramento um before this Settlement I can go on to our local MLS Which is the the portal that agents use In order to list or home for sale when The offer gets accepted you Market Pending and then of course when it Closes you mark it Clos as well and Those changes all get directed to Redfin Realtor.com Zillow Etc so before there Was a field on the MLS in which you
Could put or you would put the amount of Commission that's being offered from the Seller to the home buyer but that was a Field that consumers weren't able to see But agents were able to see um so now That field is entirely gone so there's No uh offers a compensation on the MLS That's number one number two is prior to Looking at any house with an agent you Have to sign a buyer broker agreement Which basically stipulates here are the Services I'm going to provide here's a Timeline and also here's how much I'm Gonna ask to be paid for for my services So those are two main things anything You want to add regarding that Jim no Definitely and again sometimes as a First-time home buyer you don't know What's a thing of value you don't know If you should sign document or not and So it's just important to know the Choices that you have available to you And there are four categories of those Choices that we have absolutely so let's Talk about that because how agents get Paid is a little bit different now Potentially and there's at least some Options for buyers out there and some That I'm I'm guessing that you guys who Are watching today's video probably are Not even aware that these are options For you if the seller is not willing to Uh pay your um agent commission so again You have you're looking at houses you
Have a agreement sign with your buyer or Your buyer's agent and let's just say It's 2 and half% of the purchase price Uh when you write an offer you probably Ask for the seller to pay for that but That is all negotiable so let's talk About the four ways in which you can get Paid or pay your agent and Jim has a Really good kind of Excel spreadsheet Looking at this yeah this is a this is a Sheet we've created called the Commission Choice example in this Example again every one of these Variables is different to your specific Area parts of the country rates are Changing every day closing costs and Down payments change also so in this Example we're using 2% is our commission Amount on a purchase price of a million Dollars I used a million dollars because It's just simple round numbers to use to Show the differences we colorcoded this Spreadsheet to make it be green is the Best approach red is the worst approach Yellow is um you know and paid by the Buyer and then the blue is paid by Third Parties AKA A lender so in any of these Examples the commission or compensation Paid to a buyer's agent can be in Addition to what's known as the total Amount of closing cost credits that's Issued from any product you choose That's known as interested related Parties or interested party contribution
So for example on an FHA loan you can Have up to 6% credit from a seller for Closing costs in addition to that you Can now have the compensation offered to The buyer's broker added into that Number so the government agencies Fanny And Fry Mack along with Jenny may have All created a lot more flexibility to Offer a better convenient way for Firsttime home buyers who could be Affected by this change to have opt Available yeah let's just talk about That real quickly so you said for FHA Loan the maximum amount that a seller Can give you as a credit is 6% of the Purchase price right correct so if you Want to have the seller pay an Additional amount above that amount you Can do that for um commissions to the Agent that's what you're saying that's Correct so for example if we were giving Getting 6% credit from the seller and we Got 2% on top of that for the Commissions for the buyer agent they Would be getting an ESS 8% credit um in That transaction 6% going to them 2% Going to pay a fee to the agent who's Been creating value on the buyer side Yeah and that's something fairly new as Well because the big question was gosh Are buyers going to be able to finance This um it's just going to add to the That total amount that of credit that The um seller can pay based on the loan
Type and this is kind of a new change Here that uh you can um it's not Included in that 6% cap for an FHA for Example and what's the cap by the way For VA uh it's 2% if you're not paying Off any cash and it's 4% if you're Paying off debts so again 2% plus the Compensation to the buyer broker agent Or 4% plus the buyer broker compensation Depending on if you're paying off debts To Qualify so there's a huge Advantage There if you're a veteran and you have Some debts we can put that into the loan Amount pay that off and that could lower Your ratios to qualify Okay cool so maybe if you can just uh Talk us through the green and then going To the right yellow blue yeah absolutely So this spreadsheet is our spreadsheet It's proprietary to our company we have It really dialed in so if you want this Please reach out to Jason or I to get This again it's specific to the exact Situation you're in we call it Commission choice because we believe That a buyer's agent should be rewarded For the value that they provide a buyer There's so many things that go into a Transaction you should have Representation you should not be doing This on your own because there are areas Of the country that have septic they Have well there's certain inspections
There's Adu laws there are rental laws So many things in your micro Market it's Important to work with local Professionals in your marketplace with The with that said I mean I think there Were some people saying that gosh well If buyers have to pay the commission They're just going to work directly with The uh listing agent or the sellers Agent and um you know guess what the Number one reason why why uh people get Sued in real estate and that's because Or one of the main reasons is when the Seller represents both parties because You can't um or you should have you have A challenging time you know getting the Best price for a buyer but also for the Seller as well so um it's risky to work With uh directly with the listing agent And not have an agent who is Representing you and your for your best Interest Yeah by definition the word Fiduciary cannot be used by two parties It is the benefit of one party so how Can someone be a fiduciary for you as a Lising agent and represent both sides They phys they cannot do it it's Impossible yeah I mean I can there's Been a handful of times I've done it in My career over you know selling over 100 Houses um but you know it can be very Challenging let's just say that Especially if you have an nature who Doesn't know what they're doing and
They're telling one party one thing and Another party a different thing it just Can get totally messy anyways we're Getting off off track here but talk About the the green part here first um The absolutely so the green part you you Notice is the traditional way a Transaction has been done in the past so Basically in this example the seller Isn't wanting to give the credit so We're raising the purchase price and Offering a credit so the biggest thing On the sheet to be aware of is to look At the net to seller sheet at the bottom There the net to seller means it's the Same number if you look at it it's a Million dollars across the board for Everybody y so that's the most important Thing to think about the seller is Getting the same bottom line net to them So in the first example purchase price Is a million2 the commission of $20,400 is being accredited back from The seller to the buyer's agent the Buyer is bringing in the down payment of 20% and they're getting an effective Loan of the 20% down 80% financed the Next category you'll see that the buyer Cash to close is4 thing I want to Mention too about about this to first Gym is that seller paid I mean uh um This you don't necessarily have to Increase your price in order to get the Seller to pay for it so this is one
Option but there are scenarios in which You could place an offer on a property And the seller is already willing to Give your agent a commission so the Price is already baked into the fact so Uh this is an option but it's not Necessarily one you have to take into Consideration correct each market has Different Dynamics so again we're just Sharing the four categories all these Variables can change so again we know if It's seller paid the buyer is not paying Right next category which I think is Going to be very popular is buyer Financed in this example all we're doing Is increasing the loan amount so you Notice that the loan amount is based Upon a million dollar purchase price and Now it's 8.20 versus 800,000 which would normally Be 80% so all we're doing here is we're Shifting the responsibility from the Seller to the buyer in the form of a Higher loan amount most loans that exist Throughout purchase prices up to about a Million one or million two throughout The country will allow for a higher than 80% loan to value some of those products Have mortgage insurance some don't so in This example you'll see from green to Yellow the rate went up by an eighth for A difference of 80% versus 82% financed You'll see that the buyer's cash to Close is still the same 210 $10,000
Being the closing cost example in all of These options to show that the seller Still getting the million dollars net That they expected to get originally so Again yellow is buyer financed this is Going to be a creative bucket for us as Mortgage Bankers and Brokers to really Be able to shift and pivot much Differently than large Banks large banks Will not be able to Pivot this quickly Because they don't have customized Solutions they are more vanilla and Generic in their product mix so one Thing about this on the yellow part is The loan amount is U 820 in this example So what basically he's saying here is That it's a 20% down which is $200,000 but you add $20,000 which is The amount of commissions being owed to The buyer's agent so in this example the Buyer is financing the commission to Their agent in other words increasing Their loan balance by that commission Amount just want to make sure everyone's Clear on that yeah exactly right so Again great option again buyer Finance Means the buyer's paying for it and You'll notice if you look at the monthly Payment in this example which is purely Just a a payment example of an interest Only payment you notice that the Difference in payment is only like 98 Bucks a month difference or sorry 108 Bucks month difference so again $220,000
Financed is only about $100 to $110 a Month difference in payment so again if That's holding you up from getting a Transaction into contract it's just Going to be aware that this is a Solution if the seller is not willing to Pay commissions got it thank you all Right buyer paid buyer paid this is the Worst option that's why it's in red and That's why it's the thinnest of the Groupid out of pocket is exactly Describe this yeah so you'll notice that The biggest change in this category is The buyers cash to close in actually in In h Scarlet Red it's $230,000 versus in the other category it Was 210 and 214 this is the bucket That's truly going to hurt a lot of First-time home buyers that don't have a Lot of down payment in this bucket of Buyer paid though it could be a gift From your family could be something else A a secured loan unsecured loan Something else maybe that helps bring up This money of $2,000 again the difference in this Example buyer paid versus buyer Finance You'll see that the rate is lower Because there's no longer a need for Mortgage insurance so that difference in Payment works out to be about $200 a Month difference in interest payment so Again good to know the difference there If it was me I would want the buyer
Finance um element because $220,000 out Of my pocket is hard money it's real Funds if I was to get the buyer Finance Option and rates to go lower I could Refinance to a lower rate so that might Be a way better way of doing this again Much rather you know pay $100 extra per Month compared to being out of pocket $20,000 today exactly right the last Option has to do with thirdparty lender Paid I'm looking forward to this bucket The most because at revest we we have Both real estate and lending we're able To toggle both options that are Available for the consumer or our client There are going to be times where A Lender can give credit to help pay for Those third-party fees closing cost Credits non-recurring closing costs in Those options we can give certain Credits up to certain dollar amounts in This example you'll see they're still The same $20,000 commission same Purchase price of $1 million same loan Amount of 80% or 800,000 but the payment Is higher because we've had it given a Higher interest rate we're giving a Little higher interest rate seven and a Half% in this example to be able to give Rebate financing or credits to our buyer To use for closing cost credits y this Is a fantastic mindset if you think Rates are going lower in the next couple Years another great way to save money
Potentially down the road is get it a Credit use the bank's rebates to help You pay pay for things you'll notice That the buyer's cash to close is still The same as the buyer financed $210,000 that means this credit is being Paid by the lender so there's still the $10,000 of credit involved with the $200,000 down payment so this is also Another option we're going to be finding This very viable mortgage brokers will Have a major major major advantage in This category because they can work with So many different lenders that have Different price ing on a Minute-by-minute basis so I may find a Product that's best for the consumer's Needs we always want to offer multiple Products but we might find one where the Buyer doesn't want to pay this Jim I Don't want to pay this fee I don't want It financed and the seller is not will To pay for it well we can make that for That by paying that lender paid element By having a little higher interest rate To offset that with rebate pricing so These are the four categories we have We're actually building out an app right Now that's going to really Define this Even stronger so that way our buyers and Sellers can feel confident that when They're presented with an offer or They're negotiating to buy a house they Can look at all these options
Simultaneously to make sure that they Understand if you're a seller what the Net bottom line is to use a seller or if You're a buyer working with a lender That understands the different options And can present those options to you Real time for sure and this is really Good for when you have some push back From the seller if you're a home buyer And they're saying hey I want to pay This or I want to pay a portion of it But you have a written agreement with Your agent saying hey I'm going to pay You whatever it is two and a half% but The seller is only willing to pay 2% for Example or maybe even 1% it's really Good to have this Excel spreadsheet Which is what it is right now to kind of Figure out what's the option that's best For you and also to kind of link up with A broker who can help you navigate that As well and for a nation as well Y and We're we're building this out as we Speak um it's going to have videos in it It's going to have toggle down options So you'll be able to see your situation And make the different changes we Already have a tool like this um it's Called goalie and we we're rolling that Out this next week which is exciting so Reach out to Jason say you want his Mobile app um to get to learn more Information because it is going to be a Very valuable tool and if you're
Interviewing Realtors on the buyer side Yeah or even the listing side if they Don't have this tool you shouldn't work With them because they are not being Creative and they may not be able to be As creative because they don't own a Mortgage and real estate company so Again everyone's going to have a Different take on this a different Stance on it all I feel like our stance Is very very strong being able to be Customized the whole reason our company Was created whole reason Jason's on our Team whole reason I'm here is because we Everyone's plan and is different Everyone's objective is different so Super exciting time super stressful and Complex times if you have the right Professionals you're going to be fine Because they'll help you make the right Decision your choice is what matters Most not just being shoved one option And say take it or leave it absolutely You know the the near jerk reaction now Is the best time to buy now's the best Time to sell you know um but yeah we can Create custom solutions for you guys and Um so yeah I appreciate you uh joining Us today uh Jim and we'll provide our Link in the video description below if You guys want to reach out to us if you Guys want this um you know tool to kind Of figure out the best um way to Navigate this new settlement that was
Was just announced uh or actually just Was enacted about a week and a half ago So everyone watching today's video we Appreciate so much like And subscribe And of course uh check out the video Description below for some resour Resources for you guys hope you guys Have an awesome day look forward to Seeing you on the next video [Music] [Music]
