Podcast 117: Unexpected Surprises After Buying a Home – What Now?

Buying a home is exciting—until the surprises start. In this episode, Gregory Ricks and mortgage professional Dwayne Stein of Mortgage Gumbo answer a caller’s question and walk through what happens when post-purchase problems pop up, why your rate isn’t the whole story, and how to avoid costly mistakes.

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Transcript

Hey, welcome. I'm your host, Gregory Ricks, a financial advisor here to answer your questions and help you win with your money.
So when somebody's looking to buy a house. So tell me about the discussions. When people are looking, you know, of course, they're typically picking up a 30 year mortgage, so that is a long term view, but that doesn't mean they're thinking about keeping it for the long term. Tell me about those conversations. 
Dwayne Stein 0:25 
Yeah, I think, I think for most people, you know, over 30 years, I've seen lots of market shifts and outside of how long in that property, and I can remember when we do your events, and have done your events in the past. Every time I got the opportunity to speak, the first question I always ask is, by a show of hands, how many people are in their forever home, and 95% of the audience, most of the time, regardless of age, had no idea they couldn't raise their hand because they weren't sure. So making sure that you're discussing what needs are is important, because in this environment, I think you know, when you're looking at, how long are you be going to be in that property?
 To me, Gregory and Winning at Life nation, I look at it as, more importantly, how long are we going to have this loan? Because there's no loans that's being done over the last two and a half years, that anybody signing up to say, I can't wait to wait to pay this seven and a half or whatever the number is for the next 30 years, right? So that is what is so important right now, and how we have to be able to make adjustments and look at it, because how we lend today is so much different than what we did two and a half to five years ago. Heck, it's different than what it was six months ago. And so making sure that when we have someone who is saying, alright, I'm ready to get into this game, this home buying game, making sure that you uncover everything and explaining to them the whys, right? Oh, what are your rates? Well, let's get into the whys and hey, how long are you going to be into that property is fine. In other words, are you getting relocated down here? Did you sign a five year contract? That's one factor. But let's look at how long do we expect with this program, and understand because Gregory, I've yet to meet the person when rates are high that says they don't want lower rates and when rates are low, doesn't say they want even lower. People don't call me every day and go, hey, can you give me the highest rate possible? Right? Because that person's living on cuckoo island with the person who says, hey, I want to pay more taxes. Right? That we don't know those people. They don't exist. So what we've got to protect against is people chasing a number on a piece of paper, and because people want to hear a low number at what cost. So that's the biggest part right now of making sure when you're explaining to people discount points and the difference between a discount point and a rate buy down. These are things I've been doing for 20 something years that have become popular now, but why we're not. Looking to chase things, because we want to make sure once you get in that house and Gregory, this is something I've learned from you that I implement, because you've said this so many times, return of your money sometimes is more important than return on your money. How do I get my money back? And when I'm working with a client and we're making an offer, hey, how do we get our money back? If we need to right, whether it don't appraise stuff like that, but we want to make sure also is, we don't want to manufacture a number on a piece of paper, because somebody feels good and they could say, Hey, I got 5.99 but what is the cost when you don't get that back? So the return of is just as important a return on and the return on is going to come with the being in a home and the wealth that that home bill. So it's just critical to make sure Winning at Life nation is when you're talking to someone, and if we're having a conversation, look, we get rates important, but what's going to be more important is, how long do we have? What is the plan? What is the game plan? So we can adjust accordingly. For you, you
know, bringing up that, when are you getting your money back? And that's another way we talk about that now is risk capacity. Do you have the capacity to absorb this if the money doesn't come back, where people, like with retirement funds, take some risk, and if they lose some money, how's it impacting their income ability over their projected life. So if they do a bad deal on a house, and then have to get out of it, and they come out upside down, you know what? What's their capacity to absorb that? How bad a shape are they going to be in coming out of it? So that's a – it's another twist on thinking when you're making financial decisions, and that's one reason it was important to ask you that question, like, how long you're going to be in that house. And you pointed out the more important question is, how long are you going to have this mortgage, right? Yep. Okay, yeah, so go ahead. Well, yeah, because, and that's why, you know, we're not going to go, Hey, let's go throw on a 15 year mortgage right now. Maybe that'll make sense when it's more permanent financing and when the rates come down. But right now, hey, let's keep you in this house for as cheap as possible, to let the home do its work, right? Let it grow at its 3,4,5, percent, and take advantage of it when we go to do more permanent financing down the road, when the rates go down.
Gregory Ricks 
Yeah, really good stuff. So what, what shifts have you seen in the marketplace lately?
 Dwayne Stein
I could tell you, volume is up. I think when you look at it, application volume from a purchase side, Gregory is up 20% year over year, same rates as what they were last year at this time, yet, application volume for purchases is up and refinances as well. And the refinances, it's simple. People are trying to hold on, right? And, you know, so a lot of those is us looking at, you know, second mortgages and different things like that, but from a purchase standpoint, the volume has picked up. And what I try to explain to my clients is understanding, so what does that mean? Purchase volume picked up. What that means is, it's not Dwayne going to buy a house that Gregory selling, and it's me versus you now. It is now Dwayne, Joe, Linda and Sue going to buy that house that Gregory selling, and the houses that are priced right, that are marketed the right way that are nice out look. There's a lot of lipstick on pigs out there right now, called houses, but when it is a quality house. Now, what that means, and the shift is it's you have competition, so the biggest thing is making sure that you've got a realtor that knows what the market is. Now is not the time to give Aunt Betty or cousin Joe, who's never been in this industry, or, you know, does one transaction a year. Now is not the time to listen to them tell you how tough the market is now it's time to make sure that you are going in making a nice, strong offer. Competition has improved. 
Gregory Ricks
That’s a great point– utilize people that know what's going on in the marketplace and have some life experience in it. We've got a Blair on the Winning at Life hotline. We're going to jump to Blair when we come back from the break. You're listening to Winning at Life with Gregory Ricks. We'll take a short break and have more of Dwayne Stein.
 Gregory Ricks 8:52 
We have Blair from Carrier, Mississippi. Welcome to Winning at Life. How can Dwayne and I help you today?
Blair  - Caller
Hey, how's it going, guys? It's great. So I bought a house about two years ago. It was the perfect house. We thought remodeled, totally remodeled, and everything we get in it, come to find out, it needed some leveling. Did that, of course, it cracked the sheet rock and stuff, easy stuff for me to fix. But as I got into the walls and everything, it had termite damage, the inspectors didn't find it or nothing. So now I'm in the process of remodeling this whole house. I'm probably about 35 grand here and now out of pocket. At some point do I get this thing reappraised too maybe?  I forgot what it is at what percentage you have to be in to the good for that PMI to come off and stuff.
Dwayne Stein
Okay, so, yeah, I mean you'll definitely, you'll definitely want that obviously. Now, I think you would second this and even understand. So you did have an inspection done before you bought the property?
 Blair
I had an inspection done. And of course, after the fact, small town area, you know, I tried to get an attorney to see what I can do. But they knew that the homeowner, previous homeowner, so I ended up in Covington with a lawyer. And basically he told me, he's like, do you want to spend $30,000 to get $20,000 and how long is it gonna take? Yeah. So I was like, I guess I'm eating it then. Huh? He's like, Yeah, pretty much.
Dwayne Stein 
Well, and one of the things, and that's unfortunate, but this is exactly why I tell our clients to Blair. And you would second this, and even unfortunately for you, this is why I tell folks all the time, while we don't require an inspection, we always recommend it. Now, sounds like Blair unfortunately got someone who, you know, inside job, whatever it is. So, but let's kind of get back to where you're at. The number for PMI to fall off is 80% in a normal situation, right? So now for you, you're investing all, all this money back into it. I think you're understanding. This is the house that you plan on being in, as we were kind of talking about earlier, right? This is the house you plan on being with, the lab house. That's right, as we sit here today, based on life events, this is the house, and this is where the forever home. That's why you're making this investment. One of the things just kind of want to help you understand as well, and and there's emotion now in this, right? You're fixing this. There's sweat, there's tears you spend on your weekends drilling, you know, fixing things while you're listening to Greg Ricks going, this is amazing, right? And yes, and that's awesome. But I want you to kind of be forewarned as well. And this is for all listeners. Look fresh paint, new counters. Doesn't add necessarily add value, right? I just, I don't want you to be caught off guard. Blair, when you look to read and look, we can talk personally outside, if you've got some questions, a little bit more in detail, but keep that in mind, square footage is what adds and you may be doing that while you're like… Hey, I'm all in now, you know, yeah, but that's…
 Blair
Yeah, I done laid concrete outside and whatnot. And, by the way, concrete for a shed, you know, patio whatnot, you know, yeah.
 Dwayne Stein 
And look, it's unfortunate. That stinks. Luckily you have the means to be able to do this, but these are like Gregory was talking about. These are unexpected events, right? So at some point the return of that money is going to become important. So once these repairs are done, then, yeah, hey, we need to look at and go, All right, hey, what do we think the value is going to be? How do we help Blair recoup whatever savings, wherever that money had to come from, unless you figured out how to grow money trees my brother, which you can share with us right now, right then, what we've got to figure out is, how do we get Blair his money back? And that's what we've got to look at from that standpoint, because that's the part we're talking about earlier, the return of my money. So you know, but 80% is that number when you're looking at where mortgage insurance normally now, could we refinance you today and you'd be at 90% not have mortgage insurance? Absolutely you can. And without getting into a whole bunch of detail, that's something for another time. But to answer your question, 80% is the PMI number. Sure, but what we got to look at for you, my man, is trying to figure out, how can we recoup and get you your funds back so we could get some of those zeros back in the bank, or that way you can get back to earning money on on, on your own funds,
Blair  
right, right. Okay, all right. That helps out, hopefully that interest rate might come down a little bit more, and I work out right when I'm done,
Dwayne Stein
That's right, absolutely. Man, absolutely, man. Best of luck to you. Sorry you had to go through that, bro, that that's unfortunate, but it happens. 
Blair- Caller
Yeah, I appreciate it. Okay, guys, I appreciate it. Man. Yep, you got it. 
Gregory Ricks  
Dwayne, so what if he had it to do over again? What was the, what? How about, what's the one glaring thing that he should have done that he didn't do?
 Dwayne Stein
I don't think it doesn't sound like, I think, from his position, it just sounds like he got a bad inspector, or somebody that inspected that house that was maybe in on because if the attorney said, hey, he had a lawsuit, But it was just going to cost him money. You know, maybe that inspector that he got left some things off because Gregory at the end of the day, and this is, you know, when we're doing these inspections, what I would probably say to answer your question more directly is, if we're about to spend a couple 100 grand on a house, let's not stop at we get the inspection done. Let's not stop at a I don't want to get the plumbing inspection. Let's not stop at getting a termite inspection as well, even though it's not required. Let's make sure. And he may have it sounds like maybe he did and somebody missed it, which, you know that would be a cause for alarm. But to those listening, when you're about to invest in a house and spend hundreds of 1000s of dollars, you don't want to try to save 50 or hard bucks because the because you got to get a termite inspection, because now look what it's costing his job, he opened up these walls and, lo and behold, we've got, you know, and the only way to get rid of these, you got to break it down, right and then treat it and then build it back up and then, but that at the same time, guess what that cost you money? Well, let's all shoot well,
 Gregory Ricks
let's talk about that a little bit deeper. You, you should get a home inspection, because it's it's trying to find out what is it I don't see, but I also want to drill down. I have belief that, yeah, we should probably get a company that's in the termite fighting business to look at it. Doesn't mean they'll catch it either, because they're all generally looking for signs of of where you might see some termite damage, or see the termite trail coming up on the side of the basement, or some wood damage that maybe you wouldn't spot, that they spot, but if it's been well hidden and cleaned up, and that damage is inside the wall, even though that it might not be active, that's a problem you got to deal with later. But it's also when you have different equipment added on to the house, such you might want to get somebody electrical involved to make sure this stuff right. If it looks like a bunch of do it yourself wiring, you might might want to get a second opinion. And also, the AC is one of your bigger investments that will break. They have lifespan pretty much of 10 years, I think, is how those things work. It's kind of what I understand. But we want to get more out of it. And you're buying a house with something that's nearly 10 years old or more, you know, you're kind of at the end of that lifespan. So is that thing going to be problematic on there? And I just changed out systems on a property this past year. Well, we had one of those electrical surges that created some other problems, but it was time to redo those systems so we would have better efficiency, once again, not for free, costs money, but that's not my new going in that I was going to have to do in a few years when I bought the property.
 Dwayne Stein
And it would, I would say, when you're having the home inspected, is look for those big look the inspectors. You're going to get a 50 page report. It's going to intimidate you, right? It's going to be written up electrical concerns on outlet by water. Well, okay, we need to add a GFI to the bathroom where the wife's gonna blow dry her hair, right? Maybe it's outdated, but the big, big items are that you want to be looking at are air condition, right? Roof, those are big things, big ticket items, that or not cheap if it comes on you, and it could be now, poor Blair here gets in and there's termite damage, that's a game changer, right? So, you know, didn't see that coming. So now, $30,000.35 Grand you're hearing that's a tremendous amount. Thankfully for Blair, he has the ability to do that, right? But like you're saying, as a first time home buyer who's maybe getting into a house and, you know, using their funds and doesn't have 30 grand, we want to make sure that when we're looking at that inspection report, we're being thorough, but let's look at big ticket items, right? An outlet not working, okay, can we fix that? Or is it much larger, right? Is it a whole side of a kitchen Gregory where the outlets aren't working, right? Versus this needs to be switched out, or this plug does not work because that happens. So it's so important to do your due diligence beforehand. You owe nobody anything, anything until you own that home, because once you buy it, when you sit down at that table, that attorney is going to tell you several times you are buying this property as is, as is. So if there's a timer on poop the break and it happens while you're moving in, there's no calling to sell or going, Hey, you got me right? This didn't work. Or this, you know, the A/C is not working now…it's as is. So you gotta keep that in mind.
Gregory Ricks
Yeah, a little bit of expense can save you 10s of 1000s on the back end. How do they reach you, Dwayne?
 Dwayne Stein
Very simple, you can hang out at Gregory's website or just go to mortgage gumbo.com.
Gregory Ricks
Awesome. Thank you so much. So once again, you've got some questions, or they have some questions, reach out to my office. 504-832-9200. The website is Gregoryricks.com
Outro  20:16 
We're here to help. I work in the world of helping people with their money, helping them with their investments, we use institutional guidance and the invest 50/50 philosophy, but it's not just about managing the money. I think part of what's important is that we are a sounding board where people feel comfortable reaching out saying, Hey, I've got this. I was thinking about doing this. What do you think, Gregory? That's what we are for our clients. And our clients see us that way. For their friends, family, colleagues, they know, place where you can like, I need some help on this. I've got questions about this. I need to talk about this. 504-832-9200. There's only one number to call, no matter where you want to be. 504-832-9200 or go to Gregoryricks.com
Disclosure 21:16 
Investment advisory products and services are made available through AE Wealth Management LLC, a registered investment advisor. Insurance products are offered through the insurance business, Gregory Ricks and Associates, Inc, AE Wealth Management does not offer insurance products. The insurance products offered by Gregory Ricks and Associates, Inc, are not subject to investment advisor requirements. Investing involves risk, including the potential loss of principal, any references to protection, safety or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strengths and claims of the paying ability of the issuing Carrier. This podcast is intended for informational purposes only. It is not intended to be used at the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual situation. Gregory Ricks and Associates is not permitted to offer, and no statement made during the show shall cost you tax or legal advice. Our firm is not affiliated with nor endorsed by the US government or any other governmental agency. The Information and opinions contained herein provided by third parties have been attained by sources believed to be reliable, but the accuracy and completeness cannot be guaranteed by Gregory Ricks and Associates. Please remember that converting an employer plan account to a Roth IRA is a taxable event, increase in taxable income from the Roth IRA conversion may have several consequences, including, but not limited to a need for additional tax withholdings or estimated tax payments, the loss of certain tax deductions and credits and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions with your IRA, neither AE wealth management or advisors providing investment advisory services through AE Wealth Management recommend or facilitate the buying or selling of cryptocurrencies. Third parties and guests of the show are not affiliated with nor do their opinions reflect those of Gregory Ricks and Associates or AE wealth management. AE Wealth Management provides services without regard to political affiliation and the views of individual advisors do not necessarily reflect the views of AE Wealth Management. We are Ask Gregory. 
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