Pots of Money

Dated: July 13 2021

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In real estate there is different transaction section that involve different amounts that can be moved as needed and used for different needs. I call these are “pots of Money”.

Down Payment – This pot is one of the main ones. As we discussed in other blogs before, the down payments needed is usually based on the loan type. It can also be based on the program type. Such as an investor will always need 20% to get another home, while a first-time home buyer may only need 3.5% down (Connor, N, 2010). These funds can come from Grants (there are many different type of home buying grants out there people can use), direct funds (such as money directly from the buyer/seller, and gift funds (Gift funds need to be from a direct family or religious organization). Remember that do not barriers to home buying stop you, there are many different programs pout there that can help you find your home, and pay the fees involved in the process (Wilson, E, Et all, 2013). If non-direct family and friends way to help we can make that work as well, just need to coordinate through your lender to make sure funds are tracked correctly.

Closing Cost – This pot is also another of the main ones. The closing cost is usually 3% of the purchase price (so if the home was sold for $200,000 then you would need $6,000 in closing cost). Remember that this is separate from the down payment. These funds can come from Grants (there are many different type of home buying grants out there people can use), direct funds (such as money directly from the buyer/seller, and gift funds (Gift funds need to be from a direct family or religious organization). If non-direct family and friends way to help we can make that work as well, just need to coordinate through your lender to make sure funds are tracked correctly. Usually the seller of the home will pay about $2000 of the closing cost here in San Antonio, and the buyer needs to cover the rest themselves. You can also roll some of the closing cost back into the loan, but this will cause the interest rate to go up, so be careful how much is rolled back into the loan.

Seller Concessions – This is also a main pot of money. We briefly mentioned this in the prior pot. Seller concessions is the amount of funds that the seller of the home is going to use the help the buyer pay closing cost. This amount can also be used to help cover any lender fees associated with the loan. As an agent, be careful to the amount asked for here. If you are selling a home and the other agent asks for $10,000 seller concession (or some other huge amount), this should raise flags and let you know something is not right here. Either the buyer has no money and needs to have everything covered, or the lender is charging super high fees to the buyer. Usually that is because the buyer is in a special program of has terrible credit. Usually better to avoid those buyers if you can.

Earnest money – This is a minor to major pot of money. This is the amount of money the buyer will but down up front to show they are serious about buying the home. This money is used for either closing cost or down payment. A good rule of thumb is for homes under $120,000 you put $500 earnest, homes between $120,000 and $200,000 you put $1000, and homes over $200,000 you put 1% of the sale price of the home. All earnest money put down will be used for the down payment or closing cost, as needed.

Inspections – This is a minor pot of money Usually the buyer will pay for the inspection cost, but it is negotiable. Make sure as agents that you use a certified inspector and that they have MLs access to set appointments so that you do have to be there to open the doors for them. It is also a good idea to make sure that they are license in other areas, such as pools, sprinklers, termite/wood boring insects, ect..

Survey - This is a minor pot of money. The survey is a negotiable fee, usually costing about $500 for an in-town home.  If the home is on huge acres, ect. Then it can cost much more for the survey. Usually the seller will pay it, but hopefully a pre-existing survey is available, and you do not have to order a new one.

Home Warranty – This is a minor pot of money. This is something the seller will usually pay. This warranty protects the home that the buyer purchases from any mechanical defects that may occur after they move in for the first year. We have had many instances in which the buyer moves in the home and the hot water heater, which was working just fine, suddenly goes on the first. The home warranty covers that with just a simple trip charge. As an agent, if you do have a home warranty covered in the contract then you may want to pay that for your buyer out of your commission. Stuff happens in life and they will be much happier if you have life issues covered for them up front.

The way you can use this pots of money as needed is such. Say you have a grant and it covers the closing cost, but you need more money for down payment. You can take the grant funds, move them over to the down payment funds, and ask the seller to give seller concessions to make the amount needed less. The funds are fluid to an extent, and you can move them around as needed to make the deal happen.

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Denise Saucedo

Denise Saucedo Certified as Military Relocation Professional. I aim to help buyers and sellers fulfill their dreams of owning their new homes or selling their current homes. I have 20 years of exper....

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