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the low-down on low-down loans, pardon the pun, is that after 6% selling costs you are underwater from Day 1. Since no one can be sure they won't have to sell soon (apart, perhaps, from tenured professors and elected officials), this is a bad idea unless you have a backup plan.
Can you please elaborate and explain "6% selling costs".
the low-down on low-down loans, pardon the pun, is that after 6% selling costs you are underwater from Day 1. Since no one can be sure they won't have to sell soon (apart, perhaps, from tenured professors and elected officials), this is a bad idea unless you have a backup plan.
Quote:
Originally Posted by surferdude949
Can you please elaborate and explain "6% selling costs".
If you've ever sold a house then there is nothing to explain, otherwise you are not the target audience of that post
Can you please elaborate and explain "6% selling costs".
He's talking about the real estate commission, title, escrow and other charges which you encounter when you sell a home.
The only thing I would add for the OP is to make sure the price on the home is right. From my experience, the lender will scrutinize the appraisal much more thoroughly on a low-down deal because there's no safety cushion for them.
The inherent assumption in the post that you reference is off the mark.
Seller sets their sales price. The home must appraise for at least that much. Yes, things can work out of the appraisal is short, but that involves either the seller dropping the price or the buyer making up the difference in cash. Forget about this part for now.
Home you are buying must appraise for the sales price - at least. From the seller's proceeds, they pay off their mortgage, and among other fees, the seller pays up to 6% of the price to the realtors (yours and theirs). This is the case if you use a realtor to help you through the process, and the seller uses one to help sell it. Realtors typically charge 3% of the price for their services, but at times that is negotiable.
The post you are asking about assumes that the price is somehow over-inflated to account for these fees. This is not possible. As a seller it kinda sucks to pay 6% of the price to realtors. But you (buyer) are not "walking in upside down." If you put 5% down on a conventional purchase, you (as a buyer) are "walking in with 5% equity" according to the market at that time. All home values are at the mercy of home sales around them.
Problem would arise if you wanted to sell, and use a realtor, and agree to pay that realtor 3%, and agreed to pay a buyer's realtor 3%, and you also pay for the title policy when you sell (it's a usual thing), AND if you only have 5% equity. You would have to calibrate those commissions or sell it yourself or some other headache. Don't count on appreciation. Don't buy thinking it's going to go up in value fast. Don't buy and immediately sell.
Sorry for the long post, I just wanted you to know that you're not in some magic danger if you put 5% as a down payment.
The inherent assumption in the post that you reference is off the mark.
Seller sets their sales price. The home must appraise for at least that much. Yes, things can work out of the appraisal is short, but that involves either the seller dropping the price or the buyer making up the difference in cash. Forget about this part for now.
Home you are buying must appraise for the sales price - at least. From the seller's proceeds, they pay off their mortgage, and among other fees, the seller pays up to 6% of the price to the realtors (yours and theirs). This is the case if you use a realtor to help you through the process, and the seller uses one to help sell it. Realtors typically charge 3% of the price for their services, but at times that is negotiable.
The post you are asking about assumes that the price is somehow over-inflated to account for these fees. This is not possible. As a seller it kinda sucks to pay 6% of the price to realtors. But you (buyer) are not "walking in upside down." If you put 5% down on a conventional purchase, you (as a buyer) are "walking in with 5% equity" according to the market at that time. All home values are at the mercy of home sales around them.
Problem would arise if you wanted to sell, and use a realtor, and agree to pay that realtor 3%, and agreed to pay a buyer's realtor 3%, and you also pay for the title policy when you sell (it's a usual thing), AND if you only have 5% equity. You would have to calibrate those commissions or sell it yourself or some other headache. Don't count on appreciation. Don't buy thinking it's going to go up in value fast. Don't buy and immediately sell.
Sorry for the long post, I just wanted you to know that you're not in some magic danger if you put 5% as a down payment.
Thank you very much for the explanation.
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