Day: August 22, 2024

Nate Hedrick, the Real Estate RPh, discusses six key steps in the homebuying process for first time buyers.

This episode is brought to you by Real Estate RPh.

Episode Summary

Nate Hedrick, the Real Estate RPh, joins the show to talk about the pharmacist’s playbook to buying your first home. He discusses six key steps in the homebuying process including:

• How to determine if you’re ready to buy
• Getting clear on what is most important in a home purchase
• Key individuals to have on your homebuying team
• Factors to consider in choosing a loan
• What is/not negotiable in today’s market
• What to know when it comes to inspections, insurance, and closing

This episode is brought to you by Real Estate RPh.

About Today’s Guest

Nate Hedrick is full-time pharmacist by day, husband and father by evening and weekend, and real estate agent, investor, and blogger by late night and early morning. He has a passion for staying uncomfortable and is always on the lookout for a new challenge or a project. He found real estate investing in 2016 after his $300,000+ student loan debt lead him to read Rich Dad Poor Dad. This book opened his mind to the possibilities of financial freedom and he has been obsessed ever since. After earning his real estate license in 2017, Nate founded Real Estate RPH as a source for real estate education designed with pharmacists in mind. Since then, he has helped dozens of pharmacists around the country realize their dream of owning a home or starting their investing journey. Nate resides in Cleveland, Ohio with his wife, Kristen, his two daughters Molly and Lucy, and his rescue dog Lexi. 

Key Points from the Episode

• Home buying process [0:00]
• Home buying in a changing market with a focus on rent vs buy decision. [2:46]
• Budgeting and affordability for first-time homebuyers. [6:50]
• Financial readiness for pharmacists considering homeownership, including budgeting, ongoing costs, and prioritizing what’s important. [10:17]
• Real estate agent roles and changes in industry regulations. [16:52]
• Real estate agent commissions, pre-approvals, and loan options for home buyers. [21:41]
• Home buying process, including pre-approval, loan selection, and home negotiation. [28:01]
• Home buying process for first-time buyers. [34:47]
• Home buying process and budgeting with a real estate expert. [41:10]

Episode Highlights

“Taking a step back and spending 30 minutes to figure out what your budget actually looks like, can go so far in terms of the long term affordability and giving you flexibility down the road.” – Nate Hedrick [9:00]

“Regardless, whoever you’re working with, make sure you’re interviewing them. This is somebody that’s helping you make a huge decision and you want to have a good experience. Spend the time to make sure that you’re getting somebody really high quality and somebody that you’re going to be able to work with.” – Nate Hedrick [18:38]

“You really want to have that pre-approval letter in hand up front. It’s a pretty simple process to get done, and it’s good for, typically, three to four months. And it’s really easy to renew. So it’s pretty simple, and something that everybody should be doing up front.” – Nate Hedrick [27:43]

“Try to keep your budget criteria in mind. It is very easy if you’ve got a $300,000 budget to fall in love with a $500,000 house, right? Really try to restrict yourself from doing that because it’s just gonna cause heartache.” -Nate Hedrick [33:54]

Links Mentioned in Today’s Episode

• New York Times Rent vs Buy Calculator
• Real Estate RPh
• YFP Find an Agent
• YFP Homebuying Quick Start Guide
• YFP Real Estate Investing Podcast Episode 124: Insurance Updates and Scaling a Business with Bryan Neal
• YFP Podcast Episode 361: Four Timely Questions for Homebuyers
• YFP Podcast Episode 353: Avoiding the Trap of House Poor: Evaluating the True Cost of Home Ownership 
• YFP Podcast Episode 348: 2024 Housing Market Trends, Buy Now vs. Wait, & Assumable Rate Mortgages
• YFP Disclaimer
• Subscribe to the YFP Newsletter
• Tim Ulbrich on LinkedIn
• YFP on Instagram
• YFP Facebook Group
• YFP Real Estate Investing Facebook Group
• Nate Hedrick on Instagram
• Nate Hedrick on LinkedIn

Episode Transcript

Tim Ulbrich  00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, Nate Hedrick, the Real Estate RPh, joins the show to talk about the pharmacist playbook to buying their first home. We discuss six key steps to the home buying process, including how to determine if you’re ready to buy, how to get clear on what is most important in the home purchase, key individuals to have on your home buying team. Factors to consider when choosing a loan, what is and is not negotiable in today’s market, and what to know when it comes to inspections, insurance and closing. Let’s hear a brief message from today’s sponsor, the Real Estate RPh, and then we’ll jump into the show. 

Tim Ulbrich  00:42

[AD] Are you planning to buy a home in the next year or two with the state of current home prices and mortgage rates? The home buying process can feel overwhelming, but what if you can leverage the knowledge and ongoing support of someone who has worked with dozens of other pharmacists through their home buying journey, all at no cost to you. I’m talking about Nate Hedrick at the Real Estate RPh. Nate is a pharmacist who has been a partner of YFP for many years now, and offers a home buying concierge service that can help you find a high quality agent in your area and support you throughout the entire process. So head on over to RealEstateRPh.com or click on the link in the show notes to schedule your free 30 minute jumpstart planning session with Nate. 

Tim Ulbrich  01:28

Nate, welcome back to the show. 

Nate Hedrick  01:30

Hey, Tim, always good to be here.

Tim Ulbrich  01:32

So you are fresh off a trip to Iceland. Give us the good details. How that came to be, and what was the trip like?

Nate Hedrick  01:39

Yeah, man, the Land of Fire and Ice. It was, it was really cool. So the short version of a long back story is that my oldest daughter for one of her goals this year, we do goals at the beginning of every year, and one of her goals was to go visit a foreign country. And so we were quickly informed by her that Canada doesn’t count, so we had to find an alternative. So we took her to the library, checked out a bunch of books and tried to, you know, weigh the budget options with her, and anyway, she focused it on Iceland, and we made it happen just just last week. And it was, it was really cool. It was a place unlike anywhere else I’ve ever visited. The the landscapes there just so unique. The travel there is just very, very different. But it was really cool, very worthwhile trip. 

Tim Ulbrich  02:23

You and I were talking before we hit record of how cool of a first experience that is from international travel, right? It’s different enough, but there’s still some bridges where, you know, the kids can be comfortable and things so that’s great. Love that. And as our listeners know, we talk so often about this balance between taking care of the future and living a rich life today. What a cool example of that, Nate, and bringing the family into that. So I love that. 

Nate Hedrick  02:45

Thanks. Yeah, we had a really good time. 

Tim Ulbrich  02:46

So perhaps while you were there, maybe on the flight home, back back in the US, we saw interest rates drop here recently, I think you know, the lowest they’ve been in a handful of months. And what are you seeing in terms of the impact on that rate drop, something we’ve been anxiously awaiting, and how that would shake out in terms of all the people that are on the sidelines waiting to buy a home?

Nate Hedrick  03:10

Yeah, you know, I haven’t seen dramatic changes. In fact, I’ve still seen parts of our market that are still relatively slow. I think you know, what’s interesting about the rates in general, is they don’t tend to affect the day to day. I think they sort of affect these trends and these these movements, but without things changing, you know, two and a half percent overnight, you’re not going to see all of a sudden, everybody’s showing up to the bank for an application. I saw a stat float around this morning, something that the effect of even though rates are 1% lower than they were just a year ago, mortgage application rates are still down eight or 10%. So I think, you know, there’s, there’s some movement out there, there’s some improvement, but we’re not at a level where people are going to refinance yet. We’re not at a level where it’s so good that that it’s, you know, beating inflation, or anything like that. And I just think that people are slower to react, even as these rates start to get a little bit better.

Tim Ulbrich  04:03

Yeah, I’m really curious to see kind of where that goes. And as we’ve talked about many times on the show before, there’s a lot of interested buyers out there, and I think a lot of people that are itching to get into a home and we’ll see where the rate trends continue to go, and we’ll bring you back to make sure we’ve got the most up to date information for our listeners. So I think that’s relevant to our discussion today, because, as I mentioned, there’s pent up demand. There’s interest rates. I feel like there’s a lot of first time pharmacist home buyers that are out there, and they’ve been kind of stacking right on top of one another for the last few years. And so today’s focus is we want to go through a step by step guide, step by step playbook, if you will, to buying your first home, we’re going to discuss how to determine whether or not you’re ready, factors to consider prior to beginning the home search, how to select the home loan option that’s the best for you, and ultimately, what are those costs that are involved in buying a home, and what can and cannot be negotiated in today’s market? So Nate, before we get into those specific. Six let’s talk about the benefits of home ownership, because given the housing market that’s out there right now, a lot of people are questioning whether or not it makes sense to buy a home. And I think the rent versus buy question is getting some renewed energy for good reason. So how are you thinking about the rent versus buy decision? The rent versus buy calculation in today’s market, and someone making that decision, of course, knowing that every market is different.

Nate Hedrick  05:24

Yeah, it’s it’s always been a question, right? No matter what the market looks like, even when rates were crazy low, even when 2021 when home buying was at just an absolute fervor, it’s always a question like, is it better to wait? Is it better to buy now. A lot of it has to do with how stable are you looking for? How long are you going to be in that in that particular property? If you’re in a location for a year, and you’re doing your residency there, and you’re planning on moving out after that, it’s probably never going to make sense to try to beat the market, quote, unquote, by buying a house, selling it, hoping for the best, like you might make out it might be okay, but in almost all those cases, renting is probably going to be preferred. Now, as you move that timeline out a bit further, if you’re going to keep that property and rent it out, let’s say, or you’re going to move to a location that you hope to find a long term job, that conversation starts to shift, and it starts to become a conversation of how much do I have to put down? What are closing costs? What are all the factors that go into this upfront fees? And what is that gonna look like in terms of what I could rent this for? Because, as we’ve said, you know, rates are better. They’re still high, but rents have been going up too. So you’re you’re factoring into a lot of different pieces when making that decision.

Tim Ulbrich  06:38

Yeah, and you and I cover this. Gosh, it’s probably been 3,4,5,6, years ago? Now I’m not…I’d have to go back and look what episode it was! But actually getting into the weeds on that rent versus buy, very different market, of course, than what we’re looking at today. But one of the resources we talked about in that episode, we’ll link it in the show notes again, is the New York Times has a pretty cool rent versus buy calculator that really helps avoid that trap of I’m paying X for rent and the mortgage payment is Y. And comparing those right? There’s a whole another layer of cost and things that we want to evolve really evaluate to determine what’s the apples to apples, right, or as close as we possibly can get. So again, we’ll link to that in the show notes. So Nate, let’s jump into our six steps for first time homebuyers, the playbook for first time homebuyers. And if listeners want to follow along and take notes, you can download our free YFP First Time Homebuying Quick Start Guide, and you can get that by going to yourfinancialpharmacist.com/homeguide. That’s all one word. We’ll link to that in the show notes as well. So Nate, step number one is making sure that you’re ready, building on the conversation that we’ve already started. And buying a home can be a great move, but dot, dot, dot. You got to be in the right position, and that really starts with knowing your budget and considering how the home purchase fits as a piece of the broader financial puzzle that accounts for other goals, such as student loan debt, of course, very common among first time homebuyers, making sure we’ve got the right reserves and emergency funds. How do we get started with investing in retirement savings? We have all these things that we have to consider. And of course, the home all, albeit a big one, is one of many different aspects of the financial plan. So tell us, from your experience as a first time homebuyer, it’s been a while and coaching many first time homebuyers through the process how the buyer and the bank really answer this affordability question?

Nate Hedrick  08:24

Yeah, I was just thinking it’s actually going to be 10 years since first time homebuyer status, just like this month. So, yeah, it’s been a minute. But, you know, I think this is probably the most boring part of this six step guide, right? But it’s arguably the most important. And I think people are like, up, skip it, budget. Don’t want to look at it. But I can’t tell you how many I meet with somebody every week and talk about this stuff, where, if you don’t set yourselves up for success, if you just jump into Zillow and say, I need a four bedroom house, and I already live in Cleveland, Ohio…beautiful, sunny day here in Cleveland, like this is what the house is going to cost. Rather than doing that actually taking a step back and spending 30 minutes to figure out what your budget actually looks like, can go so far in terms of the long term affordability and giving you flexibility down the road. One of the things that, again, we lucked into, because again, 10 years ago, I had no idea what I was doing. We bought a house that was, you know, less than than max, right? We way undercut what we could have possibly spent on a house, and now we’re still in that same house 10 years later, and couldn’t be happier because we’ve got this nice, reasonable payment. So even as Kristen and I have cut back a little bit on work or taking trips to Iceland, the housing is so much more affordable. And I can’t tell you the number of pharmacists that I’ve talked to that didn’t lock into that right, or went the opposite direction and said, I’m going to spend as much as I can. I want this big, nice house, and then they’re paying for it later, and it becomes problematic. So it’s something I really encourage people to do, take a hard look at the numbers and and it will benefit you in the long term.

Tim Ulbrich  09:57

You know, I was thinking of Nate as you were talking a webinar I did several months ago, talking about budgeting. And as you said, right? We bring that topic forward, and people are like, end episode. I don’t want to talk about this anymore. But what was interesting is I had several pharmacists ask them to submit their budgets in advance that we would share anonymously if they were comfortable doing so. And I kind of analyze them, talk through them. And to no surprise, one of the things that we saw is the percentage of income that was allocated to fixed costs –  very high, right? And then the home, of course, tends to be along with student loans, along with car payments, along with child care costs, which is probably the big four, as I see them. But when you’re talking about a 30 year decision that for most people, is a fixed payment outside of some of the taxes and other things that will increase over time, like we’re locking in a big piece of the financial puzzle, right? And so easier said than done in today’s market, totally get it, but we want to make sure that we’re not putting ourselves in a situation where we’re looking up a year or two years later saying, Hey, I make a great income, but I don’t feel like I’m progressing. Because one of those big reasons, at least being that home purchase.

Nate Hedrick  11:08

Yeah, I think that’s, that’s spot on. And I think that it’s, it’s, again, it’s very easy to sit here and say, right? It’s easy to say, look at the budget, don’t spend too much. But then I again, I can’t tell you the number I’ve talked to, where they look in their market, and the only option is to spend 35% of their income on a house for them, like they need three bedrooms. Is all that’s going to fit. So I think it’s a lot easier said than done, but you have to at least have a wrangle on those numbers so that you can start making an informed decision, rather than just jumping in and hoping for the best later on.

Tim Ulbrich  11:36

Yeah, yeah. And to your point, if that is what it is in the market, like, what else can we be doing in the financial plan to make some shifts or adjustment, knowing that, hey, that’s just going to be a big part, because you and I both know that pharmacists salaries don’t adjust necessarily with cost of living proportionally, right? 

Nate Hedrick  11:50

100% that’s one of the risks.

Tim Ulbrich  11:52

You know think this making sure you’re ready, portion also includes, we’re in looking at all costs of the mortgage, right? Nate, I think my experience, personally, going through this and talking with many pharmacists is most folks are probably thinking about what’s referred to as PITI, right, principal, interest, taxes, insurance, but might stop there. What else should they be considering, both one time and ongoing costs when they’re they’re trying to answer this question, Am I ready?

Nate Hedrick  12:19

Yeah, the big ones that I missed in terms of ongoing were the property taxes. So when I was a renter, I didn’t really think about property taxes. I didn’t have to pay property taxes. I knew they were a thing, but I didn’t really like factor that in. And often it’s tucked into your mortgage. But what you don’t realize is that those property taxes can go up, right? So those are going to be reassessed. In fact, here in Cuyahoga County, we just had our reassessment done, and everyone’s property taxes increased. So even though I haven’t sold my house in years, it still does go up over time, and tends to go up every year. So there are little things like that that are easy to miss, even something like utilities, for example, if you’re a renter today, and maybe utilities are baked into your rent, maybe it’s even just a couple of utilities. Maybe it’s just gas or the water and sewer bills, but all those are your responsibility now. And so if we had a really hot summer like this and our electric bills were through the roof because we’re paying for the air conditioning, that’s just that comes with the territory of homeownership, and it’s something that is difficult to calculate, but you have to kind of plan a little bit of buffer for those kind of things, because now they’re all your responsibility once you take on that homeownership.

Tim Ulbrich  13:24

Yeah, and those ongoing things, to me, are so important, right? Because when we talk about, you know, fixed costs in the budget, that we’re going to try to move other pieces around, you know, utility costs, you nailed that. Obviously those have gone up, I think, across the board, property taxes, I know, for us here in the Columbus area that’s been huge. We actually have a commercial property, our office space up in northeast of the city. And we bought that property in 2021 and property taxes nearly doubled. And, you know, and, and so those are the things as an investor, you know you’re thinking about, but you’re not thinking about doubling. And great, the property value has doubled. But guess what? Like, one is related to monthly cash flow. One is not, right. So at least in this moment. And then I think the homeowners insurance increases we’re hearing about all across the country, Nate are huge. I don’t know if we felt that as much here in Ohio. I know we’re hearing from people in Florida and other parts of the country that are more prone to natural disasters that they’re seeing some more significant increases, but these are the things that we want to be thinking about that breathing room right when we’re making this decision about, Hey, are we ready to purchase a home or not?

Nate Hedrick  14:28

Yeah, you hit the nail on the head. I mean, David and I just did an episode on the REI podcast about insurance, where we talk to an insurance agent. And it’s incredible to hear some of the stories around the country of carriers that are pulling out, carriers that are doubling policy costs. I mean, it’s, it’s pretty incredible. So it’s definitely those. Those things are not something to ignore, and even if they’re a little difficult to calculate, you have to at least plan for them. 

Tim Ulbrich  14:50

Yeah, that’s right, all right. Number two on our list of six steps in the playbook for pharmacists as first time homebuyers is determining what’s important. So once. We make sure we’re ready financially, it’s really time to determine what’s important. What do we want? What’s top of the list? What’s maybe a desire, but not at the top of the list? So Nate before keyword, before we start the search. How do you think about narrowing down this list of the must haves to a few key areas?

Nate Hedrick  15:18

Yeah, and I think part of this is not just you personally knowing, but if you’ve got a spouse involved in the decision, or you’ve got someone else involved in this process, it’s how do we all get on the same page? Right? One of the things I’ll often do with couples who are buying house together is I’ll send them both these must have sheets and let them fill them out separately, and then kind of come back together. 

Tim Ulbrich  15:39

That’s cool. 

Nate Hedrick  15:39

Yeah, it’s neat, and it’s fun to see what they put on paper, because a lot of this is, like stuff you talk about, but when you’re doing it separately, and you have to, like, write it down, and then it’s like the newlywed game, right? You get to see what they actually write down. You’re like, wait, what, you want that? I didn’t realize how important that was to you. And so kind of assessing those things can really make a difference, especially if you’re taking a step and looking at all this stuff before you hit search and you say, look, hey, we’ve got four kids, and so we need a five bedroom house, or whatever the you know, the math works out to that can drastically affect things like your budget or where you’re able to buy. You might not have five bedroom houses in the in the neighborhood that you want to look in, right? That might not be an option. You might have to build. You might have, you know, so it really changes the dynamics of how you’re going to search, and it affects a bunch of other things down the line. So again, if you’re looking at, let’s say you’re looking at, you want area for your horses. We just rode horses in Iceland for the first time ever. And so if you’re like, I need to have my Icelandic horse as part of my house property. That’s a very different location, very different agent, very different financing, all those decisions that play out after that change because of that decision of what is most important to you. So you have to have that kind of criteria established upfront. 

Tim Ulbrich  16:04

And I think knowing what flexibility Nate exists or doesn’t exist, or are some things non negotiable, right? Maybe that’s the number of bedrooms, whereas other things you’re like, Hey, I’d love if we could have X, Y or Z, you know, the finished basement or a pool or a fenced-in yard or whatever. But maybe it’s not a hey, it has to, because I think that really helps with the agent relationship. We’ll talk about that here in a little bit, and really making sure that person has the information they need, that they’re not wasting their time or your time, you know, sending a bunch of properties or going to visit a bunch of properties that ultimately, you know, aren’t the right fit.

Nate Hedrick  17:22

Absolutely.

Tim Ulbrich  17:22

Speaking of agent, let’s talk about number three on our list of six steps, which is, assemble your team. Most first time homebuyers, I think, start their search like I did, which was driving by properties, scrolling listings online, but sooner or later, they’re gonna have to assemble a team to pull the trigger and ensure one of the, if not the largest purchases they’re going to make in their lifetime go smoothly. So Nate, talk to us about how the right team can make all the difference and who you’re thinking about as key team members.

Nate Hedrick  17:51

Yeah, I think this step always kind of feels overwhelming. Building a team sounds like a pretty serious endeavor, but what we’re trying to say is that you’re looking for individuals that are going to make the process easier and help you out. This doesn’t have to be a big, long, drawn out process. You want to make sure that you’ve got people that know what they’re doing to supplement right, just like you would on the team, rounding in the hospital or working in the pharmacy. You’re not doing all this stuff by yourself. You don’t have to know everything. You just have to have the experts in your corner. A lot of times, that’s going to start with something simple, either a lender or a real estate agent. Connecting with them, getting them to give you referrals to the other people that you might need, and then taking off and running from there. I do encourage people to interview whoever you’re working with, and we can. I’ve done webinars on this in the past where we go through like tips on interviewing an agent, for example, or tips on vetting an agent. But regardless, whoever you’re working with, make sure you’re interviewing them. This is somebody that’s helping you make a huge decision you want to have a good experience, and so spend the time to make sure that you’re getting somebody really high quality and somebody that you’re going to be able to work with. Well, yeah, I

Tim Ulbrich  18:51

think great advice. And again, this is something we don’t want to haphazardly walk into, and referrals can be helpful, but you know, your needs may be similar than someone else, different than someone else. So making sure you feel good about this decision and the people that are ultimately representing and working alongside of you. Nate, I think this would be a good place, just given the agent aspect here and talk about some of the changes that we’ve talked about in the podcast before, relating to the National Association of Realtors Settlement when we talked about it, three, four or five months ago is a hey, this is coming in the end of the summer, and here we are. So now that the dust has maybe somewhat settled, like, what? What is the impact that you’re seeing? 

Nate Hedrick  19:28

if you ask our brokerage, we were like, in the middle of the dust, because it just went live, where these these changes are now in effect. And so essentially, what happened is that the National Association of Realtors was sued. They decided to settle without admitting any fault. And the big change that resulted from that settlement is one, they had to pay out a whole bunch of money, as is normal, but also they had to get rid of the buyers commission that was advertised in the MLS. So the way it worked up until a couple days ago is that if I was showing a house for a prospective buyer client, I knew that there was a 3% commission, or a two and a half percent commission that is being offered by the seller, and that when I write a contract, I’m going to get that as part of working with that buyer. That is no longer allowed. You cannot advertise that that commission agreement basically. What is now required is that that commission has to be negotiated. It has to be a part of the buyer’s contract so it doesn’t go away, it doesn’t change necessarily. It’s just the way that it’s going to be talked about is very different, and it’s going to be talked about upfront. So if you’re a buyer and you’re working with an agent for the first time, there’s going to be a conversation about, hey, my job is to negotiate and work for you, to help you guys find the best house, but as part of that, I need to get paid. And so there’s going to have to be a number. Call it 2%, two and a half, 3% whatever that is in commission that I’m going to try to be getting from the seller. And we’re going to agree to what that number is right now, as a process of working with me, my goal is to get that from the seller, right? I’m going to write a purchase agreement to you, Tim, and I’m going to say the house is $200,000 with a 3% commission. For me, my goal is to get it from that seller, but there’s a possibility they come back and say, I’ll accept $200,000 but I’m not paying your agent anything. And then we have to figure out what we’re going to do. And so that’s where we are today, where that’s sort of in limbo, and we’re going to kind of see how the market plays it out. The likely options at that point are going to be either we write the contract for a bigger amount, we write it for $200,000 plus 3% and then, you know, you finance that, or the buyers are going to have to pay that 3% out of their own pocket. I think that’s going to be not the norm. I think that’s going to be exception more than the rule. But there are a lot of changes, and we’re sort of feeling out what this is going to look like as as the time goes on. 

Tim Ulbrich  21:40

And that last point you made, you know, in terms of, could this fall on the back of the buyer, right? I think that’s what most listeners that are looking at my home are wondering. And this is just such a stark change from you know, how we have thought about buying agents in the past, and, you know, I had a conversation offline a couple months ago of like, this really will, in my opinion, it’s going to take time, but this really will start to differentiate the value that a buying agent is bringing. And I’m a firm believer, and I know this from working with you and talking with other agents, not all agents, just like not all financial planners, are created equal. And when you think about the bar of entry into someone becoming a real estate agent, similar to someone else becoming a financial planner, like you know that bar of entry, you know, there is one but, but it’s not incredibly high.

Nate Hedrick  22:24

Its very low. You can say it!

Tim Ulbrich  22:29

And so really, then comes down to like, Hey, are you talking with an agent working with one that has experience? Like, how much experience? And what has that experience been like? And so this is really going to flip that conversation. And I think for buyers, is just so different, and I’m curious to know it’s so fresh right now, kind of how this shakes out and in this market Nate that we’re in, like that first option you mentioned, where, hey, we’ll write the contract and, you know, we’ll see if the listing, person selling the home, will ultimately pay it like, you know, arguably, we’re in a seller’s market, right? So is, do you see that happening? Or what do you see happening short term? 

Nate Hedrick  23:05

I think, I think yes, is the short answer your question. I mean, we’re doing that essentially today, right? If you think about again, it’s still that $200,000 house today, right now, that 3% is coming from the seller already. So, like, that’s not really changing. What I think this is going to do is going to provide a lot more transparency. Like you said, the barrier to entry on real estate is very low, and there were a lot of agents out there that would get their license, work with a buyer, knowing full well that it did not matter how good they were at their job, if they got someone to close, there was a guaranteed two and a half or 3% sitting out there waiting to be theirs, right? And I think the benefit of this change is that that that goes away, there’s no guarantee. You have to actually prove your value as a buyer’s agent now, and so I think that’s going to help the market overall. I just, I think it’s going to be interesting to see how exactly it shakes out.

Tim Ulbrich  23:53

Yeah, and this would be a good stop that I just want to pause and we’ll talk more at the end, but put a plug Nate for you and what you’re doing with your clients through the home buying concierge service. People can learn more RealestateRPh.com We’ll link to that as well as the site on YFP website, if you click on home buying on the homepage, you can get there, but you do offer value. Our listeners will get that from you know what we’re talking about here, and you have the experience. And you’ve done it, obviously, yourself. You’ve done it with many, many clients, locally. You’ve worked with a you’ve worked with agents all across the country. You’ve done this many times as an investor as well. And so I think finding that person, that relationship, that’s a good fit. You know, now more than ever, with these changes, is going to be so important so.

Nate Hedrick  24:37

I really appreciate that, Tim, and I think especially as more and more and more agents are going to require you to lock into a contract because that guarantee is gone, you kind of have to get it right the first time which, which sounds overwhelming, and I don’t mean that to be like intimidating, but you kind of have to get this one right. And so working with somebody that that has the experience you’re looking for, or being matched with somebody that we have vetted already. Can be a huge difference maker if you’re looking at buying a home for the first time, especially.

Tim Ulbrich  25:05

What do you think’s going to happen for the many people that are out there looking, who work with an agent but never actually go through with a purchase for whatever reason? I mean, is that? Like, will there be cost? I mean, there’s, there’s obviously cost of your time and stuff that now we’re looking at this relationship differently, like, will that still be no charge to the to the prospective buyer? What do you think that will look like?

Nate Hedrick  25:26

So I think there’s going to be a lot of people that try to get creative. I have already seen, and this is like on LinkedIn, so I don’t know how legit it is, but I’ve already seen some cases where someone will say, Look, I’ll charge $995 I’ll show you up to 15 houses, and I’ll negotiate one contract, and that’s the cost to work with me, right? And whether you buy or not, I don’t really care anymore. I think you’ll see people get started to get creative, but I think you’ll see the market probably wants to keep things as close to as they are now. So I think you’ll see people just negotiate these contracts with their buyers directly and then try to get them to negotiate with the sellers to pay the cost.

Tim Ulbrich  26:02

Yeah, I actually know an agent here in the area that’s doing kind of what you just shared. And I don’t know how widespread it is, but on a per listing fee, or it’s like a higher flat fee, you know, we’ll get you so many 10, I forget what it was, 10, 15, 20, but if you want to do it kind of a la carte, it’s per you know so curious to see where that where that goes. Yeah, all right, let’s talk about number four, which is choosing a loan, probably what many people are thinking about as a top priority. And before we talk about loan types, let’s talk about pre approvals, especially important in the competitive market that we’re in today. What is a pre approval? Why is it necessary? And what items are needed to get to that point of having one?

Nate Hedrick  26:43

Yep. So a pre approval plan plain and simple is someone, typically a lender, giving you a letter that is going to say, hey, there is a person out there willing to lend to this individual for a certain amount of money. So if I go with a pre approval letter to a seller and it says, I’m pre-approved up to $250,000 that seller has confidence knowing that that there’s someone else out there behind me willing to basically front that money. So it’s all that is, is saying that someone has basically vetted you and agrees to basically to back that up. The common misconception is, well, I don’t need that until I found a place, or I don’t need that until later. I actually just spoke with a potential buyer this past week, and she said, I said, Are you pre approved? You know, just want to get an idea. And she said, I wasn’t going to do that until I found the perfect house. Like, I don’t want to, I don’t want to waste my time and do that until then. The risk there is that if you find the perfect house, and there are five other people that think it’s the perfect house, and you’re not pre-approved, you’re not getting it right? It’s not going to be something that that we would even consider as a seller. So you really want to have that, that letter in hand up front. It’s a pretty simple process to get done, and it’s good for, typically, three to four months. And it’s really easy to renew. I renew mine all the time, even though, you know, we’re not, we’re not actively looking it’s just something to keep on hand. So it’s pretty simple, and something that everybody should be doing up front. 

Tim Ulbrich  28:00

And in order to get a pre approval, you’re going to have to make a case to the bank that you’re a qualified lendee, right? So you’re going to be providing paycheck information, assets, liabilities, kind of a snapshot of your overall financial picture. But to your point about, you know, not waiting on the sidelines, like my experience is that takes time, depending on the bank, it might take more or less time, and you know how nimble they can be, but to be able to get all that information, upload it, for them to make a decision on that, it’s going to take time. So you want to have that in hand, especially given that that’s good for a period of time, definitely. So once we get pre approved and we’re ready at that point, you know how we go about the loan selection choice. It’s probably one of the biggest decisions that people are going to make in the process, and I think is confusing to navigate, given the differences that are out there in the products that are available, which can vary in terms of percent down payment that’s required, minimum credit scores, whether or not there’s private mortgage insurance or PMI. So talk to us about the common types of loans that are out there, and the key features of those loans.

Nate Hedrick  29:08

Yeah. I mean, this is, this is such a broad topic, we could do two episodes just on loans. I mean, you’ve had Tony on the show enough times talking about loans, right? Like this is such a big area of focus that, you know, the it’s, it’s hard to cover it all. But the basics are this, right? You’ve got to have some, you’re going to have some sort of product, and that product is going to be backed up by the bank in some way. And they can back that up through the government. They can back it up through like your job. They can back it up through federal programs, like you name it. There are ways for them to basically underwrite these loans. And the the qualifications within those underwriting underwritings are what determines things like your down payment, your interest rate, what houses you’re available to buy, so on and so forth, right? So typically, people are going to see one of three types, and again, there are 1000s of others. But typically you’re either going to have what’s called an FHA loan, or government backed loan, a conventional loan, which is sort of like your standard 30 year fixed rate loan, or you’re going to see like a pharmacist home loan or a doctor’s loan. That’s typical to our to our audience. And so any one of those have different pros and cons, different down payments, different interest rates, different terms, so on and so forth. But, but all of those are pretty viable, and again, pretty common for most people. 

Tim Ulbrich  30:17

Yeah as you mentioned  we’ll, like in the show, and so we’ve talked about, you know this at ad nauseam, in terms of the options that are available. But this is huge. I talked with a pharmacist, Nate last week that’s out in California. I want to say it was in the San Francisco area that is looking to purchase a home 12 to 24 months. Now, I asked a budget question, right? And I’m like, holding my breath. It’s California. So you know it was, hey, about $800,000 and then I asked the loan question, like, Hey, what are you thinking in terms of lending? No clue and no fault to their own there’s just, you know, not, not yet there in the process. But I was trying to really encourage them, like, start to dig in. Because when you’re talking about an $800,000 home and qualifying, and what a 3% or a 10% or 20% on a conventional down payment. We’re talking about either a ton of cash or still a ton of cash, but not as much cash, right? And how that fits in with, Hey, your student loans and all these other things that we’re trying to achieve. So this, again, is big, and probably for first time homebuyers, that down payment piece comes to front and center, because, right, they’re focused on many other goals, student loans, etc, that we’ve been talking about, and really making sure that you feel comfortable with the product. And you know, if you’re putting less down, are you giving up on anything, on rate or terms or other things, you got to look at the whole picture before you make a decision.

Nate Hedrick  31:33

Yeah, all good points and all things that are difficult and overwhelming to consider at times again, one of the ways that you can sort of make this a little easier is start to talk with your agent about this. If you start with an agent, if you know no if you have no idea where to start with a lender, start with an agent, and they’ll be able to refer you to a couple good agents. I can usually parse out, even though I’m not a lender, I can usually parse out like, hey, it seems like you’re looking for lowest down payment options, or you’re all about monthly payments. So these are the people that I’m going to start directing you toward, then you can refer them to three different lenders that they can have a meaningful conversation with, rather than starting from scratch and just Googling, you know, local lender near me. So that’s a good way to get started if someone doesn’t know where to start.

Tim Ulbrich  32:13

Good stuff. Alright, number five on our list is find your home and negotiate. So at this point, we’ve determined what’s in the budget. We’ve narrowed down the list of must haves. We just assembled our team. We’ve gotten pre approved with the lender. We know the product we’re going to be pursuing. So now it’s time to get serious with looking right? So talk to us about what’s involved in this step, and especially in today’s market, like, what is the reality of negotiation? 

Nate Hedrick  32:36

Usually this is where people start, right? This is step number one. Is find your home. Like open Zillow and look for your favorite house. So it’s funny that we’re waiting all the way to number five to get there, but it shows the importance of the prep work, right? Because it’s how you’re going to do this successfully. So right now, there are a lot of ways to search for homes, right? You’ve got Zillow, realtor.com, you’ve got Facebook Marketplace, the MLS, which is where realtors are posting their sites. All of those are great options, and really, there’s no wrong answer. I think the thing to keep in mind is that there’s sometimes a preconceived notion that if I’m working with an agent, they’re going to go find me a house, right? They’re going to find me a property. With the way things are set up today, with the automatic emails that you can get with the notifications you can set on Zillow and realtor and all those, it’s typically much easier to to set criteria yourself, or give those criteria to an agent and allow them to build you an automatic email that’s going to be looking for the houses that might fit your criteria, and then you be the one to decide, does this? Does this make sense? So I think that’s something to kind of just put in people’s heads, because I’ve talked to some out there where it’s like, well, the agent, you know, is trying to find me a house, but, but I’m not having much luck. It’s like, well, be involved as well, because they can do a lot, but, but you can often do just as much with with some of the tools that are out there today. So that’s that’s kind of part one. Part two is to try to keep your criteria in mind, right? We did all these steps one through four up front for a reason, it is very easy to, if you’ve got a $300,000 budget, to fall in love with a $500,000 house, right? Really try to restrict yourself from doing that, because it’s just gonna cause heartache, right? It’s much easier to start to stick within your parameters and roll from there. So those are just some kind of key tips when you get started with the process. When you’re actually looking at homes, that’s when kind of the rubber meets the road, where you’re going to be doing the bulk of the legwork to see, do I see myself living here? Are there? Are this is actually meeting the criteria that I was expecting? Does this match the pictures? Is it matching the things I’m seeing online and so forth, and then relying on your agent and eventually an inspector to help with things like, is this a problem, or are we worried about X, Y and Z?

Tim Ulbrich  34:47

Makes sense. And I think what’s challenging this a little bit right now is, you know, we’ve seen in our area, I’m sure, all across the country as well, is, you know, in terms of the competitiveness of the market cash buyers that are out there. Or, you know, appraisal gap waivers. That are happening, lots of things that are competing with, with people trying to purchase a home is, you know, you might set that budget at the very beginning at $300k even if you hold the line and you got the filter criteria at 300 right there, there could be a, you know, that home maybe goes at asking, slightly below, maybe, depending on the market, perhaps above it, right? And some other cash that’s needed to close it well. So every market, of course, different, but I think it’s hard right now, just given where it is, and I think all the pent up demand to really hold tight to that budget.

Nate Hedrick  35:33

You mentioned it perfectly. It’s very market specific. We have areas here where that, you know, over asking isn’t happening anymore, and other areas where every house that pops up, I don’t care how badly they take the pictures, it’s flying over asking price, right? So it depends pretty heavily on the market and the location.

Tim Ulbrich  35:49

And that’s within Cleveland? You’re talking about, like, different communities within the area? 

Nate Hedrick  35:52

Even within Cleveland, yep, for sure. 

Tim Ulbrich  35:53

Yeah, that’s interesting. All right. Number six, Last on our list, Nate, inspect, insure and close. So we’re under contract. It feels like we finally have crossed the finish line, given the steps that we’ve covered up until this point. But there’s some more important details remaining that are in between the accepted offer and the keys in hand, that being the inspection, consideration for a home warranty and closing tell us more. 

Nate Hedrick  36:15

So I always say this to my clients, that there’s two parts of buying a home that feels scary, and Part one is putting in an offer, because it feels very final. It feels like, once I put this in, like that’s it. But the reality is, is that the second part, when you waive inspection contingencies, that’s the actual, like, serious, scary part, right? Because that’s when your earnest money goes, goes solid, and you can’t get it back. That’s when, essentially, you are buying that house. So there’s a period in there, that inspection window that you have a chance to do some really good due diligence. Usually it’s seven or 10 days, if you’ve negotiated that in, hopefully your agent is helping you do that, and during that time, it’s really your moment to figure out, does this actually work, right? Are there things in the house that we’re worried about? Right? Is the roof caving in? Is there water damage in the basement? Is there you know, properties going up nearby that we’re concerned about. All of those pieces are pieces you want to be spending time to do that due diligence on, because there’s going to reach a time where that it’s too late to really do that stuff down the road. So it’s, it’s the moment to get all those things figured out. And again, you mentioned insurance in there, there’s also a piece of like, contact your insurance agent and figure out what your costs are going to be for this specific house. That’s still part of your due diligence. And so many people I talk to wait until the very end to do this insurance piece, and then they find out, Oh, well, it’s got an old electrical system, and actually the roof is 20 years old, and they won’t insure it  or it’s in a flood plain. I mean, you name it, right? So, so do that due diligence during the time period that you’ve got, because it’s super important. And it really is the the the actual last thing before the scary step of waving everything,

Tim Ulbrich  37:52

You know that that’s what made me so nervous about the period of time that we’re in. And I’m guessing there’s still some of this out there, of waving inspection is to your point in a traditional process, you’ve got point one, and then you’ve got a later point, right? So you’ve got a little bit of time to sleep on it. Do some due diligence. Take a breath, you know, look at the inspection report. Make sure you feel good about costs and things that are needed repairs, like when that inspections being waived. That’s bang, bang. Yep, right at that point. So Are you still seeing that out there much?

Nate Hedrick  38:23

Some. Not here in the Cleveland market as much. I haven’t had a wavelength of inspections in ages, personally, but I know it’s still common out there. There’s a question I get all the time, Tim. It’s, it’s Nate is now still a good time to buy a house? And I’ve literally gotten that question my entire career of real estate, which I think is funny, but the only time I say no to that question, quite honestly, is if you’re in a market that is still in that sort of a fervor – where you are waiving inspections, you are waving everything because it doesn’t give you that pause button. Like I think, I think it’s really, really scary to go into a house purchase not knowing all the information and trying to spend hundreds of 1000s of dollars. 

Tim Ulbrich  39:03

Especially as a first time. 

Nate Hedrick  39:04

Yeah, exactly. Even on things like new builds, where, you know, they’re like, Oh, it’s a new construction. Don’t worry about it. Like, there are just as many problems with new builds as there are with with existing construction. So I you know, it’s, it’s, there’s never a blanket answer for everything. But do hit, be worried, I suppose, if you’re in a market where that’s the norm and then everything’s being waived, then you kind of have to just just hope for the best. I I don’t like those personally.

Tim Ulbrich  39:30

So there you have it, the six steps that first time homebuyers need to be thinking through again if you want to download this information and a guide that you can take notes and reference it later and go to yourfinancialpharmacist.com/homeguide. That’s one word. Nate, talk to us about the Real Estate RPh home buying concierge service that you offer and how pharmacists, no matter where they are in the country, could benefit from from working with you. Tell us about what that service entails and where they can go to find more. 

Nate Hedrick  39:57

Yeah, absolutely. So we alluded to this service a little bit earlier. But the idea was that, you know, years ago, when I bought my first house, I wanted to have a great real estate agent on my team, and didn’t really know how to get that person, right. I knew how to ask a couple of friends who they used and whatever. I knew how to Google “good real estate agent in my area”. But, like, that was it right? So we wanted to try to create a service that kind of filled that gap. And so we, we did that. It’s a totally free service available through our website. You can go to realestaterph.com There’s the home buying concierge service right there. It’s a it starts with a 30 minute call with me. It’s totally free. We’re going to chat about things like budget must haves, we’re going to go through loan options, answer any questions you have, and then after that conversation, we’re going to connect you with a really great real estate agent that’s going to be specific to be specific to you guys in the area that you’re looking in. Somebody that we’ve vetted, or that we’ve worked with in the past through like an interview process or that’s actually helped another pharmacist buy a home. And then once you get connected, you get off and running with them. So it’s it’s a nice way to take the guesswork out of it and not have to do any of the legwork of interviewing these agents and trying to find the right one when you’re just trying to make, you know, ends meet and get get through the day sometimes. So that’s why the service exists – its there to really be a helpful thing for pharmacists.

Tim Ulbrich  41:10

So again, realestaterph.com, you get more information. We’ll link to that in the show notes. You can book a call with Nate. Nate, if I’m listening and I’ve got a distant thought of having a buy in the next maybe year, two years versus I’m listening and, you know, I’m ready, ready to go right now. Like, when would you advise people to begin this process and working with you?

Nate Hedrick  41:31

Yeah, great question. So if you’re in that six plus months out range, that’s probably the time to be, you know, focused on budget, focused on all the things we talked about in the kind of the kind of the guide, the first couple steps to get ready for those things. Once you reach that, hey, we would reasonably buy a house six months from now or sooner, that’s probably when it’s time to engage with me all the way up until, hey, we’ve already gone to a couple open houses, Nate, like we’re ready to look at this place. I’ve even had people engage the service knowing the property they wanted to put an offer on. Right? They’re like, hey, Nate, we found the perfect place. Like, can you help? And we can help that quickly. So anything six months and before is probably a good time to connect with me. If you’ve got you know longer, it’s probably time to keep, keep working on that budget, make sure everything’s all your ducks are in a row, and then, and then get closer and engage me at that point.

Tim Ulbrich  42:18

The only asterisk I would add there is know thyself, right? So it’s very easy. I remember this myself, where it’s, Hey, we’re looking in one year, and then you start searching, and it’s like we’re looking tomorrow, right? Just thinking about that timeline, thinking about the budget, and really using that that point in time, as you mentioned, if you’re six months out, to really look at the rest of the financial plan and the pieces to figure out how this is going to fit in to that as well. Nate as always, great stuff. Appreciate your insights. Love the way you teach us up to date information that you’re bringing to our community. Thanks so much for taking time.

Nate Hedrick  42:50

Thanks for having me.

Tim Ulbrich  42:52

Nate and I have covered a ton of information in this podcast. So imagine working with Nate one on one through your home buying journey and having his support to give you much needed peace of mind. We know many pharmacists want to feel confident about big financial decisions, including a home purchase. So if you have fears of being house poor, concerns about the impact a home purchase might have on your other financial goals, Nate and his home buying concierge service can help all at no cost to you. You can visit realestaterph.com, or click on the link in the show notes to schedule your free 30 minute jumpstart planning session with Nate. 

Tim Ulbrich  43:32

[DISCLAIMER] As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offered to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of Your Financial Pharmacist, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guaranteed of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

[END]

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