Earn Your Leisure Podcast Summary

Episode Title: What to Know Before Buying a Home: Hidden Costs, & Secrets to Save Big with Quiana Watson
Release Date: January 31, 2025
Hosts: Rashad Bilal and Troy Millings
Guest: Kiana Watson, Top Real Estate Agent and Founder of Watson Realty Co.

Introduction

In this episode of Earn Your Leisure, hosts Rashad Bilal and Troy Millings are joined by Kiana Watson, a distinguished real estate professional based in Atlanta. The discussion centers on essential considerations for prospective homebuyers, particularly focusing on the hidden costs associated with purchasing a home and strategies to save significantly during the process.

Understanding Mortgage Pre-Approval vs. Actual Affordability

Key Insight: Pre-approval letters can be misleading regarding the actual amount a buyer can comfortably afford.

Notable Quote:

Rashad Bilal [05:03]: "We wish we would have known... it's not a game. And number one, it's going to save you time, but most importantly, it's going to save you money."

Discussion Points:

• Pre-Approval Misconceptions: A pre-approval letter indicating a potential loan amount does not account for all monthly expenses, leading to possible financial strain.
• Emphasis on Budgeting: Buyers should focus on what they can afford monthly rather than the maximum amount approved by lenders.

Hidden Costs of Home Buying

1. Property Taxes and Appreciation

Key Insight: Property taxes can fluctuate based on property value appreciation, impacting long-term affordability.

Notable Quote:

Kiana Watson [17:24]: "Value appreciation is the number one reason for getting into real estate and owning a property is value appreciation and ownership."

Discussion Points:

• Fluctuating Taxes: Property taxes increase with the property's assessed value, which can be influenced by market appreciation.
• Equity Building: Appreciation leads to increased home equity, offering financial benefits such as loan refinancing or selling at a profit.

2. Utilities

Key Insight: Utility costs can vary significantly based on the size and efficiency of the home.

Notable Quote:

Kiana Watson [23:15]: "Utilities are such a big deal..."

Discussion Points:

• Energy Efficiency: Investing in energy-efficient appliances and systems can reduce long-term utility expenses.
• Understanding Utility Bills: Prospective buyers should request utility bills from current homeowners to gauge average costs.

3. Homeowners Association (HOA) Fees

Key Insight: HOA fees can substantially impact monthly expenses, especially in condo and townhouse purchases.

Notable Quote:

Kiana Watson [24:10]: "HOA fees are something you need to consider and see what they're including."

Discussion Points:

• Included Services: HOA fees may cover utilities, amenities, and exterior maintenance, which can offset some individual costs.
• Impact on Budget: Understanding what HOA fees cover helps in accurately assessing overall affordability.

4. Home Maintenance and Warranty

Key Insight: Regular maintenance is crucial to preserving property value and avoiding costly repairs.

Notable Quote:

Kiana Watson [27:00]: "Routine maintenance is something you have to pay for as a homeowner."

Discussion Points:

• Preventative Measures: Annual inspections and maintenance can prevent major issues like HVAC failures or roof replacements.
• Home Warranty: Investing in a home warranty can mitigate unexpected repair costs by covering essential systems and appliances.

5. Mortgage Insurance

Key Insight: Mortgage insurance protects lenders but adds to the buyer's monthly expenses.

Notable Quote:

Kiana Watson [29:49]: "Mortgage insurance covers the lender in case you default on the loan."

Discussion Points:

• Private Mortgage Insurance (PMI): Required for down payments below 20%, PMI increases monthly payments but can be removed once sufficient equity is built.
• Impact on Total Cost: Buyers should factor in PMI when calculating their overall budget.

Types of Home Loans

1. FHA Financing

Key Insight: FHA loans are accessible for first-time buyers with lower credit scores and smaller down payments.

Notable Quote:

Kiana Watson [48:29]: "FHA financing is the most popular financing for first-time home buyers."

Discussion Points:

• Down Payment: Requires as low as 3.5% down.
• Credit Flexibility: Accommodates lower credit scores, making homeownership more attainable.

2. Conventional Financing

Key Insight: Conventional loans offer flexibility in down payment options but typically require higher credit scores.

Notable Quote:

Kiana Watson [48:29]: "Conventional financing works best for people with strong credit."

Discussion Points:

• Variety of Down Payments: Options range from 3% to 20% down.
• PMI Requirements: Avoided with a 20% down payment, reducing monthly costs.

3. VA Financing

Key Insight: VA loans provide significant benefits for veterans, including no down payment requirement.

Notable Quote:

Kiana Watson [48:29]: "VA financing is exclusively for military veterans and offers 100% financing."

Discussion Points:

• No Down Payment: Eliminates the need for upfront cash, easing the entry into homeownership.
• Funding Fee: A one-time fee is incorporated into the loan, reducing immediate out-of-pocket expenses.

4. Jumbo Loans

Key Insight: Jumbo loans are designed for high-value properties but come with stricter qualification criteria.

Notable Quote:

Kiana Watson [52:10]: "Jumbo loans require at least a 20% down payment and are subject to stringent debt-to-income ratios."

Discussion Points:

• High Loan Amounts: Suitable for properties exceeding conventional loan limits.
• Increased Risk for Lenders: Leading to higher down payments and more rigorous borrower assessments.

Negotiation Tips

1. Earnest Money and Contingencies

Key Insight: Understanding the role of earnest money and contractual contingencies is vital to protect financial interests.

Notable Quote:

Kiana Watson [55:56]: "Contingencies allow buyers to terminate contracts under specific conditions without losing earnest money."

Discussion Points:

• Due Diligence Period: A timeframe to conduct inspections and negotiate repairs; exiting the contract within this period allows buyers to reclaim earnest money.
• Financing and Appraisal Contingencies: Protect buyers against issues like loan approval failures or property appraisals below purchase price.

2. Seller Concessions

Key Insight: Negotiating seller concessions can substantially reduce upfront costs.

Notable Quote:

Kiana Watson [44:02]: "Seller concessions can cover a portion of closing costs, easing the financial burden on buyers."

Discussion Points:

• Closing Cost Assistance: Sellers may agree to contribute towards closing costs, enhancing buyer affordability.
• Maximized Savings: Utilizing concessions effectively can lower the immediate financial impact of purchasing a home.

Importance of Professional Representation

1. Real Estate Agents

Key Insight: Experienced real estate agents advocate for buyers, providing expertise in negotiations and contract management.

Notable Quote:

Kiana Watson [79:02]: "An agent should advocate on your behalf, saving you money and ensuring favorable terms."

Discussion Points:

• Market Knowledge: Agents possess insights into local market trends, valuation, and negotiation tactics.
• Contract Expertise: Skilled agents navigate complex purchase agreements, safeguarding buyers' interests.

2. Real Estate Attorneys

Key Insight: Legal professionals ensure that all contractual aspects comply with state laws and protect buyers from potential disputes.

Notable Quote:

Kiana Watson [64:05]: "Hiring the right attorney is crucial, especially when dealing with land purchases and complex contracts."

Discussion Points:

• Legal Compliance: Attorneys verify that all documents are legally sound and that transactions adhere to regulatory standards.
• Conflict Resolution: They assist in resolving disputes that may arise during the buying process, providing legal recourse when necessary.

Home Inspections and Red Flags

Key Insight: Comprehensive inspections identify underlying issues that may not be immediately visible, preventing costly future repairs.

Notable Quote:

Kiana Watson [62:21]: "Hiring specialized inspectors ensures that all aspects of the property are thoroughly evaluated."

Discussion Points:

• Multiple Inspectors: Engaging experts in plumbing, HVAC, structural integrity, and more provides a complete understanding of the property's condition.
• Identifying Problems: Early detection of issues like faulty plumbing or outdated HVAC systems allows for informed decision-making and negotiation.

Closing Costs and Preparation

Key Insight: Accurately estimating and preparing for closing costs is essential to avoid financial strain at the final stages of purchasing a home.

Notable Quote:

Kiana Watson [70:07]: "Calculate 10% of the purchase price to cover down payment, closing costs, and agent commissions."

Discussion Points:

• Upfront Expenses: Down payments, closing fees, inspection costs, and agent commissions must be budgeted.
• Seller Concessions: Negotiating with sellers to contribute to closing costs can alleviate financial pressure on buyers.

Furnishing and Additional Expenses

Key Insight: Moving from renting to homeownership often involves significant additional expenses related to furnishing and personalizing the new space.

Notable Quote:

Kiana Watson [72:30]: "Set aside funds to furnish your home without accruing additional debt, ensuring financial stability."

Discussion Points:

• Budgeting for Furnishings: Planning for furniture and décor helps prevent overspending and accumulating debt.
• Gradual Upgrades: Emphasizing the importance of incrementally enhancing home interiors aligns with long-term financial planning.

Final Advice and Misconceptions

Key Insight: Homeownership is a valuable asset-building opportunity when approached with proper budgeting, professional guidance, and informed decision-making.

Notable Quote:

Kiana Watson [74:10]: "Stay within your budget and avoid the trap of being house rich but cash poor."

Discussion Points:

• Financial Discipline: Encouraging buyers to adhere to their budgets ensures sustainable homeownership without undue financial stress.
• Value of Assets: Emphasizing that a well-chosen property can significantly contribute to long-term wealth accumulation.

Conclusion

The episode underscores the complexity of the home-buying process, highlighting the importance of understanding hidden costs, securing appropriate financing, and leveraging professional expertise. Kiana Watson's insights equip listeners with the knowledge to navigate real estate transactions confidently, ensuring that homeownership serves as a stepping stone to financial prosperity rather than a source of financial strain.

Further Resources:

• Kiana Watson's Contact Information:
  • Website: kianawatson.com
  • Phone: 404-983-6380
  • Social Media: Available through her website's contact page

Remember: Purchasing a home is one of the most significant financial decisions you'll make. Equip yourself with the right knowledge and professional support to make informed choices that align with your financial goals.