First half is real-estate, second half is vehicles. Vehicles start at 56:00.

Well, welcome to a new day. We're going to continue to walk through the matters of shrewdness that we would use mammon in a biblically shrewd way, defining it in a lot of different ways. This morning, right off the bat, Al Burke and Alan Hillman are going to talk about both the mechanics and the practical matters concerning the purchasing of big ticket items, cars and houses. And they'll walk through processes, they'll walk through considerations, they'll walk through matters of wisdom regarding how to approach the buying of really, for most people, are the biggest things they'll ever buy. And we'll have, the tail will wag the dog, and so it's really important that wisdom is applied in these kinds of things.

I'd like to just pray before we begin. Please be seated and then we'll bring these men up. Father, we thank you for being the source of all wisdom. Your ways are pleasant ways, all your paths are peace. You are a tree of life to those who embrace you and all who lay hold of you will be blessed.

So we pray Lord that you would give us as a church a spirit of wisdom that we would be the kind of people that Moses prayed for, a wise and understanding people, that you would make us that way, not as the Gentiles, but as sons and daughters of your great and wonderful kingdom. Lord, we pray that you would help us to live for your kingdom, that all of our hearts would be bent upon faithfulness, not the lusts of our flesh or the boastful pride of life, but upon your wonderful kingdom. Lord, I pray you'd bless these men and you'd help us to understand your will and how it applies to each one of us in our particular stations and moments in life. Amen. Good morning.

Alan and I are going to tag team this one on real estate and then the one on vehicles. You're probably saying, why should we listen to these guys? Why are they qualified? I counted up, I think I've bought seven houses in my life and I've probably refinanced seven to ten times. Alan is a licensed real estate broker.

He's bought and sold a lot of houses. He can probably tell you the number. And he also was employed in selling cars so he knows a lot about the mechanics what goes on behind the scenes so our attempt is going to be to kind of tag-team this thing and share it from more of an analytical perspective and from an actual how it happens perspective. So hopefully it would be a blessing to you guys. First we're gonna talk about real estate.

So real estate, I love real estate. I think Alan loves real estate too. It's just an awesome thing to deal with because it's a real large asset and everybody needs a place to live. So one of the first considerations when you're looking at real estate is should I rent, should I buy or should I build because everybody needs a shelter, right. And in my mind, especially lately, the buying makes a lot of sense because rents are expensive rents aren't fixed rents go up if you buy something you kind of locked in that price.

And what we've seen historically, not always, is that real estate will increase in value. Buildings also an option. The building kind of takes a special, I think mindset. There are some in this area that have built recently. And it takes a long time.

You have to have land. And there's a lot of decisions, many, many, many decisions that need to be made as you go forward from big decisions like what's the layout of the house going to be to what color should the light switches be. And that's a huge thing that puts a lot of stress on a lot of people. I'm not sure that I would be able to do that. My wife and I, we're not sure we'd be able to make it through this process like that.

Maybe we may try one day. But that's just a lot of granular decisions that have to be made. Down payment is probably one of the major things that gets in the way of people buying houses. The banks love at least 20% down. It's very hard to raise 20%, especially when you're young.

If you want to buy a $200,000 house, you've got to come up with $40,000. It's hard to earn $40,000. So there are ways to do it, but that's one of the major hurdles, I think. Alan, would you, are there any other hurdles that are bigger than that, do you think? No, it really isn't.

And that's the biggest thing. Obviously, the credit, which we've talked a little bit about, and we'll talk about more. But the down payment, now there are some programs which we'll talk a little bit about later. But there's some VA specialty programs, some first time home buyer programs, which can help you around that bigger deposit, but there's also a big cost to doing it that way. So you have to weigh that in.

And then it's a little bit on rent versus buying. I've sat with a lot of people that are paying rent. And when we look at the numbers of what they're paying for rent, and this goes into one of the questions we had last night about some of the percentage rates and what's going on out there and is it a good time to buy. I mean obviously it's individual for everybody's income but with what you're paying for rent and what the mortgage rates are it does make it a lot more positive than the effect of buying as opposed to renting. Right now you can expect to pay I think about a dollar per month for rent.

You want to rent a 1500 square foot place it's gonna be about $1500 plus or minus per month. That's been going up in new houses or in the neighborhood of what $150, $160 a square or something like that. Just for rough numbers. When you're looking at more, sorry, interest rates are key, and we're going to talk a lot about interest rates in a couple minutes, but they play a huge role, more than you'd think. There's a big difference in a quarter of a percent, half a percent, three quarters of a percent.

These really move the needle a lot when you're talking about a mortgage of 15 or 30 year. Fixed versus variable rates. You know, in the old days, you know, you, the fixed rate was always a little more money and the variable rate was lower because you were transferring risk from the bank to you a variable rate mortgage. We'll talk more about that in a minute. It's only fixed for a certain period of time and then it floats based on market conditions, whereas a fixed rate is fixed up front and stays that way for the duration of the loan.

Then you have to consider how long am I going to be in this property? You know, a lot of people will, like I said yesterday, they're risk averse and they'll go with the 30-year fixed rate because they don't want any chance of that mortgage rate changing But most people aren't in the house for 30 years. What's the average, Alan? Do you know? I didn't look it up.

It's probably five years. Yeah, it's just right at about five years between four and five. It's actually a little lower than five for the average. Yeah, so if you're walking into the house and you know, okay, I'm probably going to be in this house three years because I've got a job situation or I know my family's expanding keep that in consideration and if you if an opportunity presents itself with a much lower rate for a variable you may want to consider that I've you know I've done 30 year fixed I've done 15 I've done seven arms seven-year arms five-year arms three-year arms one-year arms I think I've done a little bit of everything. And sometimes I made a good choice, sometimes I didn't.

But my very first mortgage was 30-year, and I think I sold that place in less than two years. You know, and it was just because of some employment conditions change and whatnot. Investment, real estate, you won't get the same rate on a on your personal owner occupied home that you own investment there I think you know the more you put down the more risk you remove from the bank, the better rate you can get. And maybe Allen will comment on this in a second. You might be able to get down close to that rate, but there's always a penalty for investment.

What do you say about that, Allen? Yeah, you have to put a lot more down. Like personal homes, again, you can do it with 5% down, 10% down, sometimes 0% down. On a investment property, a minimum 20% down, absolute minimum to even talk to them. And then your percentage rate is going to be a few points higher, which adds up over the long run.

And there's different formulas for that for investors that are looking at that. That's kind of a whole different thing to look at. Yeah, banks know that if you get into a financial hard time, you're more likely to let that investment property go than the one that's keeping rain off your head. So they just they know that that's kind of figured in. Okay let's talk about mortgages for a few minutes.

So there's something out there called a conforming mortgage and there's a there's a definition for that But basically the main thing to remember now currently, and this changes over time, is that's any mortgage of $510,400 or less. Now that varies per state. You can go on the web, on the internet, and you can look up what is a conforming mortgage in California. It's a lot bigger than it is here, but many states have this 510-400 and this a few years ago this was 417,000 for a while, but it here's where it is now. So it kind of gives you an idea.

Anything bigger than this is what they would call a jumbo mortgage, and a jumbo again has an interest rate penalty and the banks get a little tighter on things of that nature. Again, I mentioned owner-occupied. That's going to get your lowest rate. You know, if you're in the house, you're going to take the best care of it and you're going to be most likely to not default or go into forbearance or anything like that. Credit scores matter.

That's just the world we live in. We're evaluating on those criteria I showed you yesterday. When you apply for a mortgage, they're going to check your credit, and they've got all these algorithms that run on you and they say okay here's the rate we can offer you and if you if you're if you have good criteria good credit and other things you're gonna get offered the best possible rates that are out there. 20% down avoids PMI I hate PMI you should hate PMI PMI is primary mortgage insurance and what this says is when a bank loans money on a house and the house is the collateral for the loan if There's less if you have less than 20% in it the bank has a greater risk if they have to foreclose on it, because they've got to get the house back from you, maybe you damaged it, maybe market conditions change. They have a higher probability of losing money if you have less than 20% in there.

So they're gonna insure against that, and that's primary mortgage insurance, which adds into your payment. So if you walk up to the table and you say, I wanna put only 5% down, that's a 15% gap between where they want you, You have to basically insure them against that loss. I put in here 1.05 percent Pulled that off the internet. I think that's the that's what you would pay if you put zero down. Is that right Alan?

Yeah, that's pretty that's pretty close to it. So That's a big big part of your mortgage when you look at that if you have PMI on there You're adding if you can imagine adding three hundred dollars three hundred and sixty five dollars to your monthly payment Just to pay this insurance now as time goes on eventually your home will drop down below that and then you've got to actively call them and say hey I'm below this now and you can get that removed but how many years is it going to take you to do that so you really want to look at that and just two things real quick on what when he talked about credit scores matter when you're doing a home it really really matters We had a person that went out a week before the closing of the property and bought a washer and dryer and they no longer were able to buy that home because credit scores, they have formulas. I mean, this is what they do when they're lending you an awful lot of money. And they went out and bought a simple washer and dryer because they were excited about the home.

And they were not able to close on that property because of a simple washer and dryer. Yeah, it's kind of interesting. The banks are very skittish. When you're in this process, any little thing can spook them. It's kind of the opposite of buying a car.

We'll talk about that in a minute. But you walk in and they say, do you have a pulse? And you say, no, I'm actually legally dead. They go, no problem. We can put you in that car today anyway.

But at the bank, they call you up and say, hey, did you buy a Snickers bar this week? You say, well yeah I did. Say sorry, you didn't disclose that and the deal's off. Actually in preparation for this talk, I actually did a refinance this last Wednesday just so I could be all fresh on the data. No, It just fell out that way.

I took advantage of these low rates here. But they called me up at one point in the process and said, hey, Hurricane Isaias blew through there, right? I'm like, you sure did, yeah. They go, you have damage to the house? I'm like, no.

We had a little bit of wind, a little bit of rain, nothing happened. They go, are you sure there's no damage? I said, yeah, I'm sure. I go, could you send us some pictures of the house with no damage? I said, do you want me to photograph the house and show you there's no damage?

He goes, yeah, so I did. I walk around the house with my iPhone, snap the photo, send them in. They go, Okay, that's good. You know, this just gives you an idea of the level of, you know, how, you know, when they're talking about this much money, that house secures their investment. If anything happens, washer and dryer, whatever, you know, they kind of, they get jittery.

So, it's very interesting to watch. Okay, so then we go to taxes, insurance, and escrow. So I think a lot of people understand this, but we'll mention it. You know, houses have, aside from maintenance, they have two things that have to be paid every year. Property taxes which are fairly sizable.

I don't do you know the percentage in this area it's about it's probably about half a percent of the value to house something like that. It is but it depends on whether you're in the city limits or that if you're in the city limits of a place your taxes are actually almost double what they are in a regular place. You could be in Youngsville and the person across the street could literally have 45 percent less taxes than what you have in your house. Normally, you can go on the website like Wake County has one. You can go on there and it shows you exactly the tax bill.

Zillow also shows historical tax rates and so on. So you look at your property taxes and then your homeowner's insurance. Those two fees, the bank loves to collect those from you every month and they basically put them in an account called an escrow and then they actually pay those for you every year. They pay your taxes and they pay your insurance. Now, why would a bank like this?

A bank likes this because if you don't pay your taxes, let's say you're running on financial hard times, you choose not to pay your taxes, it takes the government a long time to catch up with you. So if you stop paying your mortgage and you stop paying your taxes, and maybe you stop paying your insurance too, you know, by the time the bank forecloses on your house, you may owe a huge tax bill, and they now owe that tax bill because it's against the house. So this is a way where they kind of mitigate risk and they know at least the taxes are up to date because they're as long as you're paying the mortgage they're scooping that money for the taxes and they're paying that for you and every year or so they'll look at how much they're taking from you, how much your taxes are, how much your insurance are, and they'll adjust that account and they'll say, we've got to tweak your payment up a little bit, or here's a refund check out of your escrow. And they attempt to kind of match that. In my experience, they're not very good at it, and they take out too much, or they take out too little.

And it's kind of, one time I had this property owned in Atlanta. They actually made a mistake and I think they took out double for a while. And I had to finally get a hold of them and they were able to correct that. But They had misread the tax form from the six month to one year. So you got to kind of watch that.

They like to do that. There are ways to request not having an escrow. I think the banks are skittish on it. Do you ever see that granted, Alan? It can be granted, and that, again, is credit score and income driven.

So for certain credit scores and certain incomes they will do that. My dad has always done that, so the only person I know that's actually ever done it that way, he prepares to pay it separately. I was always counseled to do it all at once because then it's simpler and it's easier. And I have an actual closing statement from a closing just to give an idea of the numbers he's talking about. On this particular one, the homeowner's premium was $1486 a year for the insurance, which you're prepaying when you do your closing.

The property taxes on this particular property, and it was a $365,000 property, was $3,282 a year for those property taxes. So again that goes on your initial closing upfront. So these are all things that they're going to collect upfront. So the idea is that rather than you having to pay a $3,200 bill in January or September, whatever it's due, is they're breaking that out by 12 months. It's in your regular monthly payment.

So on the front of this, it shows this person's particular mortgage would have been $1,600 a month. But with their estimated taxes and insurance in that, it adds 477. Their particular mortgage was $2,037. So it's not just about the house, and that's a point that a lot of things are talking about. There's all these other factors in there cost-wise.

Right, And then in the closing statement that's listed in the prepaid section, right, you're essentially establishing that escrow account so that they can handle those fees because the taxes are due on a certain date. So that kind of segues nicely to the next bullet point, which is closing costs. There's a lot of fees associated with closing. Prepaid items is listed there. That's what Alan just referred to.

There's also what they call points. Now this is, anytime you're being quoted in interest rate, for simplicity I'll say the interest rate is 3%. They might say, well the interest rate is 3% and I'll give you half a point. That means the real interest rate's actually slightly below 3. They're gonna charge you 3, but they're gonna give you cash at closing to make up the difference.

Or if you want a 2.75, you can get a 2.75, but you pay a point and a half. A point is 1% of the mortgage. So you can actually go to you can refinance or buy you can select a little higher rate and they can contribute a lot of money toward your closing or you can go the other way and you can buy the rate down if you want or if you hit the rate right on there might be zero points you'll notice if you look at the fine print can hardly see it but these interest rates down here are the current interest rates as of yesterday and at the very bottom where it says the 30-year fix is 2.99 It says on average people paid 0.8 points slash fees slash points. So what they're indicating is the 2.99 was the average closed rate on a 30-year fix during the week of August 20th and the average person paid 0.8 points at that close. Do you want to say anything about that?

Just on again on this particular closing statement I have my hand he paid one percent which was three thousand six hundred fifty dollars upfront. Sometimes they'll bundle that in as a fee, they'll call it an origination fee or there are different names for it. Sometimes it's actually called points. It's all the same thing. It's just closing costs.

Let's see, anything else to say about closing costs? I know you're going to get into more detail in a minute. So you've got the prepaid. So you're going to have stuff like a survey, usually, appraisal maybe, some court costs, filing fees. You're going to have to pay the attorney.

Those things will all be detailed out for you by law. They have to disclose up front. Early in the process, they send you an estimated closing cost. And then at the end of the process they'll send you the real ones and how much they deviate in they're usually pretty close. They've got specific laws now to protect so it used to be called and we'll get a little this more used to be called a HUD 1.

Now it's called a lender disclosure or a closing settlement statement. And they have to have that to you within 48 hours. So if the mortgage person or somebody doesn't get some information to them in time and you don't have that in your hands, then your closing gets bumped because it's not there in time. And they separated out it used to be that you went in and you had the sellers in the buyers information all right there now all you're seeing when you go in is your side of the deal and what's happening on there. I personally like seeing the both sides because I could you know see a little better but this new form is okay too.

Pre qualification I think it's important when you go out and look for a house, you're not going to want to just show up and make the offer without having talked to a bank and said, Here's my income. Here's how long I've been employed. Here's my credit score. Here's my other things in my life. And the bank says, OK, you're good.

We'll loan you up to, and they'll give you a number or whatever. You can say, I'm interested in an X amount of money. Am I qualified? And they'll say, yes, you are. They'll give you a pre-qualification later, and that's important when you make an offer because you're competing with other offers some might be cash offers and but most of the officer going to have offers are going to be dependent on some financing and all offers I believe this is true in all cases there if there is a mortgage involved they're contingent upon approval of financing so if I make an offer on a house it'll say in the fine print I'm going to finance 80% contingent upon my approval of financing.

If the bank somehow says you're not approved, then I get to, I'm released from that contract. Because when you make an offer in house, you are entering a contract with the seller that you're contracting to buy the house. He's agreeing to sell, you're agreeing to buy. What do you say about that? Yes, so two things in that.

One is when you're talking about the pre-qualification letter, my notes on that say it's a must period. You can't physically make an offer and even have it go to the seller nowadays without having that letter. So when we start the process the first thing I'll ask is do you have a prequel? I'll have you talk to a mortgage person. If you have one that's great I would still recommend you talk to another one and I'll give people a couple of names.

And that's because also you don't know. I mean you think you know but you really don't know because it's all based on them lending you a lot of money, right? So picture, you know, me coming to you saying, hey, will you lend me $200,000, $300,000. You're not just going to lend it to me. And the banks are in that same boat.

And the banks have a real long history of foreclosures and things like this. So they're going to protect their money. So before you start the process to protect you more so than them, get a pre-qual letter because your job, your income, all these things can factor into that. I had a young man recently that was going out looking at properties and makes great money, great income, great work history, but he's three months below what would actually approve him with his job to get approved. So put that into a family situation.

You, your wife, your children are all excited to go out and look at a house. Then you go try to get a prequel letter after you're all worked up and excited and they say sorry you've got to be at your job about three more months. Well in this market that house isn't going to be there in three months. Yeah in the old days these prequel letters weren't really required and you could make the offer and if the buyer accepted, sorry the seller accepted your offer they were kind of rolling the dice it will this guy get approved or not but now it's it's kind of a game changer especially with it being a seller's market down here on the last bullet I say ratios 28 36 Mao referred to 43 yesterday So banks traditionally I think this is right, they kind of want your house payment less than 28% of your gross income. So you know if you if you make a thousand dollars a month which of course would be very low, $280 toward your house payment.

And that includes taxes and insurance. That's kind of the ratio they went with for a long time. This 36 number here was total debt. So if you had a car loan and some other loans, They would like to see you 28% of the house, 38 36% total, which always felt a little high for me. You know, you got you got a personal financial ommeter inside you that says when you get to certain part, you say, well, let's pull the reins back.

That's not I'm not going that far the banks were always a little liberal there I thought and now as as was indicated yesterday. They're going a lot higher at 43 is a number I saw what have you seen have you heard in the issue? They have gone that high and again That's where being stewardship of your income and what you have is a lot of people go and do their budget like we've been hearing about. They say, okay, we're comfortable with, let's round number, we're comfortable with $1,500 a month for a payment. They go into the mortgage person and they say, well, actually you can get a house up to $2,200.

Something clicks in their mind and they go, ''Honey, we can pay $2,200 a month.'' Then all of a sudden their thing goes up. So that is again about stewardship and what all these men are teaching you, very, very important Because the banks will lend you up to, I guarantee you, over what you want to be paying. Over what you want to be paying. It's a game, they play it well, they know what they're doing, okay? This is what they do.

So you need to protect yourself and have that conversation with your wife, or if you're a young man, have it with your father, or one of these men in church that's been teaching on these things look at your income look at these numbers come up with a comfortable number you still go and get your pre-approval but within the realm of what you have already prayed about know is comfortable not what the bank says you can afford. So then down here in the bottom we have, like I said, the current rates. And these are, I mean, this week may not be the 50-year low, but there have been many lows this year, and I think they hit a 50-year low on August 7th. So we're right here at the low. We are, this is really, really, really historically low.

I think Mr. Brown indicated he got a smoking deal on his first mortgage at 10 and a half or something. I got a smoking deal on mine at 8. 8 was a hot rate. You know, you guys, you younger folks, those numbers just sound crazy to you we've got a graph here what mortgage rates have been historically look at back in the early 80s you had really high rates you can kind of guess on the graph where we were, you know, Mr.

Brown probably did his house in the late 80s there. I did mine in the early 90s. But you can kind of see how these rates have kind of moved down. The blue line is the 30-year fix. The green and the red are the 15-year fix and the five-year arm.

By the way, on arms, I'll just make this statement. An arm is treated just like a 30. It's amortized like a 30, and it'll stay that way for the initial period. If it's a five-year arm, it'll be treated just like a 30 for five years and then it'll begin to float based on market rates and they have a formula there'll be a formula inside your documents from your on your loan it'll say and it's usually a margin and an index so it's linked to some index and then they add a mark So it might say the rate that's printed in the Wall Street Journal on the one-year Treasury bill on such a date plus 2.75% will be your new rate. So if rates are going down or you're not going to be in the House a long time, You know, like I said, sometimes those can make sense if there's a big delta between the fixed and the variable.

But today, with the fixed rates so low, I see no reason to take on the future interest rate risk, because more than likely they're going to go up, I would think. But I've thought that for a while. Oh by the way I want to show here on the right side just an example of what kind of an impact interest rates have on a mortgage. Now when we talk about a mortgage payment when I talk the loan is called its principal it consists of principal and interest You'll hear P&I a lot. What's the P&I on that?

So you take the principal and interest, you add the taxes and escrow, and that's the payment. So here if we look at just PMI on a $250,000 loan on a 30-year fix, if that's at 3%, that's a P&I of 1,054. At 6% it's 14.98 on the same loan, at 9% it's 2,011. So you can see how huge this is. Right, a 9% loan versus a 3% where we are today doubles, it doubles the payment at 9%.

And that's just interest to the bank. Right? So these interest rates make a huge difference, especially on these longer-term loans. Anything to say on that? And I'm not sure if you're going to go over in the end here the long term of what you're actually paying.

But just as an example, when he's talking percentage rate, to put this in perspective view, this particular home that I sold you was $359,000. He did a few months ago as a 3.5% rate, which at the time was not a bad rate at all, 3.5 in a 30 year. His finance charge for the life of that loan, $221,758.59, which means for that home that he paid $359,000, he actually pays $588,526.39, which is a ratio of fifty nine point four percent is what you're actually paying for that loan long term you trying to scare us out of houses or what? No. And if, you know, in a few years ago, those numbers would be way larger on a 6 percent rate or not, and they'd be much, much bigger.

Okay. I think you're going to lead this slide, and I'm going to step to the side, and I'll just hold that on you. So we're going to hit some of these kind of overshadow and pull into what we've just done. But just to pull some of these things in, when you talk about broker versus non-broker. So to be a real estate broker, I believe is very valuable to you, especially as a buyer.

As a buyer, it doesn't cost you anything to have a real estate broker represent you. And legally, it's a big deal when they represent you. To become a broker, to get licensed in the state of North Carolina, you have to take a 75 hour class, which is $500, just to be able to qualify to take the test to be a broker, which is 3.5 hours, 120 questions, and it costs you $100 for that. Then after that, you have to take three more classes within three years which are 30 hours each at $300 each and then every year you have to do eight hours of CE at $100. I pay $150 a quarter for my MLS license.

I pay a $44 renewal fee every month for that. Your split with your brokerage is 50 percent. So you look at what you're paying your broker, they're not getting all that. Fifty percent goes back to the brokerage. Then the license fee on top of that is $500 a year, and then my one-time MLS fee every year is $500.

Plus, I pay a $500 per month fee to the brokerage to be there. So when you look at all the money the real estate broker is making, there's a lot that goes into that. And they're there to represent you, right? Yes, they're there, they do this for a living, but they're there to represent you. Can you buy a home on your own?

Of course you can. Can you sell your home on your own? Of course you can. But a lot of this, to me, comes back to stewardship and the value of what they can bring you on some of these things, on some of these negotiations. The broker's obligation is by law.

So in North Carolina also, North Carolina's rated in the top two states as far as the hardest to get a broker license. The only one harder is the state of Arizona. And they flip-flop back and forth. Which again, what does that mean to you? It means that they're going through a lot to get licensed.

There's a what is it 86% pass if they take the pretest which is $400. There's a 58% fail rate the first time a broker takes his test. I've met many people that have taken it three, four, five times just to get their broker license. So they're not just handing these licenses out. If I get pulled over and I don't notify the real estate commission within 48 hours, they'll pull my license.

If I show up to a home right now without a mask, they'll pull my license. I mean, they don't mess around because real estate brokers are, well especially in the old days, they would put you in the vehicle they would drive you around but they're going in homes, they're going in private homes, there's stuff in their home so there's a lot there as far as what they need to do. And that goes into how do they get paid. So there's two different ways that this happens. There's a buyer's broker and there's a listing broker.

So the listing broker is when you sell your home. Now I can't say there's a legal this is the percentage they charge because that's against the law for us actually to say. I can tell you that for me personally, it runs anywhere from 6% to 5% to list a home. And that comes out of the seller at closing. That includes putting it in the MLS, showing it, lock boxes, all these different things on there.

For a buyer's broker, that gets paid from that percentage, it gets paid from the seller. So again, if you come to me or you go to any real estate broker and say, I want to buy a home, it does not cost you anything to have that broker represent you legally to buy your home. In the MLS in Raleigh right now which is called the triangle one the buyer's broker gets paid 2.4 percent. Historically it's 3 percent. Raleigh Market is such a hot market that they drop it because they can, because there's so much business that they pay the buyer's broker less and the seller's broker gets a bit more on that.

Do you have anything on brokers? So these, to what extent are, when someone's listing house, to what extent are these rates negotiable, in your view? That's a little bit. The brokerage firm, again, keeps that. And then financially, like for me to list a home or for a broker to list a home, it costs thousands of dollars just to list your property.

You've got to have, there's certain qualifications on the photo quality. There's a certain amount of number of photos that have to be uploaded into the system. There's different organizations that you have to, like the lock boxes and the showings and things like that. So I would say anything that you're buying, always ask that question. What is the rate?

And you can shop that a little bit. But when you know that they have to pay 2.4% to 3% to the buyer's broker, and then they have to pay thousands of dollars to list your house And they're paying 50% back to the brokerage. There's not a huge amount there to negotiate on Yeah, so I had a question but I forgot what it was so I'm sure it'll come back to me. Keep going. So prequalification we already talked about, that's a must.

In this market, right now, today, if you don't have a prequal letter, don't go looking at houses. I remembered what I was going to say. So let's talk about a mistake that people can make. It's a very big mistake. So let's say I'm driving down the road, I see a house for sale and maybe there's an agent sitting in there having an open house.

I go in and express interest. Now, I don't have an agent representing me. That agent can serve both, right? Talk about the dangers of that. Very dangerous.

So again, going back to the broker license, buyer's broker, seller's broker. When I sign on for somebody to be their broker, a buyer's broker, my legal fiduciary responsibility is to them 100%. Anything I hear, anything I see, anything I do, anything I overhear while I'm there, I by law have to tell the buyer about that. If you're walking into an open house, make no mistake, they are there representing the seller, they are legally responsible to tell that seller everything. Here's an example, honey, this house, it's exactly what we want, we have to buy it.

You're saying that in front of the person representing. So then you say yeah you say and we just free called with the bank and then said we can go up to this amount. Exactly. So that person sitting in that open house is legally bound to tell that seller what you said. So your offer comes in.

It's a $300,000 house. You think I'm going to offer $280,000. And the broker goes, number one, the wife loves it. The guy's toast, right? His wife loves it.

He's toast. Number two, I overheard him say that they're moving from New York, right? New York, a dump is $800,000, so they get the money, right? And that's where you can get into trouble by going to these open houses and doing these things. Yeah, the point is you just very much weakened yourself in a negotiation.

Right. So if you're at an open house, I'm not saying don't go to them, but zip it. Poker. Don't say anything. Poker face.

Right. Yeah. So prequel is a must and I cannot make an offer and you cannot make an offer on a house without a pre-call. Let's spend 30 seconds on ethics or at least I call it ethics. If I come to you and say Alan I'm looking for a house and you say okay let me help you and you for a year we go look at 50 houses right and I'm like I don't know, that one's the wrong color, this one, I need a bigger yard here.

And then I go buy a house with somebody else. Okay, and I just go find another agent and buy the house. I said, well, Alan, he was just handy, and you've invested a year and got paid zero. So there is, I'd like to let everybody know there is, there's kind of an ethical component here I think. These guys get paid at close.

They're investing a lot up front to help you find the house and they get paid at the end, it's kind of like you're going fishing. I don't mean it in a negative way, but you don't get the reward until you pull the salmon in. So there is kind of an ethical component to this, especially when you're dealing with the buyer side, I think. You probably couldn't say that. I can say that.

You're kind of obligated, I think, personally, to use someone that's helped you through the process, and all too often, people are not cognizant of that. They think somehow, Allen or another broker is getting paid a salary somewhere to take you around looking houses not true zero In fact they have expenses. I would say actually my salary there is the same as my deacon salary It's zero right, but again. That's that we cut your deacon salary. Oh, that's right.

You cut it by 50% Yeah, so with what he just said he's absolutely right and there is a thing now when you're working okay outside of me General real estate market they will not work with you without a contract, period. So there's a form that we give you called working with real estate agent that says there's a buyer's broker There's a seller's broker, and there's a dual agency So you walk in that open house and Al sitting there as the broker and you say I want to work with that Al is actually Representing both of you does anybody think that's a good idea No, it's not a good idea and they're salesmen right so they can explain to you Why it's okay? Why it's a good idea, but it's not but with that you will sign a buyer agency exclusive things stating that It's a seven page document that states that you will hire me and pay me at closing. So technically, and most of you that I've worked with in here didn't get that until after the fact because we go to church together. So I'm not technically I'm not supposed to even show you a house without making you sign that.

And what that says is when you buy a house within this contracted period in up to 45 days after that you owe that 3%, 5%, whatever commission you put on there. Generally, a buyer's broker is going to look at the MLS, know that it's 2.5%. So they're going to say, you're going to pay me 2.5%. Legally, if you walked away and did something on your own, legally, the broker can go to you, and you owe them that 2.5%. And in a court of law with an attorney you will pay that 2.5 percent.

Now do brokers want to do that? Generally no but with that said and I've done that you spend a year with somebody and then they go to an open house and then put an offer and buy something, you have a year of time and gas and pulling comps. And I mean, it takes, just to put an offer in can take three to four hours, just to get the initial paperwork ready to drop that in. So they do do a lot of work and there is an actual document that legally binds you to that. But then the ethics portion is you want to keep in mind the time they're putting in.

MLS is on here, so there's obviously all these things out there, Zillow and all the different things. MLS is a business that we pay the rights to use. When you use these other programs, Zillow and Redfin and these other ones, I'm not saying they're bad. I'm not saying don't look at them, especially if you're using one and you're comfortable with it. But understand the way they work is, is the agent lists your home, they put in all the photos, they put in all the data.

I think there's 360 tabs that we have to go through. That hits the MLS. Then these other companies, Zillow, Redfin, they kind of pirate that information down. Right now, the biggest problem we have in the Raleigh market is inventory. There's a low inventory of certain houses.

So what MLS shows you is actual live. And a broker can set up a search. It runs behind the scenes and just sends you that data. Redfin, all these other ones, pull from that. If they're looking like they're down on inventory, they're going to leave stuff in there and not pull it out.

So Ash lists his home, he sells his home. In the MLS it shows closed. On Redfin and these other things, two months from now, they can be looking, I get calls all the time, I want to see this house. I pull it up, I'm like, that house sold 45 days ago. Now I've got it right here in Redfin it's it's for sale actually it's not for sale but it didn't update properly so again in the frustration aspect it can be frustrating for a family to find that house that they want, and then find out the thing sold 30, 60, 90 days ago and just didn't get updated.

Yeah, MLS is the business gold standard for this. Can you talk real quick on the, since you touched on the inventory, the various price points and how fast these houses are moving just in general so these guys know? Yeah absolutely and we'll talk a little bit more about that. So anything that like right now is kind of a first-time homebuyer type thing maybe 200 or so or less you can barely see it get listed and not have offers on it. I showed up the other day to show somebody an investment property.

It was listed at a certain price. When I pulled in, I thought there was a major accident or FBI raid or something. There was 16 cars in that driveway looking at that home when I pulled in. We went home, we made an offer for $35,000 over the asking price. Cash offer, I never even got an acknowledgement that they got that offer, and the next day it was on a contract.

They didn't even acknowledge my offer. Under contract with somebody else. Under contract with somebody else. Right. And again, that's where a broker can help you, right?

It's not a sales pitch when somebody comes to me for a first time home and I say, are you ready? Right? When you're buying your first time home, you can go and look at some of these things, but understand that those homes are gone within three or four days in this market, gone. Then you get up to the 300 or so range where there's definitely a hot market but that can be a little more difficult because you've got all these new homes popping up. So why am I going to buy your home for $350,000 when the next street over in the same subdivision is phase three going, and I can buy a brand new one for $356, that's all updated.

Right, and again, that's where a broker can bring value to know neighborhoods, know the market to help prepare you. If you don't have a broker and you're trying to find a first time home, I don't know how you would do it because they just go. Certain neighborhoods, certain aspects. It's a tough, tough thing. It's like a shark feeding frenzy right now.

It is. And that drops down to the next thing, DOM, which is Days on Market. That's a big deal. Number one, certain price points are gone, and a broker can prep you. We're going to do this.

We're going to look at this. But let's know that you're ready not to push you, not to push you, but to understand if you truly are ready, you need to be ready and be ready to act. It's not something you're just going to kind of bounce around. But also, why is this home and sitting on the market for 45 days? What's wrong with it, right?

And a broker can look at the history and see was it under contract, did it jump out? I showed a home last week that had been under contract three times and then jumped out. What's wrong with that home? There's something up with that home that's not buying. That's pretty common to have contracts stop, right?

I mean, somebody makes an offer, something happens. How often does that happen? Maybe 30%. It's not real real high. And it can be because of a home inspection, it could be because of financing, there's a lot of different variables that can pop up.

I think in today's market people realize that homes are going so fast, they make a quick offer, maybe think it through a little bit more, they have an inspection, they see it needs a new roof, whatever, maybe they get cold feet or something does that happen sometimes? It does. So and I'll segment because we're running out of time to some of these other ones on some of the nuts and bolts. So most of you are familiar with earnest money. In this market they have due diligence money and earnest money.

So due diligence money is money that you pay upfront. So in other words, I'm going to make an offer. It's a $300,000 home. In the old days, I would say, I'll give you $300 due diligence money, and then I'll give you $3,000 earnest money. The due diligence money is a check that's written right to the homeowner.

It goes directly to him when you own a contract. He puts that in the bank and spends it. You will never see that money again. Earnest money goes into escrow, meaning the closing attorney will take that, put it into an interest bearing account, it sits there and it's ready to be applied to the house. Why does that matter?

In this market, as an example, a home that we just put on a contract, we got $2,500 due diligence money and zero earnest money. So that means if I send that offer to them, They accept it and sign it, we're under contract, and then tomorrow you wake up and go, oh what are we doing, we don't want to buy this house, you still owe that $2,500 and you will never see that again. So again that's where a broker can come in, there's certain price points where it's more beneficial for you to say I know I want this house I trust that we've looked at it and it's okay I'll give you three grand due diligence meaning if I walk away you keep that money period as opposed to earnest money that they're going to get back so that's that's a big deal. Offers in negotiating obviously you put an initial offer it'll go back and forth a little bit. Unfortunately, that's kind of normal.

Nowadays, especially on first time homes, you'll put an initial offer in, you'll get an email back that says, give me your best and final. Again, when you look at a home, contemplating your mind, what am I willing to pay for this home big picture and don't go above that because that's where people get kind of caught up there's a lot of there's a shortage of homes out there but on the same note there's a lot of homes out there right they're not going away this isn't the end-all be-all if you don't get that home even though you think you might want it. Closing costs and fees we talked about, but in general, you're going to pay about $900 to $1,500 for your attorney fee. You're going to pay approximately $500 for your appraisal, about $700 for a survey. You've got insurance and prepayments.

That one that I was just talking about, that particular loan had $16,000 in closing costs on it. Average is about $7,000 to $8,000. So in other words, you're negotiating this amount and you're thinking this is my mortgage payment at about $6,000 to $7,000. And it's not just going away money. It's prepaid and all these things that are there.

The attorney's fee is only $900 to $1,500. That's not a ton of this. It's mostly the prepaid and stuff you're doing. And in the old days, you used to be able to make an offer and ask the seller to pay a portion or all your closing costs. That's probably gone in today's market, right?

Yes and no. Again, that's sometimes how you can structure it. And that's where a broker can know. I showed a particular home, it was an obvious divorce situation. I mean I could tell that just from experience showing a home.

With that there was some room there I knew that they needed to show a certain amount so sometimes you can ask for closing cost in lieu of money off and that depends on the home in the market. It's not gone away if it's structured properly because it's the same deal. So if your home is selling for $300,000 and I offer you $295,000 with zero closing cost, that's the same as offering you $300,000 and you paying $5,000 in closing costs. But it makes a difference in the MLS and it makes a difference on how it shows in their system. If I look at a house and let's say it's a big property and it needs a lot of specialized equipment like a John Deere tractor and there's one in the garage could ask them to throw that in the deal absolutely How does that work normally everything is negotiable?

But you want to do that when you put your offer in so when your broker structures your offer You'll say I'm gonna offer this much for the house and I want the pool furniture and I want the mower with it. And on certain properties that's totally normal and they almost expect you to ask that right. I'm jumping from a townhome to a five acre property I don't have a lawnmower. I'm moving from New York in the city I don't have a lawnmower. Things like that.

Play sets, furniture. When I bought my home nine years ago, I wanted a chair, I wanted the couch. I mean, silly things, but I liked them. And I asked for them and I got them. So you can do that.

Refrigerator, sometimes in and out, washer, dryer, things like that. Right, So washer and dryers are not part of the house. Refrigerator is not part of the house. Refrigerator you have to ask for. And if you're selling your house, your refrigerator goes with you unless they ask for it.

Your stove, your microwave, those are considered built-ins. Those stay. So again, your broker will work with you. If you want that refrigerator, ask for it up front. If you want the patio furniture because it fits well there, ask for it up front and that becomes part of the negotiations.

Once that's accepted, that's accepted as part of your contract for that home so they can't leave. I had one where they negotiated that, they, silly, they tried to take the refrigerator. One of the spouses decided I'm not going to give him my refrigerator. The broker for that home ended up having to pay for a refrigerator to buy it for them because it was part of the contract. Now that was between him and the seller, but he had problems with the seller.

So in that case, instead of seeing the deal fall apart on a $500 refrigerator, the broker just bought a new refrigerator and made it go away. Makes sense. Yep. Yep. So closing costs of fees you did, financial, so backing out of a deal.

So as a seller, it's extremely difficult, almost impossible without costing you a fortune. If you are the seller of a home, you accept a contract, so a contract isn't accepted until it has two signatures. The buyer sends it in signed. Once that gets sent back signed, you are under contract. Until that comes back signed, you are not under contract.

Backing out of a deal as a seller, once you have both those signatures, if you back out as a seller, they can bill you for time looking at a house, time off from work, you owe them for other inspections, you owe them for any attorney fees, you owe them due diligence, all that stuff, plus, plus, plus, plus up to three times is supposed to go back. Now of course you got to fight for it right depending on the structure of it. As a buyer you have a due diligence date so real quick on those dates when you put an offer in you put a due diligence date in. Usually that's about three to four weeks out depending on the structure of it. That's your time as a buyer.

North Carolina is called a buyer beware when you purchase a home. It means the seller has to tell you nothing. There's property disclosures they can put right on there not telling you. They could know that the house is going to fall down tomorrow. They can know it has termite damage.

The seller is not obligated to tell you anything and again this is why a broker can be helpful. This is why inspections you have a termite inspection, you have a septic and well inspection, you have a home inspection. These things cost a little bit upfront. Termite inspections are $100. Home inspection is anywhere from $485 to $785, depending on the cost of the home.

Water inspection is $99. There's a radon gas. It's about $125. These things are all upfront. But the seller does not have to tell you anything about that on that home.

And that's why you have that due diligence period. If you back out within that three week due diligence period, you get your earnest money back and as a buyer you walk away from that contract. If you go past that due diligence period, the earnest money you put in, they then keep that no matter what, you could still walk away from it at that point, but you've just lost whatever money you've invested in it. For those of you that haven't been through this process, correct me if I'm wrong, 99% of the time those inspections yield something, usually minor, you know, minor repairs needed. You get a punch list of $2,000 needs to be fixed.

At that point you can go to the seller and say, hey, I want you to fix these or I want you to fix half these or you just accept them. It's a little bit of a negotiation at that point. Seller can say I'm not paying anything, the seller can say okay I'll pay all that or you guys can meet in the middle, is that correct? Yes and when you get your home inspection it's gonna be about 25 pages long. Even if it's a home that is really good, it's going to be about 25 pages long because that's what the home inspector does, right?

Everybody has to show their value, everybody has to earn a living. Well the home inspector's job is to point out every single little thing. That piece of siding is a little loose there, Big deal. It's on your inspection report. As a broker, when I look at that, I go through and I try to highlight red means this really should be done.

Yellow is who cares, green is, it doesn't matter. But when we send that back as a broker, I'm gonna pick a bunch of the easy things because they're going to go, oh, that's easy, that's easy, that's easy. Then when they get to the bigger things, it can be a little bit of a difference on that. But what can happen is, as a broker or a buyer, you can either say, I want these things fixed by a qualified contractor, wording is important. Or you can just say, you know what, in lieu of doing all that stuff, just give us two grand off the house and we'll call it good.

And so there absolutely is a negotiation, and there absolutely is a home inspection report. Part of that I try to tell people up front is don't get freaked out when you see that it's gonna be a big report It doesn't mean the house has fallen apart But again in this state of North Carolina, it's a buyer but where state you want to do that home inspection report You want to have somebody qualified that can review that and tell you because some things may look really freaky on there but they're actually not a big deal. GFI is a big one it costs $26 to go buy a GFI and put it in. Home inspection will fail because of that. It's a big one meaning it's commonly on the report.

It's commonly on the report Because that has changed over time as far as code But it's not a real big deal GFI is a ground fault interrupt. It's a protective little Electrical outlet that keeps you from getting electrocuted when you're wet essentially. Yeah Yeah, so the what you're looking for in these house reports, anything that says the foundation is shifting, evidence of termite activity, roof needs to be replaced, roofs are what, 10, 15, 20, they're expensive. So these are the major items you're looking for that you're gonna want to really, you probably hire a termite expert if that home inspector sees anything related to that or if you see, a lot of times they'll refer you to an expert. Foundation is shifting.

They may say, we recommend you have a foundation guy take a look at that and just Get an idea of what's wrong with this house. You're not walking into a major problem with a 30, 40, $50,000 repair. Right, so one quick note on that, and I think we can close with this time-wise. There's certain things as a broker, there's certain people I use for my termite, for my home inspection. I know these people, I trust these people, they know me, they know my construction background, I can work with these people and they'll pull me aside during the inspection and say, Alan, I'm going to put this on there, I'm going to make a big deal out of this, but you and I both know it's really not a big deal.

Okay, there's nothing wrong with that. They're putting it on there to make you aware of it. There are certain things on there that he's going to look at that. The foundation is a good example. It's got a crack in it.

Is it a big deal? It might be or it might not be. I showed one home that had a crack in the foundation. Initially we didn't think it was a big deal. It was big enough that we did call in an engineer, which was $550 to do it, but upon going on there and looking deeper, the house actually had shifted because there were some other things that we just couldn't see.

And that was a huge deal and we walked away from that one. So there's certain things that our general inspections will tell us. A $90 termite inspection will tell us most everything we need to know. But then beyond that, if there's a lot of structural damage, that's where a broker can tell you we need to take this next step. HVAC system, a home inspector is gonna do basic tests on it.

This is working, this is working, this is working. Generally that's fine. If he sees something that's questionable, he will put a note that says, I saw this, you probably need to get an actual HVAC person in to check this. A little money up front on these things is money well spent making sure you know what you're buying. Absolutely.

That closes out real estate? That closes out real estate. You want us to flow straight into vehicles? OK. So having discussed the largest thing you'll ever buy, We're now going to discuss the second largest thing which is vehicles.

By the way I have a story for you here at this point back when I was newly married. When I got out of college you know I had didn't have very much money in college so I went and did what a lot of guys do I went and bought a brand new car it was a nice custom van very cool machine but it wasn't very long that I realized you know what I think I want to buy a house but that car payment was too big it messed my ratios up I couldn't buy I couldn't borrow money So I went and sold that van at a big loss and I bought a 1972 Chevy Impala. It was sitting in some farmers barn I think and it was you know at that time it was 18 20 years old I bought it from him for 775 bucks and that car ran great it was a little rough looking but I drove that for a few years and that allows us to buy our first house and we never looked back on that decision but my point there is consider where you're spending your money you know that cars are depreciating assets houses normally are appreciating assets and they keep brain off your head so let's look at vehicles second largest investment you'll ever make new versus used versus least Now there's lots of opinions on this.

So most of the time, most of the time I would say it makes a lot of sense to buy used. Probably almost all the time. Occasionally, it may make sense to buy new and this is just my thoughts. You know sometimes you're looking for a specialized vehicle like you know in our circles families big as ours 15 passenger vans were the thing. It was very difficult to find a 15 passenger van a year old that didn't have a ton of miles on it because they're all rentals.

50 percent of them are white. No offense against your van, Scott. You know, so they have a lot of miles. They're used hard. You know, I knew we were going to buy one for the long haul.

I have I've actually bought two of them brand new one in 2002 one in 2013. You know we're gonna keep it a long time. It's gonna be our vehicle. You know so to me it made sense to buy new on those. I don't normally advise that at all.

There also may be a specialized vehicle you need for some sort of work. But by and large, these vehicles have huge depreciation. I've listed here just kind of the general rule of thumb of what you see. You buy a new vehicle, after three years, it's one-third down in value. And a lot of that happens the first day you buy it okay after five years it's half after eight years it's two-thirds and this applies to the the lower priced entry economy type vehicle all the way up to the motor homes that are north of a million dollars.

Imagine that a million dollar motor home five years in is worth a half a million and these things are nice these are the I'm talking about the ones that are built after on a bus chassis. They have a 20 kW generator on board. They come with a 750,000 mile warranty. These are the main, the real deal. They have the same depreciation curve.

And most of those are bought by retired people and hardly driven. So you look at, you know, I like nice German cars, BMWs, Audis, Mercedes, they all have this rapid depreciation. Makes sense to pick them up used because you can pick one up five years old for half the price. You know some of these cars are very nice. They sell for north of a hundred thousand dollars five years old pick it up for fifty and you know people that buy those they're not beating those cars up they're taking care of them they're waxing them every week you know so you can pick up some really nice vehicles if because let's face it we love vehicles like boys love vehicles.

It's just in our DNA. I Know women don't totally understand that it's just a thing Alan anything to say this juncture It's not always cut and dry again the connotation out there is never by new I had a good friend that's a doctor that I when I was working at Toyota asked me about it and I said you should buy this one. It's a year or so old. He said look at my current carts 14 years old He goes I lost zero when I drove that off a lot. So in general.

Yes, I would always say By used But always with that connotation of again, that's why you try to ask maybe some of the men or people in your life that you trust There are certain scenarios and then certain vehicles, you know BMW high-end Ford truck when you drive it off the lot you lose a huge amount of money You drive a new Camry off a lot and then you try to go back and buy a used Camry, the people would say to us, why is the used one the same price as the new one? And I'm like, because they hold their value. There is a difference. Yeah, there are certain vehicles that tend to hold the value better than others. Jeeps are some.

Many of the Toyota products like 4Runner, you know, these things have very strong followings. The new Ford Bronco, which is out yet, will probably be the same. You know, there's a lot, there's these niche-y type vehicles that really do have a huge following that are kind of interesting. Insurance of course, that kind of goes without saying, that's important to have, in fact, required by law liability insurance. And as one of the other speakers yesterday touched on, collision insurance.

Make your call on that. Self-insure is good on that. You can also up your premiums a little bit if you're willing to take a risk instead of a 500 deductible or 250 deductible. You can go 1,000 or 2,000. You can raise those premiums and drive carefully.

Don't get in an accident. And then you have lower insurance costs. There's a type one slide here it says it's supposed to say know what you want. This is when you're buying a vehicle you don't want to stroll on to a dealership and say gee I'm just looking for something because the salesman will find you something. Right, Alan?

Absolutely. Yeah, and that, we'll get into this a little deeper later, but they're there to sell cars. That's what they do. So don't think that you're going to outsmart the guy that's made a living selling vehicles. You want to do your research.

That's my first tab on my thing is did you do your research? Remember you walked on to that lot. They didn't cold call you. They didn't come knocking your door. They didn't come beg you.

You went on their lot And this goes back a little bit to we talked a little about ethics and being a Christian. Just remember that when you go there. These guys, a lot of them make zero unless they sell something. So are there bad car salesmen out there? Absolutely.

Are there bad pastors out there? Do we not go to church? Are there bad doctors out there? So we want to be careful a little bit with the whole blanket thing, but yeah, you want to do your research and kind of know what you want before you show up. So in recent years, the internet has really affected this industry amazingly.

You know, Before it was kind of a secret thing of how this all worked. But now, if you're willing to spend the time, you can research every aspect of the vehicle. It's not hard to know more than the sales guys. Sales guys are selling 50 different models. You're looking at year one.

You know exactly, or you can know, what the features are. You can read the reviews, you can look at what these cars are selling for, how fast they depreciate. There's several apps out there. I used to use TrueCar. They've changed it a little bit.

But it was pretty cool because it would go ahead and get prices from dealers. And you could really get some really low prices, highly competitive. And the internet's been really a game changer. And I think, correct me if I'm wrong, Alan, these dealerships have complete staffs dedicated to internet only. It's a totally different ballgame.

Why don't you talk on that for a minute? They do. They have an actual internet department, which is totally, in most places, unrelated to the sales floor. So there's actually a competition amongst the dealership. It's a whole different way of doing business, and it's not a bad way to do it.

Cuz with the internet department, you find the vehicle you want, you basically shoot them an email and say I want a price. They basically have a one shot deal to try to get your business. So they're gonna shoot you a price on that. And that gets back to doing the research and knowing what you want. This more so applies on new vehicles, but it can definitely apply in used vehicles.

If you've done the research and they had that used vehicle on the lot, they will deal with the used vehicles also. But they're totally separate within the thing. And again, keep that in mind when you go there, because if you have dealt with a internet type thing at a certain dealership and you go to that dealership, tell them when you got there that you did that. Because otherwise, a guy that's on the floor that is 100% commission can spend three hours walking the lot, showing you the vehicle you already decided, then when you get put in the system it gets flagged and guess who gets that sale? The internet guy.

So again just just be honest if you've already been to that dealership but looked at that unless you had an issue with the person that you did and get a manager, but in general you want to try to stick with that person. When I've bought cars from dealerships whether that be a used car or new car, I always have the price totally negotiated before I even show up. I will say when I get there I'm gonna drive the car and make sure that you know I don't see anything that's problematic, but if it satisfies me in the drive, we have a deal. I'll tell them that before I get there. And that way I take all the price negotiations.

I do that when I'm just a guy on email. I'm not going in and playing a game with the guy and that's worked pretty well for me. You have any comment on that or? I'll head on that a little bit after. All right.

So when we look at a vehicle, when you say what's my vehicle worth, this is the bullet on the left hand column at the bottom. You got to be careful here because the same vehicle is worth a different amount depending on what you're talking about. If I take it in and I trade it in on something, it's the trade value. And I'm not sure how these places like CarMax, when you drive up to the little CarMax kiosk and you say, give me cash for my car, that's probably close to trade value, maybe a little lower, maybe a little higher, somewhere in there. Private party sale is a little higher than trade.

So if I have a car that trades in for 15,000 it might sell on Craigslist for 18,000 but it's on a car lot for 22,000, the same car. And then there's a further level on a lot called a certified pre-owned, which is the fancy word for used. So if it's a certified pre-owned, it means it's been, and Alan can talk a lot more about this, but it's been through a series of checks and things. If it's a certified pre-owned BMW, that BMW's had a certain amount of checks and they're saying that this is good, this is good, this is good. So you have really four values, Trade value, private party, sale value, the retail value, and certified value.

Anything about that? Yeah, absolutely right. So there's, one of my things is there's different types of dealerships, right? You've got what you call the franchise dealership, the big dealership, drive up capital boulevard, there's tons of them, right? Lee films half of them, I think.

Then there's what we would call in the industry the rock lots, right? So the franchise dealerships, they get most of their cars from your trade. They take the ones that they know are good, and then they put those on their lot. The ones that they deem not good for whatever reason, they send to auction and the rock lots, the little rots, they buy those cars and they resell them. There is a big difference on this.

So when you go to like a CarMax, they're going into the actual auction. So they're actually making money based on your vehicle. So they're going to give you what they see that. So if you bring in the 15 passenger van they're gonna pull up 15 passenger vans at that auction they're gonna look at what they're going for at that auction and that's what they're gonna throw you for a price then they're gonna gauge on their end okay is this something that I'm gonna sell for retail on my lot or am I going to send this to auction and just kind of cut my losses and take it. At the bigger dealerships, their goal is to get you on the lot to get your trade.

It's a big circle. They want your trade. When you get these letters in the mail that say, we've done some research, we've got a big demand for your vehicle, you can plug in whatever vehicle you own. That's the one they're looking for because they want your vehicles. And certified, one quick thing on that, that actually is a real thing.

So when I worked at Toyota, they had Toyota certified. They would have an inspector that show up, you would have thought the FBI showed up. He showed up with a badge, he walked on to the dealership, he went to the key machine, he opened that machine with his key, he took out the key that he wanted, he got the service manager that handles certified. There's a certified service manager, that that's all he does in that dealership. And then he went and did a 160 point inspection on that vehicle.

If it failed, that dealership got a huge fine and could lose their status. So certified, you're going to pay more. But it actually is, if it's a true certified, and I mean like Toyota certified, BMW certified, not Joe's Rock Lot certified. We're talking like a Toyota certified vehicle There is value in that. And I just mentioned a couple places you can go look for car values.

Kelly Blue Book, kbb.com is a good one. It'll tell you the current values of all the cars. Are there any others? Is that the main? Those are the big ones.

That's the gold standard. Okay. Extended warranties. Now these things are huge. And Alan will talk more about this in a second, these are huge profit for these car dealers.

Huge markup. They try and tuck these in. In general, I'm against them. Now, some people would say, wait a minute, I got one and then my motor went out and it worked out great for me. I'm not going to say it doesn't work out for some people, but in general, like I mentioned yesterday in my other talk, you know, these are profitable for the dealership in a big way.

What do you say about that, Alan? Huge way. I've got a whole segment on that, But I'll just say that that is a big moneymaker I'm gonna let you talk on gap insurance because this is not my expertise. Yeah, so gap insurance is Filling in the gap so you purchase a vehicle you finance it for ten thousand dollars like we spoke about when you drive it Off a lot. It's not worth ten thousand dollars anymore, but you owe ten thousand dollars on that car You get six miles up the road, you get side swiped T-bone, and you total that vehicle.

The insurance company comes back and says, okay, here's your $7,000 for the $10,000 vehicle you're driving. And you're saying, well, I owe $10,000 on it. Guess what? You owe that ten thousand dollars on that vehicle. What gap insurance does is it pays that difference.

So if you total your vehicle and you owed ten thousand And the insurance company says it's worth 7,000, GAAP insurance pays that difference. It's like any insurance, it's insurance. If you use it, it's helpful. If you don't, it's not. GAAP insurance would only apply if you're financing expensive vehicle for a lot of money which a lot of us aren't doing anyway But it is something that they're gonna push and I would say again if your vehicle You know, it's not a real super high-end expensive loan on it.

Then I would say to pass on the gap insurance This is kind of like PMI if you're kind of managing your affairs you should never really run into a situation where you should need this. A salvage title for those of you to know what that is that's a vehicle that's been technically totaled and the insurance companies paid out on it but it's still drivable. I know of several cases where you know the insurance company will say oh there's a there's a defect a car was in a wreck let's say it had some minor damage but the damage was such that the vehicle, it would have cost, I think, 80%. If it cost more than 80% of the vehicle to fix, they call it totaled. Insurance pays out.

So from an insurance perspective, the whole value of that vehicle has been paid to somebody, but if it's still drivable in good condition and still meets the legal requirements of a vehicle, it has lights and a horn and those other things, it's a salvage title and you can still legally drive it. What do you say about that? Absolutely. And again, that gets back to we had a vehicle that we purchased, we paid cash for it. In the market, it was worth about $3,000 more than it was as far as what the insurance company thought it was worth.

And when I went to get it checked, now this particular one was not repairable because the frame was bent, but the place I brought it to, the body shop, said that they make a majority of their living buying back those vehicles, because majority of them are cosmetic fixes that a body shop can do and they resell them. So just because it's a salvage title doesn't mean run from it, but you wanna look at Carfax and some of these other things we'll talk about and try to find out the history on that vehicle and what actually happened to it. Carfax is the next thing on the list and it's really cool because it tells you the history of a vehicle. It doesn't tell you everything, but it tells you when it was sold, where it was sold, and that's a huge deal. Because for those of you that have been up north, you know they use some serious chemicals on the roads up there in the winter.

It's a salt kind of mix and it just tears through the metal. So if I see a vehicle and it's been you know it's been first five years of its life in Ohio or something like that I'm kind of leery, I prefer places where you don't have the harsh climate down here in the Carolinas, Florida, places like that. You can also see how much maintenance was done, when the oil changes were done, how fast miles were put on the car. And by the way, this is another interesting thing. If you're looking at buying a decent used car, let's say a BMW, One thing to consider, a lot of these are leased on a three, four, five year lease.

I'm not sure which is the most popular. And the people that have a lease really take care of them because they're going to get charged for scratches, mileage. So these car dealers love to get these leases back and sell them because they look like brand new cars and they depreciate at the same Rate so those are pretty good cars I think if you're wanting to buy a car like that get it way way cheaper than a new one and it's still The nice BMW that it was when it sold brand new was that would you agree? Absolutely? Yeah, people that have leases like new vehicles, so they lease a vehicle they drive very few miles for most people almost everybody I know I would never tell you to lease a vehicle but I would generally always tell you to purchase a leased vehicle because they are doing the maintenance they're doing everything like I also the same thing with corporate owned vehicles.

I drive a corporate owned vehicle right now, my Tacoma that's out there. I get that oil change, I put tires on, doesn't cost me anything. I am on my game on doing maintenance on that vehicle. On my personal vehicle, not so much. So financial tricks dealers play.

So this is, when you go meet with the salesman and you cut a deal on the car, the next place you're gonna go is to the finance manager. Now, the salesman spent the last two hours telling you what a great car this is. This is an amazing car, the best you can buy. The finance manager is going to try and convince you that it's got all kinds of deficiencies and you better have insurance for everything. You better have tire puncture thing, you know, extended warranty.

These cars are subject to potholes in the road. It's kind of an interesting transition actually. It's amazing they're able to do it. That you get you think once they got you sold on the car like, oh I better put the clear coat, you know, super protectant film on it that you can never see. They're going to bury debt from your old car.

They're going to throw extended warranties on, throw fees in there. And they like to play the monthly payment game. Talk to us about that a little bit, Alan. Yeah, so The payment game is there's payment buyers, and that's something I'll talk a little bit more about. But when you walk into a car lot, one of my jobs as a salesman is to figure out what type of buyer are you.

Were you Al Burke that knew the exact vehicle he wanted? That's a whole different sales game than someone that says, oh honey, we've only got $200 a month. Bing. Now I know where to bring you in a vehicle because I can bring you to a high profit vehicle for me that I can fit within that $200 a month because if you're a payment buyer, which again, goes back to stewardship, Kelly, Ash, Al, they've all talked to us about these things. This is where you need to do your research up front, know what is unacceptable for your budget to buy and not get caught up in some of these things.

And I've got a couple slides on these too. So We didn't talk about this in advance, but in the old days, cash was king. You walked into a dealership with cash and all right, this is a cash buyer. Nowadays, the dealership looks down on cash buyers, right? Talk to us about that.

Absolutely. So part of the thing is financing, as you know. The dealerships have a lot of banks that they work with because they sell vehicles and Other places lend on those vehicles whether it be capital one whether it be Wells Fargo, whatever it may be So what they do is they look at your credit and again? This is what they do This is what they're trained for They look at your credit. They know your credit.

They know the banks. They know the vehicle. They know what they're doing They will send your information your vehicle your credit to three banks those banks will then send back in say we'll give you his loan for this amount and then they will pick the lowest of those and then when it gets back to you it's going to be about a percent or so higher than that. Is there anything wrong with that? No because it's about the same rate that you would have got going to your own bank But you walk into me as a car salesman and say, I'm a cash buyer, I'm thinking, stink.

Man, that leaves a lot of money on the table. You come in and say, yeah, I'm going to finance this thing. It's a whole different process. So that's another thing of doing your research upfront, talk to your bank, know what they have for a rate. I'm not saying don't finance it at the dealership because it's generally, if you're going to finance, that's generally the place to do it.

But if you're a USA customer, if you're some of these other banks, a credit union customer, you can get some good rates. So Allen, would you say if you're gonna go buy a car and you were cash buyer that you wouldn't Ascent disclose that initially bring that up later. I would keep that in your back pocket Yeah, because it's it's really interesting you would think cash is king and it's not anymore It's the way the the whole thing they actually prefer and will give you a better deal if you finance usually. I mentioned before internet shopping, internet's a game changer in many industries, definitely in car shopping, very big and we talked about the cash versus financing. I said prepare in advance.

If you are going to finance, know what your bank will do. Know what the rates are. And there's a lot of fairly attractive deals out there, if you're inclined to do that. OK, on the lot, let's trade. This lot's here.

OK, so we're going to kind of back it down to when you kind of get to the lot and kind of what happens there. I actually, so we've talked about budgeting, we've talked about stewardship, we've talked about investing. All of that applies here because this again is the second largest purchase you're gonna make. The car salesman knows that when you come in. What does that tell me as a salesman?

That means I need to help you with this decision because it's not an easy one. It's the second largest purchase you'll make So I'm gonna help you along with that Well selling the cars just like fishing Wilbur you bait the hook you throw it out and then you reel me in real slow You ask them questions about their family what they do you act like you're interested and once you get their trust, kabowee! You just sold a car! Tired? Compliments of Johnson Lexus.

They had a great series years ago. So we've all been there, but that's what he does. So why do I show you that? Why do I talk about being prepared? These car salesmen are professionals.

Again, there's a connotation out there, but this is what they do. They sell cars. So guess what? They know what they need to do to sell you a car. Right?

This is why you need to do your research prior to going there. They will know if you say and they hear you're a payment buyer, they will know how to work that in. If you say you're there for a certain vehicle, or if you say, I'm a UNC fan and I have to have red, I think UNC's red, right? Blue? Sorry.

See, it shows how much I know, right? But If you're a sports fanatic and you go in there, that's a big deal because I can find a car that matches that, that's a higher profit. That's a big deal to have those things. And again, it's a second largest person. A purchase you're gonna make.

And those cars are there for a reason, right? They were traded, they were sold, they were done this. There's a lot of variables that are in there. And again, I'm going to go back to remember you came to them. You walked onto that lot.

You want to remember that stewardship-wise. Do You know how much the markup is on a vehicle. The average markup or average profit on a vehicle, average now is 5.9%. How many vehicles are sold in the industry? It was like 16 million vehicles are sold every year in the industry.

So these guys, again, know what they're doing. They are only getting paid when they sell you a vehicle. Now my point with the percentages is you walk into the Apple store and you buy all your Apple products. Do you beat that guy up? Do you beat that guy up?

No, you don't. You buy your Apple product because you want it, right? You don't leave and say the salesman was this. You don't leave and say he did this. You don't see he did this.

You buy your product. The markup on those products at the Apple store, 59% on those products. 59%. A vehicle is 5.9% average. So why do we beat the car guy up so much?

But again, this is why you need to know what you're doing. I used to sell, I owned cell phone stores for years. I used to sell car chargers back in the day for $49.99. I paid a dollar for those. What's the markup on that?

Okay. The other point with that is in a sales environment, on a dealership, there, anywhere, there's a price on the window, ask, right? There's different ones. There's different ones. Oh, I'm going to get me one today.

Oh yeah. I'm going to get me one today. Oh yeah. Oh yeah. Oh, come to daddy.

Come to daddy. Gotcha, another fish on the hook. He he he he he he. Sorry. So make fun of that, But how does this work, right?

You're pulling on a dealership, how does this work? There's ups, there's rotations, there's systems, why do I say that? That's what we did, right? When I worked at the dealership, we had, at my dealership, we had what they called curb rules, meaning first out, first up, period. There wasn't any specific rules.

It was up to us sales guys to work that out. You pull up to a dealership, you get annoyed because there's a guy standing out there. You pulled onto his dealership. He's there to sell cars. So all I ask is that you keep that in mind.

But there's curb rules. So we had a thing where if you come up, you say you're looking whatever, that's my up, I'm now off the curb. Now the next guy is allowed to take someone. There's some dealerships that actually have a built-in rotation where the dealer has a computer screen, when a salesman gets on the lot, he signs in and they page him when the next customer comes in. He's on a rotation.

So you go in there and you're just killing time because you're on a date, you've pulled him out of that rotation. So when I was there, I was a guy that had five kids, going to church and somebody comes in and they're making a joke out of it and they leave and I just missed all those other customers that came in. So again they're there, they're professionals, they're there to do what they do. Commission structure on these guys, most of them are a hundred percent commissioned. I don't sell something, I don't make any money, I don't feed my family.

Same with real estate, right? So again, I wanted to set some stage here. I'm going to tell you some things as to what they will do technique-wise, but I want to have an understanding of what happens there. There's also what they call minis. So there's that connotation of, oh, the dealership always makes money.

Not true. And I'm going to hit on a couple things a little lower on here. But there's things called minis where the salesman gets $150. It's a particular dealership I was at. It's considered a loser deal.

So it's a car that was either there too long, or they went on the internet because they did their research. They will lose money on a vehicle. They will lose money on a vehicle. And there's a lot of variables that fit into that. But on those, again, that car guy, right?

How long do you spend at a car dealership? It's painful. You spend a lot of time there. Well, that's all the time that he spends there making zero money, and then the only thing he'll get off that is $100 or $150, depending on the vehicle. That gets into when to hit the car lots and why.

When to hit the car lots and why. You want to hit them at the end of the month. The last two days of the month are the best time to go. Why is that? Because they have numbers that they have to hit.

The salesman has numbers, the dealership has numbers. Toyota sets numbers at the Toyota dealership. BMW sets numbers at those dealerships. If they don't hit their numbers, they can pull that franchise from that owner. It happens all the time because they're not hitting their numbers.

Our particular dealership had a rotation. You had to sell eight cars a month or 32 cars in a quarter to keep your job. So in the last two days of that month, if I'm sitting at six cars, man, I'm stressed out. Those of you that were with me in church back then remember sometimes Shelly praying. It's ended a month.

He's got to sell two more cars, or he makes nothing for that month. Some of them will have a draw. Well, they might make $200, and then they pay it back at the end. But there is a science to it. And if you can, and this gets back to stewardship, This gets back to doing your research.

Don't go in there thinking that I have to buy a car today. Figure out what you want. Don't go in on the first day of the month or the second or third day of the month because you're going to get a much better deal on the last two days of the month, guaranteed. One of the other things they have is hold back. So when a car dealership sends those vehicles to them, they have hold back, meaning Toyota will hold, let's say, $1,000 back or $1,500 back.

That doesn't show up on the invoice that's on the window. So there's a built-in grand right there on the window that they can do, right, that's hold back. Well, if they don't hit their numbers, they don't get that hold back. Toyota keeps that money. So if you're the guy that, if they have to sell 300 cars, and it's the last day of the month and you walk in and they need car number 300 to retro back a thousand or fifteen hundred or two thousand dollars per car how hard are they going to work to get you to sign on the dotted line that day How much are they going to lose on that car that day?

Because if I lose $1,500, if I give you a really good deal and lose $1,500 on that, win the battle, lose the war, right? They won the war on that one. They lost the battle. They lost money on that one vehicle. But they're getting $1,500 times $300 or $400 back on every vehicle they sold.

So this might be a good chance to clarify something. So there's an invoice price, which is not on the sticker. Then there's MSRP, which is on the sticker. Those are usually $3,000, $4,000 different, or whatever. But what you're saying is the manufacturer also sends money per car called hold back.

So if a car sells for 30,000 invoices for 26, the dealership's getting another 1,000 or 1,500 or whatever in profit that you don't see there. That's kind of the way they operate. And it is fair for the dealerships to make a profit. It's not reasonable to say they make zero. But you don't want them to make too much.

And what you're saying is they make a lot on some of the deals, they take a loss on other deals, more likely take a loss at the end of the month because of the way the commission structure incentives are set up, right? Yep, absolutely. And there is. There's some vehicles that they make a lot on. There's other ones they don't.

The other thing is if you're there, so if you've done your research and you know you want a Camry, I was at Toyota so I'm going to use those figures, So you want a Camry, but you're flexible, right? You want a vehicle, you want it to be safe, you want to drive your family around, you're not looking for flashy, sexy in your vehicle. You know you want a Camry. When you show up there, you want Tim to show you that, But ask the questions, you know, what deals do you have on this particular vehicle? I know I want this vehicle, but which one?

Because we would have an influx of, they might have sent 25 white ones and three blue ones, and I'm stuck with the blue one. Like that thing, it's days on the lot. So you've got days on market on houses. They have what they call a floor plan where they pay every month for the vehicles that sit on that lot. Well guess what?

That goes towards the cost of that vehicle because they're paying that to have those cars in the lot. You get a car with 2,000, a car lot with 2,000, 3,000 cars on it, that adds up. If they've got a vehicle that's been sitting on there, sometimes they'll incentivize the salesperson, right? Hey, you sell that blue Camry that's been sitting here for six months, we'll give you a $300 spiff cash. Okay, car dealership's dealing cash for the sales guy sometimes.

It's all tracked, it's all legal. But it's incentive, right? We'd get to our sales meeting and they'd say, hey, see this car right here? You sell that bad boy, you get $300 cash in your pocket tonight. Guess which car I want to sell that day?

A blue Camry. Guess what happens if you come in looking for a white Camry? You want a blue Camry. No, really, you do. And I used to joke and say, you know what?

If I can't land them on a car here, I'll sell them their own car. Think about that. Again, my point is they're there to sell cars that's what they do and they're good at it. So don't go in there without your knowledge don't go in there without being a good steward. The Lord has given you money you have to have a vehicle.

There's nothing wrong with owning a nice vehicle but there's a way to do it properly. Spend 15 seconds telling us about the importance of that vehicle being on that lot versus another lot, where they have to swap it out and source it. Yeah. So we have someone here that just purchased a vehicle, and they wanted a certain one, and it wasn't on the lots around here. So they called that dealership and said, I want this vehicle and this color and this package.

Again, he did his research. He knew what he wanted. They didn't have it at that particular dealership, meaning on the lot. But they can get it from another lot. But how does that work?

They have a person that's worked at, again, the dealership I was at, she's worked there for 22 years. What is her job? She checks cars in and she trades cars. So I'm working with you and you say, that's a really nice blue Camry, but I don't want a blue Camry. Mama wants a red Camry and I'm looking at my inventory saying I got 50 white ones, three blue ones and I'm gonna get paid really well on and I got no red ones and I'm gonna say hold that thought and I'm gonna send a message to this lady and say I need a red Camry in XLE and I got a person that wants to buy it if I can get it.

She's going to immediately go in an inventory, behind the scenes, find that vehicle, contact that dealership, and say, I want that red Camry. If it's a regular vehicle, they'll say, OK, I'll take one of your 50 white ones. Or you know what? We don't have any blue ones, so we'll take that old blue one you got. But we're only going to give you this amount for it.

And they're going to take money off that. So they're going to lose money to trade that vehicle. They might say, you know what? That's a specialty vehicle. I had this happen with a Land Rover on the Toyota dealership.

Yeah, that's an $80,000 vehicle the guy wanted a certain one We found it it cost us three vehicles to bring that one vehicle over But they did it but sometimes they can't deal as much on that So if you want to really make a deal, find a car on that lot and make your deal on that lot. And that's where if you're doing it on the internet, you don't know that's happening behind the scenes and they have sort of different rules to deal with that. But if you're on that lot and you want to get a deal you're not going to get the best deal by picking if you see all white cars you're not going to get a good deal by picking a blue one and saying I want a blue one. Are they still going to negotiate? Yes.

Are you going to negotiate as well? Absolutely not. That That makes a big difference. If one dealership needs a car from another that don't have one to trade, do they buy it at invoice? They trade in that invoice with the connotation that the other dealership can ask for more because they know that you need it.

It becomes a sales game between the dealerships. They turn on each other. They do, yeah. Because there's certain vehicles that are hot, certain vehicles that aren't. So if you're trying to get the hot vehicle, because chances are you went on the website before you got there looking for a red one, they show a website hit that you looked at a red one.

Now this guy calls and says I want your red one and they're saying wow we had four hits on this red vehicle today. There's a lot happening behind the scenes. So then you land on a vehicle. What happens next? Yep, You're going to look good in that car.

So we ready to sign this deal? Well, we really love the car. Yeah, we love it. It's just 340 is as high as we can go a month. You're kidding me, right?

All the paperwork I had to do, I look at your credit report, you got a lot of money. So then let's do the deal. Tired of being bet. So that's one ahead, but that shows the financing. So within negotiations, you're going to ask questions, right?

They're going to ask you. So when you walk onto the lot, I'm going to greet you on the lot. I'm going to ask you a lot of questions, right? We initially saw, I'm going to build rapport. A lot of these things they joke about, but guess what?

I'm going to do that. I'm a people person. I've been in sales all my life. Back when I was a ski pro, they told me you were more of a salesman than a ski pro because I had a very high amount of requested things because I was a people person. So when I hired people for my stores and sales, I did retail sales for 11 years of Verizon Wireless stores.

I hired people based on personality, not on sales experience. If you're a people person, I can hire you and I can get you to sell. If you're a people person, you can sell anything. I used to train people. We'd take a pencil, we'd put it in the counter, and I'd say, sell me that pencil.

And I jokingly did that when I was at Toyota, and guess what that guy did to me? He goes, hey, that's great. Sell me that pencil. It's sales. That's what they do.

So they're going to ask you a lot of questions. They're going to ask, first off, do you have a trade? First, one of the first questions they're going to ask you, before I zip you around that lot, I want to know if you have a trade, because that's going to make a factor in the deal. As a buyer, walk in on that dealership, keep that in your back pocket. Say, quite honestly, not sure yet.

Let's circle back to that. Because if I know you have a trade, then I'm gonna figure that into my deal when I sell you a car. Because there's a difference there. There's this price for that trade, there's this price for the trade, there's what you want for the trade, and there's what you're gonna take for that trade. And I'm gonna get you as close to that point as I can.

Again, is that wrong? No, because you're trading it, right? If you're upset about that, don't bring your trade. Sell it on Craigslist. That's a pain, right?

Well, that's the difference. That's why you give it to them at a lower cost. They're going to take your trade, then they have to resell your trade. So it makes sense that they can't pay you full retail for that trade, right, because they have to sell it. So they're going to ask you about your trade.

Then they're going to do a walk around on the vehicle, right? There's specific trainings, and this is more so for new vehicles, but it applies to use, where we are trained very heavily on how to do a walk around. Okay, go ahead and watch when you go to a new car dealership. What do they do first? They bring you to the front door, right?

They open that up, And then they walk around, they open the hood, and I show you the safety feature here, I show you this here, I show you this here. How many kids do you have? This crumple zone in the front of this car is good for this. This side airbag is good because you have kids. Oh, it's a single guy?

Yeah, I'm not going to talk about that. I'm going to talk about this, this, and this, right? It's sales. That is what they do. Then you're going to go on the test drive, right?

It's very specific. They bring you on a certain test drive route. Nothing that they do in that dealership is by chance. Every single word, every single thing they do is calculated because they're there to sell you a car. So they're going to bring you on a test drive.

Then you're going to go inside and negotiate. So we're going to go back and forth, and we're going to negotiate in that vehicle. And again, this is doing your research. If you do the internet thing, and you know what you're doing, and you know what you want, you can avoid all this stuff. Most people don't do that.

You're out driving around, you bop in. One of the worst things you can do when you pull into a dealership is say I'm just looking. Okay? Because salesman mode, I'm gonna sell this guy today. Right?

It's a challenge. You're just looking, you're gonna buy a car today. That's what they're thinking, right? So just looking isn't the best thing to say. You might want to say I'm just starting my buying process.

That is very different to me than I'm just looking as a salesman. Then they have at the end of that process is a manager handoff. So I go back and forth, I go back and forth, I go back and forth. I can't get you to sign on it. You're kind of there.

I'm going to say, hold on one sec. I'm going to get up. Guess who's going to come visit you, my manager? Guess what he's going to do? He's got 25 years into closing car sales.

And guess what he's gonna do? If you're not prepared, if you're not a good steward, you're gonna buy that car. And it's really easy to sit here and say, no, I'm not gonna do that, I'm not gonna do that. Yes, you will. Because they are trained to do that.

There's a science, there's a mechanics, there's a methodology, and they're good at what they do. So again, be a good steward of what you have. Don't just go into those places. Hey, buddy, How about us making us a deal? I like her a lot.

How much wiggle room we got on the price? Wiggle room? I'll show you wiggle room. Wiggle wiggle wah. Wiggle wiggle wah.

Wiggle wiggle ooh wah ooh. Wiggle wiggle wah. Wiggle wiggle woo. How's that? Huh?

We got us a deal going. Wiggle wiggle woo, wiggle wiggle woo, wiggle wiggle. Tired of being bad? Wiggle room, I'll show you wiggle room. So after the handoff to the manager, if you're going to buy that vehicle, the next step is you're going to go to that finance person.

Guess what? These guys are trained in finance. They're trained to sell the extras. We hit a little on the extras. I called a friend that works at Lexus yesterday and said, hey, tell me about some of the extras you get.

Talk to me. He said, well, you know about the extended warranty. That's a warranty on that vehicle. $1,500 minimum up to $6,500, depending on the vehicle. Okay?

What does that cost the dealership, you think? Anywhere from $300, $400, $500, depending. I mean, they're making a lot of money on these things. OK? Keyguard.

You know what keyguard is? You know those funky fobs you have that start your vehicle, you can walk up and touch them in the open? Those are expensive. Those can be $300, $400, $500, $600. For $900, I Can help you when you put that through the wash for the third time you won't have to pay for it Okay dent and ding hey, let's face it guys Your car is gonna get that first dent your car is gonna get that first ding tell you what that's stressful Let's take away the worry right now 2500 to 3500 depending a vehicle when that first thing happens you bring it in here and it'll be gone by the time you come back.

We're going to fix that for you. Rim guard, man, you got nice rims on that rig, right? That's a nice ring. 15 pass in a van you got there, brother. Nice.

But they have rim guard, right? I'll move quicker, right? Rim guard, 1,500. I got a quick story, if I might. I had a gentleman work for me years ago that had been a salesman a lot.

And I asked him, tell me the craziest thing that ever happened to you. He said, well, customer came in. And I was closing the deal. And I kept throwing extras at him. He kept taking them, kept taking them.

Extended warranty, this key thing. He said, finally my conscience kicked in. And I said, look man, you don't need any of this. Just sign this thing and get out of here. So I thought that was interesting.

Yeah, that's true. So two more. Rim Guard, $1,500 to $2,500. Simon Eyes, protect your paint, protect your interior, all that. $995 plus.

Maintenance Extension, $2,500 to $4,500. All those things add up to $9,885. Show of hands. Just roll that into your payment. It'd be fun.

Exactly. So show of hands, how many here are going to take that? $9,895. You're shaking your head no, but I guarantee you, you sit in front of me and you sit in front of the finance manager, you're going to take at least 70% of that stuff. I guarantee it because that's what they do.

When you hear it presented like that, you're thinking, I wouldn't take that. I wouldn't take that. This is why we're saying you need to be prepared. It's the second largest purchase you're gonna make. I can sell you one why you need these things.

They will sell you, they will sell you one why you need these things. Some of them maybe do, maybe you don't. But In general, you don't need those things. And then the last thing I'm gonna say is be prepared to walk. Do you know what time my car is going to be ready?

Do you see this suit I'm wearing? I don't fix cars. I sell cars. Well, I've been here over three hours and it is... Do I look like I care?

I don't. Tired? Right. So be prepared to walk. Again, this goes up to you being a good steward.

Know what you want. Know how much money you have. Don't get talked into all these things. Be prepared to walk away. And I mean walk away.

You're not going to walk away without the manager coming. You're not going to walk away without the manager coming. You're not going to walk away without these guys coming at you, but be prepared to walk away. We had another quick story on this one. So I had a professor some years ago, and I wouldn't say he was the most ethical guy, but He went into a dealership and he negotiated his best deal.

And at the end, he pulled out his carefully prepared checkbook, which had one check left. And he wrote the check for $100 less on purpose. Handed it to them and the finance guy goes, is this $100 less? He goes, oh, sorry, it's my last check. And the finance guy said, get out of here.

So he said, OK. He left. And his point was, you never know when you'll be called back to the table. The phone rang two days later. It was a Ford dealership.

And they said, come on in. We'll do the deal 100 last. He goes, unfortunately, I'd already bought another car. But his point was, and I wouldn't advocate that at all, what I'm saying is if you walk, if you have a true determination to walk, you're gonna get a much better deal. If it's kind of a fake threat, I'm gonna walk if you don't meet my deal, and they don't believe it, it's not gonna do you any good.

You have to be willing to walk. There's plenty of car dealers out there. Plenty of cars, you don't have to buy from them. So once it becomes credible in their mind, they'll take money off. One more I think I have.

So are we ready to make a deal? We like it. We just like to take some time to think about it and get back to you tomorrow. I'll suit you sales. Probably won't be here tomorrow.

I got another couple interested in it. We'll take our chances. They won't be here. Okay, we'll see what happens. Well, it'll be gone.

We're just gonna wait, okay? Better buy it tonight before I sell it right from under you. Tired? So in closing, two things, what he said is correct. Be prepared to walk.

Because remember on the last day of that month when they need a deal, guess what I'm doing as a sales guy? I'm going back and calling every person that walked onto my lot that month that I didn't sell and said guess what? End of the month I just got permission from my manager to do this. And instead of a hundred bucks less, it's gonna be two, three, four hundred bucks less because I need to make that deal that day. So they will do that.

The other end of that I'll say real quick, again two sides every coin, that happens. Right? I had people tell me one time, I had one blue vehicle. They looked at that vehicle and they did that, right? And I said, look, I'm a Christian.

I'm not going to tell you to sign in this thing tonight. I don't do business like that. But I'm going to tell you that I did legitimately show it twice yesterday and I got one of these things. If this truly is the vehicle you want, then get it. And guess what?

They came back the next day, I'd sold it that night. They're angry at me, right? So at first they're angry because I'm trying to pull a sales trick on them. Then they're angry because they lost the vehicle they wanted. So again, it goes back to do your research.

If that's truly the one you want, do your research and get that one. Because there is truth to that where there's other vehicles, but if that's a certain vehicle you're looking for, for whatever reason it might be, that vehicle could very well be gone when you get back.