Offers to Closing

Lender Costs and Buyer Expenses While Under Contract

The Pre-Read Summary

Costs that you, as the buyer, will incur while under contract include appraisal (varies by appraiser; cannot be up-charged by the lender) and inspection (paid directly to the inspector and specialists you hire), and, when applicable, a survey (paid directly to the survey company) and condo certification (charged via the lender).

The biggest expense, and sometimes surprise, is lender costs. Upon close, lenders will charge buyers for fees such as origination, processing, and underwriting. Other money is held in escrow, such as for property insurance and taxes. Just another great reason to pick your lender before making an offer — you’ll have a pretty good idea of what these expenses might entail! Also, regardless of who is paying for the title insurance, the buyer will pay for the lender’s title policy.

A quick heads up before we jump in. Upon going under contract, earnest money will be due. This is what you, the buyer, are “putting up” to demonstrate your commitment to go through with the transaction. Is it an expense? Well, kinda. You, the buyer, will deliver the check to the title company (as a neutral party to the transaction) within a few days of going under contract. The check is then cashed and held in trust until the transaction is either terminated (by an applicable deadline) or closes. Upon close, the money is applied to your closing costs and down payment — not a penny wasted! Sellers determine what they want for the earnest money deposit. A good estimate is 1-1.5% of the home’s value, but we’ve seen 3% often enough to say, have that available.

Now, onto the fun stuff!

Lender Fees: $$$$$

What: Origination, processing, and underwriting to name the majority

Who: Lender

When: Paid at closing

How Much: Varies by lender and home, typically a few to several thousand

Know This: All lenders charge fees to underwrite and process your loan. This is part of every transaction that involves a mortgage (i.e., not paying all cash). Fees vary by lender. Some lenders offer programs that help minimize your expenses at the closing table, such as rolling some fees into the loan. Keep in mind, this helps on day one, but also means you’re paying interest on that amount over the term of the loan. Talk to your lender about their costs and any reservations you may have — they might be able to help. Although you don’t pay your mortgage for the first month, that’s only technically true. Upon close, you’ll be paying the prorated interest, which does make up most of your monthly payment, decreasing incrementally as the principal is paid down. Since this varies depending on when you close, an estimate is kinda tough, but if you save for a mortgage payment, that’s probably close enough!

Important: The time to interview lenders and select a lender is before you go under contract. Although it is your discretion to change lenders, switching can create uncertainty in the eyes of the seller… Why rock the boat when there aren’t even any waves? And, you’re busy during the contract — going to inspections, the riveting excitement of reading a title commitment and the HOA’s rules and regulations — fun times. But before all of this kicks off, you have time to compare rates and costs between various lenders and see if the one you liked best can match the cheapest!

Appraisal: $$$

Who: Appraiser via the lender

When: Paid upon appraisal, may be paid at closing

What: Determines the valuation of the home

How Much: Varies by appraiser and property, typically around $700

Know This: Appraisals are required when a mortgage is used to purchase the home, with a few exceptions, like with a significant down payment. Lenders require the appraisal to qualify the value of the home at or above the agreed upon purchase price. It also gives buyers peace of mind that you’re not overpaying, and sometimes that you’re getting instant equity! If you’re paying cash, most buyers opt to save the money (you know, for new yoga equipment for your workout room).

If an appraisal is completed, the buyer may still be charged for the appraisal by the lender, even if the contract is terminated and does not close, and regardless of whether or not the termination is a consequence of the appraisal. It’s up to the lender. If the contract terminates before an appraisal is performed, this expense is avoided. That is why most appraisal deadlines are set after the inspection.

Inspections: $$-$$$

Who: Inspection company and other specialists

When: Paid upon inspection directly to the inspection company

What: A visual examination of the home’s present condition and major systems

How Much: Inspections run about $500+ on a typical home, increasing by size. Additional inspections, such as sewer scope or radon, and other specialists will charge additional fees.

Know This: A home inspection is used by buyers to “pull back the curtain” and gain additional insight into the home. Additional services can include radon, specialists (HVAC, electrician, plumber, etc.), sewer scope, structural engineer, etc. Although a home inspection is not required to purchase a home, it is very strongly recommended even if the home is being purchased “as is.”

If an inspection is completed, the buyer must pay for it, even if the contract is terminated and does not close and regardless of whether or not the termination is a consequence of the inspection. Most inspectors will not provide a copy of their report until the invoice is paid in full.

Important: Plan ahead — some inspections, such as radon, require a few days to complete the test. And you may decide to get quotes or additional inspections by a plumber, for example, which takes time to schedule. Keep in mind, the more you do during inspections, the more expenses you’ll face. But, you’ll also know more about your prospective home!

Side Note, Surveys: For those buying a home where a land survey is needed or desired, this is paid similar to an inspection — upon completion of service to the survey company and before a report will be released. Surveys can cost a few hundred dollars to several thousand, depending on the type. Sometimes, a survey will be required by the title company to verify boundaries, encroachments, etc., in which case they’ll specify what is needed. Otherwise, you and your surveyor will determine what type of survey is most appropriate for your specific property and they will give you a quote before doing any work. If the survey is too expensive for you to continue with the transaction, it is your discretion to terminate before the survey deadline. If not, continue on!

Lender Title Policy: $$

Who: Title company

When: Paid at closing

What: Policy insuring title to the property for your lender

How Much: Varies by title company and property, usually around $600

Know This: If you’re paying cash, the lender’s policy is not applicable, as there is no lender! But, as long as there is a lender involved in the transaction, the buyer will be paying for the cost to insure title for the lender. Although the seller usually pays for the owner’s title policy (which runs $1k to $2k+), the buyer pays to insure the title for your lender.

Condo Questionnaire: $

Who: HOA via the lender

When: Paid upon request of certification, may be paid at closing

What: Condo certification

How Much: Varies by HOA, approximately $250, the exact amount is what is charged

Know This: Condo certifications are ordered early in the transaction, so talk to your lender about when and how this will be charged. As is the case with the appraisal, the buyer will likely pay for this upon charge and regardless of whether or not the transaction closes, although some lenders simply roll it into closing costs (only paid upon close). Condos must complete a questionnaire for lenders to confirm they meet standards needed for lending, which can impact the type of loan a lender can use to lend on the property. For example, if a condo is “unwarrantable” because too many units are used as rentals, the buyer may need to use a portfolio loan instead of FHA or conventional. Clear as mud? Great! Because you don’t need to worry a whole lot about it unless it applies to your transaction, in which case your realtor and lender will explain!

Other Costs…

Who: Where do we start?

When: Depends on what it is, but mostly paid at closing

What: Again, where to start?

How Much: Not much (most likely)

Know This: Other costs are going to show up on your closing settlement statement, which you will receive a few days before close. These could include prorations for property taxes, HOA dues, water bills, and the like. There will be a $25 (+/-) recording fee from the county to record your title. In most cases, this only accumulates to a couple hundred dollars more, if that. However, if there’s a large HOA transfer fee, for example, it could be more. In short, prorations are determined down to the day to make it fair and so costs are exact. Not a penny is wasted.

Still awake? Overwhelmed?

Do not fret! It seems like a lot the first time you buy a home — and maybe the second time, too! Preparation will help immensely.

First, have money readily available for your earnest money deposit, 1-3%.

Second, pick your lender and get a rough idea of costs to close the loan, what they’ve seen lately for appraisal charges (dust off your report on supply and demand), and other expenses you should expect. Know that your earnest money will be applied to this, and might even cover most of it.

Third, have money set aside to cover mid-transaction expenses like inspections, more if you’re looking at larger than average homes or unique situations.

Finally, and this wasn’t discussed above as it’s a totally different topic, but talk with your lender about how different terms and down payments can affect your interest rate, payoff amount, and monthly payment. What is the minimum required for your loan? What will eliminate mortgage insurance? When it’s all said and done, the down payment is the biggest “expense” you have when buying a new home.

And don’t be scared, because you’re not alone!

Your favorite Love Your Hood broker is going to guide you through the process. As related to these costs, they’ll help you navigate the timing of the steps throughout the transaction. A little preparation and a great realtor will help immensely!

Now that you’re prepped and ready… happy home shopping!

Is a contingency to sell your home a deal-breaker to buy in Denver?

We’re sure you’ve heard how competitive and fast-paced the Denver housing market is these days. If you haven’t, we will confirm that it is still crazy, but not as crazy as it was three months ago. In April, the norm was for listings receiving ten or more offers, sales hitting far above list price, and little to no leverage for buyers during negotiations. We’re still seeing sales at or above list price, but now with only few offers and occasionally with some negotiating leverage.

Sale contingency is driven by your lender

If you’re getting your finances in order to purchase a new home, you may run into one common lender requirement (also called a condition): that you must sell your current home prior to buying your replacement property. While selling before you buy is the most common scenario (then removing the condition and allowing you to secure a new home loan), it is extremely difficult to get a contingent offer on a home accepted. On an initial phone consult, most real estate brokers will throw their arms up in submission when they hear you need to sell before you buy. Rest assured, there are ways to accomplish this:

The old fashioned way

The classic way to deal with this hurdle? Negotiate it! There are more opportunities these days to negotiate a contingency into your offer. To be successful in this, you must show the seller that you’re committed and that you aren’t just testing the waters. Having a plan to present to the seller is key. Having your home ready to list and press the “active” button on the MLS helps to convince a seller you mean business. Better yet, have a live listing that hits the market when you submit your offer, or even better — one that’s under contract!

A new option

We recently published an article on ways to sell (or not) before you buy your next home. While those techniques remain great options for accomplishing your next purchase, there’s a new kid (lending product) on the block that we want to tell you about! We’re continually vetting home financing products that would be a good option for our clients, and we were recently invited to use a new lending program that is only offered to a select few brokers in Denver and their clients.

This program essentially turns you into a cash buyer by purchasing the home for you and selling it back to you once you have sold your current home. Sounds too good to be true, right? Well, there is a 1.5% fee for the service, which can be rolled into the purchase price when you’re read to buy the home back. There’s no free lunch, but it is a great service provided to contingent buyers so they can bypass the stress of selling their home until they’ve secured their new one. There are some restrictions on the loan amount, timing, etc., so reach out to us and we can fill you in on all of the details!


There are many different ways to sell your home and purchase a replacement successfully. Your first step is to sit down with a real estate broker who is familiar with all of the options and can help you come up with a solid game plan! If you’d like to utilize our expertise on this or for more detailed information about the market in your neighborhood, please reach out!

How to win in Denver’s home bidding war

I’ve been saying it since the first week of January… “It’s like someone flipped a switch and turbo charged this market!” If you aren’t on the hunt for a new home, let me be the first to tell you it’s a crazy, crazy, crazy market with the sellers in complete control. I took a quick peek at the multiple listing service statistics today, and here’s what I found:

There’s nothing to buy.

In Denver County as of February 11th, 2021, there are 895 active listings for sale and 1,831 listings that are pending (under contract). In January, there were 889 property sales. That leaves us with one month of available inventory, one month! I’m concerned for February’s stats after seeing that massive pending number. For buyers looking for properties under $1 million, it’s a very frustrating time. There isn’t much to look at. 895 homes is 0.003% of the 338,341 total homes in Denver, per the US Census as of July 1, 2019.

The competition is stiff.

Buyers are showing their resolve to succeed in this market. I was recently involved in two separate negotiations that came in over list price; one ended up $50k over list price, the other $130k. Each negotiation had over 15 offers, and not one was at or under list price. In fact, January’s single-family close-to-list price ratio was 101.3%, so my experiences were not the exception, but the rule these days. While the reality of the market may seem disheartening, let’s take a turn and break down how you can succeed in it.

Competing requires strategy.

I’ve seen some very aggressive offers in the last 30 days. Below are some of the popular tools used to get your offer accepted, though it’s by no means a comprehensive list.

  • An aggressive initial offer.
  • An escalation clause.
  • Purchasing the home “as is” and limiting inspection asks to a low dollar amount ($1-5k).
  • Appraisal protection (gap) clauses that waive the buyer’s right to object if the appraisal doesn’t come in at the above list contract price.
  • Buyer paying seller’s closing costs.
  • Higher earnest money deposits with a portion of or all of it non-refundable.
  • Shorter close periods (2-3 weeks for financed purchases).
  • Free seller lease backs after closing to allow the seller to find a replacement home (good luck).
Buyers need a Plan B.

If you find yourself on the losing end of things, don’t give up! Backup offers are becoming competitive — I just experienced my first multiple offer backup negotiation (no joke). It used to be a slam dunk to get a backup offer accepted after the home is pending, but not anymore! Have your backup prepared and submitted as soon as you receive the bad news. Being quick to the punch when everyone else is sulking could make the difference.

Backup contracts are free insurance policies that don’t prevent you from submitting other offers on new homes that you find. In the event that the primary contract terminates (which they do), you automatically become the first contract with zero negotiations. If you find another home you like while you’re in the backup position (and can get it under contract), a simple email terminates the backup contract, and voila! The best part? No earnest money is required for backup contracts!

It’s easy to get discouraged in this market, and I understand the urge to just take the “blue pill” and sign a lease to ease the endless anxiety and disappointment. But I would encourage you to take the “red pill” and work the plan that you and your real estate broker created. The end result will be worth it. Stay the course!

The emotional roller coaster of home buying in Denver

Along with every other real estate professional in Denver, for years we’ve been saying, “it’s a seller’s market,” “homes are going quickly,” so on and so on. But what does that really mean for a buyer? How do you navigate the current market, let alone the roller coaster of emotions throughout the buying process? Let’s walk through it.

Setting Expectations

It’s important to understand the current market you’re about to throw yourself into. You’ve probably heard home buying stories from co-workers, family, or friends advising on how difficult it is to purchase a home these days. While there’s certainly truth to their experiences, there also tends to be exaggeration (we all want to tell a good story, right?). The best place to start for an unbiased opinion of the market is with statistics. It may not be one of the most exciting parts of buying a home, but it’s one of the most important. It will help you understand the reality of what’s happening in the market, and more importantly, what’s driving it. You don’t need to spend hours doing research, you just need the 30,000 foot view so that you can begin to formulate accurate expectations for your upcoming journey. Luckily, we’ve made that easy for you. Skip the endless Google searches and read our 2020 real estate recap. Before you know it, you’ll be up to speed with the current market. It will be painless, I promise!

Game Planning

It’s important to have an organized plan before you start your search (yes, even your online search). Once you’ve educated yourself on the market, the next step is to make a game plan. Start putting together your advisory team, which consists of a knowledgeable real estate broker and lending partner. These professionals will help to facilitate your planning in each of their prospective areas. A few things to consider while planning:

  • Budget
  • Time frame for purchasing
  • When to start the search
  • Type of financing that is best for you
  • Down payment source and amount
  • Type of home (condo, townhome, single family, etc.)
  • Neighborhood
  • Neighborhood statistics (zoom in from the 30,000 foot view!)

This list is just a starting point. Everyone’s planning will look somewhat different based on their home buying goals. The great thing about hiring a team? You don’t need to reinvent the wheel. They’ll coach you through the process to make sure you’re making the best possible decision for you and your family.

Home Touring

This is the fun part. Once your plan is complete, it’s time to work your plan. In our current market, time is of the essence for touring homes. Traditional pre-pandemic home touring consisted of clustering several homes and viewing them back-to-back in a short time period. Usually, there are other overlapping groups touring the same home you’re looking at. Today, overlapping showings are a no-no, and bookings to view hot listings in desirable neighborhoods fill up fast. It can occasionally take one or two days for a tour slot to become available (picture anxious buyers hitting refresh over and over again). The moral of the story: When a home catches your eye, schedule a tour with your broker. Whether that’s in-person, via FaceTime, a recorded video, or on Zoom, it doesn’t matter. Just get your eyeballs on it so you have the opportunity to compete.

Submitting an Offer (or two, or three)

Now the planning pays off (hopefully). With Denver’s low inventory, you’ll likely be in competition with other buyers for a home. Emotions get high, and anxiety can creep in. Don’t worry. This is normal. The greatest advice I can give you is to trust your broker regarding the value of the home you’re interested in and listen to their negotiating strategy. Remember that they’re on your team, and together, you’ve already outlined the desired outcome in your planning session. I like to call the plan a “guard rail.” It’s outlined before all the craziness begins, and it’s there to keep a buyer from making an emotionally-based, often poor decision. Don’t let the plan fly out the window when things get stressful!

We are in a deep seller’s market, consisting of multiple offers. There can only be one winner per home, and while hopefully that winner is you, be mentally be prepared to walk away when things go awry. Stick to your plan. Listen to your broker’s advice on a recommended maximum price for the homes you are offering on, and you’ll be fine. Your solace in losing will be knowing that someone else overpaid!

In conclusion…

Buying a home can be an emotional roller coaster.The process is filled with hope, anxiety, stress, disappointment, frustration, and eventually joy. To help manage these emotions, set expectations, plan properly, and seek counsel from your real estate broker. These guard rails should soften the blows. Remember that your broker has their head in the game every day, and their years of knowledge can be trusted. Their council, along with your perseverance, will get those keys into your hands in no time.

Should You Write a Buyer’s Letter to the Seller?

You found the perfect home and simply must have it! Your real estate broker is going to present your very strong offer to the seller’s broker and found out that there are several other offers on the home. You are very emotionally tied to getting this home. In this hot real estate market where homes can go within hours of being listed, some buyers are desperate to get the home they want. They may have written offers on several homes but weren’t successful. Writing a letter to the seller “pleading their situation” has occasionally been a tactic of buyers in such situations. Should you as a buyer write a letter to the seller in an emotional appeal for the seller to accept your offer? Consider the following.

Letter to Seller

What a Buyer’s Letter Is + When to Present It

A buyer’s letter to the seller is just that: a letter written by the buyer to the seller of the home that the buyer wants to purchase to encourage the seller to accept his offer. Letters are most often used when competition for homes is strong, there are multiple offers on a home, or when the buyer feels there is a special reason that the seller should accept his offer. The buyer may explain how this home fits him perfectly, what it would mean to his family to live there, tell the seller how well the home would be taken care of or restored, complement the seller on particular features of the home, etc., all aimed to get the seller to accept his offer. The buyer may also talk about his solid finances, job status, down payment, etc. to confirm his financial strength to purchase the home. The letter should be presented by the broker at the same time as the offer is being presented to the seller.

In some instances a seller may request a letter from prospective buyers. A buyer can include any of the items in the previous paragraph as well as a photo of the buyer and family. However, the seller must be cautious about basing his decision on any discrimination that could violate the Fair Housing Act.


As a Buyer, What Can I Expect at the Closing Table?

You’ve negotiated a successful offer, resolved all the inspections items, and done your due diligence.  You are so close to ownership that you can feel the new keys in your hand.  The only thing standing between you and moving into your new home is the closing table.  Whether this is your first real estate closing or you are a seasoned veteran, the following will point out what to expect in a real estate closing in Colorado.

What to Expect at Closing


Depending on how condensed your contract period is, you may receive the final settlement and HUD-1 statements with enough time to review them with your lender and real estate broker.  It isn’t uncommon, with the volume of new mortgages and refinances, to receive these documents just hours before closing.  Either way, you will have time at the closing table to have all your questions answered about the details and account for every penny of the transaction.

Prior to your closing, you will do a final walk-through of your new home with your broker to inspect its condition.  This is your opportunity to ensure all agreed upon inspection items have been completed, the condition of the home hasn’t changed from when you went under contract, and all contractual items are in the home.  The final walk-through is not an opportunity to re-inspect the home. (more…)