904: Hidden Costs of Buying a Home | What They Don't Tell You

Speaker 1  0:40  
Music. Instead of

Brian Nichols  0:52  
focusing on winning arguments, we're teaching the basic fundamentals of sales and marketing and how we can use them to win in the world of politics, teaching you how to meet people where they're at on the issues they care about. Welcome to the Brian Nichols show. Well, hey there, folks. Brian Nichols here on another fun episode of The Brian Nichols show today we are jumping right into it with a great conversation. Would be president of the NTU, the National Taxpayer union. Pete Sapp, welcome to the Brian Nichols show. How you doing?

Unknown Speaker  1:22  
Doing well, thanks for having me.

Brian Nichols  1:24  
Thanks for joining us, Pete, looking forward to today's conversation. I know we're gonna be talking all things. You know, buying a home, which in 2024 ain't so easy, despite the Fed trying to go in and play the puppet master. You know, we're gonna dig into that as well. But before we go into all the fun stuff, Pete, do us a favor. Introduce yourself here to the Brian Nichols show audience. And who are the National Taxpayer union.

Pete Sepp  1:47  
Well, National Taxpayers Union was founded back in 1969 by a graduate student named James Dale Davidson. At that time, he had just finished working for Richard Nixon's presidential campaign. And he said, you know, not even the Republican Party has the interests of taxpayers at heart. 100% of the time, there has to be a nonpartisan organization that does have those interests at heart. He could not find one in the Washington DC white pages or yellow pages when he was strolling into a phone booth at DuPont Circle. They had phone booths and phone books back then. And he said, You know what? I have to found this thing. So he did, and we have grown to hundreds of 1000s of supporters since that time, all working for lower, fairer, simpler, taxes, less wasteful government spending and accountability from public officials, especially at the IRS.

Brian Nichols  2:50  
Oh, those good, good old friends at the IRS, they have what 87,000 new agents who are eagerly looking to dig into your Venmo or PayPal receipts. So thank you for doing your part in helping fight back

Unknown Speaker  3:01  
absolutely well, let's

Brian Nichols  3:03  
talk about other ways we can fight back, and that's a topic of conversation for today, because for many and let's just address the millennials in the room buying a home right now, not so easy, and I don't know it feels like gaslighting at points when I hear the yesteryear generation saying, Well, back in my day, or super easy to buy a house, and why are you having such a hard time? And it's like, well, I don't know. Maybe things have changed a little bit, but that's just me. You know, I am very fortunate here. Pete, I was able to secure my home before the insanity started to to really take off here. The past three years, interest rates skyrocketing. Home rates skyrocketing, and yet, there's a piece to this puzzle a lot of people seemingly just don't pay attention to, and that is not just the cost, but where the costs are coming from. And rumor is that 44% of total closing costs for a new home are government fees or taxes. Tell us more. Yeah, it's

Speaker 2  4:01  
pretty incredible. Whenever you're setting out to buy a home, some of the first things you think about are, well, how do I scrape the money together for a down payment? How do I go through the loan qualification process? How much can I get? What kind of paperwork do I have to file? How long is it going to take? Then you might start thinking about what kind of house you can actually look for, and it all seems to come together into this big process at the end, and you say, wow, look at all of these associated costs, all the paperwork, all these items that I have to check boxes on and sign an initial and everything. And why do I have to pay all of these crazy fees and these closing costs? What's going on here? We don't often stop to think, well, is my own government working for me or against me when it comes to buying a home? And the answer is often against. That's because, when you. Take a look at the average closing cost. This is data from core logic of $6,900 something on the order of $3,800 is taxes, transfer taxes, property taxes, recordation taxes, mandated fees that governments require you to pay in order to do things like qualify your income for mortgage purposes or to even take title to your new home. All of these things add up to a tremendous burden, and yet government officials right now we're saying it's the private sector's fault behind all of these high closing costs. Well, government has a big, outsized role too.

Brian Nichols  5:50  
I just feel that the reoccurring word of the day for our show is going to be gaslighting, right? Because I remember a short what, few weeks ago, it feels like it was a long time ago the last time that Joe Biden was on debate stage. But now it was just a few short weeks ago, and he was talking about all these junk fees, junk fees, man and and yet, I mean, what more of a junk fee than some arbitrary government tax

Speaker 2  6:15  
beat? Yeah, yeah, that's absolutely right. And really, junk fee is a political definition. It's not like if you ask an economist what a junk fee is, he'll point you to a textbook and say, Ah, here, the White House and various federal agencies have defined junk fees differently. The biggest definition I see, the most expansive one, is what the White House has said they call a junk fee, unnecessary, unavoidable or surprise charges that inflate prices while adding little or no value. Okay, let's start taking a look at some of the government's own charges here, for example, the passenger security fee that you pay in order to travel by air. Well, part of that passenger security fee doesn't go to passenger security it's being diverted to finance other types of federal spending. I would say that kind of adds little to no value to your flight experience. You take a look at passport fees, or you take a look at Animal and Plant Health Inspection fees on your airline ticket. And those are unavoidable, but are they necessary? Because, again, some of these fees end up getting diverted for purposes that don't enhance your travel experience. This translates into so many other realms of government policy, and it comes back to home ownership too.

Brian Nichols  7:50  
How do they get away with it? I guess that's my question, because we hear this and we're talking about this on the show today, and it just it comes across so common sense, silly, right? Like, why? Why are we being taxed, in this case, 44% in just in extra costs for government fees? Is it bureaucracy? Is it people just not paying attention? Is it something else?

Speaker 2  8:16  
I think there are really a number of reasons here. One is the nickel and diming factor. Many of these fees and taxes that the government might charge fly under the radar, 50 bucks, 100 bucks, here or there, but they start to add up. Ironically, government accuses the private sector of doing this. It's a practice, though, that the government has honed to a fine art. But another thing at work here, I think, has to do with the fact that they are hidden charges until almost the very last moment when you're prepared to buy that house you're enclosing and closing is called that for a reason, you're in the final stage of purchasing your home and moving into it, you end up getting these charges put on your bill at a point where you thought, gee, it I was thinking this was already over with, and all I had to do was pick up the keys to my house. Now you're telling me I've got 345, $1,000 of additional money I have to cough up. That's another factor. But I think an additional factor is, quite simply, that most people are unlikely to buy a home more than 234, times in their lives, so it's a pretty rare event, and they don't have kind of the muscle memory to expect these kinds of taxes and to protest them. They they it's not like an income or a sales tax that you pay through withholding or every time you go to the store. These are pretty rare in occurrence. Mm.

Brian Nichols  9:59  
It feels like divide and conquer, right? Like I'm gonna hide taxes in areas that not a lot of people are really paying too much attention at any given time. So to your point, right? Like, people buy a house maybe a handful of times in their lives. It's not something that you're doing your friends doing your other friends doing and you're experiencing at the same time. And it becomes a collective conversation, becomes part of the, you know, the major national conversation, and that right there, I think, speaks to you, to your point, other areas where we see the nickel and diming inheritance taxes, right, or property taxes, like, if you're a kid, and I'm using the term kid very loosely, like, maybe in your late teens and then early 20s, like, until you actually own property. I don't care about property taxes, like, okay, whatever, or till you have kids, right? You're trying to put your kids to school, and you care about the community that you're living in and the value of the property taxes going towards the school, unless you're in a district where we have school choice. But that's a different conversation for a different day. But with that being said, right, you You almost feel again, this pot of boiling water, and they're putting the frog in and letting it turn out very slowly. But we're at a point now where, almost again, I keep on going back to the number 44% it just blows me away that over half of the closing costs are government fees. So there must be a breaking point, right? I mean, goodness, we fought a revolution over a small, single, couple percent increase of tax on tea. I'm assuming that we're seeing at least some people starting to wake up. Are they? Are they voting, actually, with their votes, voting with their feet, voting with their dollars, doing things differently. What do you see coming down the horizon year? People?

Speaker 2  11:33  
Yeah, I think there will be a reaction to this. In fact, there already has been through the people who serve the taxpayers and the homeowners trying to get these homes closed and, you know, get on with their lives. These are the realtors in a number of states, there have been movements among realtor organizations to try to limit state level transfer taxes. Now a transfer tax is, as its name implies, something you end up paying when you're transferring ownership of the home from one person to another. They're relatively small in quite a number of states, but they can be astronomical in a handful depending on where you live. It could easily add 1000 $2,000 to the closing costs in a high transfer tax state. Realtors have been getting ballot measures proposed many places out west, places like Arizona and the Dakotas, to limit transfer taxes, and they've been succeeding because people, when they go to the polls, they have that time to pause and say, Well, you know, I bought a home a couple of years ago, and gosh, those transfer taxes were huge. I'm going to vote to limit them. Or folks who've never bought a home before might say, Wow, if I'm ever going to get into the dream house that I want better work on limiting these taxes now, so when I'm prepared, I can actually afford it. So these are popular ways to limit taxes, at least at the state level. Now at the federal level, well, we've got work to do with things like allowing people to deduct what's called Private Mortgage Insurance. That's a thing that you pay when you don't necessarily have that 20% level for a down payment on a home, and a private company will help to insure your mortgage if you have less of a down payment that allows you to get into the home, and it has the benefit of transferring some of the risk away from taxpayers who might be backing the loan and on to the private insurer that used to be deductible from your federal taxes hasn't been for a couple of years now, the value of that deduction was $400 or more on some tax returns. That could be a help when you're finally closing on your home.

Brian Nichols  14:06  
No kidding, no kidding. Well, I don't know, Pete, I think there's a magic wand here. Are you ready for this?

Unknown Speaker  14:13  
Okay, give

Brian Nichols  14:14  
$25,000 to all first time homebuyers. That's what Kamala Harris is proposing. What's the issue there?

Speaker 2  14:20  
Well, we can take a look at a lot of other areas of our economy. When federal aid, or even state aid, has flooded the zone, and we've seen the negative results. Look at Student Aid. For example, when we give student aid to try to address rising college costs, what's often happened is that tuition is simply increased by the amount of the new aid that's available. Yeah, supply creates its own demand and meets the demand. That's a law of economics, and that's what could happen here. I mean, many economists, not just your right. Growing rock ribbed, conservative type economists, but moderate ones, even left of center ones say, Well, wait a minute, if you're just infusing more money into the process rather than increasing the actual supply of housing, wouldn't just the prices of the existing houses go up, and that actually makes sense, even to non economists, which is why this should really be a non starter. I'd also add that, well, why aren't we taking a look at current federal government housing policy to see what's working and what isn't the Government Accountability Office, which is an investigative arm of the US Congress, was commissioned to figure out, well, how many housing programs and activities do we have in the federal government already? This was a couple of years ago, and they concluded there are 160 of them overlapping across all types of departments, not just the Department of Housing and Urban Development, the Agriculture Department, the Veterans Department, a whole alphabet soup of federal agencies offer some kind of housing assistance. How is all that not working? And why isn't somebody asking the question of, how we make that work better, and all the money we're spending there before we propose another $25 billion man,

Brian Nichols  16:30  
it just feels like there is a distinct divide in it's not just American voters, but just, I think, an average people. You have your prescriptive folks, and then the folks wanting to understand the root causes of the issue, right? So, like, I always go back to this analogy. You think of a doctor's office. It's like, you go to the doctor's office and you're like, Ah, my arm hurts. And the doctor's like, All right, here is a medicine to get rid of all arm pain. And you're like, cool. And then you take that medicine, and then, like, two years later, your liver starts to have issues. And you're like, Oh, my liver is having issues. Help doctor. And they're like, Hey, here's another pill to take care of the liver issue. And then you start taking that, that pill take care of the liver issue, but then, uh oh, that pill causes this. Again, you're treating the symptoms versus Why Does your arm hurt right? Like, and let's ask that question and try to answer that question, versus just tossing a prescription at it right, tossing the medicine at it without understanding the root cause. And I guess, I guess I look at the the American voter, and you look at the American culture, that mentality really does carry through where I think we have a big, a big discrepancy in the voting base, in our in our populace, like the ozempic era. I mean, we talked about this in a show previously, you have people who understand that the root causes of obesity are the things you put in your body and the lack of movement, right? I say that as a guy used to weigh 385 pounds. I lived it. Or there's other people who say, Oh, a pill that's gonna take care of all my issues. No, it's gonna cause more problems down the road in some other area that you're not prepared for yet to discuss. And again, then you just you foil it with the people who actually understand that you have to work hard change the things you do, and they see the the outcomes, and they're real outcomes. So I just, I look at where we are. Is it a matter of time preference? Is it a matter of not getting the I guess, like, the two, the two steps away that are gonna like that, the long term unintended consequences? Like, is there something that we're just seeing culturally Pete, I guess, like, that's the question I come down to, where this mentality of, like, just toss the medicine at it, toss the band aid at it, like, that's gonna fix the problem. Is there something more underlying here? I guess overall,

Speaker 2  18:55  
I think there has been an increasing trend toward that band aid ism in politics, but it's always been there. I mean, when you think about it, what sounds better from a politician wanting to get elected or reelected to their constituents saying we're going to dismantle all of the bad programs that aren't working in federal housing policy by conducting a thorough review, and we're going to transfer funds to the ones that work, and we're going to have a report on this in a year, versus we're going to create a new benefit for home ownership, and everybody's going to love it. It's an easier sound bite, and it's easier to propose something flashy and new, rather than to do the hard work and fix what's already broken. And unfortunately, if you don't fix what's already broken, putting something new on top of it is only going to make the break worse,

Brian Nichols  19:56  
well, and it goes to we talk about some sales, right? You? Have your emotional cell, which is the trigger that gets somebody to actually make the purchase, to close the sale, right? But then the logic, the facts, the figures, the reasons, the stats, all that is what you use afterwards to justify that the purchase. So it's almost like, I say almost like it is like the folks who are saying $25,000 There you go. They're They're almost at a guaranteed advantage, because they're leading with the emotional trigger, right? They're leading with, I'm going to give you something, right? And in my experience, there's really two things that people are looking to, either hope of gain or fear of loss. So when I'm voting for Kamala Harris, what am I voting for a hope of gain in this case, right? $25,000 that sounds pretty darn good. And that right there is, where is there a counter Pete? Let me ask you that, is there something that our argument here saying this approach isn't going to work, we need to start addressing the root cause of the issue. Is there a fear of loss that we can lead with to counter this hope of gain?

Speaker 2  21:07  
I think there's not only a fear of loss, but also a hope of gain. I mean the fear of loss for the first thing is to say to people, do you really want to burden your kids that you hope to raise in this new home with this kind of debt, with this kind of additional tab that future taxpayers will have to pay off, because that's what we're really doing here. The other thing, when you say hope of gain is, you know, we really need to be building a bigger supply of housing rather than creating a bigger supply of money to chase the housing, that's what we should be focusing on. The positive message is, let's work on getting more homes built that people can afford, and that doesn't necessarily have to involve the federal government. In fact, if government gets out of the way it can happen. I noted that the National Association of Home Builders did a survey of their own members and the kinds of burdens they face, like building code regulations that prevent them from necessarily getting a house up quickly permits all of these things, and the NIH be determined that as much as a quarter of the price of a median home in this country is going to regulations and the builders taxes. Well, okay, you want to increase the supply of homes make it easier and cheaper to build them.

Brian Nichols  22:44  
There's this here. We'll go to our final thoughts here. Pete, there was this video that was going viral on on Tiktok, on Instagram reels, on all the all the short form video content apps. And it was this girl who was like, I still can't get over this. I'm paying taxes on an item that the person who's selling it paid taxes on in purchasing, and then I'm paying taxes through and she just starts listing off all the different areas where a single item is being taxed multiple times over that we're being taxed multiple times over for the same services that in a transaction, it's being taxed on multiple sides. And it just feels like there are more and more people starting to just say, what's happening here, right? Like, what? This doesn't make sense. And that gives me hope. I feel that we are at a point right now where there is a large portion of Americans, and I'm gonna, man, I'm Hope. I'm not gonna eat my words, but like I am hoping that the younger generation to the that they're starting to wake up and realize that they're getting handed a terrible, terrible game to take over. And Millennials were like, Yep, we're we're doing our darndest. And then you look at the Gen Z, I'm praying for them when they carry after us. And yet things continue to get worse. You see the boomer generation still in charge of everything, it seems, and just not getting it. They it seems that there's a very real disconnect between the boomer generation and where the younger generations are today, I don't see right now an immediate path to fixing that. Candidly, I think there's things we can do now, like what we're talking about here today, to help make things better, but the schism between just the lack of understanding of what the real challenges, the real struggles that the younger generations are facing when trying to buy a new home, right? And just these, these, these Band Aid, you know, slapping the The ozempic Pill down your throat to lose the weight, like those solutions might feel good short term. And I think this is what we're feeling today, is a lot of these short term solutions felt good, and a lot of. Short term solutions benefited the boomer class, more or less, and now that is impacting where the millennials and the Gen Z ers are and trying to pursue this American dream, and then to be told by boomers as well, because you're not working hard enough, right, or you're not making the right choices, it's like or you voted for policies that help benefit you intentionally with the understanding that it's going to hurt future generations. And you did it over and over and over and over and over, and you didn't think about the consequences, or you did, and you just didn't care. And that's where I think we're seeing a really big you know, there's something brewing behind the scenes. I don't know why it is, but it's there, but that's my final thoughts. Pete, what do you have for us in your head? Well,

Speaker 2  25:41  
I definitely think that the boom generation needs to take some responsibility for this. The housing affordability index that the Wall Street Journal cited in a recent article has said it hasn't been this bad for trying to buy a new home in upwards of 40 years. Now the interest rates might be cooling, but the taxes aren't. They keep going up, and anyone who is buying their first home who isn't a boomer, Gen X, Gen Z, whoever you are, start questioning whether your own government is as responsible for raising prices as that retailer that you don't like anymore, because you're likely to find Yeah, governments are often the culprit here, and you have the power to demand accountability from them. We encourage folks to form local and state level taxpayer groups. We've got information about that. We are lobbying every day on behalf of the taxpayer, because we don't think lobbyist is a dirty word, as long as the cause is right. And if there's any cause that is more right than the taxpayer, I don't know of one.

Brian Nichols  26:56  
Well, at the end of the day, Pete, the elephant in the room is that if we're not playing the game, then we're just going to lose the game, because, by default, we have to be participants in the game. So we have a choice. Are we going to be the, you know, the ones who sit in our hands and let the the other team run the ball down the field every single time without lifting a finger trying to stop them? Or are we going to say, well, the game's being played, and we actually got to play some defense or maybe play some offense. I don't know. There's something we have to consider with that being said, Pete, I've really enjoyed this conversation. And folks, please go support the NTU. They're doing amazing work. I know you guys are a nonprofit, so every little bit helps. So please go ahead and donate. Where you can links will all be in the show notes. This is, of course, one of our special weekly interviews we do here on the Brian Nichols show. Pete has been a great conversation. Any final words or parting thoughts for the audience as we wrap things up.

Speaker 2  27:51  
So I've been working for the organization roughly 35 years now. We've been around for about 55 years. We've had our ups and downs. We lose more than we win, but when we win, that makes it all the sweeter, and you just keep pushing on. Government never stops. Why should the people who pay for government just stop and give up? That's the thing I'd like to leave people with. Keep working hard on behalf of taxpayers because you benefit and your fellow taxpayers benefit.

Brian Nichols  28:27  
You're here. All right. With that being said, Brian Nichols, gonna go ahead and wrap things up here. Our weekly interview here on the Brian Nichols show today, we had Pete sent from the National Taxpayers Union. Thanks for joining us, folks with that being said, Brian Nichols, signing off. We'll see you next time you.

Transcribed by https://otter.ai