Explain it like I'm 5: Home-buying edition
February 12, 2018 6:07 PM Subscribe
I am moving to a new city this summer. After living in a series of apartment rentals for the last 15 years, I really want to put down roots and buy a place; thanks to an unexpected inheritance I might just be in a position to do just that. I have no idea what I'm actually doing, though. Many, many questions inside.
[Please, no answers trying to convince me to rent instead. I've looked at the NY Times Buy vs. Rent calculator and done my own math on this. Buying is almost certainly a financial win, or at least a break-even. Worst case scenario, I'll rent another apartment for a year or two, but I am so freaking sick of apartments and rent hikes and moving. Call me a spoiled Millennial if you want; I just want to own my own home.]
For the last several months, I've been looking at neighborhoods online, as well as the city's Reddit and City Data fora and local paper/local blogs, and have narrowed it down to a few downtown areas that are within appropriate commute distance for me. Last weekend, I found The Place, ideal size, ideal neighborhood, ideal price. It was for-sale-by-owner, which I figured would make the process straightforward ... I put in a cash bid over asking price but lost out to another offer. That was a bummer, and made me rethink my approach of "look on Trulia and then offer people $$." What other hoops am I supposed to jump through?
Do I really need a realtor? My soon-to-be employer had me meet with a realtor during my interview, which was somewhat helpful in that she drove me around the city for a few hours so I saw a few neighborhoods, but she was really not a good fit overall. We had talked on the phone ahead of time and I gave her my general wants and budget, but every place she showed me was so, so wrong. I found much better places afterwards on Redfin. And she was new to the city herself so couldn't really give me a sense of how things had changed/what the longterm prospects were. I understand that a realtor would kind of hold my hand through this first-time home-buyer process, but how do I evaluate a realtor to see if they are a good match/worth their commission?
Once I decide to put in an offer on a place, what happens next? With the place last weekend, I basically filled in the blanks in an Offer to Purchase contract I'd found online, had a real estate attorney look over it, and emailed it to the seller. If it had been accepted, my next step would have been a home inspection, right?
If I do a cash offer, do I go to the ATM and get a suitcase full of $20s?. Or alternatively, how much control does a bank/lender have over my purchase? Can I just walk into my local TD Bank office and say, "I wanna buy a house?" And some bank manager is like "Sounds good!" I feel like there is probably more to it than that?
What exactly happens at closing? My sense, from talking to home-owning friends, is that it is a tedious few hours of signing lots of paperwork till your hand goes numb. Do I show up with the aforementioned suitcase of $20s? A check? Something else?
My aesthetic tends to favor older (Victorian/Craftsman) homes, which are also more in line with my budget. Many of those houses have been renovated inside and are "like new," but I'm sure they have unseen issues. If you own an older house, what do you wish you'd thought of before buying?
[Please, no answers trying to convince me to rent instead. I've looked at the NY Times Buy vs. Rent calculator and done my own math on this. Buying is almost certainly a financial win, or at least a break-even. Worst case scenario, I'll rent another apartment for a year or two, but I am so freaking sick of apartments and rent hikes and moving. Call me a spoiled Millennial if you want; I just want to own my own home.]
For the last several months, I've been looking at neighborhoods online, as well as the city's Reddit and City Data fora and local paper/local blogs, and have narrowed it down to a few downtown areas that are within appropriate commute distance for me. Last weekend, I found The Place, ideal size, ideal neighborhood, ideal price. It was for-sale-by-owner, which I figured would make the process straightforward ... I put in a cash bid over asking price but lost out to another offer. That was a bummer, and made me rethink my approach of "look on Trulia and then offer people $$." What other hoops am I supposed to jump through?
Do I really need a realtor? My soon-to-be employer had me meet with a realtor during my interview, which was somewhat helpful in that she drove me around the city for a few hours so I saw a few neighborhoods, but she was really not a good fit overall. We had talked on the phone ahead of time and I gave her my general wants and budget, but every place she showed me was so, so wrong. I found much better places afterwards on Redfin. And she was new to the city herself so couldn't really give me a sense of how things had changed/what the longterm prospects were. I understand that a realtor would kind of hold my hand through this first-time home-buyer process, but how do I evaluate a realtor to see if they are a good match/worth their commission?
Once I decide to put in an offer on a place, what happens next? With the place last weekend, I basically filled in the blanks in an Offer to Purchase contract I'd found online, had a real estate attorney look over it, and emailed it to the seller. If it had been accepted, my next step would have been a home inspection, right?
If I do a cash offer, do I go to the ATM and get a suitcase full of $20s?. Or alternatively, how much control does a bank/lender have over my purchase? Can I just walk into my local TD Bank office and say, "I wanna buy a house?" And some bank manager is like "Sounds good!" I feel like there is probably more to it than that?
What exactly happens at closing? My sense, from talking to home-owning friends, is that it is a tedious few hours of signing lots of paperwork till your hand goes numb. Do I show up with the aforementioned suitcase of $20s? A check? Something else?
My aesthetic tends to favor older (Victorian/Craftsman) homes, which are also more in line with my budget. Many of those houses have been renovated inside and are "like new," but I'm sure they have unseen issues. If you own an older house, what do you wish you'd thought of before buying?
You talk about a cash offer--do you have the full amount you plan to pay, or are you going to need a mortgage? If you need a mortgage, that's the first step. If you're making a cash offer, you won't actually use cash; it'll be a bank check. And yes, you just walk in to the bank that has your money and say "I need a bank check for $200,000, please." It is a very, very weird feeling.
I bought a house with a realtor and didn't love her, but she did bring some things to the table. Buying my next house, I might go with just a really good real estate attorney. If I had to do the first purchase over again, though, I'd get a buyer's agent, but a different one than I had. (She introduced me to my attorney, who is awesome, and I feel like he brings what I'd need to the table.)
posted by gideonfrog at 6:33 PM on February 12, 2018 [1 favorite]
I bought a house with a realtor and didn't love her, but she did bring some things to the table. Buying my next house, I might go with just a really good real estate attorney. If I had to do the first purchase over again, though, I'd get a buyer's agent, but a different one than I had. (She introduced me to my attorney, who is awesome, and I feel like he brings what I'd need to the table.)
posted by gideonfrog at 6:33 PM on February 12, 2018 [1 favorite]
The seller pays the agents for both the buyer and the seller. There is no reason NOT to have a buyer's agent if you are buying. I found an agent who was very candid, and she taught me so much about the home buying process. Her suggestions and counseling around offers saved me tens of thousands of dollars, and it was free for me. Highly recommended.
Make sure you accompany the inspector for the inspection, especially with old houses. Get a good one who will explain things and answer all your questions. A big thing to keep your eyes out for is evidence of water penetration - look for discoloration, cracks, etc. A good agent will also be keeping their eyes out for these things and point them out to you when you first see a place.
posted by thelastpolarbear at 6:53 PM on February 12, 2018
Make sure you accompany the inspector for the inspection, especially with old houses. Get a good one who will explain things and answer all your questions. A big thing to keep your eyes out for is evidence of water penetration - look for discoloration, cracks, etc. A good agent will also be keeping their eyes out for these things and point them out to you when you first see a place.
posted by thelastpolarbear at 6:53 PM on February 12, 2018
I got a realtor because I didn’t know what to do after finding a place I wanted to buy. As a first-time buyer I wanted someone to hold my hand through the process. He was recommended by several friends. Maybe four years before we bought our place, I met with this realtor and we talked. At that point, I didn’t feel ready to proceed but then when I reached out later, we had talked before so I felt comfortable with him. The realtor recommended an inspector, a title guy, and even a painter.
I don’t know if this works the same with a cash offer but the first step for buying a place for us was getting prequalified for a mortgage. Getting prequalified is super easy - basically you tell a lender how much you want to take out, how much you make and such and they give you a letter saying, if what you told us is correct, we are comfortable giving you a loan for $x. Pre-approval is different- that’s when they check all of your finances out. But getting prequalified gets you in the door.
When we made an offer, the sellers were reviewing all of the offers that night. We had included an escalation clause in our offer indicating that we were offering $x but if another offer came in above $x, we were prepared to offer up to $y. There were offers higher than $x so my realtor called and said, are you still comfortable going up to $y, I said yes and he said, then you’re under contract. In my area, you have a few days to pull out of a contract no strings attached for any reason. After that, there’d sometjing called earnest money (I once couldn’t remember the phrase and called it “nice money” or “happy money”). Earnest money says to the seller, I am acting in good faith so you can trust me that I am not going to back out of buying your place and if I do, you get to keep this.
Our realtor was also helpful because he talked us through the offer process including the contingencies in our offer. We made the offer contingent upon a good inspection, financing (we weren’t going to buy it if we couldn’t get a mortgage) and appraisal (if the bank said the property was not worth what close to what we were offering to buy it for, we were out). He also had good perspective on our search. One thing he pointed out is that our condo association had very little in reserves so we should expect the condo fee to increase which it did. Like you, I was like, whatever, I can find a place, and I did. But our realtor knew the sellers’ realtor and when I said one afternoon that I was interested in making an offer, he talked to the sellers’ realtor and found out they were reviewing offers that night so if I was serious, we needed to move. He also answered my many questions.
After our offer was accepted, things started moving really fast. I think we had an inspection less than a week later. My husband spent a week on the phone getting us the best possible terms for a loan. Closing was very anticlimactic. We met the sellers who recommended a Chinese food place in the neighborhood. We signed lots of things. The big transfer of money is a wire transfer so there is no suitcase of cash. We went from offer to closing in less than four weeks, which is pretty fast. Our realtor has said repeatedly it was the smoothest sale he’s seen.
Regardless of whether you’re getting a new place or not, get a good inspector. Our inspector found a broken window we wouldn’t have noticed otherwise and it actually cost about $800 to fix so that catch meant we negotiated for the sellers to pay to fix it. He also showed us what things he was looking for and explained why - things like the wiring of the switches and how the oven was attached to the wall. He also told us the limits of the inspection which was interesting.
posted by kat518 at 7:01 PM on February 12, 2018 [2 favorites]
I don’t know if this works the same with a cash offer but the first step for buying a place for us was getting prequalified for a mortgage. Getting prequalified is super easy - basically you tell a lender how much you want to take out, how much you make and such and they give you a letter saying, if what you told us is correct, we are comfortable giving you a loan for $x. Pre-approval is different- that’s when they check all of your finances out. But getting prequalified gets you in the door.
When we made an offer, the sellers were reviewing all of the offers that night. We had included an escalation clause in our offer indicating that we were offering $x but if another offer came in above $x, we were prepared to offer up to $y. There were offers higher than $x so my realtor called and said, are you still comfortable going up to $y, I said yes and he said, then you’re under contract. In my area, you have a few days to pull out of a contract no strings attached for any reason. After that, there’d sometjing called earnest money (I once couldn’t remember the phrase and called it “nice money” or “happy money”). Earnest money says to the seller, I am acting in good faith so you can trust me that I am not going to back out of buying your place and if I do, you get to keep this.
Our realtor was also helpful because he talked us through the offer process including the contingencies in our offer. We made the offer contingent upon a good inspection, financing (we weren’t going to buy it if we couldn’t get a mortgage) and appraisal (if the bank said the property was not worth what close to what we were offering to buy it for, we were out). He also had good perspective on our search. One thing he pointed out is that our condo association had very little in reserves so we should expect the condo fee to increase which it did. Like you, I was like, whatever, I can find a place, and I did. But our realtor knew the sellers’ realtor and when I said one afternoon that I was interested in making an offer, he talked to the sellers’ realtor and found out they were reviewing offers that night so if I was serious, we needed to move. He also answered my many questions.
After our offer was accepted, things started moving really fast. I think we had an inspection less than a week later. My husband spent a week on the phone getting us the best possible terms for a loan. Closing was very anticlimactic. We met the sellers who recommended a Chinese food place in the neighborhood. We signed lots of things. The big transfer of money is a wire transfer so there is no suitcase of cash. We went from offer to closing in less than four weeks, which is pretty fast. Our realtor has said repeatedly it was the smoothest sale he’s seen.
Regardless of whether you’re getting a new place or not, get a good inspector. Our inspector found a broken window we wouldn’t have noticed otherwise and it actually cost about $800 to fix so that catch meant we negotiated for the sellers to pay to fix it. He also showed us what things he was looking for and explained why - things like the wiring of the switches and how the oven was attached to the wall. He also told us the limits of the inspection which was interesting.
posted by kat518 at 7:01 PM on February 12, 2018 [2 favorites]
A Buyer's agent is a great resource with your fiduciary interest. Also they will know the legal rules, know a good inspector, and can also offer advice and experience through all steps of the process.
In our case, buying a 1908 Victorian, our agent knew to have the sewer scoped in this neighborhood, and we were able to insist the seller's fix an issue before closure.
There was alot we didn't know about buying a house, and our agent did know.
Much of closing is due diligence and title searches, insurance coverage, and signatures to sign over the plot of land and house on top.
posted by nickggully at 7:03 PM on February 12, 2018 [4 favorites]
In our case, buying a 1908 Victorian, our agent knew to have the sewer scoped in this neighborhood, and we were able to insist the seller's fix an issue before closure.
There was alot we didn't know about buying a house, and our agent did know.
Much of closing is due diligence and title searches, insurance coverage, and signatures to sign over the plot of land and house on top.
posted by nickggully at 7:03 PM on February 12, 2018 [4 favorites]
We were in a similar situation a few years ago (new to city, first time buyers, looking for an older house) and having a buyer’s agent made a big difference for us - I would really recommend it!
We found our buyer’s agent on Yelp, but I'm sure googling “buyer’s agent + your city/neighborhood” would work too. Like anything, it’s worth meeting with a few different agents in person until you find one you click with. The first person we met with was super slick and not a great fit for us (but I’m sure she was perfect for other people!) The agent we ended up going with was calm and casual, and his major value wasn’t in identifying listings, but rather connecting us to other professionals, negotiating with seller’s agents, and guiding us through the process.
In our case, because we were looking at older homes that needed work, it was also helpful to have someone with experience negotiating both price and conditions issues. While our house was technically listed "as is" our agent was able to get the owner to lower the price and make some strategic repairs prior to sale, which ended up saving us lots money in the long run.
(On the off chance that you happen to be moving to Chicago, I'd be happy to share his contact info/our real estate attorney's contact info - they were both fantastic.)
posted by cimton at 7:10 PM on February 12, 2018 [2 favorites]
We found our buyer’s agent on Yelp, but I'm sure googling “buyer’s agent + your city/neighborhood” would work too. Like anything, it’s worth meeting with a few different agents in person until you find one you click with. The first person we met with was super slick and not a great fit for us (but I’m sure she was perfect for other people!) The agent we ended up going with was calm and casual, and his major value wasn’t in identifying listings, but rather connecting us to other professionals, negotiating with seller’s agents, and guiding us through the process.
In our case, because we were looking at older homes that needed work, it was also helpful to have someone with experience negotiating both price and conditions issues. While our house was technically listed "as is" our agent was able to get the owner to lower the price and make some strategic repairs prior to sale, which ended up saving us lots money in the long run.
(On the off chance that you happen to be moving to Chicago, I'd be happy to share his contact info/our real estate attorney's contact info - they were both fantastic.)
posted by cimton at 7:10 PM on February 12, 2018 [2 favorites]
It’d be worth mentioning what state you’re in, because the requirements can vary significantly - in some states a real estate lawyer is required, in others an agent could handle the whole process for you.
posted by the agents of KAOS at 7:23 PM on February 12, 2018
posted by the agents of KAOS at 7:23 PM on February 12, 2018
I found Home Buying for Dummies very helpful.
posted by chesty_a_arthur at 7:38 PM on February 12, 2018 [6 favorites]
posted by chesty_a_arthur at 7:38 PM on February 12, 2018 [6 favorites]
If you are going to do this without a buyers agent, then you should definitely go to the library and pick up a couple books. The process will differ state-to-state - in some areas you need a lawyer, in others the selling agent won't even talk to you without a buyers agents. Also, the nice thing about a buyers agent is that they can walk you through all the steps, coordinate with the seller and mortgage company, find you a lawyer if you need one and more. They are paid by the seller, not you, so it's really worth it. Just find one you jive with and don't let them push you into something you don't want.
posted by Toddles at 7:49 PM on February 12, 2018 [2 favorites]
posted by Toddles at 7:49 PM on February 12, 2018 [2 favorites]
You'll probably want a good realtor if you're fairly new to buying real estate. Ask for personal references.
posted by ovvl at 8:08 PM on February 12, 2018 [1 favorite]
posted by ovvl at 8:08 PM on February 12, 2018 [1 favorite]
They are paid by the seller, not you
I've never done the for-sale-by-owner thing, but I've heard stories about disagreements over paying commissions (as in, who pays, and how much) -- someone selling on their own has already decided to not pay one commission, and they may not want to pay the second. Even so, as a buyer I think it is likely in your interests to have a good* buyer's agent, as has been suggested above.
* There are lots of realtors, but not that many good ones, since the barrier to entry is so low. Getting recommendations is key, and be willing to replace them if they aren't coming through for you.
posted by Dip Flash at 8:22 PM on February 12, 2018
I've never done the for-sale-by-owner thing, but I've heard stories about disagreements over paying commissions (as in, who pays, and how much) -- someone selling on their own has already decided to not pay one commission, and they may not want to pay the second. Even so, as a buyer I think it is likely in your interests to have a good* buyer's agent, as has been suggested above.
* There are lots of realtors, but not that many good ones, since the barrier to entry is so low. Getting recommendations is key, and be willing to replace them if they aren't coming through for you.
posted by Dip Flash at 8:22 PM on February 12, 2018
We test drove three different buyer’s agents before we settled on the agent who seemed to best understand what we were looking for in terms of house and neighborhood.
One thing an experienced agent can do that you definitely cannot on your own is get the scoop on homes that are about to go on the market (we saw the home we eventually bought a couple days before it officially listed).
Just FYI, the seller pays both agents out of the same commission — they split the 6 percent or whatever among themselves. You may be able to negotiate a little something there if you go it alone, but if the seller is paying, why not use the service?
posted by notyou at 9:27 PM on February 12, 2018
One thing an experienced agent can do that you definitely cannot on your own is get the scoop on homes that are about to go on the market (we saw the home we eventually bought a couple days before it officially listed).
Just FYI, the seller pays both agents out of the same commission — they split the 6 percent or whatever among themselves. You may be able to negotiate a little something there if you go it alone, but if the seller is paying, why not use the service?
posted by notyou at 9:27 PM on February 12, 2018
My last house was on the older side (50s ranch). One thing I wish I had paid more attention to was the workmanship. The house itself was solid, but a previous owner had done numerous DIY upgrades/remodeling that in retrospect were done poorly and with a lot of corners cut. Examples: using non-pressure treated lumber and nails (not bolts) to build a deck, a "renovated" kitchen that looked cheap (cabinets don't close properly, cheap materials, etc).
If you see signs of cut corners and shoddy workmanship, beware! It could be a sign of a previous owner who didn't take proper care of the house - who knows what other issues might pop up later. In my case, all that shoddy workmanship came to bite me in the butt when I sold the house - I was forced to either sell at a loss or dump a lot of money into fixing all that shoddy workmanship.
I've never done the for-sale-by-owner thing, but I've heard stories about disagreements over paying commissions (as in, who pays, and how much) -- someone selling on their own has already decided to not pay one commission, and they may not want to pay the second. Even so, as a buyer I think it is likely in your interests to have a good* buyer's agent, as has been suggested above.
Mrs. Photo guy and I just bought our place from our landlord and ran into this. What we ended up doing was asking a buyer's agent we were already familiar with to draw up a sales contract and make sure everything was nice and legal. We agreed to a flat fee that we paid ourselves, worth it to have someone experienced in our corner (and it was still way cheaper than a full commission).
posted by photo guy at 10:11 PM on February 12, 2018 [2 favorites]
If you see signs of cut corners and shoddy workmanship, beware! It could be a sign of a previous owner who didn't take proper care of the house - who knows what other issues might pop up later. In my case, all that shoddy workmanship came to bite me in the butt when I sold the house - I was forced to either sell at a loss or dump a lot of money into fixing all that shoddy workmanship.
I've never done the for-sale-by-owner thing, but I've heard stories about disagreements over paying commissions (as in, who pays, and how much) -- someone selling on their own has already decided to not pay one commission, and they may not want to pay the second. Even so, as a buyer I think it is likely in your interests to have a good* buyer's agent, as has been suggested above.
Mrs. Photo guy and I just bought our place from our landlord and ran into this. What we ended up doing was asking a buyer's agent we were already familiar with to draw up a sales contract and make sure everything was nice and legal. We agreed to a flat fee that we paid ourselves, worth it to have someone experienced in our corner (and it was still way cheaper than a full commission).
posted by photo guy at 10:11 PM on February 12, 2018 [2 favorites]
Best answer: You need at least three people on your team now, and perhaps four: a (good) realtor who listens to you and shows you the properties you want to see, helps you make offers and craft offer letters, and connects you with other experts you'll need through the process; a financial planner who can help you figure out if you really should be making a cash offer, or if you'll be better off taking out a mortgage and investing your liquidity in retirement funds; a mortgage lender (probably independent, not just the person from your bank); and possibly a tax accountant who is not the same person as the financial planner.
Going in with a cash offer without a realtor (or at least a lawyer) representing you may have gotten your offer dismissed out of hand. You should start shopping around for realtors now. A realtor only represents you for any houses that realtor shows you, so if you go looking at houses over a weekend and your realtor's a dud, pick a new realtor the next weekend and go see different houses. It may take a while to find an agent you like.
Realtors aren't paid directly by you, but your agent does work for you. If you buy a house the seller pays the commission (based on the sale price that you pay), and that commission is split between the buyer's agent and the seller's agent. Not having a realtor doesn't mean you save the commission. Some agencies (e.g. Redfin) will kick back a portion of the commission to you, but that's not helpful if you can't find an agent you like at those agencies.
[FWIW, our agent was with Redfin and we loved him. He referred us to a mortgage guy when our credit union dropped the ball and caused us to miss the offer deadline on a house ("we know we said you were approved but we can't actually underwrite a loan to you. Sorry."). After the mortgage guy he recommended got us a letter (the next day), our agent then helped us make a second chance offer on that same house, staying up late at night, calling and emailing with us as we filled out and signed forms on our phones, and then even later as we wrote a letter to go with the offer. It was 1:30 AM by the time we were done. The house is great. We bought him a really nice bottle of bourbon for sticking with us so we got it. OTOH we've heard some pretty bad war stories about other Redfin agents, including one who went AWOL on some friends the day offers were due on a house they really wanted – those friends asked us for our agent's name so they didn't have to find a whole new agency so late in the game, and I believe our agent also handled their closing. YMMV.]
Meanwhile, talk to a financial planner about the smartest thing for you to do with your money. Cash offers seem nice, but mortgage rates have been historically low, and it may make sense for you to make a large cash down payment (20% is the traditional number) and then pay off a low interest loan while you stick the rest of your money in indexed funds. Due to the magic of compound interest, if you're paying 4.5% on the money you borrow but earning 7.5% on the money you invest, you will have more money to retire with if you borrow more money up front and invest your cash wisely. Maybe the financial planner will tell you to pay cash for a house, but you won't know until you talk to them.
If you're getting a mortgage based on the planner's advice, go to your independent mortgage lender and get a prequalification letter that says exactly what loan you'll have, based on your income and your down payment. Do not attempt to buy a house without a prequalification letter, as that's another thing that will get your offer dismissed out of hand in a tight market. The lender will ask you a bunch of questions and require you to document the source of all your money (pay stubs, bank statements, gift letters, perhaps even death certificates if you're claiming an inheritance). Getting all that in order before the time crunch of an offer is absolutely critical.
[Hey, so you know how I said we missed the offer deadline on the house we really wanted, but then we made a second chance offer? We got insanely lucky with this house. The reason it was even on the market for us to make an offer was that a previous contract fell through when the buyers just … didn't show up for closing. We later found out that they were getting their mortgage from a friend who worked at a bank, and the bank literally failed at the last minute to write the loan. We never found out why. We caught the house the weekend it was relisted after that missed closing, and after our credit union screwed us over the sellers only got one offer. They rejected it, and our second chance offer came only because both our realtor and our new lender were heroic in pushing everything through in about 36 hours. I do not recommend that sort of stress. GET YOUR DOCS EARLY.]
NB: you also may want a tax person to help you figure out the implications of the new tax law passed this year, which limits mortgage interest deductions and state-and-local tax (SALT) deductions and removes some of the tax advantage of a mortgage. You don't say where you're moving, so it might not really matter for you. The question will be if you both earn enough and pay enough (in mortgage interest, in local taxes, etc) that you'd be itemizing your deductions, or whether you are still going to be better off taking the standard deduction. I live in a high cost, (relatively) high tax area so itemizing pays off for us, but the changes in the tax law are (presumably designed to be) punitive on people like me.
What happens when you make an offer? The sellers may (probably will) counter at least some part of your offer. They may ask you to change the closing date, strike a contingency (appraisal, inspection, or sale of another property), or increase your top amount if they like most of your offer package but somebody else offers more money. You already won't have one of the major contingencies since you don't own a house you're trying to sell, but you could have an inspection contingency, where your offer is contingent on the house passing inspection. In really tight markets many buyers are waiving that contingency. Our realtor had a nice technique for getting around that, though: most new properties were listed on Wednesday or Thursday, with open houses on Saturday and/or Sunday, and then offers due sometimes as soon as Monday or Tuesday. He recommended we stay on top of new listings (with his help) and plan to do all our tours on Friday, before there were even any open houses. If we liked a house and thought we would want to make an offer, we could have an inspector come in before offers were due, so we could make an offer with no inspection contingency. If you're paying cash you won't have an appraisal contingency either, but if you are borrowing any money the lender will attach the appraisal contingency and you will not be able to remove it. After you work out any counters and contingencies, they may then accept your offer.
If they accept your offer, you have a small amount of time to sign paperwork and provide an earnest money deposit (as described above). Once that's done, you will be under contract for about six weeks, assuming you're getting a mortgage. That means you've made an offer, they've accepted it, and now the wheels are turning on loan origination and any inspections and appraisals that didn't get done before you made your offer. If you had an inspection contingency that will probably happen within a couple days of your offer, but I forget how it relates to the earnest money deposit.
While you're under contract your lender (if you're borrowing) will be in regular contact with you, working on getting all the paperwork together (more pay stubs), asking you when you want to lock your rate (they fluctuate, and there's a fee to lock that gets rolled into the loan origination cost that's part of your closing), and you'll have to find a title company to handle closing. Depending on where you're buying you will have to deal with an abstract of title or title insurance (it varies by state), so you may have to answer questions about whether you want the premium title insurance or just the basic stuff (you want the basic stuff), or pay a fee for a title search, or other related stuff. Your realtor may involve a closing coordinator whose job is pretty much to project manage your closing (with deadlines for various things, reminders about stuff you have to do at various points, and so on).
Your title company will work with your lender to confirm that your loan is really going to deliver at closing, and one or both of them will send you paperwork three days before closing. It will have preliminary copies of everything you'll be signing, but the thing you'll actually care most about is the part that shows your closing costs. That's a big, long list of taxes, fees, up front insurance payments, loan origination cost, points (if you're paying them), and probably a few other things I don't remember. When you close you prepay the prorated mortgage for the current month and the full mortgage payment for the next month. If your closing is early in the month your closing costs will be higher than at the end of the month, which is why a lot of people try to close on the last business day of the month. You'll also set an appointment for the actual time of your closing, which is usually blocked out as a few hours time.
A few days before closing you'll also have a final walkthrough inspection, which is just to make sure that nothing has happened to the house since you made the offer and had it inspected as part of that offer. If windows are broken, appliances are gone, pipes have ruptured, or something else terrible has happened, there will be some sort of process where you and the sellers come to an agreement about how to resolve that. In our case the outside compressor unit on the heat pump had been stolen, and while we wanted cash the sellers' insurance company insisted on replacing it, and they made sure the warranty on the replacement would be assigned to us.
[It broke four months later, in a way that wasn't covered by the warranty, and we ate the cost of a new system. Sigh.]
If everything goes smoothly, on the day of your closing you'll go to your bank and request a certified check for your closing costs, payable to the title company, and they'll most likely ask for the sheet with all the closing cost information on it. Then you go to the title company and sit in a conference room and sign paperwork for an hour. When we got our packet 72 hours beforehand I actually spent a few hours reading as much of it as I could stand, but there were still a few bits of paperwork at closing I hadn't seen. Most people don't seem to read anything, and I skimmed over some of the stuff I hadn't seen, but even I gave up on reading everything as I signed it. Our realtor sat in the conference room with us (and actually so did a trainee he was bringing on board), and as every form came up the title company representative would say what it was and our realtor would maybe chime in, either to us or to his trainee. One of the forms is an amortization schedule that shows you exactly how much you're going to pay in interest over the life of the loan. When that one came up our realtor said, "don't look at that one. NEVER LOOK AT THAT NUMBER." I looked. Anyway, we had the opportunity to ask questions about everything at every step, but nothing was actually alarming or weird about it.
Actually, I lied. One thing had been weird, but we knew about it before we entered the room. There had been an error calculating the cost of our title insurance, included in the packet we'd gotten three days in advance. The correction of that resulted in more forms (and more signatures), but then those were wrong again, so more forms, and the version at closing was the second or third corrected version in three days. We ended up getting a refund check from the title company two weeks later. It was actually better for us that the error was too high and not too low, because the law says if they increase your closing costs they have to give you another 72 hours. If that had happened, our closing would have been delayed. So we overpaid, and we got like $600 back.
[For extra, extra credit: our realtor waited until closing to tell us that the original buyers who'd missed their closing had come back with a second chance offer while we were under contract. I think they even offered more money. The sellers stuck with our offer.]
If things don't go well (say, your lender fails to deliver the loan, or your bank account is drained by Russian hackers or something so you don't have the closing costs, or whatever) then there will be a bunch of people with a vested interest in making sure you do actually close. The lender builds a little padding into the rate lock to account for that 72 hour thing, and the sellers really want to sell you the house rather than go through all that crap again, so chances are there will be meetings and phone calls and lawyers as everybody tries to figure out what went wrong, how they can fix it, and when you can actually close. It may just be a "come back tomorrow" sort of thing, or you may have to wait a week and lose your rate lock (if you locked at all) and then reschedule, but nearly everybody in the process is going to try to make sure it still happens. If it doesn't, and it's your fault, you'll lose your earnest money and the sellers will list the house again. If it's not your fault, there may be lawsuits.
After closing, they hand you keys and you own a house. Your first mortgage payment will be due on the first day of the second month after the month you close. For example, if you close March 31, your first payment is due May 1. But mortgage due dates are weird, so it will be due May 1, but the reality is that it's late after May 15. It's less that you have to pay on the due date, and more that you have to make sure you pay no later than the late after date. Nobody explained that to us and we were worried about the first month's payment until we saw the date on the payment coupon provided by the lender.
But wait, there's more! Your lender will probably sell your loan as soon as it's originated. We got a letter from our new mortgage servicer less than a week after our closing. So even though you got payment coupons from your lender at closing, you'll probably get a letter and a new set of coupons from a new bank before you even make the first payment. (When we refinanced it took longer than a week … but still less than two).
So anyway. That's what happens when you buy a house.
posted by fedward at 10:25 PM on February 12, 2018 [22 favorites]
Going in with a cash offer without a realtor (or at least a lawyer) representing you may have gotten your offer dismissed out of hand. You should start shopping around for realtors now. A realtor only represents you for any houses that realtor shows you, so if you go looking at houses over a weekend and your realtor's a dud, pick a new realtor the next weekend and go see different houses. It may take a while to find an agent you like.
Realtors aren't paid directly by you, but your agent does work for you. If you buy a house the seller pays the commission (based on the sale price that you pay), and that commission is split between the buyer's agent and the seller's agent. Not having a realtor doesn't mean you save the commission. Some agencies (e.g. Redfin) will kick back a portion of the commission to you, but that's not helpful if you can't find an agent you like at those agencies.
[FWIW, our agent was with Redfin and we loved him. He referred us to a mortgage guy when our credit union dropped the ball and caused us to miss the offer deadline on a house ("we know we said you were approved but we can't actually underwrite a loan to you. Sorry."). After the mortgage guy he recommended got us a letter (the next day), our agent then helped us make a second chance offer on that same house, staying up late at night, calling and emailing with us as we filled out and signed forms on our phones, and then even later as we wrote a letter to go with the offer. It was 1:30 AM by the time we were done. The house is great. We bought him a really nice bottle of bourbon for sticking with us so we got it. OTOH we've heard some pretty bad war stories about other Redfin agents, including one who went AWOL on some friends the day offers were due on a house they really wanted – those friends asked us for our agent's name so they didn't have to find a whole new agency so late in the game, and I believe our agent also handled their closing. YMMV.]
Meanwhile, talk to a financial planner about the smartest thing for you to do with your money. Cash offers seem nice, but mortgage rates have been historically low, and it may make sense for you to make a large cash down payment (20% is the traditional number) and then pay off a low interest loan while you stick the rest of your money in indexed funds. Due to the magic of compound interest, if you're paying 4.5% on the money you borrow but earning 7.5% on the money you invest, you will have more money to retire with if you borrow more money up front and invest your cash wisely. Maybe the financial planner will tell you to pay cash for a house, but you won't know until you talk to them.
If you're getting a mortgage based on the planner's advice, go to your independent mortgage lender and get a prequalification letter that says exactly what loan you'll have, based on your income and your down payment. Do not attempt to buy a house without a prequalification letter, as that's another thing that will get your offer dismissed out of hand in a tight market. The lender will ask you a bunch of questions and require you to document the source of all your money (pay stubs, bank statements, gift letters, perhaps even death certificates if you're claiming an inheritance). Getting all that in order before the time crunch of an offer is absolutely critical.
[Hey, so you know how I said we missed the offer deadline on the house we really wanted, but then we made a second chance offer? We got insanely lucky with this house. The reason it was even on the market for us to make an offer was that a previous contract fell through when the buyers just … didn't show up for closing. We later found out that they were getting their mortgage from a friend who worked at a bank, and the bank literally failed at the last minute to write the loan. We never found out why. We caught the house the weekend it was relisted after that missed closing, and after our credit union screwed us over the sellers only got one offer. They rejected it, and our second chance offer came only because both our realtor and our new lender were heroic in pushing everything through in about 36 hours. I do not recommend that sort of stress. GET YOUR DOCS EARLY.]
NB: you also may want a tax person to help you figure out the implications of the new tax law passed this year, which limits mortgage interest deductions and state-and-local tax (SALT) deductions and removes some of the tax advantage of a mortgage. You don't say where you're moving, so it might not really matter for you. The question will be if you both earn enough and pay enough (in mortgage interest, in local taxes, etc) that you'd be itemizing your deductions, or whether you are still going to be better off taking the standard deduction. I live in a high cost, (relatively) high tax area so itemizing pays off for us, but the changes in the tax law are (presumably designed to be) punitive on people like me.
What happens when you make an offer? The sellers may (probably will) counter at least some part of your offer. They may ask you to change the closing date, strike a contingency (appraisal, inspection, or sale of another property), or increase your top amount if they like most of your offer package but somebody else offers more money. You already won't have one of the major contingencies since you don't own a house you're trying to sell, but you could have an inspection contingency, where your offer is contingent on the house passing inspection. In really tight markets many buyers are waiving that contingency. Our realtor had a nice technique for getting around that, though: most new properties were listed on Wednesday or Thursday, with open houses on Saturday and/or Sunday, and then offers due sometimes as soon as Monday or Tuesday. He recommended we stay on top of new listings (with his help) and plan to do all our tours on Friday, before there were even any open houses. If we liked a house and thought we would want to make an offer, we could have an inspector come in before offers were due, so we could make an offer with no inspection contingency. If you're paying cash you won't have an appraisal contingency either, but if you are borrowing any money the lender will attach the appraisal contingency and you will not be able to remove it. After you work out any counters and contingencies, they may then accept your offer.
If they accept your offer, you have a small amount of time to sign paperwork and provide an earnest money deposit (as described above). Once that's done, you will be under contract for about six weeks, assuming you're getting a mortgage. That means you've made an offer, they've accepted it, and now the wheels are turning on loan origination and any inspections and appraisals that didn't get done before you made your offer. If you had an inspection contingency that will probably happen within a couple days of your offer, but I forget how it relates to the earnest money deposit.
While you're under contract your lender (if you're borrowing) will be in regular contact with you, working on getting all the paperwork together (more pay stubs), asking you when you want to lock your rate (they fluctuate, and there's a fee to lock that gets rolled into the loan origination cost that's part of your closing), and you'll have to find a title company to handle closing. Depending on where you're buying you will have to deal with an abstract of title or title insurance (it varies by state), so you may have to answer questions about whether you want the premium title insurance or just the basic stuff (you want the basic stuff), or pay a fee for a title search, or other related stuff. Your realtor may involve a closing coordinator whose job is pretty much to project manage your closing (with deadlines for various things, reminders about stuff you have to do at various points, and so on).
Your title company will work with your lender to confirm that your loan is really going to deliver at closing, and one or both of them will send you paperwork three days before closing. It will have preliminary copies of everything you'll be signing, but the thing you'll actually care most about is the part that shows your closing costs. That's a big, long list of taxes, fees, up front insurance payments, loan origination cost, points (if you're paying them), and probably a few other things I don't remember. When you close you prepay the prorated mortgage for the current month and the full mortgage payment for the next month. If your closing is early in the month your closing costs will be higher than at the end of the month, which is why a lot of people try to close on the last business day of the month. You'll also set an appointment for the actual time of your closing, which is usually blocked out as a few hours time.
A few days before closing you'll also have a final walkthrough inspection, which is just to make sure that nothing has happened to the house since you made the offer and had it inspected as part of that offer. If windows are broken, appliances are gone, pipes have ruptured, or something else terrible has happened, there will be some sort of process where you and the sellers come to an agreement about how to resolve that. In our case the outside compressor unit on the heat pump had been stolen, and while we wanted cash the sellers' insurance company insisted on replacing it, and they made sure the warranty on the replacement would be assigned to us.
[It broke four months later, in a way that wasn't covered by the warranty, and we ate the cost of a new system. Sigh.]
If everything goes smoothly, on the day of your closing you'll go to your bank and request a certified check for your closing costs, payable to the title company, and they'll most likely ask for the sheet with all the closing cost information on it. Then you go to the title company and sit in a conference room and sign paperwork for an hour. When we got our packet 72 hours beforehand I actually spent a few hours reading as much of it as I could stand, but there were still a few bits of paperwork at closing I hadn't seen. Most people don't seem to read anything, and I skimmed over some of the stuff I hadn't seen, but even I gave up on reading everything as I signed it. Our realtor sat in the conference room with us (and actually so did a trainee he was bringing on board), and as every form came up the title company representative would say what it was and our realtor would maybe chime in, either to us or to his trainee. One of the forms is an amortization schedule that shows you exactly how much you're going to pay in interest over the life of the loan. When that one came up our realtor said, "don't look at that one. NEVER LOOK AT THAT NUMBER." I looked. Anyway, we had the opportunity to ask questions about everything at every step, but nothing was actually alarming or weird about it.
Actually, I lied. One thing had been weird, but we knew about it before we entered the room. There had been an error calculating the cost of our title insurance, included in the packet we'd gotten three days in advance. The correction of that resulted in more forms (and more signatures), but then those were wrong again, so more forms, and the version at closing was the second or third corrected version in three days. We ended up getting a refund check from the title company two weeks later. It was actually better for us that the error was too high and not too low, because the law says if they increase your closing costs they have to give you another 72 hours. If that had happened, our closing would have been delayed. So we overpaid, and we got like $600 back.
[For extra, extra credit: our realtor waited until closing to tell us that the original buyers who'd missed their closing had come back with a second chance offer while we were under contract. I think they even offered more money. The sellers stuck with our offer.]
If things don't go well (say, your lender fails to deliver the loan, or your bank account is drained by Russian hackers or something so you don't have the closing costs, or whatever) then there will be a bunch of people with a vested interest in making sure you do actually close. The lender builds a little padding into the rate lock to account for that 72 hour thing, and the sellers really want to sell you the house rather than go through all that crap again, so chances are there will be meetings and phone calls and lawyers as everybody tries to figure out what went wrong, how they can fix it, and when you can actually close. It may just be a "come back tomorrow" sort of thing, or you may have to wait a week and lose your rate lock (if you locked at all) and then reschedule, but nearly everybody in the process is going to try to make sure it still happens. If it doesn't, and it's your fault, you'll lose your earnest money and the sellers will list the house again. If it's not your fault, there may be lawsuits.
After closing, they hand you keys and you own a house. Your first mortgage payment will be due on the first day of the second month after the month you close. For example, if you close March 31, your first payment is due May 1. But mortgage due dates are weird, so it will be due May 1, but the reality is that it's late after May 15. It's less that you have to pay on the due date, and more that you have to make sure you pay no later than the late after date. Nobody explained that to us and we were worried about the first month's payment until we saw the date on the payment coupon provided by the lender.
But wait, there's more! Your lender will probably sell your loan as soon as it's originated. We got a letter from our new mortgage servicer less than a week after our closing. So even though you got payment coupons from your lender at closing, you'll probably get a letter and a new set of coupons from a new bank before you even make the first payment. (When we refinanced it took longer than a week … but still less than two).
So anyway. That's what happens when you buy a house.
posted by fedward at 10:25 PM on February 12, 2018 [22 favorites]
Get an independent home inspector to thoroughly examine any house you want to make an offer on, before you make the offer. Don't use an inspector referred by the seller's realtor. Think twice about one referred by your realtor. You want the inspector to be 100% looking out for you, not trying to please realtors for future business.
posted by Kirth Gerson at 7:06 AM on February 13, 2018 [1 favorite]
posted by Kirth Gerson at 7:06 AM on February 13, 2018 [1 favorite]
Seconding the suggestion to hit the library and pick up some books on the subject. It's confusing enough that reading a few books really helps, especially without a buyer's agent. (I didn't have one, either--my state allows the use of a "transaction broker," who made sure closing happened but did very little handholding, because it's not that kind of relationship.) Your library may even have some of those books available in e-book form, so you might not even have to go outdoors to do this, or juggle physical books when you might be getting ready to move.
And yeah, the Home Buying for Dummies book was good! As were several of the Nolo books. I kind of ignored all the books that covered how to select a place, since we were already living in the one we bought, but there's a lot out there that will help walk you through selection criteria and what to think about for older homes.
posted by asperity at 8:13 AM on February 13, 2018 [1 favorite]
And yeah, the Home Buying for Dummies book was good! As were several of the Nolo books. I kind of ignored all the books that covered how to select a place, since we were already living in the one we bought, but there's a lot out there that will help walk you through selection criteria and what to think about for older homes.
posted by asperity at 8:13 AM on February 13, 2018 [1 favorite]
I personally would get a realtor. You can easily find your own places and get them to show them to you, and if the realtor doesn't do much work, you can ask them to take 2% instead of 3%, their fee is also negotiable.
I would have the plumbing scoped, and a good home inspection done. I bought an older (for my area) home, and renovating honestly really sucks. I'm 8 years in now with no end in site. The projects just keep piling up. And labor and the work is incredibly expensive. Just know that. I would never do it again. If I ever buy another house, it's one that I'm going to be able to live with as-is without any major immediate projects.
posted by The_Vegetables at 9:11 AM on February 13, 2018
I would have the plumbing scoped, and a good home inspection done. I bought an older (for my area) home, and renovating honestly really sucks. I'm 8 years in now with no end in site. The projects just keep piling up. And labor and the work is incredibly expensive. Just know that. I would never do it again. If I ever buy another house, it's one that I'm going to be able to live with as-is without any major immediate projects.
posted by The_Vegetables at 9:11 AM on February 13, 2018
You will be at a real disadvantage without a good realtor and/or real estate attorney who is willing to assist you do things like have a title search done - absolutely essential! You don't want some other party showing up with a claim to the property, or encroaching on your yard with their new pool/driveway/garage and claiming the property boundary is in their favor. Your title is documentation that the property now belongs to you. You should investigate title insurance, which puts the risk back on the title company if some relative later comes out of the woodwork claiming ownership, perhaps years from now when you want to sell and a buyer does a title search.
Hire a sharp inspector. He or she will discover that the electrical panel needs updating and that your older home still has some knob-and-tube wiring. Have a radon test in the basement. Make sure the sewer pipe isn't old and cracked and need to be dug out and replaced. Make sure the roof doesn't have 4 layers of old shingles that ALL have to be ripped off and replaced. Broken sidewalks that are the owner's responsibility to pave. All these problems were bullets we dodged by having a good inspection, and we got appropriate dollar concessions from the seller on the strength of the inspection.
If you are a cash buyer many of the safeguards lenders insist on are optional, and could end up being really, really expensive to a buyer. Sometimes sellers aren't aware of all the deficiencies themselves, but you should go in with eyes open. Please educate and protect yourself!
I bought several empty lots for cash, and was surprised at how fast settlement went. It was because without a lender the risk was all mine.
posted by citygirl at 12:33 PM on February 13, 2018
Hire a sharp inspector. He or she will discover that the electrical panel needs updating and that your older home still has some knob-and-tube wiring. Have a radon test in the basement. Make sure the sewer pipe isn't old and cracked and need to be dug out and replaced. Make sure the roof doesn't have 4 layers of old shingles that ALL have to be ripped off and replaced. Broken sidewalks that are the owner's responsibility to pave. All these problems were bullets we dodged by having a good inspection, and we got appropriate dollar concessions from the seller on the strength of the inspection.
If you are a cash buyer many of the safeguards lenders insist on are optional, and could end up being really, really expensive to a buyer. Sometimes sellers aren't aware of all the deficiencies themselves, but you should go in with eyes open. Please educate and protect yourself!
I bought several empty lots for cash, and was surprised at how fast settlement went. It was because without a lender the risk was all mine.
posted by citygirl at 12:33 PM on February 13, 2018
Cntrl+F doesn't show any results for "exclusive," to just an add-on -- when you look for a buyer's agent, you might want to find one that's an exclusive buyer's agent. Otherwise, you could end up in a situation where your buyer's agent shows you a home, and it turns out that their firm represents the seller, which automatically shifts the agent's allegiance/legal responsibility to the seller side. And they're supposed to tell you, but they don't.
Ask me how I know.
posted by nosila at 1:25 PM on February 13, 2018
Ask me how I know.
posted by nosila at 1:25 PM on February 13, 2018
Yeah, an agent who works for you is extremely helpful in figuring out what realistic offer you should make (for example, mine advised me to take $15k off the listing price in my offer... and I settled with the seller for $13k below their listing price). I would have had no idea what a realistic below-listing offer would have looked like without their input.
posted by TwoStride at 7:10 PM on February 13, 2018
posted by TwoStride at 7:10 PM on February 13, 2018
You say you've done the rent vs. buy math, but have you done the cash vs. mortgage math? IF you can get an under 4% 15 year mortgage and put some cash in a retirement fund you could end up ahead.
When I bought a house the basic steps were:
1. Get preapproved for a mortgage - this sets your maximum loan amount, which you use to then decide your budget (which should be a healthy margin under the maximum.
2. get a buyers agent.
3. field their suggested properties and send them places you want to see. ALWAYS TAKE A TOUR. Pictures are deceiving. Look for cut corners. Be wary of "flips". Most of the hidden nightmare homes i saw had floor done wrong - carpet seems were visible, tiling not centered or planed out before being laid, spaces between floorboards and quarterround moldings. IF major renovations were done (like moving walls n stuff) see if you can check to make sure permits were pulled so that you have some assurance that the house won't collapse in on itself because someone ran with the idea of an "open floor plan".
4. When you find a place, tell your agent you want to make an offer contigent on inspection.
5. When a seller accepts your offer, arrange to have a home inspector, inspect it while you are there.
6. Once the house is inspected, you can keep your offer as is or change it based on issues the home inspector finds. Usually the change would involve either asking the sellers to fix it or reducing your offer and fixing it yourself. You can also back out of the offer completely at this point if the issues are too large for you.
7. once the seller accepts your offer a closing date is set. You and the seller meet with lawyers / realtors, someone from a title company and you hand over a cashier's check and get keys. I think right before the closing meeting i was allowed to quickly go through the house one last time (this was to like make sure that the owners didn't remove all the copper pipes or massively destroy things in the time between accepting the offer and closing).
posted by WeekendJen at 11:09 AM on February 14, 2018 [1 favorite]
When I bought a house the basic steps were:
1. Get preapproved for a mortgage - this sets your maximum loan amount, which you use to then decide your budget (which should be a healthy margin under the maximum.
2. get a buyers agent.
3. field their suggested properties and send them places you want to see. ALWAYS TAKE A TOUR. Pictures are deceiving. Look for cut corners. Be wary of "flips". Most of the hidden nightmare homes i saw had floor done wrong - carpet seems were visible, tiling not centered or planed out before being laid, spaces between floorboards and quarterround moldings. IF major renovations were done (like moving walls n stuff) see if you can check to make sure permits were pulled so that you have some assurance that the house won't collapse in on itself because someone ran with the idea of an "open floor plan".
4. When you find a place, tell your agent you want to make an offer contigent on inspection.
5. When a seller accepts your offer, arrange to have a home inspector, inspect it while you are there.
6. Once the house is inspected, you can keep your offer as is or change it based on issues the home inspector finds. Usually the change would involve either asking the sellers to fix it or reducing your offer and fixing it yourself. You can also back out of the offer completely at this point if the issues are too large for you.
7. once the seller accepts your offer a closing date is set. You and the seller meet with lawyers / realtors, someone from a title company and you hand over a cashier's check and get keys. I think right before the closing meeting i was allowed to quickly go through the house one last time (this was to like make sure that the owners didn't remove all the copper pipes or massively destroy things in the time between accepting the offer and closing).
posted by WeekendJen at 11:09 AM on February 14, 2018 [1 favorite]
Response by poster: Thanks, everyone! This is really, really helpful. fedward, I particularly appreciate your incredibly detailed walkthrough of the whole process!
I'll be moving to Durham, NC, which is super hot right now, with properties are getting snapped up within days. I was under the impression that not having a buyer's agent (this is another term for realtor, right?) meant that I could negotiate down the price with the seller -- since they wouldn't have to pay a 3% commission, I could maybe get them to cut down the price by a couple percent. At least that's how my brother did it when he bought his house (also a seller's market, though not in NC) a few years ago. But maybe it's not worth it at this point.
I'm going to talk with a couple people on Redfin and ask things like how long they've been in the area and what their strategy is to win an offer. Any other suggestions for how to interview/evaluate a buyer's agent?
posted by basalganglia at 5:32 PM on February 14, 2018
I'll be moving to Durham, NC, which is super hot right now, with properties are getting snapped up within days. I was under the impression that not having a buyer's agent (this is another term for realtor, right?) meant that I could negotiate down the price with the seller -- since they wouldn't have to pay a 3% commission, I could maybe get them to cut down the price by a couple percent. At least that's how my brother did it when he bought his house (also a seller's market, though not in NC) a few years ago. But maybe it's not worth it at this point.
I'm going to talk with a couple people on Redfin and ask things like how long they've been in the area and what their strategy is to win an offer. Any other suggestions for how to interview/evaluate a buyer's agent?
posted by basalganglia at 5:32 PM on February 14, 2018
"Realtor" is a blanket term (and registered trademark, actually) that includes all real estate agents, regardless of whether they are buyers' or sellers' agents. Many agents do both jobs; some agents specialize. The consensus in this thread seems to be that agents who only represent buyers are preferable. (I didn't find it an important distinction, but I will not argue with the consensus).
Redfin is a special case, because at Redfin the agents work for a salary and a bonus, not an individual commission. In theory you can start your process with one Redfin agent and then finish it with another without any sort of interpersonal conflict playing out. The company will assign you an agent to start, but you can switch at any time, and if you schedule tours online you may be assigned to a different agent for one day's tours anyway. We started and finished with one guy, but he was undoubtedly one of the better people in our market (he got a promotion shortly after we closed and is now a top level manager for the region). We started with them because we really liked their web site and they had the rebate on the agent commission, and we finished with them because our guy was awesome. I cannot stress enough: you may not have the experience with Redfin that we had.
The best way to evaluate an agent is to tour houses with them. I wish there were another way, but an afternoon seeing different properties with an agent will really make clear if that agent is listening and responding to your reactions, or just going down a list. The realtors who make the most money are the ones who work with every single client that comes their way, helping you stick to your budget and working hard to show you properties that you'll be interested in. If your budget and tastes are incompatible, they'll ask you questions and guide you towards a compromise that really works for you. An engaged agent will monitor listings in your area and flag the ones that might be of interest to you; a bad agent will just forward you everything.
Since the agent that works best for other people might not be the agent who works best for you, switching agents is totally a no harm, no foul sort of thing. Tour some properties, see if they spam you with useless links or turn you onto stuff you don't find in your own searches, and then go from there.
Literally the best thing our agent did for us was sit us down on the couch of the last house we saw the first day we toured properties with him, and give us a short version of how the process works in our crazy market. That's where he said the thing about touring early and scheduling an inspection before offers were due, and he also had other advice about lenders (basically: don't use your bank, and especially don't use your credit union, which, hey, turned out to be 100% accurate for us; there is one, and literally only one, credit union active around here that has a good reputation for mortgages, and we don't qualify for an account there), and he asked us enough questions about what we were looking for that we soon realized we weren't on the same page ourselves. We went on tours again the next weekend, but then we totally ghosted on him for like two months because everything was too stressful. When we finally hooked up with him again and said "we think we're ready now," he was like, "yup. That happens a lot."
posted by fedward at 9:43 AM on February 15, 2018
Redfin is a special case, because at Redfin the agents work for a salary and a bonus, not an individual commission. In theory you can start your process with one Redfin agent and then finish it with another without any sort of interpersonal conflict playing out. The company will assign you an agent to start, but you can switch at any time, and if you schedule tours online you may be assigned to a different agent for one day's tours anyway. We started and finished with one guy, but he was undoubtedly one of the better people in our market (he got a promotion shortly after we closed and is now a top level manager for the region). We started with them because we really liked their web site and they had the rebate on the agent commission, and we finished with them because our guy was awesome. I cannot stress enough: you may not have the experience with Redfin that we had.
The best way to evaluate an agent is to tour houses with them. I wish there were another way, but an afternoon seeing different properties with an agent will really make clear if that agent is listening and responding to your reactions, or just going down a list. The realtors who make the most money are the ones who work with every single client that comes their way, helping you stick to your budget and working hard to show you properties that you'll be interested in. If your budget and tastes are incompatible, they'll ask you questions and guide you towards a compromise that really works for you. An engaged agent will monitor listings in your area and flag the ones that might be of interest to you; a bad agent will just forward you everything.
Since the agent that works best for other people might not be the agent who works best for you, switching agents is totally a no harm, no foul sort of thing. Tour some properties, see if they spam you with useless links or turn you onto stuff you don't find in your own searches, and then go from there.
Literally the best thing our agent did for us was sit us down on the couch of the last house we saw the first day we toured properties with him, and give us a short version of how the process works in our crazy market. That's where he said the thing about touring early and scheduling an inspection before offers were due, and he also had other advice about lenders (basically: don't use your bank, and especially don't use your credit union, which, hey, turned out to be 100% accurate for us; there is one, and literally only one, credit union active around here that has a good reputation for mortgages, and we don't qualify for an account there), and he asked us enough questions about what we were looking for that we soon realized we weren't on the same page ourselves. We went on tours again the next weekend, but then we totally ghosted on him for like two months because everything was too stressful. When we finally hooked up with him again and said "we think we're ready now," he was like, "yup. That happens a lot."
posted by fedward at 9:43 AM on February 15, 2018
...and especially don't use your credit union, which, hey, turned out to be 100% accurate for us; there is one, and literally only one, credit union active around here that has a good reputation for mortgages, and we don't qualify for an account there....
Not a criticism of your main discussion, but your not being able to join that CU doesn't really support the agent's assertion that no one should get a loan from a CU. Did he give reasons for that "especially not" advice?
posted by Kirth Gerson at 9:59 AM on February 15, 2018
Not a criticism of your main discussion, but your not being able to join that CU doesn't really support the agent's assertion that no one should get a loan from a CU. Did he give reasons for that "especially not" advice?
posted by Kirth Gerson at 9:59 AM on February 15, 2018
He didn't really go into it much in that initial meeting, but after our CU crashed and burned he said our experience was consistent with what he had seen. Up to that point he was kind of cagey, but he said at several points on the way that he could recommend a lender if our CU didn't work out, and he recommended we contact at least one of his recommended lenders just in case. Apparently having a CU string you along and then fail rather late in the process was not uncommon. The way he put it, mortgages just aren't a specialty for most credit unions, so they tend to fail if time is tight or your requirements don't fit their product mix.
My comment about one good credit union is based on conversations with other people, not something our agent said. If you qualify, Navy Federal Credit Union seems to have its act together. That's not the one we have. Our credit union (which will remain nameless) fulfilled its destiny as a credit union that screwed up.
Since I suspect somebody will ask if I don't spell it out, our credit union advertised mortgages but really only offered three specific loan products they sold to one servicer after origination. These were a conventional loan for one range of credit scores, an FHA loan for people with lower credit scores, but only up to a certain amount, and a jumbo loan for an even more limited range of credit scores than the conventional loan. Our credit scores were just below their lower limit for the conventional loan, and our house was more expensive than their FHA loan product allowed. They had told us we were preauthorized for a dollar amount, but they didn't really run it through until we needed to make an offer. We got a call from the head of the mortgage department, after business hours, where he was very apologetic about all this, but he himself said that mortgages were a new product for them and because they were only working with one servicer they just didn't have a product they could offer us.
posted by fedward at 10:23 AM on February 15, 2018
My comment about one good credit union is based on conversations with other people, not something our agent said. If you qualify, Navy Federal Credit Union seems to have its act together. That's not the one we have. Our credit union (which will remain nameless) fulfilled its destiny as a credit union that screwed up.
Since I suspect somebody will ask if I don't spell it out, our credit union advertised mortgages but really only offered three specific loan products they sold to one servicer after origination. These were a conventional loan for one range of credit scores, an FHA loan for people with lower credit scores, but only up to a certain amount, and a jumbo loan for an even more limited range of credit scores than the conventional loan. Our credit scores were just below their lower limit for the conventional loan, and our house was more expensive than their FHA loan product allowed. They had told us we were preauthorized for a dollar amount, but they didn't really run it through until we needed to make an offer. We got a call from the head of the mortgage department, after business hours, where he was very apologetic about all this, but he himself said that mortgages were a new product for them and because they were only working with one servicer they just didn't have a product they could offer us.
posted by fedward at 10:23 AM on February 15, 2018
This thread is closed to new comments.
No, you need a buyer's agent who represents buyers only, if possible. But you should talk to a banker and get pre-approved first, so you have a more realistic picture of how much you can afford to borrow.
Once I decide to put in an offer on a place, what happens next?
It is accepted, rejected, or counter-offered.
do I go to the ATM and get a suitcase full of $20s?
NO! Certified bank checks, electronic transfers, that sort of thing.
What exactly happens at closing?
You sign some papers and give someone a big bank check and get the keys, if everything has gone smoothly. You should probably have a lawyer there, who has had time to go over all the documents.
NAL,NYL. Happy hunting. Finding a good buyer's agent can make the difference, ours found us our lender, lawyer, inspector, and really knew his shit.
posted by vrakatar at 6:28 PM on February 12, 2018 [3 favorites]