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I closed on my first home purchase today in Washington DC. I wanted to share my experience with others in the event that it can be helpful.
Overall, it went smoothly. I purchased a co-op, which is sort of unique, but a lot of the stuff that I went through is applicable to any first time buyer.
Choosing an agent: I had a team. I was fairly satisfied with them. They were very responsive and knew the market extremely well. Because they knew the market so well, there seemed to be two transactions going on-- one between me and the seller, and the other between my agents and the seller's agent. At closing it was revealed that they got a bigger commission than the seller's agent. In hindsight, they did steer me a little more vigorously to my property than some others, and the added commission I am sure was no small part of that. I am happy with the place, so no harm done, but it seems like there is always something less than transparent in this sort of deal. My transaction was also on the lower end of the type of properties they handle.
If I had it to do over, I would probably gone with someone a little less "connected" and exclusively buyer focused. I had some bad experiences with agents that I interviewed in the beginning, so I just kind of signed on with them out of frustration. I would probably do more legwork if I had to do this again. I did like the team concept-- there was always someone to answer my questions.
Buying power: Honestly, I was approved for a lot more than I felt comfortable spending. At first, I was looking at places at the top of my range. Then I did a little math and realized that I was probably going to be happier spending less. This meant looking at properties that might need some updates, which was fine with me as a lot of the "move in ready" places I viewed had finishes I was less than crazy about.
What I learned: This is a very personal choice-- I have had people say "Buy as much as you can afford!" and others who are a lot more conservative. In the end, I chose location over "done-ness" and am paying about $500 less per month than I was in rent. But I could have easily gone the other way. There is such an emotional component to buying a house, sometimes it trumps cost. I ended up going with the place that felt the most "right".
Co-op vs Condo vs SFH: In my price range (550k and less) there are few options in the city for a SFH. Those that exist have a ton of developer competition, multiple bids, and are often in "up and coming " neighborhoods. I started my search thinking I wanted an SFH slightly outside of the city, but quickly decided against it when I reviewed the difference in property taxes, maintenance, and lifestyle/commute issues. So I turned to condos. Taxes are not included in condo fees in DC, and I quickly learned that "low fees" were not the whole story. Because I wanted a historic building vs. new construction, co-ops were also an option. I did a ton of research on this form of ownership and found that it has both advantages and disadvantages, and that those vary greatly from building to building. At first, I was intimidated by the whole Co-op Board review process, but having rented forever, I quickly understood that it wasn't that much different than an application process for a higher-end rental building.
My Board interview was actually what cemented my interest in the building. It revealed a group of people who had really made the place a long term home, who were social, fun, and cared about their neighbors. The condos I looked at in contrast seemed like filing cabinets for young professionals. If I had it to do over: I would have considered co-ops earlier. I had summarily dismissed them before doing my homework.
Making offers: My market is very competitive, especially in my price range. Lots of properties have multiple offers and go above asking. I made two offers. The first one had multiple offers and I withdrew after the seller wasted a week of my time: he knew other offers might come in, so he held off responding to mine trying to get a bidding war started. The second place dropped and dropped in price so I finally made an offer.
What I learned: I was loathe to get into an escalation game, so I backed out of my initial offer. I feel good about that-- the place just closed and it went for well above asking. In my opinion, it went for more than it was worth. I was upset at first that I had come in at full price on my second offer, just because I had this mindset that coming in at full price was always foolish. But in my market, full price is more often than not, the sales price. I have been tracking lots of properties I looked at and there are very very few that come in even for $2000 less. So I learned that though I am a cheapskate, the market often dictates how much of a cheapskate you can be.
Choosing a lender: With my co-op there were about ten lenders I could choose from (a co-op loan is slightly different from a condo loan). I called all of them and met with a few before deciding. I went with Wells Fargo, despite lots of bad internet press. The rates from all were comparable-- some had higher fees, others had higher interest rates, but they all ended up being very competitive with one another. My lender was AWESOME. He never missed a call, walked me through the whole thing, and I saved money at closing due to his diligence. My loan had zero issues. I submitted pay stubs, W2s, an application and that was about it. They ran credit and I was pretty much done. No issues from the underwriters, no problems whatsoever. We actually were able to close earlier than anticipated and it only took about a half hour with no surprises. Even my agents were impressed.
My takeaway is that a good loan officer is very important-- as important as a good agent. Not all are created equal. Time spent researching here will pay off.
Down payment: What I learned was simply this: Put 20% or more if you can afford it. Period. None of this nonsense with mortgage insurance. What a waste. I never realized what a waste this was until I started this process so I didn't even mess with a lower down payment. If I hadn't had the cash, I would have saved until I did and bought then.
Other stuff: I had some issues with non-disclosure which were unpleasant surprises. I thought long and hard before I decided to move forward with the deal. In the end, it still made financial sense, so I went ahead. But you never know what will happen once I get into the place.
I also learned that applying for an FHA loan is a huge pain in the you-know-what. I completely jettisoned any thought of that early on.
I looked at a ton of places and most of them looked a lot alike. Uniqueness appealed to me as a buyer--frankly, if I never see another granite counter top or cherry cabinet, its way too soon. Why do flippers think that everyone wants a place that looks the same?
I looked in the winter. Inventory was low, but so were prices. Another unit in my building went on the market last week for 40K more are is already under contract. I definitely saved a bit by house hunting over the holiday season.
And, I am now addicted to looking at Redfin. I need to stop. I hear its normal to have buyer's remorse, and constantly checking out everything on the market now (especially since it has picked up since I was looking) will likely make that kick in. Probably not a great idea, but its reinforced my decision so far.
Good luck to everyone out there who is buying! Next stop will be moving, then renovations to kitchen and bath.
I closed on my first home purchase today in Washington DC.
Congrats on your new home!
Quote:
Originally Posted by confusedasusual
. . . there seemed to be two transactions going on-- one between me and the seller, and the other between my agents and the seller's agent. At closing it was revealed that they got a bigger commission than the seller's agent. In hindsight, they did steer me a little more vigorously to my property than some others, and the added commission I am sure was no small part of that. I am happy with the place, so no harm done, but it seems like there is always something less than transparent in this sort of deal. My transaction was also on the lower end of the type of properties they handle.
Are you saying the commission your agent received was a higher percentage than most other properties were offering? I know I often receive more commission than the listing agent, because some listing agents offer their clients a lower commission rate which they achieve by cutting their own end of the commission. If you're going to offer a lower commission rate this is the smart way to do it as less scrupulous buyer's agents will steer their clients toward other properties if the co-broke fee you are offering is on the low end of the spectrum.
Are you saying the commission your agent received was a higher percentage than most other properties were offering? I know I often receive more commission than the listing agent, because some listing agents offer their clients a lower commission rate which they achieve by cutting their own end of the commission. If you're going to offer a lower commission rate this is the smart way to do it as less scrupulous buyer's agents will steer their clients toward other properties if the co-broke fee you are offering is on the low end of the spectrum.
By my math, the seller's agent got 2% and my agents got 4%. The normal split in my area is 3% each. Of course, this is negotiable.
By my math, the seller's agent got 2% and my agents got 4%. The normal split in my area is 3% each. Of course, this is negotiable.
Unfortunately, some agents do steer buyers towards homes that have higher commission rates, or agent bonuses. How long was the home on the market for? It's possible that the sellers are using the listing agent on another deal, and want to offload their home as quickly as possible. If so, it worked.
I closed on my first home purchase today in Washington DC. I wanted to share my experience with others in the event that it can be helpful.
Overall, it went smoothly. I purchased a co-op, which is sort of unique, but a lot of the stuff that I went through is applicable to any first time buyer.
Choosing an agent: ... At closing it was revealed that they got a bigger commission than the seller's agent. In hindsight, they did steer me a little more vigorously to my property than some others, and the added commission I am sure was no small part of that. I am happy with the place, so no harm done, but it seems like there is always something less than transparent in this sort of deal. My transaction was also on the lower end of the type of properties they handle. ...
Good luck to everyone out there who is buying! Next stop will be moving, then renovations to kitchen and bath.
Quote:
Originally Posted by confusedasusual
By my math, the seller's agent got 2% and my agents got 4%. The normal split in my area is 3% each. Of course, this is negotiable.
Just curious...
Did you have a written buyers' agency agreement?
If so, did it indicate expected compensation or commission amount?
Most common buyers' agent commission in my market is 2.4%.
Many agents write that 2.4% amount in the agreement, in a field provided for just that purpose.
If there is a variation in buyers' agent commission for a particular property, that agent must "in a timely manner" inform the client:
If there is a shortfall that will necessitate the client coughing up any additional funds.
If there is additional compensation over and above the stated 2.4% that creates additional incentive for the agent to show and close the property.
"Revealing at closing" additional compensation such that the agent may have had undue incentive to steer you where there is more profit could be construed to be self-dealing in North Carolina, and a breach of duty to the client.
In DC, the seller pays all of the agent's commission, or rather, the commission for both sides comes out of the seller's share. So I didn't see anything about percentages until I got my HUD docs.
The seller's agent was actually the seller's friend. The seller's partner had purchased a 650K condo in October and the seller was just trying to get out of paying his mortgage. The property listed for about ten days, price dropped, another two weeks, price dropped, another three days, price dropped to where it was when I put in my offer. My agents kept reminding me that this place was out there as I looked around.
Last edited by confusedasusual; 01-31-2014 at 02:56 PM..
In DC, the seller pays all of the agent's commission, or rather, the commission for both sides comes out of the seller's share. So I didn't see anything about percentages until I got my HUD docs.
The seller's agent was actually the seller's friend. The seller's partner had purchased a 650K condo in October and the seller was just trying to get out of paying his mortgage. The property listed for about ten days, price dropped, another two weeks, price dropped, another three days, price dropped to where it was when I put in my offer. My agents kept reminding me that this place was out there as I looked around.
In DC, sellers may pay agents. Buyers may pay agents.
Your agency agreement did not mention any source of funds for your agent? We have the mention of agent commission partly to give the client the opportunity for representation in a FSBO situation with no listing agent and now specified co-broke.
In DC, sellers may pay agents. Buyers may pay agents.
Your agency agreement did not mention any source of funds for your agent? We have the mention of agent commission partly to give the client the opportunity for representation in a FSBO situation with no listing agent and now specified co-broke.
My buyers agreement only said that the seller is responsible for the agent's commissions, and that the commission rate was up to (total) 6% of the sales price.
My buyers agreement only said that the seller is responsible for the agent's commissions, and that the commission rate was up to (total) 6% of the sales price.
Wow. You could have worked them for free on a FSBO.
I like our system here, with some level of documentation that somewhat aligns the client and the agent.
Wow. You could have worked them for free on a FSBO.
I like our system here, with some level of documentation that somewhat aligns the client and the agent.
Actually, yeah. I looked at a FSBO (there are very few in the city) and they got really nervous. It was way overpriced and not really what I wanted, so it worked out okay but I could tell that they were kinda not into that property. I think if I would have really liked it, we would have had an issue. To their credit though, they took me there and didn't balk at all.
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