Recently, house buying has been on my brain! I bought my condo three years ago, but last year, S finally moved in, so the 1000 square feet of space seems to have shrunk a fair bit. “No, I would not like to watch Avengers at 12:30am on a Tuesday night, so could you please turn down the volume?!” 😛
I’ve been house hunting a bit recently, and that got me thinking back to my condo purchase, and the uncertainty and excitement of the process, as well as the random fees. So I thought I would write down how it all happened, things I learned, a breakdown of those pesky closing costs, and what I’m planning to do differently this time around. I’ll also show some interior photos for posterity’s sake! (plus, play “find the cat” in every photo!)
1. Browse to narrow down the choices
Since I was new to California and to my city, I didn’t have a clue about the really fine-grained stuff that matters when buying a property – which neighborhoods are safe, which are walkable, which are new/old, which are near to good grocery stores, etc. Stuff that you can’t find out just by reading online statistics about an area – you actually have to visit the places in person to get a feel for things. So the majority of my time initially was spent browsing real estate websites (Redfin is my favorite), and visiting open houses in prospective areas.
At first, this was really overwhelming – so many choices! But gradually after seeing a tons of options, my preferences started to bubble to the top. I realized I wanted a 2-bedroom condo, relatively new for easy maintenance (built in 2000+), somewhat upscale (e.g., granite counter tops), and close to the university (for future rental purposes, since I eventually wanted to upgrade to a house).
With those preferences in mind, the number of possible choices dropped dramatically, and there was basically only one condo complex that satisfied all my criteria. So I settled in to wait for the unit to be listed.
What I would do differently this time: Nothing. Just remember to be patient with the process, and your personal criteria will eventually become apparent, and feel “right”.
2. Find a good real estate agent
Ohhh boy. This was where I really went wrong the first time. I asked my colleagues for agent recommendations, and one colleague recommended me an agent called B. B was about my age and seemed really friendly and helpful, so I figured I’d work with her.
B was indeed very friendly and nice, and did her best to help. But I later realized that she was a newbie agent, and was also the girlfriend of my colleague (which was not disclosed by my colleague until later, ugh). You can tell this story isn’t going to end well!
My first offer was a unit that I found in my desired condo complex. I emailed B and set up a meeting to go over the offer paperwork. As a first time buyer, I had a lot of questions. For example, if I backed out after X days, how much money would I get back? How long was the mortgage contingency? What did this particular clause in the paperwork mean? Maybe I’m a detail fanatic, but I like to know what I’m signing for in a large purchase! B basically read back the clauses to me verbatim, and upon my pressing her to explain things in layman terms, responded “I’m not a lawyer”. Pfffft.
Anyway, needless to say, that offer didn’t work out! By the time we submitted the offer, the property was gone. I feel this was an issue on B’s part, as I had asked her at the beginning to contact the selling agent and get a feel for how competitive the bidding would be, and whether there were other offers on the property. She didn’t do that, and had no idea how competitive the process would be, hence we were late. OK, /endrant
Anyway, it was awkward disentangling myself from B, since she was my colleague’s girlfriend, but it had to be done. I told her I was taking a break from house buying, and left it at that. Meanwhile, I met another agent, J, at an open house. She had a ton of good reviews on Redfin/Zillow, and also had purchased/sold many properties in the exact condo complex I was interested in, so I decided to continue my search with her.
What I would do differently this time: Don’t be a part of another agent’s learning curve! (I read this somewhere on another agent’s website, heh). Find an experienced agent in your area who will negotiate on your behalf.
As a side note, I’ve also heard good things about OpenListings from a colleague who recently used them. OpenListings is an online startup where they assign you a local agent, and they give you back half of the commission. I feel that with information dissemination on the Internet today, the value of a real estate agent is much less than in the past. Don’t get me wrong, you still need a good agent, but 3% commission ($7000 in my case) seems like hefty sum of money for the amount of work they do. I’m considering trying OpenListings for my next house purchase. But please correct me down in the comments if you disagree! (PS: not sponsored or anything, this is just my personal opinion.)
3. Swoop in quick on the desired property
For me, the hardest part of the house buying process was knowing what I want. Once I know what I want, it’s just a matter of patiently waiting for the right property to come on the market, then swooping in on it quickly once it appears.
My new agent J emailed me one morning to tell me about a property that had just been listed in my desired condo complex. I went to see it on the same day, and it looked good. It had been used as a rental for the past few years, but was in decent condition. It also had a great view of the canyon, although it was a little closer to the road than I liked. After thinking about it overnight, and discussing with my family, I decided to make an offer. We had the paperwork filled out the next day (with all my contingency questions answered fully by J!), and made an offer at full price.
A few days later, I got the notice that we had won, and were officially in escrow! I later found out that there was another offer on the property for $5k less in cash, but the seller still went with me because I was a reliable buyer in terms of mortgage risk.
What I would do differently: Nothing. Just make sure to be quick on the good properties, they won’t last long.
4. Lots of paperwork and inspections
J was fantastic and helped me with everything! She scheduled the inspection and several repair quotes (HVAC, carpet) to negotiate repairs with the seller. She recommended what items to push for and not to push for in the negotiations, and was aggressive on my behalf. I appreciate that, as I think I’m not the most aggressive person.
The rest of the process went pretty smoothly once we had agreed on the necessary repairs. It was just a matter of responding to information requests from the mortgage broker or real estate agent when needed. All the forms were electronic, which was great. Although with the amount of forms I signed, I could’ve signed away my left pinky toe to drug smugglers, and I still wouldn’t know it…
What I would do differently: Nothing. Again, as in step 2, just making sure the agent is good and on top of things. The agent can schedule inspections, repairs, etc., so that you don’t have to chase around those details.
5. Pay up the monies and close
At long last, we were done with escrow! Next came the final closing costs and title transfer. You typically read online that the closing costs will be 2-5% of the total purchase price. I was curious, and dug through my old records to see how much it cost. In my case, it came to about 3% of the total purchase price.
Some of the fees made sense (e.g., flood certification, credit report), while others seemed like a money gouge. Why $500 for a house appraisal? What is a $50 document preparation fee? $20 audit fee? Fees, fees, and more fees. Oh well, when you’re making a huge purchase, they slip in all these little fees, and you can’t be bothered. There was also an additional ~$2000 (not shown in the screenshot above) for prepayment of property taxes, HOA, and other necessary things.
It was pretty nerve-wracking sending the final closing costs through a wire transfer. I got all these scary notices from the escrow company saying to double-check the wire numbers and to call if there was any confusion, because apparently there were cases in the past where people accidentally wired large sums of money (i.e., their down payment) to scammers.
Another issue that came up was that I was actually out of town for work on the closing date! So I had to sign and notarize all the final forms in a UPS office in downtown DC and fax them over. It wasn’t exactly the most glamorous or exciting experience. My friends told me that at their closing, there are hugs and celebrations all around, although that sounds a bit useless anyway, so maybe I’m glad to have skipped that 😉
What I would do differently: I would be more aware of the timeline so I could be in town at closing, and do a final inspection. I might also consider negotiating all those darn fees, but I’m not sure if it’s worth the hassle, or if the fees are even negotiable.
Anyway, that’s the end of my condo purchasing story! I bought it for $230k, and Redfin now estimates that it’s worth $270k, so I think that’s reasonable appreciation over the last 3 years. In terms of finances, my parents gave me the down payment ($50k), for which I’m very grateful – thanks mom and dad! I’ve been mostly happily living there since then and gradually making small home improvements, which has been very rewarding. But that’s a story for another day.
Do you think the commission of real estate agents is fair value? How do you narrow down what property you like? Any general house buying tips or struggles?