| Meet Shawn Baeschlin. |
IMAGE: Maggie Gardner
"Look at houses." This is real estate-ese for "get nosy." As many homes are stumbled upon as are tracked down. Let your network know you're looking. A heads-up from a friend—"This great place behind my neighbor's house just went up for sale..."—might be the edge that gets you in before 10 Audi TTs pull up outside. Otherwise, scour the indispensable local listings website rmls.com, which lets you sort by price and location, and keep your eyes open.
"Cash sale." This means you have enough money to buy a home without taking out a loan. It means, yes, that you could produce a suitcase stuffed with $300,000 if you wanted to. Put down this paper at once—you're screwing up our demographic.
"Financing." What most of us think of as a loan, the Mortgage Class thinks of as a product. By agreeing to give up money every month for an incomprehensibly extended period of time (like 15 or 30 years), you are creating something. Your promised toil and multiple signatures commingle to create a financial instrument, just as God wanted. People smarter (or more boring, maybe) than you will buy, sell and bundle that financial instrument in ways that it pays not to imagine. For your more concrete purposes, while you look for a home to buy, you (or your mortgage broker; see sidebar) will also graze for the ideal financing program.
"Preapproval." Whether working with a real estate agent, a mortgage broker or simply a bank, you should begin with a document from a lender that says you would be approved for a loan of some amount. Sellers need to know that a potential buyer is serious, not just an extrovert in the midst of a manic episode.
The "contract" is the document that pilots buyers and sellers from accepted offer to closing. With a contract, you may also commence sweating, as you will have to put down some earnest money—a few grand may be earnest but is still money—to get the transfer of assets rolling.
Here's where the real negotiation takes place—through back-and-forth amendments to the contract. As a buyer, you can set yourself an easier pace by stipulating a distant closing date, but think of what a disincentive that is to a seller: I agree to buy your house in 12 weeks...if I still want to. The closing date also gives you an out; if fatal problems (like serious structural flaws in the house) crop up, both parties can walk away, though the would-be buyer usually leaves some of that earnest money behind. Closing dates can also be extended.
A good real-estate agent will keep you up to speed on all of this without stressing you out. Keep your cell phone on, but never say things like, "Let's make it a 10K contingency!" on a TriMet bus, or people will think you are an idiot.
"Inspection period." This is the period within which the house inspection must be completed. It is also the point at which various government agencies reach into your not-even-yours-yet home and tell you that you must remove, dustlessly, heaps of dubious Cold War-era insulation and install a somewhat less dubious and much more expensive system of microporous membranes. You may try to get concessions from the seller based on the necessary work: usually a reduced price or repairs to be completed before closing.
Fee structures and hidden costs. When a purchase goes through seamlessly, a buyer might look at his real-estate agent and silently wonder: "How and why, exactly, are you getting paid?" A buyer's agent is paid by the seller. That is, both the buyer's and the seller's agents share a percentage of the sale price—usually 4 percent to 6 percent, split either down the middle or in a Masonically complex scheme that's pretty much worked out without your input. The seller, of course, sets the asking price knowing this: It's "priced in." So you're paying, too. Cool, eh?
You want to talk about baffling and seemingly parasitic: What's up with title companies and title insurance? Turns out, though, these scriveners you encounter near the end of the process actually do something to earn the fees they collect. Every party to the sale must be vetted, every document researched before the title is transferred and a deed recorded with the county. Taxes and insurance due must be prorated to a certain day and charged to the correct party. The title company does all of this and then assumes the task (and the tedium) of saying what belongs to whom.
The title insurance company assumes the risk that a party may come forward at any time with a lien on your home. Previous owners were probably prodded to "TAP INTO HOME EQUITY!!!" as often as you are about to be, and might have sold or traded away some portion of their legal ownership. The result can be the financial equivalent of waking in the morning to find a stranger on your couch with a toothbrush.
The title companies, then, are there to make sure of the one thing you wanted all along: Until the revolution or the rapture, you actually own the place you just bought.
Mortgage Brokers: Your Friends in the Money Business!
You could track down your own loan—if your financial situation is straightforward and you have the patience to compare hundreds of financing structures. Or look for a bank displaying posters in which handsome young couples flounce happily onto a couch in a sun-dappled and otherwise empty room. Hint: These banks wish to sell you loans.
The better alternative is to work with a mortgage broker. You can hand your broker a messy pile of financial documents and tell him how much money you need to borrow. He turns around and negotiates with the loan officers of banks and finance companies. Because brokers represent many borrowers, they can secure better rates. But they get paid either by charging a simple percentage of the loan amount or by delivering to you a slightly less favorable interest rate than they secured with the bank—the difference between the two rates is called a yield-spread premium or rebate.
Now meet Shawn Baeschlin. Baeschlin has been buying and selling loans for 18 years. Northwest Mortgage Group, where Baeschlin is a senior loan officer, sold more than $1 billion in loans in 2006. Baeschlin sold about $20 million of that. His job is all about numbers and details and quickness. The trick, he says, is reading quickly whether clients want to hear the long version of what's going on behind the scenes or just want to know how large a loan they can secure. "There really are some very creative forms of financing today," he says. "You simply need to keep in mind that the loan you can be qualified for is not necessarily the loan you can afford."
HABITAT: Table of Contents
Become Donald Trump in One Day!
A Renter's Survival Guide
I'm Buying a What?
Way of the Ninja
Guns for Hire
Cracking the Code
What the Hell Does $250K Buy, Anyway?
The Final Frontier
Armed & Dangerous