Shiny and new, but feeling ephemeral

The Thinker by Rodin

Muscles hurting? Check. Sweating much of the day while I frantically move things from one place to another? Check. Feeling overwhelmed with this business of moving in general? Check. Feel like I am in real estate hell? Check, check, check.

But here we are in our new house on a prominent hill in Florence, Massachusetts with about a third of our stuff in it. The rest of it remains in a storage unit until a mover can get to it. While we are in the house, we still don’t own it due to some frustrating real estate settlement issues. I’ll have more on that in a bit. But the builder was nice enough to let us in, as they have done with other owners in the past when things were not 100% done and these snafus happened. We had to sign a “hold harmless” agreement and if we don’t settle by October 7 (it was originally October 1) we start paying rent of $100 a day.

We can be annoyed with our builder for his extended delays, something not unusual in the home construction business. But we can’t complain that they did a poor job constructing our house. The house is solidly constructed and the standards for its construction were very high throughout the whole process. We know because we had five months to watch the process. Our house sits in a 55+ community. It comes with a full but empty basement and a huge loft bigger than our old apartment. Also up there is a large adjacent storage room. The main level has a kitchen and living room of course, but we also have a sunroom in the back. The main level has two bedrooms, two baths and extra wide doors. It is highly energy efficient. We have gas heat when we need it and a gas stove too. The master bathroom includes a shower and a soaker tub, as well as two vanities. It anticipates a time when we might be aging in place and need to navigate in wheelchairs. The wood floors were not prefinished. They were installed untreated and stained three times with the stain of our choice, and lacquered twice. We have a two-car garage with the interior actually finished and painted. We have a deck made with plastic wood that will still look pristine when we are dead. We even have a sprinkler system built in that we can’t control, part of one that belongs to the whole complex. It comes on whenever the system figures our turf (landscaped in earlier this week) should be watered. The house definitely smells new and everything is pristine, clean and shiny. Of course there are some lingering issues and mistakes. They will be addressed in time.

I can’t complain about our movers. There wasn’t much in our apartment, but they emptied our apartment and placed its contents in our house in about two hours. I can’t complain about the boxes everywhere and the sheer work in putting stuff away, although I’d like to. There is much more of this to go. It will take a couple of months for our house to resemble the way we want it arranged. I should be thrilled with the new house experience and all this space but I am too exhausted to appreciate it at the moment. It’s going to take a while (and a couple of new cats) before our home really feels like one.

But I certainly can complain about our crazy settlement process, full of highs and lows much worse than any roller coaster ride you can imagine. What’s infuriating is that I did everything I could to mitigate problems and it wasn’t enough.

Settlement was supposed to be Thursday morning. We had been “preliminarily approved” the credit union told us, but the settlement papers had not arrived on Wednesday and calls to the credit union only resulted in being sent to voicemail. I had heard our house needed a final appraisal, but had not heard if it had happened. The appraiser was late filing his report and in fact it didn’t arrive until Friday, the day after settlement, and it was the preliminary appraisal. Late Friday the credit union found a problem in the appraisal that had to be corrected. Settlement was effectively delayed to some indeterminate time in the future.

Also Friday night came a major shock. The title insurance company our credit union is using requires our title to be free of exceptions and they were adamant about this. As we are technically a condominium, there must be exceptions, none of which affect the use of the property. All the other units have these exceptions and to leave them out would constitute gross malpractice by our attorney, subjecting him to legal jeopardy. If this cannot be resolved our whole mortgage may be in jeopardy. I tried to reach the credit union Friday night but while they were answering the phone, no one who could actually do anything about it was available and I was sent to – you guessed it – voicemail. So we’re living in suspended animation until Monday.

Our builder is not faultless either. Settlement did not happen principally because documents did not arrive from the builder’s attorney. He and his assistant are Jewish so of course they went off to celebrate Yom Kippur even though our settlement date was known more than a week ago. They simply let it slip and didn’t tell anyone including the builder who was clueless. The only good part of this was that the screw up allowed me to convince the builder to let us occupy our home. This was good because we had given notice on our lease and the movers were already scheduled to move us the next day.

We are feeling our way through this mess, none of it our fault. The worst-case solution seems to be to cancel the mortgage application. The mortgage amount is only $30,000. I can probably cobble cash and a personal loan to make up the difference. But of course that will take time too, and reduce our savings buffer. I’m guessing it won’t come to this.

So we wander a house customized to our specifications and wondering if it will really be ours, or if it’s all an illusion. Meanwhile we have to put stuff away and hang things on the wall and buy lots of stuff to make it livable.

And I ache. I spend much of my day in motion, lifting, stretching and moving. My calves are as hard as a rock. My shoulder muscles throb. What’s discouraging is that I was already physically fit and it still hurts. It’s too much all at once, and my aging body pushing sixty is complaining. My wife meanwhile spends much of her day in extreme pain due to chiropractic work that left the muscles attaching to her sacroiliac joint throbbing, with Percocets not quite taking care of the problem. I pick up a lot of her slack, of course. Stuff has to get done, and quickly. She needs rest, but moving households means she must move anyhow and that included cleaning up our apartment yesterday. We ache and snipe at each other.

At least we have utilities. DirecTV came yesterday and gave us a satellite dish. Comcast won’t give us Internet until next week but I was surprised to find a strong Comcast Wifi signal in the neighborhood. That’s a great relief. At least I have a tool to manage all this mess. My Internet phone won’t work with the Wifi. Otherwise everything else seems to work.

It will all settle down soon, but I fear there is more chaos ahead.

Settlement shenanigans

The Thinker by Rodin

Having recently completed a half-million dollar transaction (the sale of our house) I have been pondering the HUD-1 form we got at settlement. This is a standard form issued by the settlement agency that indicates all the costs of the buying and selling transaction. If a form could stink, this one would stink, at least a little.

Clearly commissions cost money, and the seller typically pays the commissions, both for the listing agent and the buyer’s agent. Traditionally this was six percent of the sale, split equally between agents. In recent years most realtors seems ready to bargain with sellers, perhaps because home prices are so inflated now. 5% is probably typical these days. Some sellers bargain for 4% and probably wonder if they get the same quality of service for this price. Some may get less than that. Our listing agent said she would take 2% in commission, so we agreed to pay 5%, with the buyer’s agent getting 3%. More than once I raised the fairness issue with our agent. She did most of the work and got 2% while the buyer’s agent earned more. She shrugged. That’s the way it goes. She often acts as a buyer’s agent and comes out ahead in those transactions.

Anyhow, the HUD-1 lays it all out. Since we sold the house for $505,000, our agent got $10,100 and the buyer’s agent got $15,150. Nice money if you can get it. But the buyer’s agent didn’t get $15,150. Unknown to us until settlement was the figure in the buyer’s column on Line 205. It’s called “Realtor credit” and it showed $7,000. This is money that the buyer’s agent will give back to the buyer for the privilege of being their agent. So she really got $8,150 from us for the sale of our house, and gave $7,000 of her $15,150 to the seller.

This means in effect that the buyer bought our house for $505,000 but really paid only $498,000 for the property. And this was because we were not savvy enough in the real estate trade to know we should try to discount the commission because the buyer would get a kickback, sorry a credit from his agent.

I am at once upset about this and wanting to shake our buyer’s hand. He’s one crafty dude. It’s not just us whose pocket he picked without us even knowing. He also got a kickback, sorry a credit from his lender (line 204), for $1000. Yes, for the privilege of taking out a loan with PrimeLending of Dallas, Texas, they gave him $1000 at settlement, which means in effect he paid only $497,000 for our $505,000 house. To the buyer’s credit, he did put 22% down in cash and financed the rest. Perhaps that had something to do with the credit.

Of course neither my wife nor I at any time knew we were effectively giving $7000 to the buyer. There was no piece of paper with the offer that said anything about this at all. Maybe there should be. We had two competing offers on the table, both for full price. Maybe we would have accepted the other one had we known. Or maybe we would have countered and asked for a credit from the buyer too. We could have asked for a higher asking price, of course, I just didn’t know these details.

What’s missing is transparency. These credits/kickbacks really affected the entire real estate purchase. Without them the buyer might not have made us an offer, or perhaps he would have raised his offer. We were just in ignorance.

The buyer’s agent just happens to be the top selling agent at our agent’s office. She has found a profitable niche. You see she is Indian and caters to the Indian community. Asians including many Indians are rapidly moving into our former zip code. I looked up the census data, and Asians went from 15% to 30% of our population between the 2000 and 2010 census, so it’s a growing market. There’s nothing wrong with this of course. Indians are likely to ask around mostly inside of their community when looking for an agent. Most likely they heard about her and heard that she offered generous credits on her commissions. In this case, it was a very generous credit, as $7000 is 46% of the money she could have gotten from us if she hadn’t kicked it back.

What she does get to do is to count the $505,000 sales price of our former house to her yearly sales total. It helps make her the #1 agent in that office. Doubtless nowhere in her marketing material is she calling attention to the fact that while she was one of two agents in the sale, she effectively earned a commission of 1.6%. So our agent really made more from the deal. The effect of our sale was that 3.6% was paid in commissions, but we were charged a 5% commission. We apparently gave the buyer a 1.4% rebate, but it’s not listed anywhere. The HUD-1 form at least provides this transparency; it just came too late to be useful.

I’m unlikely to do many more house sales in my lifetime. But if there is a next time I will be more wary. I will relate my experience to my new agent and suggest because we were effectively discounted, maybe 2% for each agent is appropriate. At least that way the buyer pays a higher percentage of the actual house sale, which will end up in our bank account. What I really want is all these details in the offer up front. I know I’m probably Don Quixote pointing my lance at a windmill on this issue.

So it’s too late for me, but not for you:

  • Sellers: if you are planning to sell your home you can at least be wise to what’s going on behind the scenes. Perhaps say you don’t want to pay more than 4% in commissions because you know it is likely that the buyer’s agent will give the buyer a credit.
  • Buyers: find an agent with both a good record of finding people the homes they want at a good price and who is willing to give you a substantial credit on their commission. Apparently 40 or 50 percent is not an unreasonable credit.

If this information is valuable to you, please send me 1.4% of the sale price. Thanks.