How We Got Started In Real Estate

TREE's DIARY:

I’ve been asked by some “fans” of this journal (thank you! I love you too!) to talk about how we got started in Real Estate and came to acquire the famed Z-Tree house. I have mentioned in other parts of this site how I got started and will leave Mike’s telling of his story to him, should he choose to share it.

But I do want to talk about the problems we had with lenders (and/or brokers) since it was our biggest source of frustration in acquiring this house. In fact, we almost lost the house due to our lender at the very last moment! And this was actually the fourth lender (and/or broker) in the long line of lenders (and/or brokers) we had. By the way, just so I don’t have to repeat “lender (and/or broker)” throughout this entire story since I’m sure you're already as tired of reading it as I am of typing it, I’m going to use the term “lender” from now on though a couple of them were actually brokers. For a description of each, please see my Basic Real Estate Terms (or click on the underlined words). If it becomes significant to clarify which was which, I will.

Our first lender (and/or broker) – JUST KIDDING! I won’t do it again, hee hee – was the lender that I used for my current home, the one I’m living in. For the long story version of Lender #1, click here. For the short story version, keep reading. He was going to charge us two points and would not budge, so we decided to find another lender. After several phone calls, we found Lender #2 who said he could beat the terms we had with the first guy and would not charge us 2 points.

When we finally got the written confirmation from him (it took 2 weeks), he was right about not charging us 2 points, but he did charge us an origination fee that was greater than the equivalent of 2 points. This sneaky practice is further explained in A Word About Lenders & Brokers.

So on we went to find another lender. By this time, we were already in escrow on the Z-Tree house and needed to find someone fast. After some discussion, we decided to go to ING DIRECT. We both love that bank and were willing to make some changes in our original plan in order to go through them. For the long version of Lender #3, click here. For the short version, keep reading.

After 4 weeks in escrow, ING DIRECT fell through. The house was uninhabitable and they don’t loan unless the house is habitable at time of funding. With 2 weeks left to closing, we scrambled to find yet another lender. After many more phone calls, we found lender #4. For the long version of Lender #4, click here. For the short version, you know what to do.

We told them our situation and asked if we extended our escrow another two weeks, would they be able to help us. They said yes. We received the extension from the seller and proceeded with this lender. They promised us zero points and only $850 in total fees. Despite several requests, we never received any paperwork from them on the terms of the loan. In fact, trying to get anything from them was like trying to get Keanu Reeves to show any emotion in his movies (I really like him, btw, I just put that in there to humor Mike). We had no idea if we were going to pay 10% interest and $10,000 in closing costs or what! And we were only days away from closing!

In fact, Mike called them 10 days before our new closing date and asked them how things were going and they said, “don’t worry, we’re on it.” They were so “on it” that when I called them 5 days before our close date, they said, “don’t worry, we should have you guys finalized by the week after next.” When I pointed out that we didn’t have until “the week after next,” the lady said, “OH MY GOD, REALLY?” and put me on hold.

UGH! There were so many more “OH MY GOD, REALLY?” moments that I won’t even bore you with the details. They asked us to request an additional 2 week extension. We did, but this time the seller was not so accommodating. The seller’s agent told us that if we could not get the loan funded in time, the deal is off. We called the lender back and relayed this to them. Lots and lots of scrambling happened and after talking to the agent directly, they were able to get ONE. extra. day. as long as they promised to have the loan funded the very next day!

Suddenly lots of compromises were made, phones ringing off the hook, people came in to work on the weekend, Michael drove up to sign paperwork and in the end, we finally closed not one, but five, days after we were supposed to.

Now if you read my Daily Dose entries, you know I like to keep things positive. So to give this last lender credit, the fees did remain at their promised $850 (outrageously low!), the terms actually were pretty good, and they were able to pull their act together within a few days when it was necessary for them to do so. We found out that they switched loans on us at the very last minute and was able to fund with an entirely new loan in less than a week. That really is pretty fast! I certainly would not use them again, but as a last resort, it’s good to have an inexpensive backup. Only this time with a bit more pushing and prodding to make sure they’re really “on it” when they say they are.

Looking back, it’s all pretty funny, like some kind of dark comedy. I’ve never had an escrow go off without a hitch, this one just happened to be the worst. But it ended up working out, we have a wonderful house and I’ve learned a great deal more about real estate because of it. And we both now have a “lender horror story” to add to our collection to scare the bajesus out of Real Estate newcomers. Just kidding.

Seriously, my advice is just go out and do it! There are so many things that can go wrong and so many things that can go right. It’s all part of the process. Scared or not, just get up. Go out. And do it. Because you can!

For more info on how you can get started, see How To Get Started in Real Estate: Six Steps for the Traditional Homebuyer page. If you need a pep talk first, click here. If you're ready to start and don't need the pep talk, the back story, or are otherwise just sick of reading my rambling stories, go to Helpful Links (I ramble a little on that page too, but just a little, I promise!)


MIKE's DIARY:

How I got started in real estate.

The harrowing experiences perpetrated upon me physically and spiritually during the agonizing 45 days our "government" refers to as escrow were so terrible, so gargantuanly putrid that I will spare you the details which would surely cause immediate bleeding from your eyes and rectum.

I’m kidding. Sorry about that.

The actual process of buying the house did get tough at times but Tree gave you the details of that lovely colonoscopy in her entry. To tell you the truth, I really don’t feel like I’m “in” real estate right now even though my signatures are on a bunch of official looking papers and I have a key. I suppose it’s because I’ve never owned a home or property before so I don’t know what it’s supposed to feel like. It could also be, and the more I think about it the more I think this is it, that because this home I bought with Tree is a solid 2 hours away, I’m not experiencing it in a physical way right now. I don’t care what it is you purchase, if you immediately hide it away and rarely see it you won’t feel like you own it. Possession is very much tied to a tactile experience of that thing. I believe that once we begin remodeling the house I will begin to have a whole new set of feelings about being in real estate. (Stay tuned for those journal entries!)

In terms of the “why” of getting into real estate, I had never seriously considered it. I always thought that it was a game for the semi-rich and above, not for a regular working slob like me. But I want to make money like the next guy, so I got into stocks. Thank you very much tech industry stock market crash where I watched half of my savings scream out in agony and die a horrible death. I became a total investing wimp after that. It was nothing but savings accounts for me after that. Oh, maybe I’d get into the occasional 6 month CD if I’d had a glass of wine or something, but I tell you, I held on to my money like it was one of my nuts. But interest rates suck ass and if you ever hope to make anything in this world you need to make your money work for you. Of all the options out there, real estate just made the most sense to me. It was buying a physical thing. Land is good. People will always want land and if you invest wisely, there is a strong potential for healthy returns.

So that’s WHY I got into real estate, I wanted better returns than the pennies I’d get from the bank, but at the same time I wasn’t ready to do the bungee jump that is the stock market. I was going to take the simplest approach: buy a house that needed some work – not too much – and live in it while I fixed it up. Well, you all know how real estate became pretty insane in 2003-2004 so the only thing I could afford put me either next door to a crack house or across the street from Mr. Burns' nuclear power plant. It was extremely depressing. But I knew this was where I was going to put money and the more I had to wait the more I would have saved to put into it come the time. I had been recreationally looking for just under 2 years when Tree came to me and said let’s go in on a place together in Big Bear. The market was still reasonable up there and we found plenty of fixer-uppers within our price range. I was so fed up with the LA market that this sounded fantastic to me. It would be a smaller investment. I would gain the experience of fixing a place up with a friend and best of all, it would get me in the game.

And that is the one piece of advice I would like to give you. Just get in the game. Be smart about it! Be patient and use your head, but keep playing that tape in the back of your head that says, GET IN THE GAME.