Ask HN: Buying house – any disruptors I can use?

20 points by 100-xyz 4 years ago | 22 comments

We are starting to look at houses and are realizing how much we will be paying for services that IMO are quite mundane.

1) Mortgage broker - This lady will charge us 1% (10,000$) to find us a suitable loan. Basically, she will compare about 10 loans and choose the best one. Software systems can do this easily.

2) The buying agent - so far she has not come up with any houses on her own. She finds the same things we find on line. I dont need her to visit open houses. Legally, in SF I need an agent to be present during the inspections. I can use the selling agent for a fee. If I use her to place an offer, there is a bias problem. A buyer agent may be biased towards placing a "strong" offer. The "stronger" the offer, higher the probability that it will go through and higher her share. I have researched the areas enough and am comfortable coming up with a price.

Are there any startups that are disrupting this space? Say mortgage brokers and buying agents rolled into one. Small flat fee for the mortgage broker and flat fees for the buyer agent only for services that I need?

Alternative ideas also appreciated.

victorquinn 4 years ago |

We are disrupting the housing market! https://better.com/

We don't charge any mortgage broker commission (eww, it's gross) we'll give you transparency into the mortgage process so you can configure loans to your hearts content to optimize for what you want on your own terms.

We also have a fleet of real estate Agents that can help you find your new home and currently we'll cut 1% of the purchase price off of your eventual mortgage at closing if you use one of our Agents https://better.com/realestate

You're in SF so I don't think we're live there yet with our cash offer program, but in case anyone else see this from other markets, we can make you a cash buyer https://welcome.better.com/cash-offer/

We are actively working to make the homeownership journey less painful and there's a lot more we'll do in the future but as is we're one of the main disruptors in the space

Happy to answer any questions since I do work for Better!

roland35 4 years ago | |

I used better for my first refinance, super easy to work with! I did have to use a different lender for a second refi since there seems to be a 6-month cooldown period (rates kept going down...)

My only recommendation for buyers is to do some cross-shopping, since it is pretty easy to compare different loan options. Lenderfi is good alternative. I have heard most lenders can generally match each other. Your credit will only take 1 hit when shopping for different mortgage lenders, at least for a certain time window.

You can shop around for various services (helpfully listed on the loan estimate as You can shop for..), but the most you can save is a few hundred $ there.

Lastly, you can ask to have no escrow for insurance and property tax! As long as you have discipline to pay the tax bill and home insurance once a year this makes it a lot easier, especially when you sell or refinance, since you don't have to wait weeks for the escrow to pay you back.

duped 4 years ago | |

Late to this post but I think it's important.

Better gave be the best loan terms I could find, however no seller would accept an offer with Better as the lender. I was told outright my offers were rejected because they did not recognize Better. After switching to a local loan agent associated with Guaranteed Rate my first offer was accepted.

The cash offer service is interesting but ultimately I think it disrupts in the wrong direction. The issue on the buying side is information asymmetry, not access to money.

johnthescott 4 years ago | |

dood, i grok your chutzpah.

sharemywin 4 years ago |

Ask if they do borrower paid compensation. you might also want to check a local credit union.

You might also try looking for mortgage brokers and small banks in smaller towns in CA with lower property values. They might be willing to give you a break since your loan amount will look big to them. And they are used to doing loans for 4-6K

Also make sure you get the inspections worked out upfront. Last thing you want to do is try to round up all the inspectors at the last minute.

Here are some you may need: pest, radon, structural, general, one with moisture detector

for buyers agent https://www.upnest.com/ finds agents willing to offer buy credits

100-xyz 4 years ago | |

Appreciate your detailed pointers.

sharemywin 4 years ago | | |

One last thing APR APR APR. rates closing costs are all baked into APR.

giantg2 4 years ago |

Most of the paperwork for offers etc are standard forms that are used in the state. You can put in an offer and get a mortgage on your own. There is some overhead of learning it, but it's not difficult. If you do run into anything tricky (covenants, etc), most agents just tell you to talk to a real estate lawyer anyways. You should be able to save the 3% that a buyer agent typically charges.

100-xyz 4 years ago | |

Thanks. Because it involves such a large investment and affects are life, I want to understand and learn it - so problem with overhead of learning.

Will research into the paperwork.

roland35 4 years ago | | |

Ask around for a real estate attorney recommendation. You can pay a flat hourly fee which should in total be $500-$1500 for their services.

It sounds expensive, but remember you are paying realtors 3-6% of the sale price, it is actually a bargain! If you are not using a buying agent you may be able to knock off a few % on your offer by saying there is no buying agent fee.

f0e4c2f7 4 years ago |

I suspect who you will eventually see move into this space is Airbnb. This may be some time off though and after they absorb hotel booking.

Another possible one is Zillow or one of the real estate apps. They seem less savvy than the Airbnb guys though so I'm not so sure about that.

Both of those seem like good places for innovation to me. One of the challenges you might find is that in both cases they are connecting to the legacy economy with phone calls rather than api's to get things that haven't been put on the internet yet (random bankers, listing that haven't been posted yet).

Those aren't insurmountable problems though.

As far as stuff you can use today, you can shop banks yourself rather than using a mortgage broker (obviously here you run the risk that the broker would have found the better rate).

In a way just using sites like Zillow or realtor is a big disruption. Think about how much more dependent on a real estate agent you would be if calling them on the phone or driving by a for sale sign was the only way to find a house.

Trias11 4 years ago |

Any commissioned agent - buyer's or seller's are incentivized for transaction to occur.

No one is acting in your (or seller's) best interest.

However either seller's agent keeps all the commission or split it with buyer's agent. Which essentially you paying anyways, unless you find FSBO house.

So i don't think you're losing anything by having buyer's agent. Just use this person for what he/she is good at, make them work harder to give you information to help you to make an informed decision.

If your current buyers agent is lousy - call another one. You're not married to an agent. However seller is.

We used mortgage broker few years back because we had issues with credit. They do have connections that maybe beneficial.

markus_zhang 4 years ago |

Why not call banks and find out your own rates? You can compare with the ones from broker.

pkrotich 4 years ago |

Not an alternative idea - just want to mention that don’t trust inspector picked by the bank. Pay for extra independent inspector - it will save you thousands especially if it’s an older home with potential hidden issues.

pickle-wizard 4 years ago |

I've never heard of the buyer having to pay a mortgage broker a fee. When I bought my house I didn't have to pay them. The guy used gets a commission from the bank when he sales a mortgage.

However when I refinanced I didn't use a mortgage broker. I just went through my credit union.

100-xyz 4 years ago | |

The commission paid by the bank is recouped by the bank by raising the interest rate slightly. One way or the other it's paid.

Gustomaximus 4 years ago | | |

This isn't true in Australia at least. Banks wear the cost their side for the new business and enjoy when people go direct to them for the lack of fee paid.

The broker issue is stems from they wont look at loans that dont offer commission, these are often cheaper. And potentially an unethical one will push you to a worse loan that pays them more.

IMO brokers have a much more limited benefit these days with easy to use comparison sites but still serve a purpose for more complex transitions and people that are low in financial literacy.

MattBearman 4 years ago |

Is a 1% broker fee normal in the US? We just bought a house in the UK, and paid a flat fee of £300 to the broker (on a £415k house). The broker saved us £3,000 overall, so well worth the cost. The broker gets a much bigger commission from the lender

quickthrower2 4 years ago |

In Australia/UK these are both typically not a problem because the lender pays the broker not you and you don’t use a buyer agent you just do it yourself.

AnimalMuppet 4 years ago |

Homie might be what you're looking for. I don't know if they're nation-wide yet, so they may not be in the market you're interested in.

mrfusion 4 years ago |

I don’t remember paying a mortgage broker commission. Do they hide that fee somehow? The mortgage closing costs did seem high.

100-xyz 4 years ago | |

They will hide it in either closing costs or a slightly higher interest rate.