This year my wife and I had the fortunate yet-gut-wrenching-experience-that triggers-doubt-and-doomsday-thoughts experience of buying a house and a car together. These are the two largest outlays of money that any couple is likely to make besides education, a hip replacement, or that last kilo of cocaine before you retire and go straight.Our circumstances are very fortunate, we were conservative, and I knew that if our mortgage and car security were sold individually, pension funds would even buy them. If worse came to worse, I had sold my bodily fluids before so that wouldn't be new. Therefore, I was able to ponder how homes and cars are bought and sold, the parties involved in the purchase, the business model, and purchase experience.
The housing market still seems as unstable as a Southern California hill side during the raining season. Transparency has improved but is not completely there. The biggest problem to me seemed like those who work in the housing industry are either overwhelmed or aren't the brightest candles on the menorah too begin with.
We were refinancing the house (which still felt like buying it all over again with the financial paper work). I started with my current lender, Wells Fargo, which was able to give an easy trade in from a 6% interest rate to a 5.5% with no closing costs. We didn't find anything better so accepted and attempted to sign, initial, and notorize their tablet sized closing book. Wells Fargo has an "easy" 1-2-3 Do It Yourself (DIY) closing process where they give you instructions on where to sign and initial. Of course, we missed on signature somewhere on the back of page 8A, Section G. Wells Fargo didn't tell us until I call them asking for an update, and that offer had already become null and void. They offered to resend us the closing book so we could try the DIY process again. I told them what they could Do It Yourself with their closing book that involved physically impossible acts. They didn't really seem interested in actually helping us with the process.
I had also sent my information on Lending Tree prior to accepting Wells Fargo. Looks like the mortgage business was doing better since I got flooded with so many calls and emails that I felt like Lending Tree was run by a Turkish bazaar. The offers were better then the month before and I was now looking at 5% interest rate. Our main criteria was a lender with a local presence to prevent the DIY disaster. This narrowed it down to 2 lenders.
One of the lenders, Arivian Financial, put together a very accurate estimate with the right amount of days interest, months of state taxes, and other factors based on actual state laws and lending requirements. The other broker underestimated those factors to make their offer look better and included his photo in the email signature with his hipster soul patch and side burns. Arivian Financial not only had the best deal but was able to send me state legislation to support their terms. Finally, any documents that they sent us clearly showed me where to sign.
The final piece of incompetency in the mortgage lack of value chain was the Title company sent me someone else's initial estimate. The inability to handle personal financial information combined with inability of some banks to handle their work load, the Turkish bazaar atmosphere, and the ability to still misrepresent closing costs makes me understand the mortgage disaster even more.
On the other hand, the car market is remarkably clear and transparent with access to easy to compare information. The last time that I had been involved in a car purchase was during the Clinton administration so I felt like a cave man entering the Bronze Age. Car features were clearly outlined as well as the dealer price and the sticker price (although it was no longer actually on a sticker so it didn't leave glue on the windshield). The dealers told us their profit, their incentive plans, and how they got paid. I can't think of any other purchase where you know this much about their compensation and business model.
The sales force had some interesting approaches. At the first car dealership, the head sales guy came out with a piece of paper that had the dealer price. We talked about this family, my family, and my favorite cars. At one point, I thought that he was going to look at my teeth as part of the horse trading. Finally, he wrote down his profit next to the dealer price, added it up, and told me the total price. He told me that he was giving me the same price as his father-in-law which could mean he really liked me or really hated me, depending on the relationship with his father-in-law.
Ultimately, I bought a car from another dealership. After I agreed to their price, the sales person told me that part of their compensation ($25 per car sale) depended on their performance in a customer satisfaction survey that I would receive in the mail. They showed me the survey, explained it, and emphasized its importance to their compensation. As a result, it ceased to be a customer satisfaction survey but turned into a customer compassion survey as in how did I feel about the sales person receiving full compensation for their work. My satisfaction was irrelevant as I realized that my influence on their compensation did not stop with my decision to purchase a car from them.
Personally, I would rather have that influence on how much the participants in the mortgage business get paid.
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