Despite the fact we bought our first home a couple of years ago now, this story is still a good lesson to anyone planning to purchase a home soon.
We bought our first real home in Tartu, Estonia. Obviously, we were assisted by a loan from the bank, and our family. I want to shed some light on our buying story, so you can avoid the mistakes we did.
As I’m a complete real estate freak, I’ll start incorporating stories about real estate into my blog a bit more often. Here’s the first one.
Finding our First Home
My husband, Ronald, and I were 27 and 23 when we started looking into buying a home, as we’d dreamt of owning one for quite some time.
We’d just recently gotten married. We kept in mind that we’d be unlikely to stay in this home forever and were looking for something that could be rented out easily if, or when, we move to another city or abroad. All good so far.
Soon enough, we found a super cute flat on a local real estate website. The apartment was near Tartu city center and the price was relatively good – close to 70K €. Here are the specs of the apartment we found (and later bought):
- A wooden house with 8 apartments
- 45 square meters – perfect for two minimalist people
- First floor
- High ceilings (3.8 meters)
- Completely renovated on the inside
- Not renovated from the outside
- The roof and chimneys of the apartment building were renovated in 2015
- Two heating options – a wood burner, and air conditioning, which could also be used for cooling
- Awesome tall doors separating the bedroom from the living room (I fell in love with them immediately)
The apartment was renovated by a guy who would be our future neighbor – so in that sense, we had a bit of security with the deal as well. We knew that if something is broken or wrong with the apartment, we’d be able to contact him directly. It sounded like a really good deal to us and we decided to buy it.
First, we filled out a loan application with our bank at the time, Swedbank. They agreed to finance our apartment (a 25-year loan with an interest rate of 2.5%).
We were dumb enough to agree with it immediately and not ask for any competing offers, we just didn’t know that you should ask for an offer from any other banks who give out home loans. We didn’t have any friends who would’ve been in the process of buying a home at the time, who could’ve informed us.
So, here’s the first lesson: always ask for an offer from several banks. If we’d asked other banks, we would’ve been able to lower the interest rate to probably 1.8-1.9%, as we had solid and secure incomes. We also had no other loans, car lease(s), or anything else.
For the down payment, we had to pay a little over 10K€. But before that, we also had to pay a reservation fee to the brokerage company. And that’s when things started getting really ‘weird’, to put it lightly.
Presenting: The Most Incompetent Broker in the World
Act 1: Does our broker have amnesia?
We bought the apartment through a brokerage company, whose name I’m not going to disclose here. At first appearance, the broker looked like a regular Estonian guy who probably didn’t have the best grades at school and decided to become a broker (as you don’t need a license for it here, sadly).
I’m all good with people who decide to pursue the career of a broker, regardless of their grades at school, or education level. But I’m not good with people who have no clue how to do their job.
To buy an apartment financed with a bank loan, the bank first needs to receive an appraisal. It basically shows how much the apartment is worth, and that determines the size of the loan.
We ordered another brokerage company to compile the appraisal, as the bank didn’t accept appraisals completed by our current brokerage company.
Long story short, our broker had to send the appraisal document to the bank, with his digital signature on it (basically the only way you sign documents in Estonia is digitally).
A few weeks later, when we had a meeting in the bank, it turned out that he hadn’t sent the document. We thought – ‘Maybe he just forgot?’
So, we just wasted our time, as the bank doesn’t give out a loan before the apartment’s worth is confirmed by a professional opinion.
After a few phone calls where he obviously pleaded not guilty, he finally sent the digitally signed appraisal to the bank. Yay! We then had to wait 3-5 business days to receive the final answer from the bank telling us whether we’re eligible for the loan or not.
Act 2: We’re Sure He has Amnesia
Meanwhile, he thought it was a really good idea to call us twice a day and ask when we’d pay the reservation fee for the apartment. We explained, every single time, that we won’t pay it before the bank gives us an official answer (and it takes at least 3 days for the bank to get back to us).
And it’s like we never explained it – a few hours later he called again and asked THE EXACT SAME question. And again. Every day, twice. By the 5th day, we were sure he has some sort of short-term memory loss or amnesia.
Meanwhile, the bank called us and asked for the exact address of the apartment. We called the broker to request this, and of course, he didn’t even know the address.
He kept telling us (three times, to be exact) that he’s “sure” that the apartment number is 2. But we remembered it being 2A from our visit. So, we eventually got the phone number of the actual apartment owner and he confirmed – it’s 2A. By then we were certain that it was a serious case of amnesia.
Act 3: “Pay in Cash”
Finally, we got a positive answer from the bank and were eager to move on with the process. This meant we had to pay a reservation fee of 3000€, and the broker said that paying it in cash is the only option. That’s more than weird in our digital society, but we agreed, as they promised us a receipt.
Ronald then went to the brokerage firm to pay the money, and of course the broker was listening to PowerhitRadio (which has a rather negative reputation) in their open office.
He paid the money and got the “receipt” (a massive overstatement) which was basically a piece of paper with no meaning. That’s when it got really sketchy and we wondered whether we’d just given away this money and whether we should quit this whole thing.
The receipt said absolutely nothing about what would’ve happened if the deal fell through, or if the brokerage firm declared bankruptcy. Absolutely no legal element to it. So, we just hurried, hoping for the best, as we really wanted this apartment.
Act 4: The Final Act of Incompetence
We agreed a time with a notary to finalize the deal, hoping that this drama would end soon. Not so fast!
A day before the notary appointment, the broker called – just seeing his name on my phone’s screen made us shiver – what now? He announced that actually the price of the apartment is now 2000€ more expensive! 1 day before the notary!!!
Yes, you read that right. And he said we need to pay the brokerage fees as well. It seems funny to think back on it, but in the moment it really wasn’t funny. All our savings were already spent for the downpayment, and the buyer never pays the brokerage fees in Estonia.
So, we said that we’d seen no email or anything else to prove that the price was more expensive, and the bank had already given us the exact sum determined by the appraisal.
This time, we called the owner directly, and it turned out that the broker had told us the wrong price from the beginning! Obviously, the owner was furious at the broker, but understood that there’s not much he can do now.
So, we got the apartment for a cheaper price, if you don’t consider the amount we’d already paid with our mental health.
Needless to say, at the end of the process I sent an extensive complaint email to the brokerage firm (basically the length of this blog post). And their reply? ‘I think you misunderstood the broker.’ Wow.
There was no point replying after that. Please do enjoy living in the bliss of ignorance and watch your company fail.
- Should You Invest in Real Estate or the Stock Market?
- What it Takes to Achieve Financial Freedom
- The Power of Admitting Your Mistakes
Although my first experience of buying a home was horrible, I have met some good brokers since then. Actually, now when I think of it, our second experience was also pretty bad, but that’s a story for another time.
I hope you can avoid the mistakes we did. I mean, you have a decent chance as this broker isn’t working anymore. Hmm, I wonder why…
Also – More pictures of our home coming soon!
Have you had experiences with incompetent brokers? Or maybe with really good brokers? Would love to hear them in comments!