How to not get ripped off in your line of business...

[Butcho22]

I figured it would be very imformative if everybody would post how people get ripped off in their line of business.

I'll start. I'm a mortgage broker.

The most obvious way I could rip you off is simply by charging more fees to do your loan than are actually necessary. We are allowed to charge as little as we want, but no more than 5 points on a loan (5%).

Of course I'm always going to shoot high. All you would have to do is ask your broker how many points he's charging you. If he says anything more than 1 pt, tell him you're shopping around and you'll get back to him. At that point, you can either actually shop around, or come back to your broker and tell him you'll do the loan through him, but only if he drops his fee to 1 point.
The loan amount shouldn't really factor into the broker fee, but it almost always does.
If it's anything over 250k, tell the broker you'll do a loan through him only if he charges $2,500. Just because you're refinancing $700,000 doesn't mean your broker is doing any extra work compared to a $150,000 loan. The larger loan amount only makes the fee appear more reasonable.

That is on the front end.

We also make money on the back end of loans, which is called "yield spread premium".

YSP explained in depth, Wiki

In short, if you qualify for a rate of 6%, but your broker signs you up at 6.5%, they get paid yield spread for getting you to take the higher rate. The lender makes more over the life of the loan, so the broker gets a cut of that.

I hate to say it [img]/images/graemlins/grin.gif[/img], but you really should be shopping around to a few different brokers unless you're dealing with somebody you absolutely trust.

In many cases, it's beneficial for the borrower to roll the closing costs into the broker's fee, which is tax deductible. Any broker can do this, and many will offer, but you should bring it up yourself if they don't.

There is no such thing as a "no closing cost" loan. It's just an attractive way of saying, "we will roll your closing costs into our fees."

Lastly, when you have been sent the GFE (Good Faith Estimate), call your broker back and tell them it's a deal if they waive (x) fee. There is usually an admin fee around $350, and a processing fee of ~$600. These are part of your closing costs, but they can actually be waived without rolling them into the broker fees, as opposed to the underwriting fee.
Just tell them, "If you waive this fee of $600, I'll sign these papers right now and fax them to you."
If you're dealing with a big corporation, they might not waive it. Smaller companies would never lose a deal over a $600 fee.

Brokers, feel free to add to this if you see fit. Or flame me for writing all this, meh.

All,

Please help out the 2+2 community by telling us how to not get ripped off purchasing products in your line of work.

[cianosheehan]

This isn't my line of business, I'm more on the receiving end, but I've had to put up with enough crap to be able to say a thing or two.

If you are getting any web-design job done, make sure you set some things straight before going ahead with whatever developer you are dealing with.

Firstly if you value any kind of confidentiallity get an NDA (Non disclosure agreement) signed between you. Make it as extensive as you wish. If they have a problem with any of the content they will let you know.

Your designer will give you an estimated build time. In my experience the speed of completion is ALWAYS overestimated. E.g if they say 2 months, expect it in 4 months. You have to make it clear to them at the start that you are aware of the delays that can come up during development and that you want absolute assurance that they do their best to deliver when they say they do. You may try figure some kind of deal to protect yourself from this, such as reduced fee if completed x amount of days over deadline. Although finding a company who would agree to this may be hard.

Most developers will give you a quote for the whole build which reflects their standard $$$/hour, and other associated costs. This quote doesn't change throughout the build. Since they know they will be getting their money either way, it doesn't really matter to them when the job is finished, because they are getting their money for hours put in either way.

If the development company is busy and working on multiple projects at once, they may have so much going on that coordinating a build and delivering it when promised becomes impossible.

Another thing, if you want X solution built, to combine with Y and resolve problem Z, developers may be aware that X+Y wont resolve Z, but they will build X and charge you for it anyway. Then you find out that Z isn't resolved, but hey, it's not their fault because you only asked them to build X. So, interrogate and confirm and explain the full scope of your problem, and make sure what you want done is what's needed to be done.

If you are going to hire a company, I'd recommend going through their portfolios and contacting anyone who they have worked for before, and making sure they are not a bunch of cowboys.

As I'm saying this, I just want to say that there are great and honest web developers out there. But there are definately those who will mess you around and not really care about the true resolve of your solution.

-Cian

[NajdorfDefense]

Never buy a muni bond unless it is on the offering date. You are paying very large markup you cannot ever really quantify.

Also, munis are exempt from SEC regs, so you might pay more than 5% markup even.

[Emperor]

Nice Post...

Couple things to add...

1. If you have crappy credit, then you aren't going to get the best rate, and working with a broker might actually be beneficial. If you have GREAT credit, your rate isn't going to be THAT much better. I dealt with plenty of people who thought they should get a 0% rate because of thier 800 score. I gladly quoted them a 0% loan (With all the interest paid up front of course)

2. If you owe less than 70K, then your rate has to drop A TON to cover the closing costs of a refi.

3. If you owe over 200K+, then your rate only has to drop a little to cover the closing costs of a refi. The "2%" rule isn't for you.

4. Refinancing through your existing mtg holder may save you a chunk. Maybe Not.

5. Learn to say, "No". I had a broker who would intimidate 2 customers into a new loan every month to meet his $15K in fees quota. They would get to the closing table, and he would have built in the max legal limit in fees, and then some. Don't let this happen to you.

6. You can prepay your mortgage insurance premium and wrap it into the loan. NOBODY does this, but it is legal and will save you a ton of money on MI.

7. Does a Line of Credit make more sense? A line of credit is a TON cheaper than a mortgage in upfront costs. The rate is usually better if you have a 660+ score. However, it may be variable, so run the numbers and make sure the savings you get the first five years is worth the increased rate you may pay the last 5 years. (Most people who fit the HELOC criteria can payoff thier mortgage in 10 years or less). I sold a number of HELOCs to old people looking to refi with tiny loan amounts. Ya know the lil ol lady who calls with a $20K loan and a 10% rate, and the 10% rate is driving her crazy, so she is looking to spend $3K in closing costs to get it to 6%... I wasn't that unethical, so I just sold her a HELOC for a $100 or something.

8. Some banks require more seasoning on refis where equity has "increased" dramatically. Some don't. Shop around.

9. Some banks will do your loan even if you have no job, no income, no credit, no property, and live in another country. Of course your rate will be really high, but they can be done.

10. "How much house can I afford" - My pet peeve. Buyers asking me how much they can afford. WTF?!?!? I always replied, "I can get you a million dollar mortgage tomorrow. Can you afford that? If not how much can you afford?" They always replied, "Well we could afford a little more than we are paying now for rent/mtg." WALA... They always knew the answer to thier own question, but what they really wanted to know was how much money I could get them. Which is always a bad place to start because I could always get them a bigger mortgage than they could afford to pay back. Again, I wasn't unethical like that...

Which is why I am no longer a broker.

[ua1176]

i work in the music industry as an audio engineer/music producer.

people get ripped off all the time by engineers/studios who talk big but can't deliver.

my advice to musicians looking to record would be as follows:

always visit the studio before booking time (sounds obvious but many people dont. i've made this mistake a few times myself). make sure it's built well, clean, and that the engineers/owners/managers are at least marginally intelligent.

studio rates are always somewhat negotiable. the business is tough and most places are hurting for work. i think you can reasonably expect to haggle down 10%-20% from the advertised rate. i [censored] hate it when people do this to me but it certainly works.

don't listen to engineers who talk about their great gear unless you know enough about the gear to know what's up. just ask to hear a few records that have been recorded and mixed at the studio by the engineer. if they sound good....go with it.

if you find an engineer who you can trust....don't necessarily insist on being present for the mixing. talk to him/her about what you're going for sonically, and meet up with him afterwards to tweak the mix. but generally when musicians are present the mixing takes twice as long and comes out half as good. i know that i tack on about 50% to my hourly rate for mixing sessions where the whole band wants to come along.

[Butcho22]

Some good stuff so far...I'm hoping to hear some tips from a life insurance salesmen, and maybe a car salesmen.

For instance, I was watching "The King Of Cars", and this old guy pretty much demanded he got a 0% interest loan. Is it possible to demand this? I would assume he's paying more fees, but I'd like to hear how this works exactly.

[James Boston]

This won't apply to most here, but if you own a business and decide to advertise (radio, tv, paper, etc...):

1) Don't call in and ask for prices, they will always be alot higher.

2) Try to trust your rep. Our business is built on repeat business. I try really hard to come up with things in people's budgets that will get them results. If I see that they won't listen to me, and are insistent on doing things their own way, I'm going to assume that their brilliant ideas won't work, they won't renew, so I need to get as much cash out of them as possible this one time.

3) Make sure you're comparing apples to apples. This is tricky, but I've seen alot of people get ripped off by being presented with audience data that, while technically true, isn't really what they needed to see.

[uclaben]

I'm a banking consultant. A few things you should know - none of this is rocket science, but you'd be surprised how many people are making these mistakes:

1) Do not overdraft your account. Ever. With interest spreads decreasing, banks are looking at fee income to make up the difference, and that means overdraft charges. They generally won't waive them anymore, and it's a lot easier to go NSF (non-sufficient funds): checks generally post high-to-low, etc. Be aware of how much money is in your account and how long transactions take to clear. DO NOT OVERDRAFT.

2) Don't leave any money in a B&M bank savings account. You're typically getting <1% return on this cash - absolutely no point. Get those funds in a high-yield online savings account ASAP. In fact, you really don't need more than emergency money in your checking account; the online savings are almost completely liquid, ATM card and everything. I know people who leave five figures in checking accounts as a matter of practice. It's seriously burning money. There is no upside to this whatsoever.

3) Don't be afraid to shop banking. Unless you have a pressing reason to stick with your current bank, if you're unhappy, move: get to a bank the consultants haven't reached yet. Don't pay for checking, ATM service, etc.; the average Joe should be able to bank more or less for free.

4) If you're assessed a fee that doesn't jive well with you, call and complain. As mentioned above it's becoming harder and harder to get fees waived, but in most cases it's possible. These charges are not set in stone. Call and speak to a teller, and be persistent - you can probably get it reversed.

That's about all I've got for now. Don't overdraft your account. Seriously. You can get the money elsewhere.

[suzzer99]

[ QUOTE ]
This isn't my line of business, I'm more on the receiving end, but I've had to put up with enough crap to be able to say a thing or two.

If you are getting any web-design job done, make sure you set some things straight before going ahead with whatever developer you are dealing with.

Firstly if you value any kind of confidentiallity get an NDA (Non disclosure agreement) signed between you. Make it as extensive as you wish. If they have a problem with any of the content they will let you know.

Your designer will give you an estimated build time. In my experience the speed of completion is ALWAYS overestimated. E.g if they say 2 months, expect it in 4 months. You have to make it clear to them at the start that you are aware of the delays that can come up during development and that you want absolute assurance that they do their best to deliver when they say they do. You may try figure some kind of deal to protect yourself from this, such as reduced fee if completed x amount of days over deadline. Although finding a company who would agree to this may be hard.

Most developers will give you a quote for the whole build which reflects their standard $$$/hour, and other associated costs. This quote doesn't change throughout the build. Since they know they will be getting their money either way, it doesn't really matter to them when the job is finished, because they are getting their money for hours put in either way.

If the development company is busy and working on multiple projects at once, they may have so much going on that coordinating a build and delivering it when promised becomes impossible.

Another thing, if you want X solution built, to combine with Y and resolve problem Z, developers may be aware that X+Y wont resolve Z, but they will build X and charge you for it anyway. Then you find out that Z isn't resolved, but hey, it's not their fault because you only asked them to build X. So, interrogate and confirm and explain the full scope of your problem, and make sure what you want done is what's needed to be done.

If you are going to hire a company, I'd recommend going through their portfolios and contacting anyone who they have worked for before, and making sure they are not a bunch of cowboys.

As I'm saying this, I just want to say that there are great and honest web developers out there. But there are definately those who will mess you around and not really care about the true resolve of your solution.

-Cian

[/ QUOTE ]

This is very interesting to hear from the receiving end. I'm a web developer who's worked on everything from one page websites to $10 million corporate projects with an AJAX front end. At many different places I've had to clean up after soooooo many horribly done jobs--both by internal employees who had no clue what they were doing--and by external shops that also had no idea what they were doing, and managed to rape the client in the process. It's hard to say which is worse to clean up after, generally the latter.

In my estimation you could do all the stuff you list above right and still have about a 50/50 chance of getting royally screwed. But at least that's down from maybe a 75% chance of disaster 5 years ago and a 95% chance 10 years ago.

[z28dreams]

I work doing web marketing stuff, and I would say the biggest concept is simply to negotiate EVERYTHING.

I've negotiated $20 CPM ( cost per 1000 impressions ) down to $1.50 CPM.

While standard rules of negotiating often say to let the other person make the first offer, I believe that sometimes it's better simply to state right up front what you think you service is worth to you, or what you can afford.

It's much easier to argue in negotiations that "you can't afford it" rather than "you're making too much money".