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When I was in high school, I visited a friend in El Paso who took me on my maiden voyage to Juarez. While walking though the markets, we were bombarded by people asking us to buy all sorts of things (but mostly Chiclets¹). I came upon a blanket I liked and my friend warned me not to pay the asking price. Everyone there barters, it seems, and it would be foolish to pay a price the seller has intentionally inflated expecting to endure the bartering process.

So, I dove right in. Heck no, I’m not paying that much! I’ll go around the corner and buy the same blanket from someone else. It worked, of course, and I paid about half of what the man originally asked. I considered the trip a success.

About a year ago, however, I had a startling realization: I didn’t learn my lesson. My experience in Juarez wasn’t (as it seems I assumed) merely a brush with Latin culture; it was a manifestation of the core principles of capitalism that (believe it or not) applied to more than just buying Mexican blankets. I needed to take better advantage of these principles. I was in the process of buying a new house, so I had all sorts of opportunities: real estate agents, insurance companies, and new utilities – to name just a few. I decided to put the lesson I learned in Juarez to work, and it worked splendidly. Here are some of my more notable or interesting experiences. Hopefully it will save others as much money as it did me.

Comparing Real Estate Agents

With a new baby on the way, my wife and I decided to check out Realtors to help with selling our home.² We had received mailers and seen lots of signs for one local Realtor in particular, so we called him first. He made a house visit, briefly inspected the decor and home condition, gave suggestions to facilitate a quick sale, and (most importantly) went through a short presentation of his services – including a recommended sales price. He was professional and obviously this wasn’t his first time around the block, but his top price was 10% less than what we wanted. After thanking him for his time and sending him on his way (which we planned to do no matter how much we liked or disliked him), we inspected the report more closely and found the "comps"³ he pulled were all older homes from the neighborhood next door. He also didn’t seem to have factored in various home improvements.⁴

The next agent we called was referred by family. She had a much different style; she was more talkative and personable and her presentation wasn’t as formal (nor as aesthetically pleasing or technically correct). There were also big differences in the comps she pulled; they coincided nicely with our desired selling price.

We thanked her for her time, also, and then took a couple of days to discuss our options (him, her, or call in a third Realtor). We decided to go with her – and ended up selling our house in three weeks for exactly the price we wanted. That, however, is not the point. The key here is just how different "comps" can be depending on the Agent (or software?) doing the pulling.

Comparing Lenders

Staying in the home market vein, I went through a large lender comparison process before buying our most recent home. It was more a competition than a comparison, however, as I again took the opportunity to pit service providers against each other.

The first thing I did was look around online and talk to friends/family about where the "good deals" were. From this I identified three lenders I thought had a decent chance of coming out on top: Bank of America (who had a "no closing costs" promotion running), Intercontinental Mortgage (who offered a discount because of their association with our builder), and Heritage Lending (where I had family hookups). I then contacted each for their best Good Faith Estimate (GFE).⁵

Next, I identified strong and weak points on each. Bank of America had no closing costs but a high interest rate, Intercontinental had a better interest rate but high closing costs, and Heritage Lending had similarly high closing costs but an even better interest rate. (Other considerations included customer service and the bank name / size.) I used the best of all worlds to piece together what I considered as my "dream loan."

Then, I approached each company to see what they could do to improve. I told Bank of America I liked their name brand and low closing costs, but I needed them to match the lower interest rate. With Intercontinental I noted the need to improve their closing costs and their rate. And to Heritage I said I was content with the rate but needed something to be done about the closing costs. In all cases I attached the GFEs of the two competing lenders.

The response was phenomenal. Intercontinental lowered their interest rate before I even sent them the competing GFEs. (I had just mentioned I was going out for other estimates and would get back to them.) After doing a more complete analysis, they also cut their lender fees in half. Bank of America didn’t seem to have as much to give, but they did send details of my options to buy down my interest rate. Heritage Lending offered a list of very impressive customer service benefits.

Once I was confident I had each lender’s best offer, the choice was fairly straightforward – and I was confident making it.

Comparing Insurance Providers

When it comes to comparing insurance providers, I tend to start with comparative websites. There are a number of them out there, and each offer an easy way to get quick quotes from competing companies. I recently used insurance.com to compare both auto and home insurance companies and found the experience quick and pleasant.⁶

In each case, however, I didn’t find (or couldn’t reach) the same amount of wiggle room as with the lenders. All of the insurance companies seemed to offer the same fixed discounts for the same things (e.g., drivers safety course, good grades in school, monitored alarm systems, in/out of flood plains, combined policies, etc.) – and they don’t allow negotiation outside of that.

Given the above, I’ll just share the stories of my insurance company comparisons, rather than describe a step-by-step method to pit insurance companies against each other (when the websites seem to take care of that).

Auto Insurance

I was in my first accident ever last year, and it was my fault. I had gone over fourteen years without a crash – four of which were with my current insurance company (GEICO), but I still got slammed with a 50% increase in my insurance premium – from ~ $500 every six months, to just over $750. Obviously, I decided to look at my options. A comparison on insurance.com returned a wide range of prices from at least ten name-brand companies.

Safeco seemed to be the obvious choice, so I made the switch – being sure to call GEICO and end my policy. (Interestingly, GEICO mentioned if I came back within six months, I could keep my progress towards "accident forgiveness" – apparently something you earn by staying with them for five years. "Like I’d ever come back to you backstabbers," I thought to myself.)

A couple weeks later, I was hit with a large downside to the quick and easy Internet comparison method. I’m not sure why it took so long, but Safeco had finally "completed their file" on me and determined I needed a rate increase – all the way up to what I was previously paying with GEICO. They had determined the amount paid out to resolve my accident and this caused the rate adjustment. (There was a place to enter this information on the online form, but I selected the "don’t know" option.) I’m not sure why this made such a difference as to the cost of my insurability, as the payout amount is not a clear indicator of the seriousness of the accident. My accident, for example, involved rear-ending a Suburban, which was pushed into a Lexus SUV. Neither showed any visible signs of damage. I understand some parts are expensive, but the high cost of recalibrating Japanese sensors doesn’t have any bearing on my insurability. It’d be a different story, of course, if they could somehow prove expensive vehicles constantly surrounded me when I drove, increasing the probable cost of any future accident. I mean, just because I didn’t rear-end a Pinto this time, doesn’t mean it won’t happen next time.

Safeco didn’t want to discuss the ins and outs of logic (for what reason I can’t imagine), so I decided to switch back to GEICO. With the cost being the same, I had no reason to pass up on the accident forgiveness I had coming at GEICO. (Safeco actually had accident forgiveness after three years, so they would have been the better deal had I not already had four years with GEICO.)

One last random note on the topic of auto insurance: Take a defensive driving course. Or, if your employer requires you to take a driving safety course at work (like mine does), call up your insurance company and see if they’ll accept it. Mine did, and it took $45 (6%) off of my premium – a discount that will last for three years.

Homeowners Insurance

The competitive comparison method was much more effective when shopping for homeowners insurance. I don’t recall the website I used, but the process was essentially the same as on insurance.com. After entering a good amount of up-front information, I was presented with a list of quotes to compare. I picked the top seven (or so) and got in contact with them (if they hadn’t already contacted me) to be sure I was comparing apples to apples. This is a critical step, in my opinion, as there are a number of different home insurance policy types and I had to be sure I was getting the coverage I wanted (and not the coverage I didn’t want). Once everyone was on a level playing field, I chose the best deal and signed up.

About two days later I got a call from a company just opening up close to my home. I’m not sure why they didn’t come through on the results page (perhaps because it was a new office), or how they got my information, but it was clear this was the best deal. I waited a couple of days (in case someone else decided to call) and then made the change.

All in all, the homeowners insurance comparison was straightforward. You can’t go wrong if you compare a large number of companies on a level playing field and don’t get too rushed to sign up.

(Also, I should note I seem to have stumbled on the homeowners insurance jackpot. Not only is it a low rate, but I’ve scored two $10 gas cards recently for referring friends to get quotes. Both of those friends couldn’t find anyone to beat them.)

Comparing Alarm System Monitoring Providers

As soon as we moved into our new home, we started having alarm system salespeople visit. Little did they know they would be subject to merciless capitalism! I simply gathered information over a period of weeks and then started making calls – both to those who had come by, as well as the big name brands. As it turns out, most alarm monitoring sales companies are actually brokers who use large, common monitoring services. Knowing what I was paying for to be essentially the same made the comparison all that much easier; It was simply a matter of deciding who I wanted to bill me and how much, rather than choosing between different levels of service quality.

The first cut I made was the obvious one: the companies with high fees. This left 3-4 providers with very competitive rates. The next cut was to select those with promotions; one was offering three months free (I’ll call them company A), and the other (company B) a free item installation (e.g., motion sensor, extra keypad, keypad remote, etc.). I liked (and wanted) both. It was time to start making calls.

Company A was happy I was interested, and really wanted my business. Upon hearing of Company B’s offer, they quickly offered to throw in a free item installation on top of their initial deal.⁷ Pleasantly surprised, I called Company B, who quickly matched the deal. Time to take it up a notch.

Knowing I was getting more for my money than most, I turned to the soft issues. Based on professionalism and friendliness (things that couldn’t really be negotiated), I selected Company A. It was difficult to tell Company B I would be going with someone else after they had sweetened things up for me, but such is the nature of the process.

The story doesn’t end there, however. In the middle of Company A setting up to begin programming and installation at my home, I received a call from Company B offering to install two free items. (It’s crazy, I know.) I could use a motion sensor in addition to the extra keypad, so this piqued my interest. Rather than bail on the guy already at my house, I explained the situation and gave him a chance to call his boss. And, what do you know, they matched it on the spot.

The lowest rates, three free months, and two free items. Thank you Mexican blanket salesman!

Comparing Pest Control Providers

As it has been shown, some industries appear to have a lot more wiggle room than others. Put pest control in the "heavy wiggle" category. While you’re categorizing, go ahead and put them in the "prone to tape lots of garbage to your door in the Summer" category (as well as the "give a huge discount to the Hansen family" category).

Before jumping right into the same process I used with the alarm system monitoring companies, I noted a couple of key differences. First, most (all?) pest control companies aren’t brokers. They are actually the people who would keep my house free of the insanity that is the Texas pest population. And second, there wasn’t a non-monetary deal with which to work – or at least no one put one on the table. (No one has a "scare-mosquito" they can stick in my yard, apparently – which is a shame, as I could really use one.) Altogether, these differences meant customer service was going to play a larger role in my decision.

Being sure to take special note of this, I began. I collected info, made calls, eliminated the pricey and picked out a select (based on price and customer service) few to go head-to-head. The results, once again, were outstanding. After receiving initial offers as high as $552/yr, I signed up for less than $17/mos ($253.29/15 months or $202.63/yr, to be exact) – with the company manifesting the best customer service, no less. (The 15-month term might startle you at first, but I was assured this wasn’t like contracts you have with your cell phone providers. It was just a period over which we had negotiated a price; there wouldn’t be a fee for changing service "early." Additionally, we had used this company in the past and felt confident in their service.)

Concluding Remarks

To wrap things up, below is the skinny on the comparisons described in this article:

• Real Estate Agents – Get quotes from more than one and be sure the comps are actually comparable.
• Lenders – Gather and share GFEs.
• Auto Insurance – Use comparative websites and be sure they have all the details.
• Homeowners Insurance – Use comparative websites and allow time to hear from all of them.
• Alarm System Monitoring – Get brokers for common services to compete.
• Pest Control – Emphasize customer service, particularly in the area of providing good rates.

So there you have it – my adventures in starting service provider wars. It wasn’t easy the first couple of times, but it’s become almost natural since and has saved me a lot of money along the way. Hopefully it can do the same for you. Or, if it already has, please share your story. Let us bask in our communal capitalistic glory!

I’ll end with one last anecdote: A friend of mine manages a pest control company and inquired as to my service provider when he heard I was having an ant infestation treated. (It’s a long story. Let’s just say "our guys" handled it.) I told him I went through a rigorous comparison process – including his company – before committing to someone, and I chose what was clearly the best offer. Thinking I might not have talked to the right people, he offered to "seriously hook [me] up." So, I sent him our terms. His response a couple of days later had a different tune: "Wow! Well, you get what you pay for."

I think what he meant to say was "you get a lot out of what you pay for," in which case I heartily agree.

¹ "Brands." Cadbury Adams. Accessed August 2008 from http://www.cadburyadams.com/Brands/tabid/54/Default.aspx. Chiclets are gum candy, and apparently they’re made by the same people who make Sour Patch kids and Swedish Fish. That’s some mighty fine company.

² We actually took a stab at trying to sell our house ourselves a year prior, and so we knew we weren’t willing or able to put in the work necessary for that.

³ A "comp" is a home that has either recently sold, is on the market, or was on the market before being pulled. Comps are used to determine what price per square foot is reasonable when listing a home.

⁴ I detailed one of these improvements in an article entitled "How to Build a Glass-Mosaic Tile Fireplace." (Accessed August 2008 from http://www.omninerd.com/articles/How_To_Build_a_Glass_Mosaic_Tile_Fireplace.)

⁵ A Good Faith Estimate (GFE) is an estimate of the loan amount and closing costs based on money down, interest rate, loan length, etc. A blank GFE was accessed from http://www.rld.state.nm.us/FID/PDFs/Good%20Faith%20Estimate.pdf (PDF) on August 2008. For further information on the form, see: "The good-faith estimate." Bankrate.com. Accessed August 2008 from http://www.bankrate.com/brm/green/mtg/basics4-5a.asp.

⁶ "Insurance.com: May the Best Quote Win." Insurance.com. Accessed August 2008 from http://www.insurance.com/.

⁷ As far as an alarm system company goes, an "item" is a motion sensor, carbon monoxide monitor, extra keypad, etc.