Getting Started

 

This post is a brief overview of what to expect in the home buying process after you have identified your Realtor® to better prepare you as to what to expect of your agent and what will be expected of you. Keep in mind it is brief and there will be many different cases where some of these will or will not apply.

 

1. Finding property

When it is time to find the property that you will buy your Realtor® will want to sit down with you and discuss what your wants and needs are. It helps them to do their job if you have a general idea of what you feel you must have in a home and what is a desire but won’t break the deal. The initial consultation should result in your agent having a general idea of what you are looking for and will enable them to identify a few properties to go and look at. Sometimes people find their dream house on the first outing and others take much longer. Nonetheless, you should expect your agent to ask some questions about what kind of property you need to satisfy your home needs.

 

2. The offer

Once you find the right house you will need to submit an offer to the seller and your buyer’s agent is going to produce a pretty decent pile of paperwork for you to sign. Of all the paperwork you can expect a Residential Purchase Agreement (often referred to as an RPA), Buyer’s Inspection Advisory, Agency Disclosure and a variety of other disclosures, contracts and auxiliary documents. Documents such as a copy of a deposit check, pre-approval letter and sometimes buyers will send in a cover letter to the seller. All of these contract should be explained to you by your agent so that you know what your agreement entails.Things that will be addressed in the offer include your offered purchase price, the timeline of the escrow period, which party pays for repairs and inspections such as pest, septic and natural hazards. There will also be two clauses in the California RPA in regard to how legal issues will be handled should they arise from the contract. The price will be expressed both as a number amount and spelled out as it would be on a personal check so that no errors will be missed. Along with the price offered, the terms of financing the purchase will be noted so that the seller knows how qualified your money is. Escrow will be addressed below as well as repairs but for the sake of making your offer you should know that certain costs should and in my opinion, MUST be addressed up front in the contract. If you look at the home and can tell that repairs need to be made in order for you to purchase the house then your contract should recognized the repair and note whether you or the seller are expected to pay for them. You don’t want to get down the line of the deal and then have to hash that out, just ask your agent.

 

3. Accepted Offers and Contingency Periods

Once you have an accepted offer you will begin your contingency period in which you have the right to hire contractors and inspectors to verify the condition of the property and what it would cost to make any necessary repairs. Pest inspectors will come out and check to see whether or not the home has any pest infestation, mold or water damage. Pests include dry wood termites, subterranean termites, wasps ants and other insects. I have even had bats listed in a pest report. A standard contingency period in California is 17 days, however, in these times of short sales and foreclosures the banks can request much shorter periods. During this very important time you should make sure that your lender has ordered an appraisal to verify the value of the property. They will likely have done this to make sure that they are lending you the money on a suitable investment from their standpoint as well. At the end of this time period you should expect to receive a Contingency Removal document to sign and submit to the sellers letting them know that you elect to continue with the contract. If you don’t like what you find during the 17 days you can elect to cancel the contract, sometimes this happens so don’t be embarrassed if this happens to you.

4. Escrow

Escrow is commonly used to describe the contract period, the time from when the RPA is ratified and the recording of the title on the home but technically escrow is the process in which a third party, escrow company, receives and disburses money and documents pertaining to a contract among two principal parties, buyer and seller. In real estate the escrow officer will collect deposits, the contract and amendments, money transfers, repair bills, order the title report and often times the Natural Hazard report and coordinate signings of trust deeds and recording of the new owners at the county recorder’s office. Common escrow times range from 30 days (less common these days), 45 days and 60 days for residential purchases.

5. Funding and Closing

Once your lender has seen that all contractual obligations have been met, contingencies removed and the appraised value is satisfactory they will have the loan reviewed and approved for funding at which time loan documents will be drawn up for buyer signatures. Once the loan is drawn, signed and wired to the escrow account the escrow officer will wait to verify that funds are available and once they do so, they will have your deed recorded and ‘close’ escrow. Closing consists of cutting checks to the seller for their net proceeds, sales agents for their commissions, any contractors that did work, for fees pertaining to obtaining the home and when this is done there should be no money in the account or outstanding costs. Once that is all squared away you as a buyer can expect a congratulatory phone call from your agent and a set of keys to your new home. Every story is different but in my experiences, holding the keys to your first home can result in emotions ranging from shock, excitement and absolute bliss. Those emotions are the biggest reason that I love working with first time home buyers, there is no better feeling than seeing a large smile as you hand the keys to a new home to a happy client.

Please, recognize that this is a brief description of the process and that I am more than happy to answer any further questions or discuss your opportunity to buy a home. It will be a pleasure to help you get into your first home.

 

How should you go about finding a good agent?

Your two biggest allies in buying your first home are without a doubt your lender and a good REALTOR®. Your choice of who you work with on this deal is very important right from the get go because you are about to trust what is probably your biggest life decision, up to this point, with them. A real estate agent is easy enough to come by, it’s likely that if you ask around your group of friends and work acquaintances but this isn’t about finding any old real estate agent. This is about finding a GOOD real estate agent. So, where do you find a good agent and what makes them so good?

The REALTOR® Designation is more important than you may know. To become a REALTOR® real estate agents choose to join the National Association of REALTOR®s and abide by a code of ethics set forth by our organization as well as continue to seek out further education in our industry to better serve our clients. Many of the agents that you find will likely be REALTOR®s but don’t settle for them just for that reason, a good real estate agent has many important qualities you should look for beyond the big “R” on our business card. Here are my top 5.

1. Personality – You say, “What?” You’re darned right personality is on my list and here is why. When you are working with an agent for 2 months or more you want to make sure that your agent is compatible with your personality and style of buying. Nothing can kill a deal faster than having a ‘hard sale’ agent pushing you into a corner to buy something that really isn’t something you want. When you meet with an agent for the first time pay attention to how they treat you and to how they respond to you. A lot of first time homebuyers should be looking for an agent that is patient and willing to explain answers to your questions rather than take for granted that you know what they are saying. You also want an agent that is present and in the moment and not playing with their Blackberry, computer or fidgeting with other gadgets. If an agent is distracted and not paying attention to you, run away! You want an agent that is ready to step to the plate and hit a home run for you. (pun intended)

2. Big ears – Figuratively, not literally. I touched on this briefly above but it is imperative that your agent takes the time to not just hear you but listen to you. If they aren’t listening to you and your needs and desires how in the world are they supposed to know what you want? When I meet with clients there is very few times that I want to be talking at, when I introduce myself, when I ask my client questions that are meant to help them and when I am answering questions that they have for me. Sure, once we get more comfortable with one another we have a more conversational tone. Even then, however, my focus is always on their needs. Having big ears and a small mouth should be a quality you look for.

3. Comprehensive knowledge of the surrounding area – Your ultimate agent should know everything about the community that you are seeking out and if they don’t they need to know how to get any information that you need. I would never expect an agent to know exactly how many yellow houses there are in their market but I would expect them to know pertinent details to the property that we are looking at such as the school district, whether the home comes with additional costs such as an association fee and what kind of amenities are nearby. If you are looking to buy a home that is near a particular park or school so you can walk there, that agent had better be showing you properties with a safe path to those amenities by pedestrian modes of transport i.e. not requiring an Evel Knievel stunt across a rail road bridge to go home from the matinee.

4. Lots of letters after their name – The letters behind an agent’s name mean multiple things including, REALTOR® designations, specialization in a particular field of real estate, experience and an advanced knowledge of the industry. Designations range from ABR (accredited buyer’s representative), SFR (short sale and foreclosure resource), GRI (graduate REALTOR® institute), e-pro (designation that denotes advanced technology training) and many, many more acronyms. To earn those letters and the right to put them behind an agent’s name the agent must complete varying degrees of education and conduct a certain number of transactions to qualify. To become an ABR you must complete and intense course that covers everything from buyer disclosures to psychology of buying a home and even lessons in home construction. The course is very thorough but it also expects a candidate to complete a minimum of 5 transactions representing a buyer with successful closings. The main thing is that you want to find an agent that has a few letters after their name because you will know that the agent has experience with the business and has pursued higher training and education to better serve their clients. Don’t you want to work with somebody that is a specialist in their industry as opposed to just any old Joe REALTOR?

5. Lastly and most importantly – You must find an agent that is with a reputable office in the area that you are shopping in. If you don’t use a local agent from a well respected company you assume the risk of employing somebody that may have questionable business practices, works for a new and possibly inexperienced agency or a fly by night agency that may or may not be there for you when you need help in the future. Nobody wants to work with a sketch-ball, well…. they shouldn’t want to. I like to think that people are universally good and that we all work in a diligent and honest world but the bottom line is that we don’t and there are people out there interested in turning a buck even if it means compromising ethics and morals. Therefore, make sure that you qualify your agent and their brokerage first so you don’t get left holding the bag.* New brokerages may or may not be a problem due to inexperienced agents or brokers, tread easily with these offices and make sure you spend considerable time asking them questions and verifying that they are capable of handling your purchase. A new agency may be new to the whole process of buying property due to the fact that anybody that wants to sit through the minimum classes necessary to get a broker’s license can open an office and sell houses with no actual business savvy. Not all new agencies are going to be inexperienced so use your judgement when assessing them and be aware of that fact.Finally, there are numerous offices that pop up all over the country for a short time that promise to sell your house or find you the perfect home for a low, flat rate fee that can beat the price of all of the other offices in the county. Good for them. In theory it’s a great idea but the problem with many of these agencies is that they are here one day and gone the next. When home buyers have a problem with their new home they typically go straight to their agent for initial advice and any agent that’s worth their salt should be available for you 10 years down the line and if they aren’t still around (retired, deceased, moved across country, etc.) their brokerage should still be around to help you out. One thing that I have always stressed to clients is that I will ALWAYS be available to help them out, no matter what the problem and no matter what time the problem arises. They can call me at any time and I will gladly accommodate them, I am their agent for life. Make sure that you get that commitment from your agent when you sign an agency agreement so that you have some assurance that you have a resource at your fingertips to help you through the first time your water heater busts or your roof starts leaking. If you used Fly By Night Real Estate to buy your first home and 2 years later they close, who are you going to call in year 3 when you need to clarify an item with your title or home repairs. (A good start would be contacting the author of this post)

*A lot of times when lawsuits and legal issues pertaining to real estate arise the agent is included in the suit. If you find down the road that your agent wronged you in some way in the transaction it’s safe to say you will want to be able to contact them and set things straight.

 

Using the internet

Many people use the internet to research property, whether or not they are looking for their first property to buy or selling one of their investment properties. The reason for this is because there is a vast amount of information available to the general public online these days. I think it’s always a good point to start your real estate searches because you can do it first thing in the morning with a cup of coffee or later in the evening in your slippers on the couch with no pressure of meeting a person face to face. It also is a great way to familiarize yourself with the real estate vernacular, market trends and general information from sites such as this one. That’s as far as I think it should go for consumers using the internet for home purchasing information.

Why is that the limit? It’s not because the internet is a bad source of information, it’s more along the line of there is too much bad information out there that can lead to inaccurate assumptions. Assumptions that lead buyers to think that they will never be able to own a home, that they will be able to afford a mansion or that the entire process is overwhelming and they don’t want to deal with it at all. The amount of information is extremely overwhelming. For example, if you Google “real estate” today in .25 seconds you will receive over 1.5 BILLION results none of which I can verify as 100% accurate resources without sitting down and reading each and every one. (sorry guys, I have other plans for the next 100 years of my life that don’t involve verifying other sites’ info)

 

Using an agent

When you hire a REALTOR® effectively what you are doing is hiring a professional to do all of the data crunching, property analyzing and filtering of 100’s of bits of information so that they can give you a concise and appropriate portion of information that you can actually digest mentally. Our job is to understand both what is happening with our industry/ local market and how to get that information to you so that you can actually carry on your life, job, family etc.

What kind of info should you expect? As many home buyers seek to own a home the most common bit of information that is sought out is available homes for sale or that have recently sold. That information really should come from a licensed agent and not from a website due to the fact that some websites don’t update their information often enough or that they don’t verify the information. As a member of the local Multiple Listing Service I have access to every active listing in the market, provided the seller doesn’t elect to withhold their listing from MLS, and I can provide that information to a client. I will not provide that information to a client without reviewing it first to check to make sure that everything looks right. Another great thing about getting information from an agent is that we often times will provide you with our insights on the property as well as feedback if you have any questions. If you try to ask a 3rd part website to get back to you on a question it’s a roll of the dice as to what kind of a response you will receive and how long it will take. If you call your agent, they can get you a quick and complete answer over the phone.

In short, I say that starting off on the internet is a great strategy but make sure you use an agent to find detailed information. It is our job to make sure that you are completely satisfied and informed and I feel comfortable saying that a large majority of REALTOR®s are going to do well by you. If you have any questions about San Luis Obispo County property give me a call and I will gladly help you out.

 

Finding the right home: What kind of styles of home are available?

As a first time home buyer how are you supposed to know what the right house is going to look like? Does it have a gable or monitor roof? Do you want shutters on those windows or would you want a house with just a nice painted trim to compliment the eyes of your home?

With so many different types of homes on the market I understand that it may be a bit difficult to answer the question your REALTOR® is likely going to ask you, “What kind of style are you looking for?” The first piece of advice I can give you is get out and look at various types of homes to see what catches your eye. By total immersion into a variety of homes you will likely start to develop your own individual style preferences. While you are out looking at homes pay attention to details such as rooflines, siding materials, window shapes and coverings, floor plans and obvious decorative embellishments.

To give you a couple ideas of styles that may be available for homes in your market I have put together a real basic starter list for you.

California Real Estate Finance USA Real Estate License, Inc. 2008, p 297

 

Notice the differences in detail on each home including the aforementioned items like roofline, siding etc. In San Luis Obispo we also have other styles such as Craftsman, Ranch, Mediterranean, Santa Fe, Victorian and many more. A simple Google search will also help you to find over 15,000,000 sites with more in depth charts of homes. You can also visit architectural sites to get definitions of each style. A sample definition might be like this; Craftsman: a simple, modest style of home or bungalow with low gabled roofs, large overhangs, with wide front porches with columns.

For specific questions or to talk to a live person about different styles feel free to contact me, the owner and author of this site.

 

Finding the right home: What is the difference between an SFR and a condo?

When you meet with an agent they will undoubtedly ask you what kind of property you are interested in. You can answer them in several ways including “Anything I can afford!” What you are saying may have further implications than what you would expect, however. If you take anything that you can afford it could open up a variety of different property types including mobile homes, manufactured homes, condos, PUDs, SFRs multi-family etc. To give you an idea of what these terms mean I have compiled quick description for each one below.

Mobile home: A detached dwelling unit that is designed for transport after construction on a street or highway via its own wheels, a flatbed truck, a trailer or other method where once it is delivered it can be inhabited with little to no assembly. Mobile homes generally rest on a temporary or permanent foundation where it can then be hooked up to utilities for home use. Mobile homes may or may not be located in designated parks or on private property. The mobile home is treated as personal property as opposed to real estate.

Manufactured homes: A broad category of residence that includes any home that has parts of it that are constructed at factory and transported to the residential site either intact or in pieces and assembled on site. They can be as simple as a mobile home or as complex as multi-level homes built with separate panels assembled on site.

Condos: A type of residence where an individual may own air space within a particular piece of real estate that shares rights and access to property such as a hallway, laundry facility, common areas, parking lots and pools.

Planned Unit Development (PUD): An individual may actually own the building of their residence while sharing ownership, rights and access with other individuals in common areas such as hallways, laundry facilities, parking lots and pools.

Single Family Residence: Also known as a Single Family Detached. This is a stand alone home built on a permanent foundation where an individual owns the home with no shared or common areas like a condo or pud. Some SFR’s may be apart of Home Owner’s Associations where there may be common grounds shared but are not expressly apart of the home itself.

Multi-Family: These vary depending on the type of multi family. Generally a multi-family home is a residence that consists of two or more dwelling units. In San Luis Obispo multi-family units are denoted by zoning codes and corresponding numbers. For example; an R2 property is a residential multi-family property of 2 units, R3 is 3 units etc.

 

Finding the right home: My first home tour is this weekend, what should I expect?

On your first home tour you can run into a variety of different situations and being prepared for them will make the experience more pleasant. Many times you will go and look at property and your agent will have made all of the necessary arrangements to make the occasion enjoyable, successful and worth your time. A few things to keep in mind and to expect are listed below.

No two properties are the same and for that reason you can expect to see a number of different properties. Generally I try to keep that number in the ball park of 5 homes to look at because looking at any more than that and you risk overloading your memory and the houses start blending together. When you look at these properties you want to be able to clearly recall the details of each home so that you don’t buy a home thinking that it had a jetted tub in the master bath and find out that in fact, that tub was in the home you looked at earlier in the day. You may end up touring in different neighborhoods as well so that your agent can expose you to all that your town has to offer.

Tenants may be in the homes that you look at as well as homeowners. Sure there are some times that you look at property that is vacant but many times the home has a person or family living in it and it might be awkward for you to be in their home. It is very important for first time home buyers to look past the personal possessions of the occupant in a home so that they can see the property as just a house and not somebody else’s home. There are even times when there may actually be tenants physically present in the property that may or may not want you to be there looking to buy their home. Home owners will often times be there to offer up any bit of helpful information to get their home sold whereas a tenant may offer up any information that will prevent you from wanting to buy the home so that they can prolong their stay in the property. Be certain to keep in mind what the occupant’s motives may be.

Condition of the property varies from one property to the next. Especially when first time home buyers are looking at property they find that the conditions of property may be less than perfect because the price point that they are shopping in might be the lower/ introductory end of the market. As such, it is a good idea for you to dress accordingly i.e. wear a pair of jeans and close toed shoes. Homes that haven’t been cared for due to vacancy might have weeds around the house that are head high and along with that comes a variety of other issues including spiders, fleas, stickers and a host of other less than savory goodies laying in wait for a nice set of bare feet and legs to attach themselves to. On the other side there are the times when you may be asked to take your shoes off before entering a property to help preserve the new carpets or hardwood floors, be considerate of that and honor the seller’s requests whether or not you will be buying that particular property.

Timing is another thing that often times gets overlooked both by agents and buyers. For  your safety try to have another person accompany you on the tour regardless of what time you go look at property for the first time but also try to avoid tours where you will be out looking at property after dark. While your agent may be an outstanding individual and totally safe, take the precaution of making plans to meet during the day when you are more visible to the public in case you end up with an agent that is a bad person. It is never a good thing to find out that the agent showing you the vacant country house after hours has criminal tendencies. Play it safe and have a partner join you for a daytime tour. Another good reason to see property during the day is so that you can actually take a good look at the exterior of the property. In the sunlight you can take a good look at the roof, exterior siding, yard, foundation and see the house for how it sits in the neighborhood.

Goodies are always a good idea to have with you. Something to eat or drink such as a granola bar and a bottle of water usually do the trick to help keep you comfortable while you are out looking at the available properties. Sometimes, looking at homes takes longer than we expect and we miss a meal or just flat out get hungry and need something to eat to keep our blood sugar up. If you’re out looking for property but distracted by your hunger you might miss out on a few key details that really make or break the house for you and it could all be prevented by snacking on a prepackaged goodie. It might seem silly to read this but I have been out with clients that really needed a sip of water or a snack and when I’ve produced a goodie it makes their day much more enjoyable. A good agent should be able to help you out in a pinch.

Don’t expect to find the perfect house on your first outing there aren’t any expectations for you to buy the very first property you see. In fact, many times people see between 6 and 11 properties before they find the right one and some see way more than that before they settle on a property to make an offer on. That being said, if you go out and find a house that you fall in love with on the first day don’t be afraid to jump on it just because it’s the first day. If you really love it and feel like you need to have it have your agent draw up the documents to purchase the house and tell them to hold onto it overnight so that you can go home and sleep on it. If you wake up in the morning and still feel just as confident shoot that offer out and make the deal happen.

There are a lot of different factors that will affect your first day of touring properties but keeping these few things in mind will be a good start to finding your new home. Also remember that every time you go out to look at property you will find a new circumstance that could lead to a new adventure. From parking tickets to crazy neighbors; you can expect to have a story to tell after each showing. Enjoy!