Now you are thinking about buying a house. The exciting journey is starting! A real estate purchase is one of the largest investments in our life. It is important that you select the right agent, understand your own budget and priorities, know the market condition and the neighborhoods, before deciding on a house. In addition, a good knowledge of offering and escrow processes will help prepare you for a smooth purchase process. This document is a concise step-by-step buying guide for San Francisco bay area home buyers from start to finish. It also includes additional services that I can offer to you as my client.
Select the Right Agent
The first step in finding a house is to select the right agent to help you through the process. Purchasing a home is a big investment with many legal and financial ramifications, so you should not choose an agent merely on “personal connection”, or the agent’s commission rate, without deeper investigation. Furthermore, it may be easy to locate properties through a combination of open houses and online searching. It may not, however, be in the client’s best interest to wait until you locate a house to select a specific agent.
As an experienced bay area real estate agent, I can help identify the right neighborhood, coordinate financing, explain the tax consequences of home ownership, filter out inappropriate properties, identify off-market opportunities, and answer questions that come up along the way. Additionally, I can help screen properties during “broker tour” and notify you when suitable properties come onto the market. Check out the all 5-star reviews on my Google Business Page to know more about what I was able to bring to my past happy clients.
Getting pre-approved by a local lender or mortgage broker is one of the first things you should do for many reasons. Generally, you should begin the pre-approval process immediately after meeting with your agent. Knowing the maximum loan amount and purchase power will aid in determining how much you can spend on your home and which neighborhoods to consider. If any issues come up, such as inaccuracies that make your credit score lower than expected, you will have time to resolve them. In the bay area, a pre-approval letter is usually a prerequisite for offer submission.
With years of experiences working with different lenders, I can recommend excellent lenders and mortgage brokers fitting to your situation, to get you qualified for the maximum loan amount and/or the best rate.
Know the Neighborhoods and Marketplace
Location, Location, Location! Location is no doubt extremely important to a real estate purchase. Clients may have an initial idea of what cities and neighborhoods appeal most to them. To decide whether that neighborhood is a good match, you should examine your criteria and budget versus what the area can deliver and what the area demands on you financially. You should only purchase a home when you are familiar with the neighborhoods and have seen enough properties to truly recognize an excellent fit.
For home buyers who choose to work with me, I will personally take you to some of the neighborhoods, give you an overview of the area, and show a few representative homes in each candidate area. More importantly, I will provide you with information about local schools, parks, market situation and appreciation potential of each candidate area. The real estate market in the bay area is very dynamic and competitive. A dedicated agent who is good with numbers like me will keep you informed with the constantly changing market of the area you are focused on.
Find a Home and Review Disclosures
Online search is the primary way of finding a home for both consumers and agents. Street signs, open houses, coming soon and off market listing information are some additional sources for finding a home. After locating an interesting property, you then tour it in person, often together with your agent. You and your agent analyze the pros and cons of the property after the tour. If at this point you feel this property is worth to be further considered, you express your interest to your agent in moving forward to reviewing the disclosures. Your agent will request the disclosures from the listing agent and forward them to you. Disclosures contain many important items, most notably the property and pest inspections, the seller’s disclosures, and the title report. You will need to carefully review the disclosures that the seller and the listing agent provide, before making the final commitment. Below is an introduction of important reports and disclosures buyers encounter in purchasing a house.
Property Inspection Report
The property inspection is the inspector’s opinion on the home’s plumbing, electrical systems, foundation, roof, and overall condition. This report will list all issues the inspector finds. The property inspector does not provide the cost estimates. Generally, items found in the property inspections are not addressed by the seller, but buyer’s responsibility to repair.
Termite Inspection Report
The termite inspection report, also called the pest report, will look for any damage to wood, caused by termites as well as any water damage that may be found in the home. Unlike the property inspection report, the pest report will usually list the costs required to alleviate these issues.
The pest report describes damage as a Section I or Section II issues. Section I issues are current problems with the home, such as active termite infestation or dry wall damage in which water has rotted away at the wood underneath the flooring or walls. Section II issues are future problems with the home, ones that could lead to pest or water damage in the future, such as a lack of caulking by the bathtub that could lead to future water damage.
Most sellers in the bay area will NOT clear Section I issues in the escrow for their buyers, rather than selling the home As-Is. If you purchase the home in “as-is” condition, it would be wise that you address the Section I issues after close of escrow.
The seller’s disclosures contain a lot of information about property history, modifications that have been done, current property data and problems existing with the property. For example, sellers need to answer whether any remodeling has been done, and if so, whether the remodeling was done with permits. California is very protective of homebuyers and requires sellers to disclose all known material problems a property may have.
The title report is issued by a title company, such as First American Title Company or Chicago Title Company. It reports all the title related information including the ownership, property boundary, rights and easements, and exemptions. It ensures that the seller can convey clean title without any liens preventing a smooth conveyance. All liens that may be on the property, such as unpaid property taxes, are listed in the title report, and need to be cleared prior to or upon close of escrow.
Homeowners Association (HOA) Documents
If you are considering a townhouse or condominium, the HOA documents will be included in the disclosures or be quickly forthcoming. Important issues to consider include whether any litigation or special assessments are looming, and whether there are plans to heavily increase HOA dues. Unlike the interest on your mortgage, HOA dues are not tax deductible.
For my clients, I will help you find your house through all of the possible venues. I will share with you pros and cons in my professional opinion of each house we identified, to help you decide whether to visit a house, and then whether to go for a house. In review of the disclosures, I will provide you with a summary of the critical issues and analyses, walk you through important issues, and help you decide whether the outstanding issues are significant enough to call off the offering, or the issues are something that can be mitigated after closing. You should only consider making an offer after you feel comfortable with the disclosures.
Make an Offer
How exciting! Yu have decided to make an offer on this great property! Your agent will use the standard CAR or PRDS forms to draft a purchase agreement for you based on your interest level, financial situation, market condition, area norm and his or her experience. You should only sign the agreement when you are comfortable with all the terms specified in the offer.
The bay area’s real estate market is often highly competitive. As a skilled buyer’s agent, I will speak with the listing agent ahead of time to ascertain the seller’s desires and to see if you can offer any items of value to the seller with little cost to you. This shows our desire to work with the seller and can optimize the situation for both you and the seller. To help you decide the offer price, I will provide you with a comparable market analysis, showing the sale price of recent comparable properties and what the market value is of the current property. Additionally, I will update you on the interest level of other parties and whether you may be in a multiple offer situation. My goal is to get you the house you really want at the lowest price and best term possible in least amount of time, when you are ready to commit to that property.
Acceptance, Rejection, or Counters
Once an offer is made, it can be accepted, rejected, or countered. A counteroffer accepts all the terms of the contract, except the terms that are mentioned. For instance, a counteroffer may increase the purchase price or shorten the escrow period. A counteroffer can be made to one party or multiple parties. If there is only one counteroffer and that counteroffer is accepted, then a binding contract has formed. On the other hand, if there are multiple counteroffers, which may all have the same or different terms, the counteroffer must be accepted by the buyer and reaccepted by the seller, ensuring that the home sells to only one party.
Getting a counteroffer is the second chance you may get your dream house. I will try my best to win a counteroffer for you when our offer is short on certain terms in the first round, and then help you get an edge in the counteroffer bid. Inevitably, you could face fierce competition on certain properties, so handling rejections is also a lesson to learn for buyers. We will move onto the next house together as a team when over bidden happens. We WILL get the house you really want eventually.
After the parties formed a contractual agreement, the escrow period begins. An escrow company is a neutral third party that acts as an intermediary between the buyer and seller. In Northern California, title companies handle both the title and escrow duties of the same transaction. The most important job of the escrow company is to properly take the buyer’s money in exchange for the seller’s property. An average escrow period is 30 days, with the vast majority ranging from 15-45 days. Sending the “good faith deposit” specified in the contract to the escrow company would be your first step in the escrow process.
If your purchase contract has contingencies, such as a property contingency, then I may find experienced inspectors for you to examine the home during the contingency period. During this period, you can decide whether you want to proceed with the purchase. I can assist you and ask the seller to credit you for any new problems. Usually, an agreement can still be reached if the seller accepts your requests. If you choose to back out of a contract for a reason related to a contingency during the contingency period, you are entitled to a full return of your deposit.
If you have a loan, as most homebuyers do, then an appraiser will come to the property to appraise the home you are buying. I will help facilitate the appraisal process for a smooth and in-time appraisal. Also, I will work with your loan officer to ensure that the loan proceeds arrive on time and with little hassle.
To prepare you to become the proud new owner, I will get you to sign all the disclosures required for closing conveniently, order home warranty on your behalf, and arrange visits to the property for your contractors and for your final walk-through. I will remind you and share my experience with you in each step, and answer any questions you may have.
Day of Closing
On the day of closing, the escrow company transfers your funds to the seller and records the deed in your name with the county. Once you are on record, you officially become the new homeowner of this property. Your agent will provide to you with the keys, garage openers, and access codes, if any, of your new home. Other information, such as manuals for appliances, is usually left in the property. As a courtesy to my clients, I will also share with you a list of tasks and reminders new owners may need to take care of in their early ownership as well as ownership tenure.
Enjoy Your Home & Ping’s Client Appreciation Program
Yay, you have made it! Congratulations to you and your family! It is time to enjoy your new home or to start the home improvement work you have planned for! I am still here to serve you for all your housing questions or issues even after the close. I have a database of referrals that I can send to you, for home maintenance and improvement.
While you become the owner of record when escrow closes, please be aware that you generally will not receive the official deed from the county until a few weeks later. Grant deed is a public record in California, so take it easy if you receive it late or do not receive it for any reason. The escrow company that closed the transaction for you can furnish you a new copy electronically instead.
Supplemental property tax bills will arrive from the county months after closing, to have you make up the difference between the property tax rate of the previous owner and your new rate. It would be wise to check on the county’s property tax payment website from time to time to ensure on-time payments of supplemental tax bills.
Close of sales is not the end of my service to you. Feel free to reach me by phone, email or social media for house related issues that I may be able to help with. I will do my best to resolve them for you. On my end, I will send you real estate updates and reminders periodically, to keep you informed with the real estate market and other changes. I would very much appreciate a review from you if you enjoyed my services, to help keep my business thrive. If you know someone who is interested in buying or selling, please do send them to me. I will take great care of them, just as how I worked with you. It has been a great pleasure knowing you and your family, and working with you along the way!
Morgan Real Estate
San Jose, CA 95131