This one of the most important home buying questions. Get pre-approved for a mortgage, that is unless you happen to be an all cash buyer. The seller will not consider your offer unless you have a solid pre-approval in place with a reputable lender. It’s a fairly quick process that can be done in a few days. Don’t wait until you identify a house you want though. You’ll risk someone else buying it while you’re in the process of getting pre-approved.
These terms are often used interchangeably but they have very different meanings. Pre-qualification can mean lots of things, but is usually means a lender has discussed your finances with you and may have gathered some documentation, but not all that’s required. Based on that info, he or she says you are pre-qualified to buy a home. A pre-approval means that all documentation has been verified and your loan is approved pending finding a house and the home appraising. Big difference!
You sure can. By default, the contract states you have 17 days to do your inspections and remove all contingencies by day 17. As long as those contingencies haven’t been removed, you can cancel and get your whole deposit back. No questions asked. The only money you would lose would be any money spent on inspections and the appraisal.
Open houses can be a great way to familiarize you with neighborhoods and current homes for sale. Go to as many as you like, just remember that the agent sitting the open house isn’t there to sell that house, he/she is there to meet buyers for other homes. Just let them know you’re working with an agent and they’ll usually leave you alone.
Most FSBOs will gladly pay an agent who brings them a buyer. Why? The real estate transaction is complex. Most FSBOs want at least one agent involved to oversee the transaction. Remember, the seller pays the commission, not the buyer. Don’t give up your right for representation for the benefit of the seller. If you see a FSBO, have your agent contact the seller first. Most of the time the seller will be happy to cooperate with an agent.
A buyer’s market exists when there are more sellers than buyers. During a buyer’s market, home prices typically go down. The reverse is true for a seller’s market. When there are more buyers than sellers and there are no clear indicators that that will change in the near future, then prices should continue to go up. The decision should be based on whether or not you feel you’re personally and financially ready. Trying to guess what the market is going to do is no easy task.
The seller. When a seller lists his or her home, they sign a contract agreeing to pay an agreed upon commission to the listing office. When the home is put in the Multiple Listing Service, the listing office agrees to split the commission with the agent who brings the buyer. The full commission typically ranges between 5-6% of the sales price. The buyer pays no commission to either of the agents unless there is a special arrangement.
This is not a good strategy in today’s market. Offering too low creates a knee-jerk reaction. The seller will often be insulted by your offer and not take you seriously and, if they bother to counter you, they will typically counter you higher than they would have if you made a reasonable offer. This is not to say that sellers won’t negotiate price, but your offer should have a basis that is determined with the help of your agent. If the home is priced reasonably, make a reasonable offer or you may risk losing the home.
There are many variables in determining an offer price. It is important to sit down with your agent and discuss these items before you make an offer. Your offer will depend on the following: Your motivation to buy, the seller’s motivation to sell, how long the home has been listed, the strength of your offer (i.e. Are you pre-approved, what’s your down-payment, are there any contingencies such as selling your home first, etc.), what were the most recent sales, what time of year is it, plus many more. It is important to realize that there is more to an offer than just price.
Comparable sales provide a good ballpark figure for what a home is worth, but they don’t determine what a home is worth. A home is worth what someone is willing to pay for it as long as it’s within reason. If comparable sales were the only tool used to determine a home’s value, prices would always stay the same. So use comparables as a guide for a home’s worth, not the determinate.
A contingency is a condition of the contract. In other words, if your offer is contingent on you qualifying for a loan and you are unable to qualify within the contingency period, then you can cancel the escrow and keep your deposit. However, contingencies usually have to be removed by a set period of time. If you try to cancel an escrow after all contingencies have been removed, you risk losing your earnest money deposit. Contingencies include: inspection, seller disclosures, appraisal, selling current residence, HOA docs, loan approval, plus more.
The deposit is what you give the seller when escrow is opened (held in an escrow account) as a good faith deposit to demonstrate the seriousness of your offer. The deposit is usually 3% of the purchase price, but it can be any dollar amount agreed to by buyer and seller. The deposit gets credited towards the down payment during escrow. If you cancel the purchase after removing all contingencies, you would forfeit that deposit to the seller.
Unless otherwise agreed, the buyer has 17 days from the date of acceptance to complete all inspections. The buyer is permitted (at the buyer’s cost) to complete any inspection desired. Buyers are strongly advised to get at minimum a physical inspection by a licensed inspector. The physical inspector will check things like the appliances, electrical switches, air conditioner, plumbing, and more. The inspector then gives the buyer a room-by-room report outlining any problems that may exist.
If the inspection is performed within the inspection contingency period, the buyer can request repairs to be performed by the seller. If the buyer and seller cannot come to an agreement regarding the repairs, the escrow can be cancelled and the deposit returned to the buyer.
If obtaining financing is a contingency of the sale (it usually is), then the buyer can cancel the sale and get the deposit back if the buyer is unable to obtain financing within the contingency period. The contract provides 21 days from the date of acceptance for the loan contingency to be removed.
Homes are sold “as is” meaning in their present physical condition. In L.A. and Ventura Counties, the seller is only required to do three things: Strap the water for earthquake safety, install smoke detectors, and install carbon monoxide detectors. That’s it. Everything else is negotiable.
The final walk through is usually done within the last 5 days prior to the close of escrow. The purpose of the walk through is to make sure that the home is in the same condition as the day your offer was accepted (ie. The lawn is still green, no fixtures have been removed, etc.), and to verify that the buyer requested repairs have been completed.
The appraisal contingency (if selected in the purchase agreement) states that the agreement is contingent upon the property appraising for no less than the specified total purchase price. In other words, if the home does not appraise for at least the price you agreed to pay, the sale can be cancelled and the deposit returned to the buyer. )
Closing costs can vary greatly from deal to deal. A good ballpark figure to expect is between 2-4% of the purchase price. However, your closing costs will depend on how many (if any) points you are paying on the loan, if the seller will be paying any of the buyer’s closing costs, plus many more variables. During escrow, you should receive a good faith estimate to prepare you for your closing costs.
About 5 days before the close of escrow, the buyer meets with the escrow officer to sign the loan documents and arrange the wire transfer for the rest of the down payment (this is the buyer’s final step). The documents then go to the lender for final review. Once they have been reviewed, the lender funds the loan. After the loan is funded, the deed is recorded and escrow closes (usually the day after the loan funds). Once the deed is recorded, the home is yours!
One of the many home buying questions I get asked everyday. When you purchase a single family home, you’re buying everything – the land, the roof, the walls, everything. When you buy your typical condo or townhome, you are technically buying “the space between the walls” meaning that the homeowners association owns the structure. The positive is that won’t have to pay ongoing homeowners insurance premiums or buy a new roof one day, the negative is that your HOA dues are an added expense that many single family home don’t have.


Thinking about buying in the Conejo Valley?