So you are thinking of buying a home in the Bay Area? We'd like to help. Here are a few simple steps that you can take to insure you are on the road to a great Real Estate transaction.
Step 1 - Apply for a Home Loan
Before even picking up one of those real estate publications or searching the internet and dreaming about buying a home you can't afford, find out how much you CAN afford. This will make your search for a property much more rewarding and ensure that your Real Estate Agent shows you the homes you are qualified for.
Learn the difference between pre-approval & pre-qualification
Step 2 - Hire a professional Real Estate Agent
In the State of California as a buyer you are entitled to representation at no cost to you. When you us Picasso Property Realtors as your buyers agent, you are ensuring yourself professional care. I will work with you and manage the entire Real Estate transaction. Not having proper Real Estate representation is like going to court without your attorney or performing a surgery on yourself! (OUCH).
Why hire Picasso Properties Realty?
Step 3 – Location and Features
It's time for you to do your homework. Know where you would like to live or at least what characteristics you are looking for in a neighborhood? By narrowing down your choices you will soon find many homes to your liking. And it will help your Real Estate Agent show you only the properties you are interested in. You don’t want to spend an entire Saturday looking at Victorians if you don’t like Victorian style homes. As your Real Estate Agent, We will focus on selecting features that will suit you and your lifestyle. We ask all buyers to complete our Buyers questionnaire.
Step 4 - Searching for your new Home
Now you know how much you can spend, where you want to live, and what features are important to you. We will search listings, and tap into my network of over 2000 Bay Area Real Estate Agents to find you the home you desire. You can feel free to search properties on-line, drive around your favorite neighborhoods and go to open houses. Together we will walk through the steps that will have you walking through the door of your new home in no time and with no stress.
Step 5 - Writing an Offer to Purchase Real Estate – Contingencies, & Earnest Money Deposit
Once you find the home you want to buy, the next step is to write an offer – which is not as easy as it sounds. Your offer is the first step toward negotiating a sales contract with the seller. The offer is much more involved than simply coming up with a price and saying, "This is what I’ll pay." Because of the large dollar amounts involved, both parties will want to build in protections and contingencies to protect your investment and limit your risk.
Contingencies in a Purchase Offer
In most purchase transactions there may be a slight challenge or two, but most things will go quite smoothly. However, you want to anticipate potential problems so that if something does go wrong, you can cancel the contract without penalty. These are called "contingencies" and you must be sure to include them when you offer to buy a home.
There common contingencies you should include in your offer. Since you probably need a mortgage to buy the home, a condition of your offer should be that you successfully obtain suitable financing. Another condition should be that the property appraises for at least what you agreed to pay for it. During the escrow period you are likely to require certain inspections, and another contingency should be that it pass those inspections. Other contingencies could be the based on the sale of another property or purchasing another property.
Basically, contingencies protect you in case you cannot perform or choose not to perform on a promise to buy a home. If you cancel a contract without having built-in conditions and contingencies, you could find yourself forfeiting your earnest money deposit.
In an offer to purchase real estate, you include not only the price you are willing to pay, but other details of the purchase as well. This will include how you intend to finance the home, your down payment if any, who will pay what closing costs, what inspections are to be performed, timetables, whether personal property is included in the purchase, terms of cancellation, any repairs you want performed, which professional services will be used, when you actually get physical possession of the property, and how to settle disputes should they occur. Buying a home is a major event for both the buyer and seller. The seller makes plans based on your offer that affect their finances, too.
Earnest Money Deposit
After you have come up with an offer price, the next step is to determine how large a deposit you want to make with your offer. You want the "earnest money deposit" to be large enough to show the seller you are serious, but not so large you are placing funds you may need later at risk. Another reason to limit your deposit is "just in case." Although problems are the exception and not the rule, they do occur. "Just in case" there is a nasty or prolonged dispute between you and the seller, the less money you have tied up in a deposit, the fewer funds you have placed at risk.
During a hot market there may be several offers on the property that interests you. A large deposit may impress a seller enough to accept your offer instead of someone else’s, even when your unknown competitor is offering the same price or slightly higher. Since large deposits do impress sellers, you may also find that by making a large deposit you can convince the seller to accept a lower offer. More money up front may save you money later.
Step 6- Agent Presents Offer to Sellers Agent
We will talk with you and stratigise on presenting the best offer for the property you are interested in buying, and negotiate your offer with the listing agent.
Step 7 - Your Offer has been Accepted Now what?
The listing agent of the property you have placed your offer on, will notify us when your offer has been accepted. This can be from 1 to 7 days.
Step 8 - Escrow Opened
You are going to need an escrow or settlement company to act as an "independent third party" between you and the seller. Without having a third party involved, ensures you that when you fork over the money, you are going to get the deed. They will hold your deposit and coordinate much of the activity that goes on during the escrow period.
Since this third party is very important to both you and the seller and both of you will pay fees to this company, it is important to agree on which service to use. Therefore, your choice should be part of the offer. Since you do not buy a home every other week or so, you are probably unfamiliar with companies that provide this service. Your agent can make a recommendation. You have the authority to accept this recommendation and include it in your offer, or make your own choice.
Keep in mind that the seller may also have a preference and this may be a point of negotiation in a counter-offer.
Step 9 – Submit Loan Documents; Underwriting, and Appraisal
Submit to the lender, your loan application. You should already have a letter of pre-approval from your lender to make this process less exhausting and remove the possibility of any surprises. (See Pre-Approved vs. Pre-Qualified.) Underwriting will review files for loan funding. An appraiser (that you will pay for) will go and do an appraisal on the property. An appraiser establishes the value of properties. The lender wants to make sure their investment is worth the price you are paying for the house.
Step 10 - Inspections & Disclosures
Although you have toured the property, looked at the walls and ceiling, turned on the faucets and played with the light switches, you have not lived in it. The seller has years of knowledge about his or her home and there may be some things you want to find out about as quickly as possible. For this reason, you will require certain disclosures as part of your offer.
Basically, you want the seller to disclose any adverse conditions that may have a substantial impact on your decision to purchase the home. This would include any problems with the house, whether the property is in a flood zone, a noise zone, or any other kind of hazardous area.
If you have us representing you, this is automatic, but some states do not require individuals selling their own home to provide you with this information. Often they do not require banks selling foreclosed property to provide these disclosures, either. Obtaining these types of disclosures should always be a part of your offer, and time is of the essence.
Inspections You Should Require
Besides appraisal and the termite inspection, you should also have a professional go through the house and seek out potential problems. Of course, you will have inspected the home, but you are not a professional. Even if they are not things the seller is expected to repair, at least you will have foreknowledge of any potential problems.
The seller will want this inspection performed quickly, so that you can approve the results and move forward with the purchase. Once you receive the inspection, you will want to allow yourself sufficient time to review and approve the report. If you do not approve the report, you may negotiate with the sellers on which repairs should be performed and who should pay for those repairs. Otherwise, you can cancel the purchase without penalty, provided you are within the timetables in your offer.
Step 11 – Getting a Title Report and Insurance
Title insurance is important because, by providing you with an Owners Policy, they insure that you have clear title to the property. If there are any problems later, you can always go back to the title insurance company and have them clear it up. Since it is customary for the seller to pay for the owner’s policy, they have an interest in which company is used. However, you are going to pay a fee to the title insurance company, too. This is for the Lender’s Policy. The lender’s policy insures your mortgage lender that there are no liens or judgments against the property and that the mortgage will be in first position. In other words, should you sell the property or refinance it, their mortgage gets paid first, before any other claims against the property.
Step 12 – Remove Contingencies
There are several contingencies that are presented with an offer to purchase real estate. (See Above) All contingencies must be cleared in order for the purchase to proceed.
Step 13 – Get Homeowners’ Insurance
You will be required as part of your loan contingencies to get homeowners insurance. Once you select an insurance company and coverage, you will give your insurance agent the details of the escrow information.
Step 14 - Final Walk-Through Inspection
Before closing, you will want to revisit the property to ensure it is in the condition you have required in your offer, and to inspect that any required repairs have been performed. You should do this no sooner than five days before you intend to close. Make sure this right to do a final inspection is included in your offer to purchase the home
Step 15 – Document Signing
This is the biggie! This is when it really all happens. At the Title company you will sign all of your loan documents, escrow documents, and title documents. This is when you are really buying the house.
Step 16 – Loan Funding
After singing documents, the lender sends funds to the Title company.
Step 17 – Record & Transfer
The title company will close escrow, transfer title and will record the transaction at the County Recorders office. Then . . . .
YOU ARE THE OWNER OF A NEW HOME!!!