Your Path To Home Ownership Part 1 of 3
by William Johnson, GRI, CRS, E-Pro, CDPE
As part of my counseling process when I am working with a home buyer, I will take you through the home buying process here in California from start to finish. I will also familiarize you with the team of other professionals that may be assisting you along the way in this process consisting of 21 steps on your path to home ownership.
In our first get together, I think it is most important for you to know that you have connected with the real estate professional with the experience, credentials and the patience to help you through these 21 steps to home ownership in a professional and personalized manner.
Thank you for selecting me.
I am listing here the 21 steps you will take in order and the title of the person you will be working with in each one of these steps. A number of these steps will be underway at the same time and they will require your attention and assurance that we have open lines of communications at all times. I will be there to guide you every step of the way.
Step 1. The Loan Officer
Consulting with the loan officer that will help you in the loan pre-approval process. He will help you determine what you qualify for and also how much payment you will be comfortable with. Once you are pre-approved, the loan officer will provide a pre-approval letter that we will use later to accompany any offer you want to make on a home. I have several loan officers I work with and we will discuss my experiences with them. You are not obligated to use a particular lender that I may recommend and know that I always respect pre-existing relationships. The key here is getting the best guidance and the best service to get the transaction closed on time with as little stress as possible.
Step 2. My Real Estate Team
This is where I come in again. I will or one of my team will send you the available properties that need meet your general or specific criteria in both location and price that you will first preview on-line. You will narrow these properties down to the ones that actually interest you and send me the list of properties to set -up for showings. As we pursue these properties, we will coordinate the plan to physically see both the home and the neighborhoods that interest you.
Step 3. Working With Me to Prepare The Offer
Once we have found the right property I will prepare for you a CMA ( Comparative Market Analysis ) that will help you determine the relative market value in the area of the chosen property. You will determine it's value to you. REALTORS® never tell you what you should offer. Once you have determined the price, it is time to prepare the offer. I will have provided you by this time a blank offer so you will already be familiar with the many paragraphs to be completed. I will explain your many options in the offer including specifying the amount of Earnest money, time frames and closing date, identifying title and escrow services, any personal property that is to be included without Seller warranty, a Home Warranty to cover the mechanicals of the property and any additional disclosures you are asking of the seller, etc.
Step 4. The Listing Agent and the Seller
After we have prepared the offer, typically I will submit the offer to the Listing agent and they will present to the offer to the Seller. In some cases I will ask to present the offer directly to the Seller with the Listing agent in attendance. This is more today but can happen if need be. In any case the Seller will review the offer with the listing agent and determine if the offer is workable for them. The seller will be instructed that they have 3 options.
1. The Seller can accept the offer as written 2. The Seller can reject the offer 3. The Seller can counter the offer.
The Seller will consider your offer and if they disagree on something you have asked for, be it price, terms , personal property etc, they may counter offer your offer. #3 happens frequently and the listing agent will prepare a counter offer detailing each of the things the Seller disagrees with for your consideration. If you get a counter offer, you are presented with the same three options. To Accept, to Reject, or to Counter the Counter Offer. If and when there is agreement, we go on to the next step and either I or the Listing agent will open escrow, depending on which one us recommended the service.
Step 5. Open of Escrow (Escrow Officer )
Once we have a completely signed agreement, it is time to open Escrow. The escrow company that was agreed to by all parties will receive the signed offer , counter offer( s) if any and any other pertinent addenda affecting the purchase of the property. The escrow officer will cause the opening of the title order to research the ownership and any recorded liens or easements on the property. They do this in preparation to insure the title . The earnest money deposit that was agreed to in the contract will be sent to escrow according to the way it was agreed in the offer. The funds will be deposited in a non-interest bearing account. If this is a subdivision ( most homes in Ca. are in subdivisions) the escrow officer will order the association documents for your approval. They will also order a "Pay Off " demand on the Sellers loan (s). Other recorded liens on the property also have to be reconciled.
Step 6. Home Inspector and Me
Once escrow has been set up and all the documents are in, it is time for you to begin your "Due Diligence" of the property to ascertain to the extent possible the true nature and condition of the property. In the offer to purchase agreement, you would have specified to the seller that you are to receive all the Sellers disclosures by a time certain. Most often you will have possession of these disclosures by the time the inspection appointment arrives , meeting with the licensed contractor or engineer that you will select at time of acceptance of your offer. Home Inspectors are not licensed but are certified. A Contractor or Engineer is licensed by the state which is why I recommend a Buyer to strongly consider having them do your home inspection. At the time of the inspection, I will present to you a form called the "Buyers Election of Inspections" and based on the preliminary findings and recommendations of the contractor or engineer, more inspections may be called for to ascertain a more detailed condition of the property by other experts, including licensed roofing contractors, pool and spa inspections, Electrical and Plumbing inspections, soils engineers or licensed landscapers, etc..
Step 7. Buyer's Request for Repairs ( The Buyers and Me )
Very often things are discovered about the condition of a property that you may want to address to the seller, asking them to explain their experience with the issue or condition, request they make the repairs to the property during the escrow period or provide you with an " In Lieu Of" credit through escrow. The lenders never allow for the credit to be in the form of cash. The credits that you may obtain can only be used up to the extent of your closing costs or reducing the sales price or both. Sellers are not obligated to make repairs or provide the Buyer with credits. If the seller opts out of making the repairs or providing you a credit, your only recourse would be to accept the property in its present condition and deal with the needed repairs yourself or cancel the purchase.
Should a request for repairs be made to the Seller, I will provide you with a form that itemizes the requested repairs or an " in lieu of credit " for these repairs. In California, if you accept a credit or accept the Seller's response to your itemized request for repairs, the inspections contingency is then removed upon that agreement. There may be other contingencies still remaining such as receipt and approval of HOA documents, loan funding, appraisal etc. Those remaining contingencies will be dealt with in later steps.
Suffice it say that inspecting the property and being comfortable with the condition to the extent that you can ascertain it's condition requires careful consideration of the findings. Homes of various ages while they were most likely built to the building code at the time of construction, that code changes and the inspection will usually call out these items as not being to current code. These items are best reviewed with the person doing the home inspection and they will advise you accordingly. As your real estate agent I am not qualified to advise you on these issues should they come up in the inspection. This is your "due diligence" period and other top quality professionals are needed to advise you.
Steps 8 through 14 will be in Part 2 - These steps include involve securing property insurance, lenders disclosures,appraisal, underwriting and loan conditions.
Steps 15 through 21 will be in Part 3 - The steps in this last part discuss the loan docs themselves, signing loan docs and the balance of down payment, funding the loan, removal of remaining contingencies, close of escrow and finally getting the keys to the property and moving in. Becoming your REALTOR® for life.
Stay with me here as once you have my 21 steps complete, you are a new homeowner and now my newest past client. Our relationship doesn't end here, in some ways it is just beginning. Stay tuned.