Monday, December 15, 2008

Closing Escrow – Finally, The House Is Yours!

An escrow closing is the pinnacle of the real estate transaction. It signifies legal transfer of title (ownership) from the seller to the buyer and the completion of all conditions set up as part of the escrow.

Generally, ownership is shown through a grant deed. This deed is recorded with the County within one working day of the escrow holder’s receipt of loan funds from the buyer’s lender. This recording completes the transaction and is what is commonly known as the “close of escrow.”

Prior to this and once all of the conditions of escrow have been satisfied, and escrow officer or your real estate agent will inform you of exactly the date escrow will close.

After the escrow officer has verified with the County Records Office that the documents have recorded and legal transfer of title has occurred, the final closing papers are disbursed (usually within one day of close). The final acts of closing the file, preparing statements, and the disbursing of any remaining funds is the end of the escrow. At this time you may or may not be receiving the keys. Depending on how the purchase contract was set up, it may be as long as three days before you are allowed to move in. Reference the first page of the purchase agreement, paragraph 3b, to determine when you will be given possession.

To obtain keys, we will contact you to arrange a drop off or pickup. We hope that you will take this time to check out the place, order a pizza, break out a bottle of wine, and spend some time warming up to your new home. There’s still plenty of work ahead with the move in but this is the perfect time for a little celebratory break. Congratulations, you’ve earned it!

Thursday, December 4, 2008

Great Deals on Fullerton REO real estate

What do these homes all have in common?

First, they were all recent bank owned real estate sales sold at rock bottom prices in Fullerton, CA

Second, all of the buyers were represented by us

Third, all of the current owners have read
our guide to bank owned real estate and used it, our personal advice, and their own judgement to make it happen.

In today's market of bargain priced homes,
many buyers are missing out on the best opportunities. Our buyers are not.

If you haven't already, please use the tools available on the site as well as our own personal advice to take advantage of this downswing in the real estate market.

Make sure your not following the herd,
get in touch with us today to get representation that will put you in front of the pack.

Friday, October 24, 2008

Loan Funding- Show Us The Money!

During the process of buying or selling a piece of real estate, most buyers require a loan in order to purchase the property. There comes a time in the transaction when the money is ready to be exchanged for ownership of the property. Funding of the loan is essentially the transfer of money from the lender to the seller of the property. Actually it is transferred to our third party escrow but for simplicity purposes we can think of it as being transferred to the seller.

After you review and sign your loan documents, the escrow company will send them back to the lender. A final review by the lender’s underwriter takes place and if everything looks good according to the underwriter, the lender will notify the escrow company that they are ready for funding. In other words, the lender is ready to send over the money to complete the purchase of the real estate.

At this time or preferably before, the escrow company will instruct the buyer to bring all necessary closing money (i.e. closing costs and down payment) into escrow to be held until funding. Most of the time when the loan is funded the actual money for the loan is wired over in just a few minutes but in order to fund the loan all conditions and instructions set up in escrow must have been met. This dotting of the i’s and crossing of the t’s is usually what delays the actual funding from happening. Many times underwriters will take a hard second look at the borrower’s financials that may delay the funding a few days. For this reason, we encourage buyers to get their entire loan application and supplementary materials to the lender as quickly in the escrow process as possible.

As you can see, in most real estate transactions funding is a very significant event in the process and a critical component to purchasing your home. Now that you know what the funding process is all about, the only thing left is the closing and recording. You’ll learn about this final step in our next tutorial.

Monday, October 20, 2008

Purchase Agreement Contingencies - A Buyers Emergency Escape

When you wrote an offer to purchase your prospective home, you more than likely had a few safety nets put into action should the deal go sour. These safety nets are known as contingencies and are considered normal buyer protection in our purchase agreements.

The most common contingencies are to:

  • See all disclosures from the seller

  • Inspect the property

  • Obtain acceptable financing for the property

  • Have the property appraise at a value equal to or greater than the purchase price
If for any reason you are unable to obtain any of the above, or have an issue with them, no matter how small (ie unacceptable interest rate on loan, too many repairs, or low appraisal) within the first 17 days of the transaction, then you most likely will be able to cancel the entire agreement with zero penalty.

There does come a time in the transaction, usually after the 17th day, that the buyer will need to be ready to remove all of these contingencies of sale. We call this the "release of contingencies" and usually send the buyer a form to be signed stating that they are satisfied with respect to all of the above conditions, are electing to proceed with the transaction, and realize that backing out or failing to close escrow from this point forward could lead to the forfeiture of their deposit.

After the contingency release is complete, a buyer is starting to turn the home stretch toward owning this new piece of real estate. And while the remaining length of track may be short, it is the stretch where most deals are either made or broken. We'll do everything we can to make sure you are able to make it across the finish line with your new home.

Look for our next article on insurance for the first thing we can do to get you there.

Monday, October 13, 2008

Appraisals - How Much Is This Home Worth?

Appraisals are very easy and simple to understand so we are going to keep this one short. Within the first 17 days of escrow buyers will need to have their lender order an appraisal to prove to the bank's investors that the property is worth at least as much as the loan they will be writing on it. Appraisers work for the lender but are often paid by the buyer via closing costs. The cost for an appraisal can range from $300-$600 depending on size, type, and location of property.

Appraisers are licensed and will visit the house, look at recently sold homes in the area, and combine this information with general market trends to determine a fair market value for the home. There is no need for a buyer to meet an appraiser at the property.

Many buyers confuse appraisal with inspection. Think of it like this:
Inspectors check for physical defect in the property, work solely for the buyer, and do not discuss value of the property.

Appraisers work solely for the lender and speak mainly about the value of the home based on recent sales.

In order for you to get a loan to purchase your home, it will need to appraise at least at the value of the loan you are proposing taking out. If it doesn't, you will either have to make a larger down payment or need to renegotiate the purchase price. If none of the above are possible, you will need to cancel escrow.

Very rarely do appraisals come in way above the purchase price as this can create major problems if the seller then has second thoughts. Since they work for the lender, their main job is to ensure that the lender is secured by property value not to give the seller an accurate estimate of his properties value.

Now that appraisals are out of the way, we are excited to bring you our next article on real estate contingencies.

Repairs - What Can You Ask For? What Can Happen?

So you've been through the comprehensive inspection report detailing all of the shortcomings of your soon to be new home. At this point, it is natural to feel a little apprehensive about proceeding with the transaction as there is undoubtedly more wrong with the home then you initially thought. This is a normal feeling and in most cases a night or two of sleep will help to put it all in perspective. Remember, most all of the homes on the market are used and do have some defects so it will be an impossibility to even find a home with zero areas of concern. The same also goes for new construction and probably even the property you are currently living within.

The real purpose for a home inspection is awareness. That means you, the buyer, now have the knowledge about the various shortcomings with your property and can make the best decision possible.

What Options Are There After A Home Inspection

Ask For Repairs - Most standard sellers will be open to making a few repairs to the property in order to ease buyer concern. Of course, the property is privately owned so the owner does not necessarily have to do any repairs and some will not. All of this depends on the motivation and general disposition of the properties current owner. It is common practice for buyers to ask for items listed as health and safety issues to be remedied before proceeding. Items such as exposed wiring, broken glass, unstrapped water heaters, and other potential hazards are the most commonly asked for repairs.

How much can you ask for? You can ask for as much as you like, and your certainly not limited to health and safety items, but generally 5-10 items is what we would consider average. Again, the chance of you getting these items fixed will depend on many factors including: the negotiations leading up to the escrow, the sellers feelings toward the buyer, market conditions, and the overall condition of the property. For example, a seller who has endured endless price negotiations leading up to escrow may have such ill feelings towards the buyers that he will not do any repairs to the property. This is also known as selling "as-is."

Ask For Credit - Sometimes in addition to or in lieu of asking for repairs, the buyer will ask for a cash credit to fix the problems on their own. Again, good judgement should be exercised here as it is not likely for a buyer to recieve a credit for a broken pool heater when the seller had been crediting the buyer for it in the negotiations leading up to escrow. Cash credits, on the other hand, can be advantageous as the buyer will be able to fix the problems in any manner they like without worrying about the seller picking an unqualified "low ball" contractor for quick fix. The buyer is not bound to use the money for repairs, in fact, they are free to spend it any way they see fit.

Proceed With The Sale - The above solutions can lead to the continutation of sale when both parties can arrive at a mutually beneficial arrangement. Sometimes, there are so few problems with the home that the buyer is just ready to proceed without any repairs. Other times the buyer will know going into escrow that asking for repairs will be pointless and if don't see any major issues, they also elect to continue on with the transaction. After a home inspection it is perfectly acceptable to continue on with the sale of the home with zero talk of repairs.

Cancel Escrow - Every once in a while the inspection will reveal more problems than the buyer can handle and the buyer will simply cancel escrow without penalty and continue on looking for another property.

Bank Owned And Short Sale Property - With bank owned property, the simple fact is that it is often sold "as-is" from outset so any hopes a buyer may have for repairs will be fruitless. Banks very rarely will acknowledge any information about the property given the unique way in which they acquired title to the property. Since it was acquired through foreclosure, they may have never been given any disclosures about the condition of the property and therefore are not willing to vouch for its shape.

Occasionally, banks will offer cash credit for repairs but they certainly are not under any obligation to do so. In fact, many banks price their properties so well that they recieve multiple offers and may be completely unwilling to accomodate a buyer asking for credit because they have so many backup buyers.

Short sale sellers may be more willing to do repairs and credits but this is often overshadowed by the slow process it may become to ask for considerations. Often times, asking for repairs can kill any time sensitive approval the bank has given so it may not be wise to demand them. More often than not, the price on short sales and bank repo homes is so competitive that it just may not matter to a buyer. This is obviously a good time to consult with your real estate agent about the overall value of the deal.

Some Other Ideas

When you do decide to continue on with a transaction, it would be an excellent idea to keep a copy of the inspection report so that you have some idea of problems you may want to look at remedying in the coming years. This advice alone will pay dividends when it comes time to sell your home.

Look for our next article on understanding your homes appraisal.

Thursday, October 9, 2008

Understanding Disclosure Paperwork From The Seller Of Your New Home

The beginning of the escrow process is an exciting and very busy time for most home buyers and real estate agents. One of the first issues to attend to is the gathering of all disclosures made by the seller about the condition and overall situation of the property in question. And you thought there was a lot of paper work to sign during the offer process? Just wait till you see how much more is coming down the pipe!

As a home seller, they do have an obligation to provide the buyer with signed copies of these disclosure forms detailing all material defect known about the property within the first seven days of the transaction. As a home buyer, you have an obligation to read, understand, and sign off on any information provided within these disclosures or cancel the agreement if something strikes you as a deal killer.

We will attempt to guide you through these documents so that you have a basic understanding of the information they are trying to convey. The forms making up the disclousure packet include but are not limited to:

Agency Disclosure For Seller and Sellers Agent - Shows that the sellers agent has a fiduciary duty to act in the best interest of the seller.

Transfer Disclosure Statement (TDS) - Filled out by the seller showing A) the current equipment in the systems of the home B) the awareness by the owner of any material defect with any of these systems C) the awareness of any problems in the area or surrounding community/neighborhood and D) the awareness by the agents of any known defects.

Preliminary Title Report - Shows all matters affecting title to the property including but not limited to back taxes, mechanic leins, and past due homeowners association dues.

Supplementary Statutory Disclosures (SSD) - More representations made by the seller as to whether people have died on the property in the past three years, whether the property is located near ammunitions or industrial areas, and a few other items.

Earthquake and other Hazards Booklet -
A booklet usually paid for by the seller detailing the extent of risk associated with earthquakes, radon gas, and other hazards, with regards to California real estate. Booklet also provide some advice for things you can do to help mitigate damage from earthquakes and other disasters. The last two pages have a section to be filled out by the seller and signed off on by the buyer. Pay attention to any of the boxes marked that may pose potential hazard risks in the future. You may not be able to renegotiate the deal but at least you will know for the the future.

Sellers Affidavit of Nonforeign Status and Withholding Exemption (FIRPTA) - Sellers disclosure of their citizenship and details of ownership to prevent foreign investors skipping out on paying capital gains taxes after the sale.

Natural Hazard Disclosures (NHD) - A packet usually purchased by the seller stating the presence of various natural hazard risks to the property. Typically, these hazards include flooding, fire, and liquifaction (land movement during earthquake). Most of our coastal real estate will have some flood risk, most hillside real estate will have some fire risk, and nearly all the properties in our area will have some degree of liquifaction risk.

Lead Based Paint Hazards Disclosure - Only used with property built prior to 1978. Disclosure discusses the risks associated with lead based paint, the hazards it can present, and whether the owner knows of the the presence of any lead based paint within the property.

Water Heater and Smoke Detector Statement of Compliance - Discloses State law with regards to the bracing and strapping of water heaters as well as the presence of smoke detectors.

Seller Property Questionaire - More disclosures from the seller with regard to whether they have repaired, replaced, or rebuilt the home or any of its systems plus more disclosure about known defects affecting the property.

Statewide Buyer and Seller Advisory - The catch all form outlining all things real estate brokers are not qualified to advise clients about.

Normally, these disclosures can be returned to the seller within the first seventeen days of the agreement but it is often better to get them to us well in advance of this date. We would personally recommend signing these documents with some other preliminary paperwork such as the inspection authorization, escrow insructions, and loan application to save you some time. We know your hand is probably already beginning to cramp just looking at all of this but we've found it less painful to do as much paperwork as possible at one time while your in "the zone" as opposed to the tedious drip of never ending forms. As always, if you have any questions about these disclosures, please do not hesitate to ask.

We think you will enjoy our next article on home inspections.

Monday, August 4, 2008

Securing Your Financing - Insider Tips for Understanding and Finding Your Home Loan

After being pre-qualified for a home loan, looking at homes for sale in your area, making an offer to purchase, and ultimately entering escrow, it is time for most prospective home buyers to officially arrange some sort of loan in order to purchase a house. Luckily for them, there are a lot of choices in the marketplace and the interest rates for home loans are generally low when compared to hard money and lines of credit loans. The following are a few key points that home loan shoppers will want to clarify with any vendor they are considering obtaining a home loan through:

Interest Rate – This is the rate you will be paying back to the bank on the money borrowed. Ideally, you want as low a rate as possible although there are the following other factors to consider:

Loan Structure - The following are just some of the choices with regards to structure:

AdjustableThe interest rate of the loan will adjust with the money index it is tied to. If that index goes up, so will your interest rate. If it goes down, your interest rate will reduce as well. Adjustable rates are not for everybody as they can lack the peace of mind that a conservative fixed rate loan may provide. They do, however, serve a purpose and may be a good choice at a time of high interest rates or for somebody not looking to hold the property for a long time.

Interest Only The payment you make is only for the interest on the loan. Your payments will not pay down the principle and reduce your loan balance. Typically, an interest only loan lasts for one to five years before switching back to a principle and interest payment. At this time, you have to pay the entire loan amount in a shorter time frame, say 25 years instead of 30, resulting in a larger monthly payment. The pros and cons are similar to an adjustable rate mortgage.

Fixed – A loan with a fixed or stable interest rate for the duration of the loan.

Conventional – A general term used to describe a loan from a private sector lender with a fixed interest rate.

FHA – A loan subsidized by the Federal Housing Authority, sometimes able to provide 100% financing to qualified buyers. Usually entail a little more paperwork and stricter borrower guidelines.

VA – Loan available to veterans and their spouses with similar guidelines as FHA.

Loan Term - A home loan can be of any term from 0-40 years. The longer the term, the less the monthly payment and the shorter the term, the more you’ll pay monthly. The typical home loan is for 30 years although it is very common for owners to refinance and stretch that term out over many more years.

Points and Fees – Typically, it is wise for buyers to pay a “point” to buy down the interest rate on their loan. A “point” is slang for a fee in the amount of 1% of the loan amount. It is also known as a loan origination fee. For a $400,000 loan, this translates to $4,000. There are zero point loans available to most home buyers but the catch is that you will pay a higher interest rate. You can always pay more than one point to buy the interest rate down further.

Other fees to watch are for processing, underwriting, administration, document preparation, wiring, courier, and notary fees. Typically these extra fees should be substantially smaller than the point charged but you’ll want to have us look at your good faith estimate in order to determine if you are getting a good (or realistic) deal.

Prepayment Penalty – If you plan to sell or refinance the house any time in the near future, you definitely do not want to have a prepayment penalty. In fact, most loans today should not have a prepayment penalty but often lenders will try to slide them in to the unknowing home buyer. A prepayment penalty is a steep fine assessed if you ever want to pay off the entire loan amount before a certain date.

Private Mortgage Insurance Recently, many lenders are starting to require the payment of private mortgage insurance by the borrower. Private mortgage insurance, or PMI for short, is an insurance policy paid by the buyer in order to protect the bank from the buyer in case of default. PMI can be calculated into the loan and borrowers need to ask their lender if their loan will carry PMI and how much it will cost.

Choices of Lender - There truly are so many choices with regards to mortgage companies that the decision is often overwhelming. Experience has shown that almost everybody promises the world, but few ever deliver. In an effort to save some people future headaches, we've put together a list of preferred vendors for
Orange and Los Angeles County home loans. We strongly urge consumers to use these vendors as they have saved many loans for our clients who had originally elected to get a loan elsewhere only to have the company’s claims prove to be empty promises.

Locking Your Loan – The decision to purchase your loan is an orchestration in timing. This is done sometime during the escrow period and is best discussed with your lender and us in order to best weigh the situation and all of its implications. Please avoid procrastinating in the lock of your loan in hopes that interest rates will decline. Unless you have very good reasons for waiting, delaying the loan lock can have disastrous consequences on your home purchase.

Home buyers need to understand that all of these factors weigh into the worth of a home loan, not just the points or interest rate. It is very common for a loan to look terrific when only a few of these factors are considered, only to have it look horrible when all the values are assessed. We urge you to use this checklist, ask lots of questions, have us review your good faith estimate, and ultimately save a big headache by using one of our preferred lenders. After this many years in the business, we have seen it all and have consciously chosen to work only with the best home loan providers. Please take advantage of this.

Wednesday, July 30, 2008

Short Sales - Starting To See Some Hope

Anybody who has been in the market for real estate in the past year is all to familiar with the pre-foreclosure short sales. They have been the cause for much of the disappointment felt among home buyers in the past months simply due to the fact that the banks were not responding to their offers to purchase, many of which were terrific offers.

All the sitting around has apparently caught up with the banks as we are really starting to see an uptick in the amount of short sale offers that are being quickly (at least quickly for the banks) processed, assigned, and responded to. Many of the banks have apparently gotten the message that it might be a good idea to take the loss now instead of letting it accumulate over a period of months by going the bank owned REO route. This is all culminating in more closed short sale transactions for our clients and us.

This is great news to today's home buyer as it puts a lot of properties back into play. One word of caution is that prudent home buyers still needs to evaluate each property with a little skepticism and have us run comparable sales to see if the price is even realistic. The old cliche still holds true that if it seems too good to be true, it probably is.

Still, we are excited to report that their is some more good news for today's home buyer in that the banks might just listen to some reasonable offers on short sale property. We encourage the banks to keep it up, and home buyers to keep it reasonable!

Saturday, July 26, 2008

Why Your Home Isn’t A Retirement Account, and Where You Should Be Using Real Estate To Fund Retirement.

The recent downturn in the real estate market has caused many homeowners who were banking on the equity in their house to rethink their retirement planning. Rather than run from the depreciating real estate market, they should consider investing in properties that will carry them through retirement.

There is a defined distinction between property you would consider as a home and property best suited as an investment. Many times, real estate that would make a great home would be a lousy rental, while similarly, property that provides excellent financials for investors would not be real estate you’d be proud to call home. This is exactly the reason why real estate buyers need define exactly what purpose the property they are searching for will serve, and then use a specialized approach to find properties that would make good candidates for that usage.

Lets first consider real estate used as your primary residence. We will first examine things that make the best homes terrible investments and then how these same shortcomings are huge pluses when viewed through a pair of rental property glasses.

Investing in Real Estate That You Want to Call Home
Uncertain Appreciation – Markets change and no matter how highly desired your location is, there is always zero certainty that appreciation will happen within a short window of time.

Illiquidity – Investing in a bigger home, in lieu of acquiring rental property, has the distinct disadvantage of not being able to be turned into quick cash without selling or refinancing. Since the property generates zero monthly cash flow, the only way to collect income is by taking on additional debt (ie refinancing) or an outright sale which can take months to close.

Impractical – Beside being slow to sell, selling your home to cash in on the equity leaves the big obvious problem of “Where will you live?” Your going to have to live somewhere and this usually requires either buying another home or paying somebody rent.

Tax Consequences Spending a large amount of money on your home is a rewarding experience and can increase your homes value. You will not, however, discover any new tax breaks even if your tax liability increases. Remember, you are the one paying the taxes in the first place, and deducting them from your income liability does not completely negate those payments. Even if you extend you loan to keep your interest deductions, that additional monthly payment that you picked up during the refinance may have been better used somewhere else, such as in rental property.

Investment in Rental Property
Cash Flow – Investings polar opposite of appreciation is cash flow. Cash flow of an investment property is the real indicator of its value. In short, cash flow can be defined as the amount of money the property generates in rents after all expenses are paid.

Whether a property appreciates or depreciates is really at the whim of the market and availability of buyers. There is not much a homeowner can do to increase the value of their home without taking on considerable costs that may outweigh any gains in value.
Income property owners, or cash flow investors, have much more control over their properties value. They can increase rents, decrease expenses, or any combination of these to make the cash flow situation better and ultimately increase their property value.

1031 Exchange – An investor’s response to lack of liquidity is found partly in the above explanation of cash flow and partly in a process known as a 1031 exchange. A 1031 exchange allows an owner of rental property to sell their property, identify a replacement property, close escrow on that property, and defer any capital gains taxes until a future date.

From Impractical to Practically Too Easy – If the investor decides they want to completely liquidate the property in the future, there are even strategies for this that will severely limit their tax liability and they won’t even have to worry about finding a new place to live! There are lots of options open to rental property owners, none of which are available to a primary residence owner.

Additional Tax Benefits – Unlike your home, the value of income rental properties is allowed to be depreciated from most owners tax liability. Also, during rougher rental years, owners are allowed to write off losses directly related to their investment property. Even during a bad year, the tenants that you do have are continuing to pay off your mortgage until you owe nothing.

By delaying a little gratification and looking into purchasing rental properties right now, most people will be able to generate a little income, create peace of mind for their own retirement, and have more assets to pass on to their children. We encourage you to start looking this direction immediately. After all, the timing is perfect: rents are up, prices are down, and interest rates are still historically low. Even in a down market, you won’t care if values ever go up because your property continues to generate income and your tenants continue to pay off your mortgage.

Even though the timing is perfect, please do not use your home for leverage in order to get into the rental market. Save some money every month, get a second job, or ask your boss for a raise. Just please leave the ever fickle equity in your home alone!

We are not advocating living in meager homes and never upgrading your property. In fact, if you have your retirement settled then it may make perfect sense to live a little. We’re speaking more to the people who don’t have a clear plan for their retirement, have a little money to spend now, and want to really invest in their financial future. If that sounds like you, forget the kitchen remodel, the time to get in the rental market is now!

Tuesday, June 10, 2008

Move Fast, They Won't Last! - Making Sure You Get Your Shot At Today's Bargain Properties

As contradictory as it may seem given the current market and media headlines, todays serious home buyers are learning very quickly that speed is essential in not only finding the good deals, but making sure you get a chance to purchase them. But what can todays motivated home buyers do to make sure they are fast enough? The following is a quick reference guide.

Speed Three Ways

Internet - the Internet has definately changed the way modern home searching is being conducted. The first thing a homebuyer should do is make sure they are set up with an automatic drip campaign to update them when houses meeting their criteria come up for sale. Thet only thing they have to do then is read their email.

Agent Custom Search - If one has an automatic search working for them, they are officially caught up with the pack. This is a good thing, but since we never recommend just being average, the next step is to have a real estate agent looking for properties that will fit the buyers needs. One will be suprised just how often that second set of eyes picks up on properties that home buyers may have missed all by themselves. Some real estate agents are excellent at filtering the good deals from the mediocre which will help a buyer find the best home in the shortest amount of time.

Go Now, Offer Now - Eventually a home buyer will find a property that interests them and it is of paramount importance to go see these immediately. They shouldn't wait until they have nothing better to do. They need to make seeing what may be their future home a top life priority. Only this kind of dedicated motivation will give home buyers the advantage they need in finding the very best deals. Rest assured that there are others buyers who are this motivated and they will be the ones snatching up all the good deals.

Besides being a very effective technique, making it a habit of being the first ones out looking at the hot new deals can be a very exciting process. The buzz is usally very noticeable at these properties as agent after agent and buyer after buyer will be roaming around the property sizing up its features and agonizing over what price they will have to offer to get it. Everybody suffers from this agony, the best advice is to make a reasonable decision and make it quickly. Waiting much more than overnight is usually suicide to ones chances of obtaining one of these distress sales. By learning to act quickly, homebuyers will be able to take advantage of todays discount real estate.

Saturday, May 31, 2008

What CA Home Buyers Need To Know About Home Inspections

Most of time, there comes a time during the escrow period when a prospective home buyer will want to conduct an inspection of the property and all of its various systems. These home inspections should be conducted by a licensed professional home inspector who has been trained in all aspects of home systems.

The first thing we should note is that a home inspector is not an expert in any one trade with regards to home building. They are more generalists than specialists. Much like a general practitioning doctor would recommend a patient to a cardiologist if they suspected heart related issues during a regular checkup, a home inspector will recommend the home buyer to the appropropriate professional (roofer, electrician, etc.) if they notice issues during the inspection that might want to be further investigated. Of course, having these experts come out will be solely at the expense and discretion of the home buyer.

After a home inspection is completed, a reputable inspector will provide the buyer with a detailed report that includes pictures and outlines the general condition of all systems associated with the property. The home inspector should be available to answer any questions home buyers have about the report. They may or may not be able to give answers to some questions for liability reasons. Answers to questions like "Is this a big deal?," "Do you think I should buy it?" or "What would you do?" are subjective and most inspectors will avoid answering these out of fear of being sued. They will be much more likely to answer questions that can be answered with factual and objective information. For instance, you may be more likely to get away asking things like "How many houses have you seen this in?", "Is this common in this age house?", or "What are the imminent dangers associated with this?"

We highly recommend that buyers are present at the home inspection to go over any areas of concern with the home inspector. It is not a good idea to shadow or follow the home inspector around for the duration, rather, a concerned buyer should arrive toward the end of the inspection and review the issues when the inspector has completed the inspection. If accesible, the inspector may be able to point out the issues in person so a home buyer has a solid understanding of the situation.

Items that could be considered "normal" to find vary with property type, location, and age. In other words, there really is no "normal." Contact us if you'd like to see some report samples from homes that have been recently purchased. These are by no means what you should or shouldn't accept as ok for your home, they are merely shown to demonstrate what an inspection report will probably look like on most real estate in Southern California.

Every once in a while, we see an issue come up during the inspection that will be considered very serious in nature. Issues such as mold, unstable foundations, geological instability, lack of structural integrity, and other things might be such big events that buyers choose to back away from the home altogether. We will go over this in detail in our next article regarding the negotiating of home repairs in escrow.

The cost of a home inspector varies but typically they will range from $300-$400 depending on size, type, and age of the home. Expect to pay more, sometimes almost double, for an inspection on a duplex or property with multiple units. Feel free to contact us with any questions or for a recommendation to a good home inspector in Orange or Los Angeles County.

Wednesday, April 30, 2008

How To Avoid Losing The Real Estate Deal of a Lifetime

With short sale transactions becoming increasingly prevalent as a way of liquidating real estate, many buyers are getting fantastic opportunities to purchase property at unbelievable prices. While the deals are coming around, far too many of these are lost during escrow. The biggest cause of this is the inability of the new lender to fund the loan within the deadline approved by the bank holding the loan and taking the loss. If you haven't already, you may want to familiarize yourself with short sales using this handy guide to foreclosure real estate.

Here's how it can work. If the lender who will need to approve the short sale grants permission to carry out a short pay transaction, they will outline a time period for approval of the sale including a definitive deadline. The process of being assigned a negotiator, ordering a broker price opinion, and ultimately approving the sale is slow to say the least. As a short sale home buyer, one really only wants to go through this process once on a single property.

Failure to fund the loan and close the transaction in accordance with the banks window for sale approval can cause everybody to have to start over again. Let's say the sale was scheduled to close on the 3rd of the month. If the loan doesn't fund until the 4th or 5th, the entire file may have to be resubmitted, reassigned, and renegotiated. None of these situations are what we would describe as pleasurable.

So how do we ensure that a short sale closes on time? Here is the best things a potential short sale buyer can do:

  • Start by getting pre-approval from the lender as soon as possible

  • Attempt to negotiate a close date that will be a few days before the lenders time window closes

  • Complete all paperwork you receive from lender and escrow company as soon as possible

  • Complete all inspections and due diligence as soon as possible

  • Do not wait till the last minute to lock in a loan in an attempt to predict the lowest possible interest rate

  • Submit all documentation required by the lender as quickly as possible

  • If delays come up that will prevent closing, notify the bank taking loss well ahead of time and request an extension

  • If deadline comes and goes without closing, ask bank taking loss to keep the file open with same negotiator

Losing an incredible deal at the last minute can be an unbelievably stressful situation for any home buyer. One can decrease the chances of this happening to them by using the list above. Here's to not letting opportunities pass us by!

Sunday, April 13, 2008

We're In Escrow!....Now What? - A Guide To Understanding The Escrow Process

Its a big day and the seller has accepted an offer/counteroffer from the buyer who is now officially taking a huge step toward owning the subject home. Many have heard this term "escrow" thrown around quite a bit but most have no idea what it means let alone, what goes on there!

What Is Escrow?

Escrow is a simple enough concept to understand, it's the process by which the buyer investigates the property, works with the bank to obtain a loan, and coordinates documentation for changing ownership into his/her name. In other parts of the country, escrow closing is done through an attorney while in Southern California real estate, there is typically a seperate escrow company that acts as a neutral third parties to the transaction; ensuring that both sides abide by contractual obligations.

Esrow companies are paid by the sellers and buyers of the real estate and perform a multitude of duties during the escrow period (typically 30-60 days) to ensure a smooth closing and change of ownership. As one can imagine, the absense of a neutral third party will cause some less than ethical buyers/sellers to attempt to take advantage of the other party and can ultimately result in nasty lawsuits.

Explain The Escrow Process?

The process is actually quite complicated, but for convenience the best way to explain it is to simplify it according to these critical parts:

Opening - The buyers deposit check is sent to escrow along with copies of the purchase contract. Escrow rewrites the contract in their own language, but with the same terms, and sends it to both real estate agents to be reviewed and signed by the buyers and sellers.

Discovery/Contingency Period - Typically the first 17 days of the escrow period where the buyer can conduct investigations of the property, attempt to obtain a loan to buy the property, and ultimately decide whether or not they would like to continue on with the transaction. The buyer should have appraisal, inspection, and loan approval contingencies in the contract prior to entering escrow. This period is usually considered fairly risk free since the buyers deposit is not yet at stake, even if they decide to back out entirely.

Appraisal - In order to obtain financing, the bank will need to make sure not only that the property exists, but also that it is worth what the buyer has agreed to pay. Appraisals are done by licensed professionals who will look at the recent sold properties in the area, note general apperance of the home, and double check the square footage of the building. An appraisal is not to be confused with an inspection which will be explained next.

Inspection - Besides being valued correctly, the home buyer also needs to know the physical condition of the property. They will usually hire a professional home inspector to conduct a detailed investigation of the home, prepare and appropriate report, and possibly explain the findings to the buyer. If during the contingency period , the buyer finds the condition of the home to be less than acceptable, they can cancel the agreement or try to renogiate repairs or a price with the seller. The seller has the option to work with the buyers with regard to repairs/negotiations or they can also cancel the agreement.

Termite Report - Most residential purchase agreements are written such that the seller will pay for a termite inpection, report, and any active infestation damge (i.e. living termites, structure damage). The buyer will be responsible for treating, or not treating, the areas described as preventative maintenance, otherwise known as section 2 items.

Loan Approval - Most people will need to obtain some sort of loan to buy a home. The bank will need to verify all documentation needed for obtaining the loan and start the process of submitting the loan documents. This process is the most usual cause for delay that prevents a transactions from closing on time. Buyers need to get started on the loan as soon as the home enters escrow. As with appraisal and inspections, if the buyer is still within their discovery period and has not released the corresponding contingencies, they can cancel the transaction without any sort of penalty.

Contingency Release - There comes a time when the buyer of the real estate really needs to sit down with a clear head, weigh all the things they know about the property, and decide whether they want to continue on with the transaction. We call this the release of contingencies and it is the point at which the buyer places their deposit on the line if they can't close the transaction.

Closing - There comes a special day when escrow will call the home buyer up to the office, ask them to bring in all the money necessary to close the deal (sorry, no personal checks), and have the lender wire the remainder of the money over. Escrow will then be closed. At this point, the home is sold but it may take an extra day for the transaction to be recorded at the county. Shortly thereafter, the buyer will recieve the keys to their new home and the seller will recieve the proceeds from the sale!

Here's to closing another escrow!

Friday, March 21, 2008

A Cheat Sheet Guide To Finding The Right Neighborhood

The Importance of Neighborhood Selection

It has been said before that real estate is zip code, neighborhood, and even street specific. We agree with this notion that location is the single most important factor in choosing whether or not to buy a particular piece of real estate. Home shopping should be no different.

Finding the right neighborhood for ones needs will make all the difference in determining future factors such as resale value, home valuation, and ultimately (and probably most importantly) satisfaction with the homes purchased.

Doing Some Preliminary Research

After recognizing the importance of neighborhood location, one should look into their own situation to determine what needs will be of primary importance. Common factors are local schools, crime levels, neighborhood age demographics, proximity to workplace, proximity to transportation, area buzz, local hospitals, and types of property available.

Schools and Crime - There are a multitude of sites available online for learning more about area schools and crime levels. We personally like,, and Most cities will also keep crime maps which they will furnish upon request.

Quick Neighborhood Look - We're huge fans of Google. We really like the Google Street View feature as it has saved us many trips to areas that would have been a quick turnaound. (**Note: If you pull up a home on our homefinder, make sure to check the map tab. You'll see the Street View window and access a webcam that can be walked all the way around the block. This tip is HUGE!)

Proximity to workplace/ transportation -  Use Google maps again or a good old fashioned Thomas Guide to calculate an approximate distance from your place of work to all areas of interest.

All the details - A fantastic resource for finding the all important, but not readily available, information about an areas buzz, hospitals, or types of property is something like this North Orange County real estate guide in combination with a more localized neighborhood tools like this Placentia CA real estate page. These kinds of tools can really help a potential homebuyer to drill down into detailed area information without wasting any time. In the end, they may end up at a neighborhood specific page like this one about real estate in the Hidden Lakes neighborhood.

If prospective home buyers like the area, they will also find tools there that show them to local homes currently for sale. It is so easy, its almost cheating!

Driving The Neighborhoods

Traditionally, the most common way for prospective homebuyers to investigate real estate has been simply to get in the car and drive from neighborhood to neighborhood. While this is still a great way for consumers to get a feel for an area, we'd recommend they use the internet as much as possible both at the beginning of their home search, and when they reach the stage where they are starting to investigate individual properties. With the cost of fuel these days and the large number of properties available online, there really is no reason not to utilize the internet.

There is a point, however, when homebuyers will want to actually get out from behind their keyboards and drive around. They should be looking for things like:

  • Overall appearance of neighborhood
  • Types properties in the area
  • Number of homes for sale in the area
  • And similarity of house in question to others in the area
Most people tend to do this in the daytime, but it is always a good idea to investigate an area as night as well. Sometimes the look of a neighborhood will change dramatically once the sun sets.
Things people should be looking for are:
  • Look of neighborhood at night as opposed to the look during the day
  • Any new distractions, disturbances, noises, or other that weren't present earlier
  • Availability of parking at night versus daytime

Visiting Some Homes in The Area

When homebuyers get to the point where they have identified some likely neighborhoods and are comfortable with them, it is time to start getting familiar with the homes for sale in the area. This may seem repepitive but the best way to start doing this is again with the help of the internet. Online tools like our home finder will help you to investigate all the homes for sale in an area so that one can compile a list of favorites. Other tools like this premium buyer service will let a top-selling agent know a little about their needs so they can alert the buyers to likely properties new to the market.

Once a person has a list of likely homes it is time to go see them in person. Many people, especially first timers, seem to think the only way to view homes for sale is to attend an open house. Often, the best properties are never held open because the savvy homebuyers snag them before the agent even has time to hold the open house. The best way to see a home of interest is to contact an agent like us to schedule a private showing appointment. Then, we will make arrangements with the seller of the home, the sellers agent, and prospective buyer to coordinate a convenient time to take a private look at the home.

Follow the steps above and we guarantee that a prospective homebuyer will be able to find the best available neighborhoods, in the shortest amount of time, with the very least amount of headache.

Tuesday, March 11, 2008

What To Do When Its Time To Make An Offer....Besides Get Nervous and Throw Up!

So You've Found The House You Want, Now What?

After consulting with your Realtor, driving around and finding the neighborhoods you like, discussing financing option, having your real estate agent show you some properties, and finally finding a home you like, the next step towards making it yours is putting in an offer to purchase the property.

What is an offer?

An offer is actually a proposed contract to the seller of the real estate. In California, it is a ten page document called the Residential Purchase Agreement which will outline the terms of the sale including price, close of escrow, down payment, and all the other details. There will be a multitude of other disclosures and advisories that will all need to be reviewed and ultimately signed by you, the buyer.

In real estate, offers will need to be in writing in the form described above to be considered legitimate. Many people new to the home buying process will want to make a verbal offer in an attempt to find the lowest price the seller will accept. We call this fishing and a savvy real estate agent will warn their sellers against the dangers of answering these flimsy offers.

How do I make an offer?

For you, the buyer, its really easy! All you need to do is tell your Realtor that you'd like to make one and they will, or should, help to fill out all the paperwork for you. All the buyer has to do is decide on an offering price, terms of sale, and then sign the documentation.

How much should I offer?

We'll just get right down to the million dollar question. The answer is simple, offer as much as you are comfortable with or maybe a little less. But bear in mind one thing, the fact that you are comfortable with the price does not have any affect on whether you will actually obtain the property for that price.

To get an idea of what a fair price for the property would be, your real estate agent should conduct a quick market analysis to go over what has sold in the neighborhood within the past three months. You'll need to accurately compare all of the features and conditions of the property to accurately determine how the one you are interested in will stack up.

This knowledge is combined with the general trend of the market to determine a fair asking price. Be warned that the most important properties to be considered in the analysis are ones that have been sold in the last three months, and of those, the ones that most closely resemble the one you are purchasing. Again, your Realtor will play a very important role in this analysis so choose agents wisely.

Your goal as a home buyer is to purchase a home that you like, for a fair price that you can afford. Many home buyers will offer extremely low initial offers (low balls) on their first offer because they fear leaving money on the table. This is a practice that can be dangerous to home buyers because these offers are ignored and somebody else often snags the property before they even have a chance to get serious.

What else will I need to do to write an offer?

Beside signing all the necessary paperwork and figuring out the terms of your offer, there are a few more items you'll need that will make your offer stronger.

Deposit Check - Include a copy of the deposit check. This amount varies from 1-3% of the purchase price here in California. We find most deposits to be about 1% on average although a little more never hurts. You'll need to give a check made out to the Brokerage, in our case that will be Fullerton Century 21 Discovery, directly to your agent for holding. They will then present a copy of this check to the seller of the home and their agent. Always ask you agent for a copy of the check and make sure they notify you when/if it is going to be cashed. They are usually not cashed until the two parties have reached an agreement and the deal goes to escrow so you may have a little time. Should a deal not come together, or the property does not pass your requirements during inspection, the deposit check is fully refundable if you stick to the terms of the contract.

Pre-approval Letter - Most sellers will want to see that you've already talked to some lender about getting a home loan and that you have been given the green light. All lenders will provide you with a pre-approval letter for the amount you qualify for after a brief discussion with them and a careful analysis of your financial situation.

Proof of Funds - If you are planning on making a down payment part of your offer to purchase or you will be paying your own closing costs, a savvy listing agent and seller will need to see some documentation that you have the money necessary to close escrow. Home buyers can black out their account numbers but will need to have some type of statement from the financial institution with both their names and the dollar amounts in print. Bank statements are a perfect example of this.

What happens after I offer on the property?

Once you've submitted your offer you can relax a little because now the ball is in the sellers court. They have these four basic options:

Accept The Offer - If they accept the offer, you can smile and go smoothly into escrow. This would be the best result for your offer.

Reject The Offer - If you receive the offer back and it has been rejected, chances are the seller does not think the offer is even close to what they want for the property. You can either wait, look at other homes, or try again with a new offer.

Make A Counter Offer - Many times prospective buyers will receive back a counter to their offer. In this, the terms of sale are usually modified to terms the seller would find acceptable. An example would be the seller specifying a new price, not as low as your offer but not as high as their asking price. This stage of the game is a negotiation and once you receive a counter offer, the ball is again in your court.

Ignore The Offer- If you've made an offer and you just aren't hearing anything back, you can almost bet that the owner is not terribly happy with your offer. If you have confirmed that the seller received it, no response usually indicates a lack of interest in the price you are offering. You now have the same options available if your offer had been formally rejected.

Whatever happens after you write an offer, the same values continue to be of paramount importance; a realistic attitude and a healthy dosage of patience. People would be surprised just how many times a seller will come back to a buyer they previously ignored after they've had a few weeks of their home just sitting unsold on the market. Conversely, prospective home buyers should listen to their agents advice when they tell them a home is a good deal because the good ones are often gone before most buyers have a chance to put in a good offer.

Want To Write An Offer Or Just Learn More?

Writing an offer on a piece of real estate can be a very nervous time for many home buyers but it really shouldn't be. If you remain calm and understand all the parts of the offer process, it will seem like no big deal in no time. If your interested in writing an offer of your own or you just want to learn more about the process, please feel free to contact us with any of your questions and if you get lucky and your offer is accepted, you'll need to read this escrow tutorial.