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!

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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 http://www.greatschools.org/, http://www.publicschoolreview.com/, and http://www.neighborhoodscout.com/. 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.

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.

How To Always Know What The Neighbors Home Sold For...And What Yours Is Worth!

The neighbors house is listed for $________, so how much is mine worth?

It is a common question asked by most homeowners and one that is not easily answered without some knowledge of the neighborhood home sales market and a very clear understanding of what their home has to offer a potential buyer.

Realtors and real estate appraisers look at a variety of variables in determining what your home is worth. The best way to always know what the neighbors house sold for, and get an idea of what their home might be worth, is to use our real estate value tracker which will keep them updated on sales activity within their area of interest.

If you are thinking of selling real estate, it is an even better to get a professional opinion. If you contact us and provide some basic information about your property, we can offer you a complimentary Broker Price Opinion which will be far more accurate than any online real estate valuation. To see what were talking about, please see our article on why online real estate valuations can cost you thousands.

On the other hand, Realtors with a great deal of experience, like ourselves, who perform price opinion services to national lenders for a fee, will offer them free to consumers considering the sale of their real estate. Ultimately, sellers will find these Broker Price Opinions to be deadly accurate and worth their weight in gold. Happy Selling!

The Best Way To Use The Internet For Finding A Home

Recently we stumbled across something, an old listing book, that really made us realize how far we've come in the home buying business. For those of you who never experienced the home buying process pre 1995, you might be startled to hear about the way it used to be done.

A Little History

Every week the real estate brokers local association would publish and distribute a new set of paper sheets containing all the new home listings in a particular area. The various real estate offices would gather these new listings and add them to the office listing book. If you were to look at these sheets according to todays standards, they would be considered very crude. No pictures, very little description, and very little detail.

To make things even tougher, every time anybody wanted to investigate a property they had flip tediously through the big book and hope they didn't miss it. Then they had to hope it was still available for sale and that the book they were using was accurate. Even if you had an idea of what you wanted, there was no way to narrow the search down to a handful of likely prospects. The only search feature was a pair of eyeballs, fingertips, a sharp memory, a plethora of local knowledge, and a healthy dosage of patience.

While we do see some advantages to these older ways of doing business (local knowledge, inventory familiarity, etc) we are in no way hoping for the return of the "good old days." Todays Southern California home buyers have so many advantages in their search for real estate that it'd be foolish not to take advantage of the various tools at their disposal. With this in mind, here's the best way for todays home shoppers to research, find, and ultimately buy real estate with the help of the internet.


Researching The Area You Want

We've said it before that real estate really is a "boots on the ground" type of business and when searching out an area to live, there really is no substitute for actually visiting the area. However, we think it is better to have some idea of areas you might like before driving aimlessly around the County. Orange County home buyers will be suprised how much information they can gather about a city, county, school district, or neighborhood from our local area home buyer guides and we encourage them to use them, possibly even before looking at a single home for sale. Some prime examples of this would be our Anaheim California real estate and Yorba Linda California real estate guides.


Researching The Homes For Sale In The Area You Want

Recall for a second the above example about the old crusty listing book which agents and buyer had to flip through just to get an idea of prices in a specific area. Now visualize a new modern listing book that is instantly searchable, provides multiple full color property photos, contains 99% of all homes for sale in a particular area, can issue email alerts, uses interactive property maps, and contains more property info than you could ever need. Now you'll have an idea of the benefits available within our home finder map search. This and some of the internets more helpful home hunting tools can also be found at local sites like Brea CA homes for sale and Fullerton CA homes for sale, which specifically deal with property listed in the local market.


Upgrading To Premium Service With The Help Of A Professional

So you've done a little homework and found a few different areas that you would consider calling home. You've got an idea of what homes in these areas are selling for and are reasonably sure of what type of home will fit into your budget. Now is the time to enlist the help of a real estate professional in custom tailoring you a home search around your specific needs. Not only will you be notified by email when new homes come to market but you'll also be alerted to any homes that drop in price and are now down around your comfort level. The kicker is that all of this information will be available within your email inbox so that you may access it at your convenience!

Some home buyers are ready to just dive right in and tell us agents all about what they are looking for and our premium home finder service will let them do this. By telling us what they are looking for, there is an added bonus because we personally review hundreds of properties a week and can quickly contact them when a hot deal comes to market. Still, some are not ready to "open up" about who they are or what they are looking for and we completely respect this. We'd just like all to know how having a true real estate professional can be an unfair advantage over their fellow home shoppers.


How Lucky We Are

Anytime we become frustrated with slow downloads, spotty internet connections, annoying pop ups, or internet spam, we really should count our blessings and realize just how much better the internet has made shopping for a home. The last ten years have brought us leaps and bounds forward in the real estate business and its exciting to think just what is in store for the next ten years. Until then, happy hunting.

Real Estate Investing - Fact vs. Fiction

Ever stay up at night and see the guys on T.V. that claim to buy real estate for pennies on the dollar? These guys are some of the best salesmen out there and real estate is not what they are offering. Without ever having to show a single property, they are actually getting people to pay good money for a "system" that will show them the "secrets" of how to buy real estate. While this may be a serious display of good salesmanship, one must ask themselves why they wouldn't buy these unbelievable deals themselves? In reality, it is probably because they are really too good to be true.

There have also been countless books published on ways to buy property under market value and get rich in the real estate business. These products, no matter the form, are not going to help you much with real estate. Somebody once classified a class of buyers known as real estate investors and another class known as "investors." The difference is that "investors" have usually just learned one of the latest real estate buying systems, usually do not own any property, need to get rich quickly, and have expectations that can only be met on a Hollywood movie set. You need to steer away from individuals of this type.

Real estate investors ,on the other hand, understand that investing in property is serious business, can be risky and time consuming, will require them to usually have money already available, is not a miracle pill, and will pay dividends if done in a responsible manner. These are good people to have in your sphere of influence if you are looking to start investing in real estate.

So without diving too far into the details, here are the things you need to know before you buy any investment property.

Fact:

• There are no "miracle" deals that will take you from broke to rich very quickly.


• You will probably already need some money to invest in real estate.


• Most real estate fortunes were made greater by real estate investment, but were not initiated by real estate investment.


• Betting that a property's value will go up due to market conditions is risk filled speculation.


• Valuing property according to its financial condition (i.e. money it generates via rent vs. money it costs via expenses) is the most common form of valuation, and probably the least risky form of real estate investing.


• Great real estate deals can be made in any market.


• Borrowers will probably pay a higher interest rate than they did for their home loan.


• Infomercials and "get rich quick" books do not reveal all the facts and are misleading.


• Investing in real estate can help you pay less in taxes.


• Real estate investments can be traded without immediately paying taxes on your gains.


• A qualified real estate professional can be your greatest ally in finding good property and gaining valuable insight, but you only need one professional if they are properly qualified.

Fiction:

• Real estate investing will take a person from unemployed to rich in a short period of time.


• Good real estate deals can only be found at distress sales like foreclosures and bank repossession sales.


• Its easy to make money investing in real estate for those without any money.


• Property should only be purchased if it will immediately break even or cash flow positive.


• Online "foreclosure lists" are the trick to finding good real estate deals.


• Your home should be viewed as your biggest investment and you should view home shopping as investment research.


• Telling people you are an investor means you are an investor.


• It is a good idea to take advice from everybody, regardless of whether or not they own or have owned investment real estate.


• To find the good deals, you should work with as many real estate agents as you can.

This quick list should give prospective investors a basis for better understanding the principles of real estate investmnet.

People who understand these things and are interested in pursuing the worlds best form of personal investment should contact us to further discuss their needs.