Prepare to Close Escrow and Move In. Step #7

YAY! You made it to the FINAL STEP in the Home-Buying process!

Closing an escrow is the most exciting part of the home buying process. It can still be nerve racking, but just the same, EXCITING!

A week before your close of escrow (the day when the ownership is legally transferred in your name):

• Call your loan officer and escrow officer to confirm your loan documents are in.
• Contact your real estate agent to arrange for a final walk through at the property to make sure the condition is the same as it was during the escrow period.
• Set up an appointment with your escrow officer to sign the papers.
• Arrange for utilities to be turned on the same day as your Close of Escrow date.
• Start services on the day of you close escrow such as: telephone, internet, cable, garbage, 
• Notify your local post office of your change of address
• Make sure the Home Warranty and Fire Hazard Insurance coverage is in place.
• NOTE: If you’re using a moving company, you should have this arranged by now.
• Schedule the general house cleaning crew, carpet cleaners, and movers carefully or you’re have chaos on your hands – carpet cleaning and movers don’t like being in the house the same day, if you get what I mean).

Several days before closing
       With your real estate agent:

• Conduct a final walk-through of the property.
• Make arrangements on how to obtain keys for the house, garage, and mailbox (if applicable)

      With the escrow officer confirm the following:

• All your documentation is in order.
• The exact amount for the certified funds needed for closing
• Have a picture ID with you when you sign documents with the escrow officer
• Inform him/her on how or where your final documents should be delivered to you.

Close Of Escrow Day! – Official recordation of the title on the property in your name.

Your real estate agent will make sure you the keys are delivered to you as soon as he/she gets the confirmation from the escrow officer that the property is on record under your name.

• IMPORTANT: It’s always prudent to change all the locks or re-key the house and reprogram the remote controls for the garage doors (refer to the owner’s manual, call the manufacturer or go on-line for instructions on the make and model of the unit). If you’re using a locksmith, he/she may be able to assist you with the remote controls too.

 A Final Note:
Throughout this house hunting and home buying process, you would not only gain valuable experience, but you would also, most likely, establish trust and rapport with your real estate agent. Make sure you stay in touch even after your close of escrow – he/she would want you to.

Remember, your real estate agent is a great future resource for:

• Reliable contractors for various home improvements or repairs.
• Loan Officers or Brokers for refinancing
• Referral to Real estate or Trust attorneys and/or accountants.
• Current market value of your home.
• Tax trends on property tax laws that may save you money.
• Assist your family and friends to sell or buy their home

For you who is closing your escrow, CONGRATULATIONS ON YOUR NEW HOME – CELEBRATE THE MOMENTOUS OCCASION, YOU DREAMT IT, WORKED FOR IT, AND YOU DESERVE IT!

And if you’re still in the home buying stage, STAY WITH IT, be organized and follow the steps,  you’ll be closing your escrow on your own dream home sooner than you think!

Your Offer Is Accepted - Now, What? Step #6



REPORTS AND INSPECTIONS



Once you and the seller have agreed on the terms of the purchase offer you presented on the property, it becomes a legally binding contract and the escrow process begins.

An escrow account is usually opened by the buyer’s real estate agent. In my area, this is handled through a Title Company which also acts as the escrow holder. As the buyer, you will be expected to send the earnest money deposit to escrow as stated on the contract.

Property inspection and investigation.

Within the period of time outlined in your contract, you will receive property disclosures from the seller. At the same time, you will be expected to exercise due diligence in obtaining the inspections and investigations you deem necessary. Examples are: home and pest inspections; property boundaries for set-backs and easements; covenants, conditions and restrictions; and so on.

There are various inspections available to you as a buyer, but the most important is the home inspection performed by a qualified professional. Some buyers are reluctant to include this expense, especially when they have a friend or family member who “understands real estate or houses”.

Yes, this inspection can be expensive ($375 to $500+), but its well worth it especially for properties sold in “As-Is” condition, short-sales, and REO/foreclosures. You don’t want to buy anything without knowing the problems with the property, which may cost you plenty later on. Focus your attention on structural problems and the major components such as foundation, plumbing, electrical.

“Don’t sweat the small stuff”, in real estate this usually refers to conditions that may be easy or inexpensive to fix. However, if they are important to you, it will be prudent to get an estimate of cost from a qualified trades person to confirm or disregard your concern.

You may be able to convince a the seller to fix the condition, and if all else fails, you can decide to walk away from the transaction. NOTE: Make sure you’re within the inspection period as stated on your contract to approve or disapprove or terminate the agreement to avoid the possibility of liability.

Read and understand the disclosures and reports you receive from the seller, a third party vendor and from the real estate agents involved in your transaction. Ask tons of questions and clarifications before you sign or approve anything. Better to be annoying than be sorry (not too many realtors will like to read this… oh well, I’m sure I’ll hear from them!)

When you are satisfied with the information you obtained about the property, you will be ready to remove the contingencies, except maybe the loan and appraisal conditions which you don’t want to remove until your lender gives you a written final loan commitment.

After you’ve removed ALL contingencies on your purchase agreement, you are in the FINAL STEP: Preparing to close escrow and moving into your amazingly new home! Another good time to do your HAPPY DANCE, just like when a football player scores a touch down!

Watch for my Next Post: Prepare to Close Escrow and Move In. Step #7 

Writing A Purchase Offer. Step #5

Writing An Offer

It is exciting when you finally find "your dream home"! It is also the time when you can so easily allow your emotions dictate what you want to pay versus what you can actually afford.

NOTE: if you need to secure financing for the purchase, check out Step #3, Get Pre-Approved By A lender. Most sellers require a copy of your loan pre-approval letter when the offer is presented.

Often, the seller may even call your lender directly to confirm. So having this upfront could only strengthen your negotiations with the seller.

This is one of the most important steps in your home buying process, so let's go through some steps to guide you through before writing your offer.

• Walk Through of the Property.

Do a thorough walk through of the property again. Take note of items in the house that you want to include in your written offer, such as window coverings, appliances, fixtures. 

Pay close attention to repairs you want the seller to do before close of escrow. Don’t wait after your inspections to request for repairs. Ask for them upfront. If you'd rather fix them yourself after close of escrow, get an estimate of cost from a qualified third party vendor. The seller will most likely be more responsive to your request for credit of the amount towards your closing costs.

NOTE: If the property is being sold "As Is", this means the seller will not do repairs, although they are obligated to disclose material facts. Some may consider repairs for health hazard or safety conditions uncovered during your inspections, but don’t I wouldn’t hold my breath on this especially on “As Is” or REO properties. With this type of transaction, as a buyer, you’ll either accept the property in its present condition or walk away.

• Decide On The Price You Want to Offer.

Analyze the information about the property and the area such as: the comparables recently sold in the neighborhood, location, amenities, condition of the property, and so on. Consult with your realtor, or do a research through the public records.

You might be tempted to offer a higher price especially with the current market drawing multiple offers. Remember to stay within the monthly payment you budgeted for and consider extra expenses like gas and electric, water, garbage pickup, which add up.

Some Other aspects on the Purchase Contract you need to be aware of.

• Earnest Money deposit is a show of good faith that you are serious about your offer.
• Allocation of Costs – defines costs that buyer or seller will be paying for.
• Inspections and removal of contingencies period – state the deadlines involved.
• Home warranty coverage – items included may be appliances, roof, air conditioning, etc.

A real estate agent can easily guide you through the purchase contract. But if you choose to do this yourself, you may want to consult a real estate attorney to assist you. Once you and the seller agree and sign on the terms of the offer, everything becomes legally binding.

Give the seller several days to respond after you've submitted your offer.

You may get a counteroffer for changes on terms and/or price. It’s also not unusual to have several counteroffers before a mutual agreement is decided. So be patient. More likely than not, parties are flexible as long as the terms are reasonable. If you can’t reach an agreement on terms, either of you can walk away at that point.

But, if you and the seller sign the full agreement of terms, it's time to do your "happy dance", and your escrow process begins. This is the period when you'll be receiving disclosures and reports from the seller. Your inspections and investigations are also conducted during this period. You want to pay attention to the deadlines as stated on your purchase contract.

NEXT: Your Offer Is Accepted - Now, What? Step #6

 

Make A List. Buying A Home Step #4



Make A Checklist

Now, the search begins for your new home.

Surfing the internet or driving all over town to look at properties is an exciting part of buying a home. However, with the cost of gas and the time you spend on it, you’ll soon find out that the fun fades away without finding what you want.

So before you start venturing out on your search, whether on your own or with your real estate agent, it’ll be good to sit down and create a "wish list". Analyze your needs and wants; features and amenities you prefer to have in a home.

Points to consider on your wish list and prioritize them:

• Older or newer homes; fixer-upper or move-in condition?
• Preferences for the style: ranches, bungalows, split level, two levels, or others.
• Location: access freeways, nearby schools, parks, shopping.
• Living space and size of yard.
• Number of bedrooms and bathrooms
• Size and type of kitchen.
• Garage or carport; for how many cars or recreational vehicles.

Amenities you need or want:

• Home Office
• In-Law suite
• Family/Recreation or exercise room
• Fireplace
• Laundry room
• Security system
• Patio, deck, or porch
• Pool or Hot tub
• Workshop/Studio

One of my clients even brought pictures of some of the features they wanted. We didn’t find their “perfect” home, but we came pretty close to it. And with some repainting, updating fixtures, newer appliances, landscaping, and so on, I have to say their new home is almost picture perfect after only a year of living in it.

I’ve always encouraged homebuyers to continue searching on internet. While realtors have access to a large inventory of current listings or properties that may just be coming on the market, they may miss something that fits your needs or one you may be willing to consider.

As a realtor, the thrill of searching and finding the right home for a client, is just as great. The smile on their faces and hugs I get when we finally close their transaction is worth a million!

NEXT: Writing A Purchase Offer. Step #5

Get Pre-Approved By A Lender. Step #3.



Get Pre-Approved!

Ahhh, the thrill of buying your new home! About 90% of buyers start on Internet for information and properties. It is a good first step and most websites have “calculators” to show how much loan or price range of homes you can afford.

However, when you finally decide to buy your home and you need to secure financing, the best way is still the traditional "meeting in person" who will be handling your loan transaction for the largest investment you’ll probably ever make in your lifetime.

Finding a loan officer.
Your real estate agent is ideally your most reliable source. Realtors are in constant communication with lenders through their current transactions, past clients, and networking with financial institutions, such as banks, savings & loans, mortgage bankers and brokers, and credit unions.

If you haven’t hired a realtor, get recommendations from your local bank, friends, colleagues and people you know. I strongly recommend not using the internet or yellow pages to find one. It’s too much risk for such a large investment.

Determine how much you want to pay.
Keep in mind: Your lender decides the amount you can borrow but you ultimately decide what you can afford. Nobody knows your style of living and spending habits as well as you do.

Most lenders base their decisions on debt ratios, loan to value, FICO scores, and compensating factors. Your loan officer will guide you through the application process. They will carefully analyze your financial profile and recommend the loan amount and price range you can qualify for. Most loan officers are available on evenings and weekends or maybe even meet with you at home.

Don’t hesitate to provide documentation they need. Confidentiality ranks high on their priorities. The accuracy of the loan amount they can approve for you is as accurate as the information you give them.

Some things you want to have ready when you meet with your loan officer:

• Latest W-2 forms or Federal Tax Returns (for self employed)
• Most current pay-stubs (for salaried income)
• Proof of down payment (such as copies of bank statements, etc.)

      Information:

• Installment loans (example: Car payments, personal loans)
• Revolving credit (like credit cards, equity loans)
• Student Loan payments
• Child or alimony support (whether you are paying or receiving them)
• Bonuses, overtime pay, part time jobs or non-traditional sources of income may help to establish and strengthen your financial profile.

Understand the loan programs and interest rate structures your loan officer presents. Ask questions and have them clarify terms (this industry has so much jargon, even I am constantly asking for clarification or explanation).

You most definitely want a Pre-Approval or a Lender’s Loan Commitment letter to present to the seller when you make an offer on your dream home. It may take several days to get this from your lender as they will need to obtain your credit report and verify information you have provided on your application

NOTE: Being pre-approved is different than having  been pre-qualified, in that, being "pre-qualified" usually means the loan decision was based solely on information provided by the buyer which has not been documented nor verified, and in most cases, a detailed credit report have not been obtained.

Getting a lender approval for your financing is crucial in buying a home. You don't want to spend time and energy searching for your dream home, only to find you can’t qualify for the loan to purchase it.

But once you’ve gone through the “pre-approval” process, you are now armed with the knowledge and confidence of having the guidance of real estate professionals whom you can trust to be looking out for your best interest.

NOW, YOU ARE READY to embark on the most exciting part, finding and buying your new home!

NEXT: Make A List . Buying A Home Step #4

Why Do I Need an Agent? Step #2



Why An Agent?

Now that you’ve made the decision to Buy Your Home Step #1, its time to find a real estate agent who will work diligently and effectively to accomplish your goal of having your dream home. The question on most of the potential buyer’s mind is still: Why Do I Need an Agent?

Internet has become easy, convenient and it’s probably the first place a consumer will turn to for accessing information and searching for properties. Most statistics show over 90% of buyers search online and the other 10% still rely on the newspaper and magazine ads, before they think of contacting a real estate agent.

Yes, the industry trend has shifted to a different way of marketing and how information is accessed, but the tradition of consulting a real estate agent lives on when obtaining more details, seeking advice on current market activity, and negotiating the purchase or sale of a property.

Why buyers need a real estate agent; Understanding their role:

• It’s FREE. There is no charge to the buyer
• Realtors understand the buyer’s needs and wants to find the homes that fit their criteria
• Realtors have access to a large inventory as properties come on the market and MLS data for pending and sold listings important for comparison
• Realtors know the local area such as school ratings, community activity, local building ordinances and codes, and so on.
• Realtors are acquainted with current financing sources and reliable loan professionals.
• Realtors can be of assistance in avoiding legal entanglements and compliance issues.
• Realtors have the professional training and skills to negotiate on your behalf when dealing with the seller and the other real estate agent. 
• Realtors can expertly coordinate the work of other service professionals to successfully close your transaction,  such as appraisers, home and other inspectors, title and escrow officers, lenders, seller’s agents, just to name a few.
• Realtors are experienced to handle the details of the paperwork and deadlines.
• Realtors have the ability to solve problems and issues that may arise during the escrow process.

I can't stress enough the importance of hiring your OWN real estate agent as a buyer. REMEMBER: the listing agent, by his or her fiduciary obligation, is representing the best interest of the seller, NOT YOURS. Some may even offer a cut in price, assist in your closing costs, or some crazy concessions on the side "the seller need not know". Do you really want to have someone who is unethical and unscrupulous represent you? 

A competent, skilled and knowledgeable real estate professional is best to have on YOUR SIDE, to ensure everything goes smoothly and to look out for your best interest throughout.

Next: Get Pre-Approved By A Lender. Step #3

Decide To Buy Your Home. Step #1

If you are paying rent, you very likely can afford to buy. Base your decision to buy on facts, not fears.

I can probably fill this page for all the reasons and benefits why you should buy a house. But what stands out is the idea of wealth building and the fact that, as a homeowner, it is still one of the best tax benefits you can have.

While I also believe there is never a wrong time to buy the right home, there are concerns that most first time buyers or previous home owners have when they think of buying a home. Let’s address a couple of the most common concerns.

Less-than- perfect FICO score (Fair Isaac Corporation)

FICO score is most commonly used by banks and financial institutions in determining the creditworthiness of consumer. FICO scoring range is 300 and 850. A low credit score may not necessarily mean you won’t be able to get a loan, but, in most cases, it will affect the type of loan or interest rate they can offer you.

First step to take is getting a copy of your credit report from the 3 major credit reporting agencies: Equifax, Experian and TransUnion. These 3 companies have set up AnnualCreditReport.com as a centralized location where consumers can request and obtain free access to credit reports every 12 months in accordance to the Fair and Accurate Credit Transactions Act of 2003 (a Federal Law passed as an amendment to the Fair Credit Reporting Act)

It’s good to know what’s being reported on your credit, correct or remove erroneous ratings from your record on your record, and if need be, start taking steps to improve your credit scores. Watch for my post on how to improve your credit score in the next a couple of weeks, maybe sooner.

Note: these major credit agencies market this scores generated with their data differently, and there are compensating factors some financial institutions may be willing to consider. Don’t let a less than perfect score stop you from buying a home.

Lack of Downpayment
Next step is to look at your liquid assets: savings accounts or bonds, term deposits, or anything that you can readily access or turn into cash easily.

Loan programs are available for as little as 3%, an example of government programs:

• VA (Department of Veterans Affairs)
• FHA (Feeral Housing Administration)   
• HomePath  (Created by Fannie Mae)

Your local banks, savings and loans, credit unions and loan brokers are a good source too, as they typically have comparative loan programs to what the government loans are offering. Please be careful about Internet based companies. Remember: for most of us, buying a home is probably the only major investment we will make in our lifetime. You would want to be able to sit down, shake hands and meet eyeball to eyeball with the person you entrust to handle it for you.

I am not saying you shouldn’t shop loan programs or interest rates on-line. In fact I totally encourage it. However, have your loan officer check it out. Most of the time, your bank or loan broker may have a similar program or may even be able to offer a better one for you.

Once you’ve gone through these first steps, you’ll find that buying a home is not that complicated and not necessarily intimidating. Your first home may not be your dream home, but it’s a major step towards getting it.

Next up, connect with a loan officer and a real estate professional to work with you. Make sure you’re choosing one who is actively involved in your local area, or one who is recommended by someone you trust. This is not the time to search the internet or the yellow pages.

If you're in my area, email me if a recommended list of loan officers and loan brokers my clients have happily and successfully worked with (please know these referrals are FREE. It is illegal for me, as a realtor, to receive referral fees or compensations from lenders and financial institutions).

Happy hunting for your new home!

Next: Why Do I Need An Agent? Step #2