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Archive for the ‘1st Time Homebuyers’ Category

You’ve found the home you want…

It’s owned by an individual(s) and not a bank.  That’s a very good thing!

Now comes the adventure of making an offer, waiting for a response, negotiating the counter offer, signing the contract and completing the deal.  This might all sound a little daunting but your Realtor is there to explain it all to you and help you every step of the way.

The process of making an offer on a home owned by an individual(s) is  different from making an offer owned by a bank.  (we will explore Bank Offers in the next post).  The conventional offer is fairly simple and straightforward.  Timelines are clear and spelled out.  You are dealing with only one contract — the California Residential Purchase Agreement and Joint Escrow Instructions.  This form is used in the vast majority of cases and is approved by the California Board of Realtors.  Other forms/contracts can be used but this is the one you’ll see 99% of the time.

If you want me to send you a sample contract so you can look it over and become familiar with it — just email me at jeffpalmer@windermere.com and I’ll send you one.

So you’ve found your home.  The realtor has given you a list of houses in that area that have recently sold (called a CMA — Comparative Market Analysis) so you can determine a fair price for you and the seller.  It fits in your budget.  Now you sit down and write the contract.  You fill out the Purchase Agreement with the property information, the price you are offering to pay, the way it will be financed and a timeline on when certain things will/must be done and who will pay for what.  These include obtaining financing, performing inspections, who will pay for what regarding inspections, title, escrow fees etc.

All of this can sound very scary and impossible, but the Purchase Agreement takes them all one step at a time and your Realtor is there every step of the way to explain each item to you so you are satisfied and secure.  When you take one item at a time it becomes very possible.  If you are unsure or don’t understand something — that is one of the reasons your Realtor is there.  They know the contract — they should be able to explain it to you so you can understand it.

Remember — this has been done literally millions of time before.  You can do it also.

So you’ve filled out the contract.  Your Realtor now sends it to the the seller’s Realtor to give to the seller.  In the contract you have give the seller a deadline for responding to your offer.  If they do not respond within the time you stated — your offer is no longer valid and you can walk away if you wish.  If and when they do respond — be ready for a Counteroffer. This is the Seller’s response to all your terms — the price, who pays for what, deadlines etc.  Now you either accept the seller’s new terms or get together with your Realtor and fill out a Counteroffer form giving your new terms.  This process goes back and forth until all the terms of the Purchase agreement are agreed upon by both you and seller.

Congratulations!  You’ve completed the first major step!  The clock has now started.

Escrow is now opened.  In your Purchase Agreement you and the seller have agreed upon an Escrow company with the help of your Realtors.  This company acts as an impartial agent.  They accept your earnest money and hold it, they receive papers/forms from the seller and from you that are needed to close the deal, and when everything has been completed — they take your money and your loan and exchange it for the seller’s property.  So now the seller has their money and you have the property.

In the Purchase Agreement you have stated how long everyone has to get this deal finished.  The clock starts ticking when you get the signed contract back from the seller.  Now you must get a loan.   Remember that PreApproval Letter you got (explained in an earlier post)?   You now bring all your papers that your loan person needs to secure the loan and they start their process.  Your Realtor will work with you and the loan person to make this process go smoothly and on time.  You must also get all your inspections completed in the time you both agreed upon — your Realtor will help you with these also and keep track of the deadlines.  This process can go wonderfully smoothly, might have some bumps along away (explained and remedied by your Realtor) or fall apart.  The first two end with you in your new home.  But you also might find some hidden problems in the house and cancel the deal.  Your loan might not go thru for some reason.  If this happens — you start the process over again.  It’s very disappointing but you must always keep your goal in sight — a new home — it’s worth the work!

This all might sound like a lot of effort — it is.  Be ready to ride the roller coaster of emotions.  But your Realtor is there to smooth out the bumps and help solve the problems.  It’s so important to keep your goal of owning a home in mind, go with the flow and hope for the best.  What’s the alternative?  And no matter what emotions you’ve experienced — nothing will beat the excitement and satisfaction you feel when you open the door to your new home.  Go for it!

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You have your Pre-Approval Letter…

You know how much you can afford…

Now it’s time to start the search.

Before meeting with your Realtor — here are some questions you should ask yourself. If you are not the only one involved in the purchase — you really need to include them also. So when the search begins — everyone is playing the same game.

What neighborhood(s) do you like?
School District important?
House or Condo?
What style home? Spanish, Contemporary, Mid-Century etc.
What size home?
single level?
How old ?
How Many Bedrooms?
How Many Baths?
Family Room?
Garage or Carport?
Yard size?
Pool?
Fixer? Define what fixer means to you.
Perimeter Fencing/Wall

And just as important — what you don’t want!

You and your Realtor will go much more in depth about these, but it is good to think about these points before you meet.

If you have seen homes that you like in real estate ads — clip them out. If you have gone to Open houses — bring in the flyers. This gives your realtor great information on what you like so he can tailor the search to meet your wants and needs.

Now it’s to sit down with your realtor and go over your lists of wants and needs. Together you will come up a great list that will give you a roadmap to find your home.

Then the process usually will include:

The Realtor will start searching the MLS (Multiple Listing Service) that lists any home for sale by any realtor. He will ask his co-workers if they know any properties. There are also the properties he has personally seen on realtor caravans.

He will email you all the properties that match your wants and needs so you can see them and start eliminating the ones you don’t like and keeping the ones you want to see. Then you will all meet and go out and actually look at the ones on your list.

This process will end up with you selecting a property that fits. You will then make an offer. (We’ll talk about the offer process in another post.)

Start the nail biting!

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Can you think of anything more unhinging and exciting than buying your first home? Those of us who have been thru the process tend to forget with time how huge it is. But the process can be overwhelming if not exposed to the entire picture and then taking it one step at a time.

That’s the role of a good realtor.

So let’s take a look at the first step of the process…

Pre-Qualification/Pre-Approval Letter — Before anything, you want to get Pre-Approved. Only a short while ago getting Pre-Qualified was all that was necessary. But in today’s real estate market — you really need to get a Pre-Approval letter. With the new and more strict lending rules — Sellers and banks are looking much harder to see if a buyer can qualify to buy their house. They want the information up front. So many sellers now require a Pre-Approval to accompany an offer. On Foreclosed properties, you have no choice — you must provide the letter with the offer.

It’s not that difficult — here are the steps…

1. Get the name of a lender from your friends, co-workers or real estate agent. It can be someone in the Loan Department of a bank or a Mortgage Broker. (I know several that I can refer you too).

2.Meet with them to get Pre-Approved. A pre-approval letter involves verification of financial and credit information. Rather than taking your word on faith, the lender will ask for documentation to confirm your employment, the source of your down payment, your credit and other aspects of your financial circumstances. NONE OF THIS IS SHARED IN THE LETTER.

3. Get the Pre-Approval letter. After the loan person crunches all the numbers — you’ll know how much money you can qualify to borrow. Most home buyers have a rough idea of how much they would feel comfortable paying every month on their mortgage. However, there’s no quick-and-dirty way to translate that monthly payment into a specific maximum mortgage amount because other factors — down payment percentage, mortgage insurance, property taxes, adjustable interest rates and so on — are part of the calculation. And, you might not be qualified to borrow as much as you think you should be able to borrow, depending on your income, your debts and your credit history. The lender will give you a letter stating that you are Pre-Approved for a certain dollar amount.

Now you know what price range you can look at! No disappointments. A clear and focused journey.

4. You’ll have more leverage in negotiations with the seller. Sellers often prefer to negotiate with pre-approved buyers because the sellers know such buyers are financially qualified to obtain the financing they need to close the transaction. A pre-approval letter is an especially favorable point in a close multiple offer situation. Foreclosed properties require one. And, you might feel more confident about making an offer with a pre-approval letter in hand and the knowledge that you’ll be able to obtain a mortgage.

5. Your real estate agent will work harder on your behalf. A simple fact of life — A pre-approval letter signals to your real estate agent that you’re a well-qualified buyer who is serious about purchasing a home. The increased likelihood of a closed sale — and a commission — will naturally motivate your agent to devote more time and energy to you.

I have learned the hard way — for myself and for my buyers — not to start showing property without first having the buyer obtain a Pre-Approval letter. I have spent countless hours showing homes to a buyer only to find out the were not qualified to buy a house. And buyers have had their hearts broken putting in an offer on a home only to find out there was no way they could afford it. So to save both the Buyers and myself time, money and disappointment — I require any buyer who wants to work with me to get Pre-Approved.

5. A few caveats: Pre-approval letters aren’t binding on the lender, are subject to an appraisal of the home you want to purchase and are time-sensitive. If your financial situation changes (e.g., you lose your job, lease a car or run up credit-card bills), interest rates rise or a specified expiration date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly.

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