Congratulations, you are about to embark on your first home-buying experience but are not sure where to start. Once you know the steps involved you will be nearer to starting your search and finding your new home. Here are 5 questions you should ask your Realtor®
Q: I know how much I can afford so do I need to talk to a lender before looking at homes?
A: Yes, you will need to get a pre-approval letter from a lender before starting your search. You may think you know how much you can afford, but the facts may turn out differently. You will need to supply all kinds of financial statements and information to a mortgage lender who will advise you on how much you qualify for. Your payments are not just the monthly mortgage principal, but interest, insurance, and property taxes. There are also closing costs involved in the purchase of a home. You don’t want to start your search looking at homes that may be above your price range. Not to mention that you cannot submit an offer without a letter from a lender; it will not be accepted. Should you happen to be a cash buyer you will need to submit proof of funds, generally within three days after contract signature.
Q: Won’t I get a better deal if I contact the listing agent?
A: Not really. The listing agent primarily represents the seller who is paying the commission and it is very difficult for someone to remain completely neutral in that position. You need someone who is going to represent you fully and who is free to negotiate for you only. Submitting an offer and having it accepted is only half the process. Next come the real negotiations when you have your inspection and find problems. Again, remember who is paying the commission. Also, legally, a listing agent is bound to present all offers which are submitted which should result in the best offer being accepted.
Q: What are my responsibilities after my offer is submitted?
A: There are certain contractual contingency periods you must adhere to once the offer is accepted:
• You will need to submit 3% of the purchase price to escrow within three days of contract acceptance.
• If you are getting a loan you will have 17 days to remove your appraisal contingency and 21 to remove your loan contingency. In this sellers’ market these numbers of days are pretty much the norm. A day or two’s delay may be acceptable but you and your Realtor® need to make sure that the lender can perform in the times allotted since, as long as you do your part in providing all the paperwork, this is the responsibility of your lender.
• It is strongly recommended that you perform an inspection of the property with a certified home inspector. You may want to conduct further inspections based on the home inspector’s findings, especially on an older home. The sewer and foundation are highly recommended additional inspections. Next you and your Realtor® will discuss the repairs you would like to request from the Seller.
Q: What happens if the Seller doesn’t agree to do the repairs or offer a credit?
A: If you are not willing to do the work yourself or can’t afford to you can cancel escrow and walk away. Or if you simply don’t like the condition of the home you can cancel escrow.
Q: Can I or the seller cancel escrow at any time?
A: Technically you as the buyer can cancel escrow at any time before a contingency period is up and you have not removed it. It should be for a valid reason, not because you got cold feet. The seller cannot cancel escrow for any reason other than default by the buyer in which case they can send a Notice to Perform to the buyer who has a chance to comply or be in breach of contract. The California Purchase Contract has a Liquidated Damages clause which allows the maximum to be held from the buyer as 3%. Overall the California Purchase Contract favors the buyer.
In Southern California we do not use lawyers. Escrow ,a neutral party, handles the entire transaction and together with your Realtor® is available to guide you through the entire process and make your life as easy as possible. All you need to do is to be available and responsive throughout.
Enjoy your new home!