BUYING REAL ESTATE IN 2020
Whether you are a first time buyer, new to Southern CA, or haven’t bought (or sold) real estate recently, there’s a lot you need to know and most of what you are going to read online or hear from your friends, family and co-workers is just wrong or outdated. In other words, buying a home is a lot different than what you see on HGTV.
Actually, one of the most common reasons that many renters don’t become owners is not because they don’t have the downpayment or credit to buy, but because they simply don’t understand the process.
I do know what it takes and want to share that with you.
I’ve already helped hundred of people in all price ranges, including many first time buyers, purchase homes for their primary residence or for investment and I want to help you too. (You can learn more about me here if you are looking for an agent.)
The information on this page is current and up to date. What you’ll find are the real answers to the questions many buyers have.
BUYER FREQUENTLY ASKED QUESTIONS
These are the most frequently asked Real Estate questions from buyers. Or, if not these questions exactly, a pretty close variation. So, in no particular order, here goes.
- How do I make an offer
- What’s a counter offer
- What happens after an offer is accepted
- What inspections do I need
- Why are they selling
- Will the seller take less
- How much are the taxes
- Can I lose my deposit
- What if my loan isn’t approved
- When can I get the keys
Here’s my quick answers to the questions. There’s a lot more to each topic. Contact me for details.
HOW DO I MAKE AN OFFER?
In most instances we are going to use what agents refer to as the “RPA” or more formally the Residential Purchase Agreement.
In some instances, probate sales or if you are buying a property from a large builder like KB homes, a different form may be used.
WHAT IS A “COUNTER OFFER”?
A seller can accept, reject or counter your offer. Over the last few years many listings have received multiple offers at once and sellers can respond to all of them, what we call SMCO, Seller Multiple Counter Offer. With a multiple counter, a seller is allowed to accept whichever offer they deem to be the most attractive based on price and terms. When only responding to one offer at a time, the seller has to accept if the buyer agrees to the terms and conditions.
Sometimes buyers ask how we know if the seller really has multiple offers. Short of seeing the other offers there is no way to verify this and there is probably some misrepresentation going on by if the listing agent is working for a reputable brokerage, chances are they are playing it straight.
WHAT HAPPENS AFTER AN OFFER IS ACCEPTED?
The next step is typically to do buyer inspections and investigations. These can include a general home inspection, a termite inspection and a sewer line video. Depending on what is discovered during these inspections there may be further inspections.
After the inspections are completed, the buyer can make a request for repair which can include actually doing the repairs, giving the buyer a credit for the repairs or lowering the price.
WHY ARE THEY SELLING?
While there are many things Sellers have to disclose, why they are selling is not one of them (in most instances). Sometimes we have an indication based on the type of sale: foreclosure, short sale, probate or trust sale, relocation, new construction, etc.
What might be a better question to focus on is what terms are the sellers looking for, i.e. long or short escrow, leaseback after the close of escrow, seller contingency on finding a replacement property.
Often by pursuing those questions, you can get a better understanding of what’s going on behind the scenes. But, truthfully, in most cases it doesn’t really matter. If the seller has gone through the trouble of listing their home for sale in the MLS, they want to sell and that’s all you really need to know (at least at the beginning).
WILL THE SELLER TAKE LESS?
That’s going to depend on whether we are in a Buyer’s or Seller’s Market. A Buyer’s Market is generally defined as more than 6 months of inventory on hand and a Seller’s market by less than 3. If there is between 3-6 month’s of housing inventory listed, the market is considered “balanced”.
The second determining factor will be how long has the home been on the market. Lastly, you will need to know if the seller can afford to accept less and we also have to factor in what kind of sale it is and who are the decision makers.
Better questions to focus on are whether the Seller has multiple offers and when the offers are being reviewed. If it is a new listing and they already have offers in the first week to 10 days or so, it pretty much will sell above the asking price unless someone has some extraordinary terms they can offer (such as all cash and closing in 7 days with no contingencies).
If the listing has been on the market for a while, is not moving, has not had any price reductions, and activity is low, then yes the seller may very well accept an offer below the MLS list price.
As I also mentioned above, whether the property will sell for less or not is often also a function of who the decision maker is. In a short sale or REO, the loss mitigator or asset manager may only have authority up to a certain limit to discount the home. On the other hand, if the seller is someone who inherited a property owned free and clear they very well might accept less than the asking price if the property has been on the market for a while.
HOW MUCH ARE THE TAXES?
The 2 most common questions I hear from buyers at Open Houses are “how much are the taxes?” and “how long has it been on the market?”.
Hint. Don’t ask those questions at Open Houses. Here’s why.
The property taxes in California, based on Proposition 13 which has been in place for quite a while, are 1% of the purchase price plus local assessments and bonds which usually run another 20 or 25 basis points (a quarter of one percent).
So if you are buying a home that costs $1,000,000 you’ll be paying around $12,500 a year in property taxes (+/-).
Two other things about property taxes in CA.
It doesn’t matter what the current owner is paying. Your property tax will be based on the sales price of your purchase.
Some communities such as Playa Vista (Phase One only) and ThreeSixty South Bay additionally have Mello-Roos taxes. Those will be disclosed to you on a case by case basis.
WHAT ABOUT DISCLOSURES?
The most important disclosure document by far is the Transfer Disclosure Statement (TDS) closely followed by the Seller Property Questionnaire (SPQ). These forms give the seller the opportunity to disclose what they know about the property.
CAN I LOSE MY DEPOSIT?
In the standard CA purchase contract (CA-RPA), you can only lose your deposit if you remove ALL of your contingencies and then do not close escrow.
And, the amount you can lose in most instances is limited to no more than 3% of the purchase price or the actual amount of your earnest Money Deposit (EMD). There are some variations to this specifically in some REO contracts, builder’s contracts and Probate Sales. But sticking to the most common standard transactions, if you have removed all of your contingencies in writing and then do not perform, that EMD may be forfeited.
WHAT IF MY LOAN ISN’T APPROVED?
To finish up on the previous question, assuming that you have done all of your inspections and there is nothing wrong with the house (or the Seller repairs or otherwise compensates you), and that you aren’t a total flake who at the last minute decides that rather than buy that cool Craftsman fixer at the Beach you really want to move to Australia, or that you don’t lose your job the day before your loan is supposed to fund, the most common reason that Buyer’s default is because their Lender can not perform and you aren’t notified until you are beyond the point of no return (contingencies removed).
Unfortunately, there are some lenders that say they will fund your loan and then do not perform meaning the loan documents never show up and they start giving you excuses at the 11th hour when it is too late to get out of the deal. This most typically may happen when you are dealing with a “mortgage broker”. That is someone who can not directly fund the loan but is only taking your file to someone who can fund your loan.
Under normal circumstances, if for some reason you can not get the loan and you have not removed contingencies you can cancel the contract. Many sellers or their agents may ask for the actual document from the lender showing you were in fcat turned down. But if you acted in good faith, you can get out of most contracts.
WHEN CAN I GET THE KEYS?
I think what you are really asking here is when can I move in? In the CA Residential Purchase Agreement (RPA), the standard time of possession is 5 PM the day of Close of Escrow (COE).
That means the day that the Title Company records the deed at the County office. In LA County where I do almost all of my sales (Redondo Beach, Hermosa Beach, Torrance, Long Beach, Rancho Palos Verdes are all LA County), in most instances recording is the day after the loan funds.
Equally important to when you get your keys is how you get your keys.
Sometimes, the listing agent will leave them in the lockbox (if there is one) and other times they will be turned over directly. It’s also important to make sure that in addition to the keys you also get any garage door openers (clickers), mailbox keys or if it is a condo or gated community, those keys as well. And please have your locks changed or re-keyed as soon as you can after your own the home.
Ellis Posner | dre 01416970 | 310 308 0488