How Long Should I Search for a Home?

I’ve been asked this question a number of times. And there is no real right or wrong answer – it depends on you.

Some folks are able to find the house of their dreams, or at least one they want to live in, fairly quickly. A few weeks, a month or two. They may look at 5 – 10 houses and they are done. The shortest time was 1 day (for a relocation) in my personal experience.
Others may take much longer, for a variety of reasons. Can’t decide, don’t like what they see, are too picky, are afraid of making the decision, keep hoping a better deal will come along, etc.. I have had buyers take over a year to find the right house and finally buy.

I wouldn’t get it into your head that finding a home has to take a certain period of time, since so much depends on your personal decision making style, the inventory in your price range, the amount of time you have to look, and more. Some first time home buyers like to set a goal of buying by a certain time, or need to due to their rental or family situation.

But if you find yourself getting frustrated, take a look at what might be causing the problem. And is there something you can do about it?

Happy New Year!

My best wishes to you for a healthy, happy

and prosperous 2008

 

HAPPY NEW YEAR

What Happens After the Due Diligence Period?

In the process of purchasing Carlsbad real estate (or elsewhere here in California), the period once you have completed the due diligence may seem a bit of a letdown. After all, you’ve been through all the anxiety of:

• finding the right home
• putting in an offer
• negotiating the final purchase price
• getting the offer accepted
• wading through all the disclosures
• worrying about getting your loan commitment…then getting it

Read Part 1 on How to Make an Offer

Read Part 2 on After the Offer Comes the Negotiations

Read Part 3 on What to Expect After My Offer has Been Accepted (the due diligence period)

Read Part 4 on Your Carlsbad Home Loan Commitment

Whew, now THAT’S over. So what happens after the due diligence period?

This will be somewhat of a quieter time for you. But there is still lots to do.

ONE: You need to being planning your move (how are you going to move? If with a mover you need to get estimates and pick the right vendor). And you probably should start packing the personal stuff you don’t need. If you are having a mover pack for you, that can make your job a little easier, but if not you will want to start packing as it can take quite a while.

TWO: Check into the utilities for your new house – gas and electric. You will need to set up accounts IN YOUR NAME and have them plan to start the new accounts on the day of closing (when you take possession). Allow some time for this, it often cannot happen over night.

THREE: Check into cable and telephone services. They often need a week or sometimes more to set things up, and may need to come out to the house. Need more telephone jacks or a cable installed? Again, plan ahead. Some folks are just using their cell phones and not having new phone service installed.
FOUR: Pay your home owner’s insurance policy for 1 year starting from the closing date and make sure the escrow company gets a copy of the binder (receipt) showing you are paid in full. You cannot close without this, at least if you are financing the purchase.

FIVE: There may be some conditions you will still have to meet according to the mortgage lender (see your loan commitment). These may not need to be met until the day of closing but it depends. Make sure you understand what is required and take care of it.

SIX: Don’t forget to take care of all the mail forwarding – notify the post office (you can do this on-line). And notify your magazine subscriptions of your new address in plenty of time.

Congratulations. You are almost there!

Your Carlsbad Home Loan Commitment

We’ve been talking about what to expect during the process of buying a home. I’m not trying to share EVERYTHING you can expect but to focus on the highlights AND the critical things you should be aware of as a buyer.

Read Part 1 on How to Make an Offer

Read Part 2 on After the Offer Comes the Negotiations

Read Part 3 on What to Expect After My Offer has Been Accepted (the due diligence period)

I wanted to talk a bit about the loan commitment, since this is such a critical piece of the puzzle.  After all, if you cannot obtain a commitment for a loan from your lender you will not be able to purchase the house. Certainly, you should have gotten pre-approved before you started house hunting, or somewhere early in the process, so you knew that you would likely not have any problems getting a loan (unless something changed, such as your financial situation, or if the interest rates changed significantly).

During the due diligence phase the bank, once they have your signed contract, will order an appraisal. They need to make sure that the home is worth what you are paying for it. This is particularly important to the bank if they are loaning you 95% or more of the value of the home, since the home is THEIR collateral  for your loan. If the home appraises below the purchase, you may to renegotiate the price with the seller, or not more forward.

Once the appraisal has been completed and the report provided to the lender, the underwriter will review the entire file – the details of the loan program, your financial history and all the associated documents, and the appraisal – and issue a formal written commitment to loan you the money at a particular interest rate. There may be some final terms and conditions you will need to satisfy by closing as well (e.g., showing proof of homeowner’s insurance).

You will need to notify the seller once you have obtained the commitment for your loan, and this should be done by the end of the due diligence period, unless a written extension was granted.

My Carlsbad Home Offer Has Been Accepted – Now What?

Do you have any idea of what to expect after your offer has been accepted on your Carlsbad home?

Read Part 1 on How to Make an Offer

Read Part 2 on After the Offer Comes the Negotiations

Here in California you will have agreed upon a specific DUE DILIGENCE period (typically 17 days – the default) in your contract (Form RPA). This could be more or less depending on what the seller would agree to. This process may vary somewhat in other states – see your contract.

The DUE DILIGENCE period is critical for you, the buyer. During this time period you must do all your investigations and review all the available documentation about the Carlsbad home you are buying to make sure you are comfortable with it and willing to proceed with the sale. Carlsbad real estate is too expensive to make a mistake – it’s not like buying the wrong size shirt that you can return.

Possible the MOST important thing you should do (I’d say MUST but it’s not required, only strongly advised IMO) is have a thorough home inspection. You really need to know about any defects in the home, repairs that are needed, and so on, before moving ahead. This is especially true if you are buying a Carlsbad home “as is” and when buying a SHORT SALE or FORECLOSURE property.

There will be a host of DISCLOSURES from the seller and from the escrow company (the neutral third party that manages the transaction process for both buyer and seller) that you must review and approve by signing. This is valuable information about the home — you can’t change it but need to know about it and be willing to buy the home knowing what you know — including natural hazards, mold, lead paint, past insurance claims (if any), wood boring insects (e.g., termites), and information from the seller (form TDS) about the home’s systems and condition, among other things.

The other critical event that must happen is you need to obtain your LOAN COMMITMENT so you can remove the loan contingency. The bank must obtain all the financial information from you and conduct an appraisal of the home before they will approve your loan. Failure to obtain loan approval could mean you lose the house.

The DUE DILIGENCE period is a critical one, and you must take responsibility for doing a thorough investigation (including reviewing all MLS data, and perhaps even measuring the rooms) to satisfy yourself. Once this period has passed IT IS TOO LATE.

Upcoming Changes in Mortgage Pricing – BEWARE

Fannie Mae and Freddie Mac have announced changes in the pricing of CONFORMING mortgages that will take place beginning MARCH  1, 2008.

Key factors:

• Less than 30% down-payment (that’s most folks)
• Credit Score of less than 680 (do you know YOURS?)

If you fit either of these criteria you will be paying more for your mortgage, based on the following:

Credit Score | Pricing Adjustment

679 – 660 = .75%

659 – 640 = 1.25%

639 – 620 = 1.75%

620 & below (or missing Credit Score) = 2%

That’s SIGNIFICANT money and even if the rates are lower (right now they are below 6% for a fixed rate) you could end up spending a lot more for your mortgage.

Find out what YOUR credit score is and start planning. There may be things you can do to get your score above 680 in the next couple of months so you can avoid these extra fees.

Or get busy and buy a house BEFORE these new pricing changes take effect.

Buyers – After the Offer Comes the Negotiations

After you complete the offer paperwork it will be forwarded to the listing agent and seller for their consideration. Hopefully you will have made an offer that the seller will respond to, which begins the negotiations.

Read Part 1 on How to Make an Offer

The negotiations will take place between buyer and seller, with their respective agents acting as intermediaries. Since the agents are neutral parties, this generally allows negotiations to proceed in a less emotional manner.

 

The seller will respond to your offer, hopefully within a reasonable period (that may vary depending on how much time was given, whether the seller is local or not, and other factors). Here in California the seller will respond in writing using a Counter Offer form (other practices may occur in other states, including counter offers in verbal form).  This form, signed by the seller, will lay out the seller’s response to your offer, i.e., a revised purchase price, different closing date, and any other factors the seller wishes to propose as a new offer.

The Counter Offer Form (numbered consecutively beginning at #1) may give you a deadline date to respond, or may revert to the default which is 3 days in California.

You may accept the counter offer (which incorporates items from the original offer plus the revisions from the seller, thus creating a new offer), or you may accept it AND submit a counter offer of your own, with other revised terms (e.g., price). You can also choose to not respond at all and discontinue the process.

The negotiations go back and forth until the parties agree on the terms and conditions, or negotiations break down and one or the other parties will not negotiate further. Once agreement is reached, the paperwork is signed to acknowledge this, and al parties receive a copy.

Thus begins the critical due diligence period.

Buyers – How to Make an Offer

Once you have identified the home you would like to purchase, it’s time to make an offer. This aspect of the buying process probably causes more anxiety than anything else.

 

The right offer will allow you to play in the negotiatin game, the wrong one will result in you being struck out.

Here’s what you need to do:

Decide on the offering price – this is perhaps the most important thing you need to do, and you must do this in a thoughtful way. Consider what you can afford (based on being approved) but also look at the value of the property as compared to other homes that have sold. Your agent can help you examine this information, but the choice of offer is YOURS. No one wants to overpay for a home, and in a buyer’s market you have more negotiating room, but don’t assume you can waltz in with a low ball offer and walk away with the deal of the century. Ideally you want to make an offer that the seller will respond to, not one that is so ridiculous that the seller ignores you, refuses to respond, or counters at full price.

In addition to price, make decisions  - about offer contingencies, desired closing date, the time frame for the seller to review the offer and get you a response, how much to put down as a deposit, items you wish included in the sale (if any), date to complete the due diligence period (this may vary based on standard practice in your state/region, your personal situation, etc.), the timing of the home inspection (this is essential)

Review all required paperwork (this will vary by state, but in California the primary form is the RPA or Residential Purchase Agreement and Joint Escrow Instructions) and complete all required items. This should be done with your Agent, who can help you make the right decisions.

Sign, initial and date all pages as required.

Complete other required paperwork (varies by state) – in California you will sign an agency disclosure (form AD – Disclosure Regarding Real Estate Relationships), the Buyer’s Inspection Advisory (Form BIA) and the Disclousure and Consent for Representation of More Than One Buyer or Seller (Form DA)

Provide a check for the deposit to accompany the offer – a copy will be submitted; the actual check is not given to the listing agent until the offer has been accepted.

Make sure you get copies of all the paperwork that you signed as well as a copy of the deposit check.

Go home, celebrate your first offer, and try not to get too anxious

The next phase is the Presentation of the Offer and Negotiations (counter-offers, if applicable).

What About Those Interest Rates?

Have you been thinking about those interest rates?

You should.

Right now the rates are about the best we have seen in 2 years – that’s a long time. Going below 6% is pretty good news. So if you are thinking about buying you might seriously want to consider it now due to the rates, if everything else makes sense in your personal and financial life. If the rates go up again, which they will, that could negate any other drops that might occur in prices. And that is not happening in all areas.

This time of year tends to be slower with the holidays, and there are less people out looking at homes. What this means for you is less competition. All in all this could be a great time for you to buy, given the inventory is very good in most prices ranges and communities (at least here in the Carlsbad area).

Giving Buyers What They Want

This is NOT about sellers giving buyers what they want…although that is certainly one way to make a deal happen.

This is about blogging, and the value to consumers such as yourself – the first time buyer.

Presumably you are reading this and other real estate blogs because you WANT and NEED information as part of your home search process. And that’s precisely what you should receive, when you want and need it most.

It’s not about convincing you to use a certain agent (well, it shouldn’t be).

It’s not about SELLING to you, either.

The Internet, and blogs in particular, are there to provide you with what you need to know in your home search. Yes, you will likely want to use an agent, and blogs can help you decide WHO you would like to work with.

But first and foremost you are reading to gather information to help make important real estate decisions as a  first time buyer, and this should be available to you without any strings attached (like in the “old” days when the consumer HAD to use an agent in order to get the details on the homes that were for sale).

If you have been researching on-line for a while you have probably figured this out. If you are just getting started, there is a wealth of real estate information out there for you…on this blog for first time buyers and elsewhere. Take advantage of what is there for you to use.

And DON’T let yourself be sold.

If you have any questions you need answered, let me know and I will post a response for all to read.