Jeff’s Carlsbad Blog for First Time Home Buyers


Do You Have Proof of Funds?

Posted in Financial,Offers by Jeff Dowler on April 27, 2010
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Proof of funds (POF) can be an important component of your offer.

If you are a buyer with a down payment, it may be in your best interest to submit an offer with proof of funds. While this may only be required in the case of REOs and short sales as we see here in Southern California, I think it may be in your best interest, and make your offer more competitive, if you include a copy of a bank statement or other record (black out those account numbers) to prove you have the funds for the down payment.

If you are a cash buyer this is pretty much a MUST DO part of your offer.

Your state contract may require this, as ours does, after offer acceptance, but why not show your interest and your financial capability to the seller up front.

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All content copyright © 2010 Jeff Dowler “The California Relocation Dude”

What is POF (Proof of funds)?

Posted in Financial,Offers by Jeff Dowler on January 13, 2010
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If you are buying a home these days, especially a short sale or REO (foreclosure), you will likely be asked to provide PROOF OF FUNDS (you may see this as POF in MLS listings).

Just as the seller wants to see a pre-approval to know you are qualified to obtain a loan, a seller (and almost always the bank) wants PROOF that you have the money for the down payment, or for a cash purchase. This can be copies of your bank statement (as recent as possible), your mutual funds statement, or similar. Be sure to block out your account numbers when providing this to your agent to submit with your offer.

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All content copyright © 2010 Jeff Dowler “The California Relocation Dude”

Should I Arbitrate or Not?

Posted in FAQs,Offers by Jeff Dowler on June 26, 2009
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GAVEL3S

One of the issues you need to think about when comleting an offer to purchase in California is whether to use arbitration to resolve any conflicts that arise as the result of the transaction (this may not apply to other states).

I am not an attorney and cannot advise you on whether you should or should not, as it is a personal choice. That said, I have been told by legal advisors in our state that arbitration often can be a faster way to resolve issues, if any, adn less expensive than going to court. And most people tend to choose this option.

If you do not elect to use arbitration, the seller will also have to agree, since both parties must agree on which way to go.

Know that there are some issues that fall under the jurisdiction of small claims court (e.g., deposit issues) that can get resolved in court even if you elect the arbitration route first. Our Residential Purchase Agreement (RPA – CA) explains this in more detail.

What You Should Know About the Offer to Purchase

Posted in Offers by Jeff Dowler on September 2, 2008
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This is a reprint of an article I wrote some time ago for buyers on my ActiveRain blog. There is lots of good stuff there, too, for buyers, including information about San Diego communities and housing in general.

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Buying a Carlsbad home, or a house elsewhere in North County, means using the standard California Residential Purchase Agreement and Joint Escrow Instructions (a.k.a. RPA).

It’s an imposing document, especially for first time buyers. The standard document is 8 pages of single-spaced contract language, so for someone who has not done this before it CAN be intimidating.

There are critical decisions that YOU have to make along the way.

But here are some hints to get you through the offer process. However, the intent is NOT to review everything, since you need to do some of the Q and A stuff with your trusted Buyer Agent (you DO have one, don’t you? Someone to represent YOUR fiduciary interests?).

There are some KEY DECISIONS you will need to make (but NOT an exhaustive list), so knowing about these in advance will give you some time to ponder the issues, and give some thought to what you might want to do with regard to these matters.

  1. Purchase price– obviously this may be THE MOST IMPORTANT issue you have to decide. Give this a lot of thought. And make sure you talk with your buyer agent to review the comparable sales so you can develop a strategy. This can, and will likely be, a major point of negotiation with the seller.
  2. Initial Deposit– how much are you going to put down as a deposit with the offer, i.e., your good faith down-payment. Not everyone has money but not putting down a deposit will make your offer very weak and a concern to the seller.
  3. Loan Amount– how much are you going to finance? This will depend on your down-payment and how much you are qualified to borrow. If you have not gotten pre-approved, do it NOW!
  4. Balance of the purchase price– if you have other cash you will contribute in addition to the deposit and the loan, you need to indicate that. Some folks only put down the down-payment and the balance is financed.
  5. You need to provide verification of your down-payment and closing costs, in writing, normally within 7 days.
  6. Loan contingency – unless you are a cash buyer, your offer is probably contingent on getting a loan, and you will need to obtain approval of your loan within a specific period, typically this is the standard 17 day contingency period (but negotiable).
  7. Closing date and occupancy – when do you plan to close and obtain occupancy? This can often be a critical date for the seller too. Be prepared to negotiate the time frame.
  8. Costs associated with the purchase – there are a series of questions about costs for which you must decide (or propose) who is paying for what. Some of these are traditionally the seller, some are the buyer’s, and some are shared. These include things like the inspection, wood destroying insects inspection and damage remediation, other inspections, natural hazards report, escrow fees (usually split 50/50 but again this is negotiable), transfer taxes, HOA transfer fees, home warranty and more.
  9. Issues relating to statutory disclosures
  10. Items to be included or excluded – things like appliances
  11. Sale of your current home contingency – will not apply if you don’t own a home or can buy a new one without selling your current one.
  12. Contingency Period – the standard period during which you much review all the disclosures, have your inspection, obtain your loan and more is 17 days, but is a negotiable time period. You will be expected to remove ALL contingencies by the end of the agree-upon time frame.
  13. Liquidated damages – if you default you may be subject to loss of all or a portion of your deposit. This can be limited to 3% of the purchase price depending on the conditions.
  14. Dispute Resolution – in the event of a dispute, you might agree, with the seller, to go through arbitration in order to resolve the issues.
  15. Miscellaneous Terms and Conditions – maybe it’s a short sale, or there are other terms you want to include
  16. Expiration of Offer – how long will you give the seller to consider and respond to your offer. Without a specified date, the default is 3 days.

There you go…a pretty good list of the things you need to consider in the offer process. Not an easy task, and there are some important decisions you will need to make. A qualified, knowledgeable REALTOR is your key to success here.

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If I can provide more information about Carlsbad and surrounding areas, or the housing market in general, or otherwise assist you in your homes search, please contact me by phone or text at (760) 840-1360 or email me at JDowler@remax.net.

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All content copyright © 2007 Jeff Dowler Carlsbad Homes and Real Estate Tidbits

Negotiating Your Offer

Posted in Offers by Jeff Dowler on July 1, 2008
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One of the most stressful aspects of buying a new home is negotiating the offer.

Once you decide on the home you wish to buy you will formulate a written offer with the help of your agent. If you are in a market where full price offers are common (i.e., a seller’s market) then the negotiation is pretty simple – you give them what they want and they accept.

The reality of most markets is that buyers offer less, sometimes substantially less, and the buyer and seller must negotiate. Some folks take the approach that they must WIN, but a true negotiation is based on both parties reaching agreement by a give and take so that both feel they are treated fairly. Obviously the seller wants as high a price as possible, and you want to pay as little as possible. Somewhere in between, if both parties really are interested in negotiating, will be the final agreement.

Try to not get emotional about the process, the give and take. Sometimes buyers feel they are giving in, but keep in mind sellers do as well. You should focus on the final objective, which is to buy a home that you love for a price you can afford and which feels like a fair deal in your particular market.

Negotiation is a normal and expected aspect of buying a home, and it can take hours or even days. But neither party wants to feel they are giving up everything when the other party is giving up nothing. Nitpicking over minor little details or a few hundred dollars can circumvent the negotiation and really doesn’t achieve anything. If your attitude is that you must win, there’s a good chance you won’t. The same is true, of course, for the sellers.

One final point. If you are trying to buy a short sale, foreclosure or REO, then negotiations are very different. Banks don’t operate like typical sellers, and they tend to not respond for long periods of time. The difference in negotiating an offer with a typical seller and the bank is like night and day.

Read: Buying a short sale.

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If I can provide more information about Carlsbad and surrounding areas, or the housing market in general, or otherwise assist you in your homes search, please contact me by phone or text at (760) 840-1360
or email me at JDowler@remax.net.

Search for Homes Community Information
First Time Home Buyers Relocation Services and more How to get in touch with me

All content copyright © 2007 Jeff Dowler Carlsbad Homes and Real Estate Tidbits

Buyers – After the Offer Comes the Negotiations

Posted in Offers,Realtor's Job by Jeff Dowler on December 17, 2007

shaking-hand-photo.jpgshaking-hand-photo.jpgshaking-hand-photo.jpgAfter 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

Posted in Offers,Realtor's Job by Jeff Dowler on December 17, 2007

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).

Carlsbad Homes – Short Sales Q and A

Posted in FAQs,Financial,Offers,Short Sales,What do I Buy? by Jeff Dowler on November 20, 2007
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I am often asked questions about short sales. Let’s face it, they have an appeal for many buyers, even though they may end up not being a great deal, and there are a good number of them around in various markets. Sooner or later you will come across one in your Carlsbad home search, or anywhere else you may be looking (keep in mind that laws regarding some of these issues MAY vary from state to state).

I have been writing a series on common questions that Carlsbad buyers typically ask. I will update this list as I post other articles; these are probably pretty common for buyers everywhere:

Who Pays the Taxes and Penalities?

Who Pays the HOA Fees?

Who Pays the Commissions?

Can I make an Offer Contingent on Selling my Home?

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First Time Buyers – Silence is Golden

Posted in General Information,Offers,Realtor's Job by Jeff Dowler on October 2, 2007

A few words to the wise, for those of you who are buying your first home (or even those who are more experienced).

When you find that home that really excites you, it’s hard to not talk about it…what you like about the home, where you would put your furniture, etc. You SHOULD be that excited. Just make sure you are not talking about your feelings in front of the SELLER or the LISTING AGENT. And presumably you have an agent who is representing YOU so it’s OK to talk with him/her.

Silence is golden, when it comes to this situation, and making an offer. As a first time buyer you want YOUR agent to represent YOUR best interests, so make sure you are not revealing things to the seller unintentionally that might jeopardize your ability to negotiate the best price and deal. Once the seller (or the seller’s agent) knows you LOVE the place they are going to expect that you will pay more to get it. Don’t let that happen. Let your agent do the talking with the seller and listing agent.

Make sure things that should be confidential stay confidential…with you and your agent. If there are things you don’t want revealed (like you will pay full price if you need to), make sure this is clear with your agent.

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Buying Your First Carlsbad Home – The Pest Inspection

Posted in Forms,House Hunting,Offers,Short Sales by Jeff Dowler on September 17, 2007

One of the forms that you will need to complete as part of your offer for buying you first Carlsbad home is the “Wood Destroying Pest Inspection and Allocation of Cost Addendum” (called the WPA, for short).

Termites, and other insects that destroy or damage wood, are a big problem in many parts of California. If you are financing your home the mortgage compnay will require that your Carlsbad home have a pest inspection and that the seller obtain a clearance that termites and other critters have been destroyed.

Normally the inspection is completed by the seller (and paid for), and any work needed to take care of what is called Section 1 conditions – evident infestation and/or infection. The buyer generally is expected to take care of Section 2 conditions (those likely to result in infestation or infection). But like many things these are negotiable.

Some homes are sold “as is” and you will be required to do this inspection yourself (and of course pay for it). In some short sales, for example, because of the financial situation of the seller, the owner may only do the inspection and report, but not the repairs, and sometimes not even that. It is part of your due diligence in this case to investigate the possibility of termite issues.

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