Today’s real estate market offers incredible wealth-building opportunities, yet can be filled with more risks than ever before. There are a multitude of factors to consider and decisions to make about where and when to buy – whether it’s for your permanent residence, second home, or investment property. When buying, it’s crucial to have all the available resources necessary to make a well-informed decision. A trusted real estate professional who’ll be able to provide expert guidance at each step of the buying process is perhaps the best resource you could have.
Below is a very brief overview of the primary steps in the homebuying process. Please feel free to contact your PacifiCrest Real Estate agent to discuss any questions you may have or request a buyer specialist today.
1) Define Goals, Research Options, Make Plans
Given that buying a home is such a big step, it’s very important to educate and prepare yourself as much as possible. This means clearly determining the reasons you’re buying and what kind of property you’re looking for. Since buying and financing are so closely related, it also means examining your current financial situation and projecting how much you can afford. Once you’ve answered these questions, even tentatively, you’ll be in a better position to research property and mortgage options, and create an action plan with timelines for moving forward. Although it is possible to do this yourself, you may benefit by consulting an experienced real estate professional right from the start – particularly to learn more about the housing market conditions.
2) Contact a Real Estate Professional
Buying real estate is a complex matter with many factors to consider since no two homes or transactions are alike. Moreover, with all the unique opportunities and potential pitfalls of the current market, it’s more important than ever to contact a real estate professional once you’ve decided to buy. When choosing a real estate professional you should consider their local market knowledge, experience, and track record among other things. It’s important that you take that decision seriously as they should become your trusted real estate advisor to provide advice, input and guidance through the property search, financing, negotiation and transaction processes.
3) Get Loan Pre-Approval
We recommend that you get pre-approved for a loan before you start viewing homes with the serious intention of buying. The pre-approval process involves working with a lender and authorizing them to examine your current financial situation and credit history. On the basis of this examination, the lender may provide you with written evidence outlining the amount you can borrow to buy property. Consider looking online to see what different lenders offer, or contacting your local bank or credit union. Also, your PacifiCrest Real Estate agent can refer you accomplished professional local lenders that are familiar with Big Bear.
The benefits of pre-approval are numerous but most importantly, YOU will know what you are approved for and can afford to spend on a property. Also, as a qualified, motivated buyer you’ll be taken more seriously when you make an offer as often times, a seller will not formally accept your offer unless the offer is accompanied by a pre-qualification or pre-approval letter from a reputable licensed mortgage lender.
Also, you should be aware that there is a significant difference between being “pre-qualified” and “pre-approved”. It is best to have a “pre-qualification letter” in hand before you begin touring properties in earnest with your Realtor. To be pre-qualified, the lender will just need you to answer a few simple questions and take a verbal “application” about your income and debts, and also run your credit history. Depending on the results, they should be able to issue your letter in a matter of 24 hours or less!
However, a “pre-approval” letter takes some significant additional steps beyond that, by requesting and reviewing documented evidence of your current income as well as usually two years of tax returns and two months of bank statements. Then after receipt of the documentation, they will typically run your formal documented application through an initial round of underwriting and then issue a “conditional pre-approval letter” identifying that you have been approved subject to property conditions, appraisal and any final needed documents to complete the file.
4) View Homes and Select THE ONE
Simply put, the key to the home search process is knowing what you’re looking for. Among other things, that means distinguishing between “must-haves” and “like-to-haves”. That said, here are a few recent facts about the search process that might put your experience in perspective:
- 92% of buyers use the internet or mobile apps to search for homes
- The typical buyer searches for 12 weeks and views 12 homes
- 97% of buyers view real estate agents as important in the home search process
There are many benefits to starting the search process at a real estate website like pacificrestrealestate.com. You can view many homes and their details, take video tours and access neighborhood information. You can also sign up for listing alerts through our “My Listing Manager” service whereby you will receive email listing updates of properties that meet your selected criteria as they hit the market. That way you are constantly on top of the market and can be one of the first buyers to view new properties that you want to see.
However, it’s also important to view homes in person. While the property details online are extensive, nothing compares to seeing it in person. Pictures can be deceiving while homes and neighborhoods, particularly in Big Bear, can vary drastically. You will need to view homes with your real estate professional in order to gain access and they will also be able to help you notice things you might miss, provide expert analysis, and act as an impartial sounding board.
5) Make an Offer and Negotiate with the Seller
Once you’ve found the property you’d like to buy, it’s time to make an offer. Your Realtor will utilize official California Association of Realtors (CAR) contract forms. Our Agents are well trained and versed in all aspects of the contracts and related forms that are written to protect the interest of ALL parties to contract and provide for the various respective responsibilities and performance obligations.
These contracts enable you to specify a sale price and allow for the inclusion of other important terms of purchase, such as property inspections, financing, contingency periods, length of escrow, and items included or excluded from the sale. The contract also provides for the allocation of standard escrow and related transactional costs between the buyer and seller, as well as 3rd party services such as title and escrow. You should carefully review these terms with your real estate professional to be sure that you fully understand them. Once the offer is signed, your Realtor will present it to the seller and/or the seller’s representative. At that point, the process will vary somewhat but generally speaking, the seller can accept your offer, reject it, or counter it to initiate the negotiation process. Successive counter-offers, with deadlines for responding and meeting conditions, may be exchanged between you and the seller until a mutual pending agreement is reached or the negotiations breakdown.
6) Secure Final Financing Approval
Once you have a pending agreement, it’s time to return to your chosen lender to finalize mortgage loan details and approval. This means finalizing and “conditions” that need to be met for final approval and getting your loan terms fully “locked in” that includes your required, down payment, interest rate, loan costs and fees, and regular payment schedule for the principal, interest, property taxes and homeowner’s insurance. Remember you will have a contingency period for your loan, which means that you will need to have the loan fully approved and ready for funding by the timeframe specified in the contract.
Too many buyers suffer negative consequences from not fully understanding their financing decisions. Thus, it’s crucial for you to work with people you trust and most importantly – ASK QUESTIONS of your lender and make sure you understand all of the loan terms, costs and conditions. In this regard, a good lender and Realtor working together with you as a team can make a world of difference in terms of how well the process proceeds and your confidence that you are making wise decisions.
7) Property Inspections
Concurrently as you are finalizing your loan, your Realtor will also be scheduling and managing the property inspection process – that typically includes a termite/pest control inspection as well as a property inspection. Additionally, the Seller will provide their disclosures about the property by formally providing written disclosures about everything they know about the property – such as the condition of the roof, any plumbing or electrical issues etc.,.
Typically, but not always, the seller is responsible for the termite inspection cost and the buyer is responsible for the property inspection fee. These terms are identified in the purchase contract. As with financing, you will also have a contingency period for the property inspections – meaning that the inspections will need to be completed and reports provided to you in a timely fashion. As you and your Realtor will need to carefully review the reports, ask any follow-up questions of the inspectors and decide whether or not to ask for any “repairs” of the Seller.
It is important to note that the default condition of the standard contract, is that the sale is to be “as is” so the negotiated purchase price should reflect that. However, a Buyer always has the right to ask for repairs and the seller can either say yes, no or make a counter offer on what they may be willing to do to make the situation satisfactory for the Buyer – including buyer financial credits in escrow. Typically, the Seller is responsible for providing a Section I termite clearance (certification from a termite company that there is no active termite infestation). At times, the negotiations over repairs and property conditions in general can be the cause for a transaction to not be completed. Although it’s impossible to foresee what will happen in the future, that is why it’s important for all parties to have a common understanding as to how repairs are to be generally handled during the initial contract negotiation stage. That is, given a certain purchase price, will the Seller entertain additional repair requests or not. Generally speaking, the better the original offer from the Buyer, the more likely a Seller would be willing to help with reasonable requested repairs
8) Close Escrow
Close the deal if you’ve efficiently taken care of everything connected with purchasing your new home, taking ownership should be a positive joy with no surprises. Key steps to the closing, also referred to as the “escrow” or “settlement”, include: Getting a title search and title insurance (usually paid by the Seller) – which insures that you are receiving full ownership of the property and that there are no claims against the property or errors in the chain-of-title. The final walk-through – you will be given the chance to look at the home one last time to make sure it’s in the same condition as when you signed the sale agreement.
The settlement – typically your escrow officer will coordinate all of the paperwork required to complete the transaction as well as the transfer of sufficient buyer funds from your account or lender to complete the transaction. The settlement will include paying your closing costs, property tax adjustments and transfer taxes. At that point, you’ll receive the property title and copies of all documentation pertaining to the purchase. Oh, and after a 3 day waiting period – one more thing – you’ll get the keys!