Buying Your New Home
Thanks to a sound economy, the San Francisco Bay Area continues to welcome families relocating from throughout the United States and around the world. As a desirable city, San Francisco homes remain in demand and typical of higher West Coast prices. According to the California Association of REALTORS®
(CAR), homebuyers paid a median price of $749,000 for a house in San Francisco in February 2013, an increase of 23.8 percent from the same period in 2012. Luckily, homes in the surrounding area offer a lot of great selection. This chapter will help you participate in the San Francisco real estate market by providing an overview of the homebuying process as well as the benefits of enlisting the help of a REALTOR®
Before you start looking at houses, identify preferred and ideal locations based on your needs, social activities, job location and lifestyle preference. Since you are new to the area, get familiar by driving around some of the neighborhoods at different times of the day. Once targeted locations are identified, it is important to define living needs within the house and the style you seek.
How many bedrooms and bathrooms are needed? Are there special requests, such as ample kitchen counter space or an island in the kitchen for food preparation? Is it important to have a family room or backyard? Are there preferences for the kitchen, such as gourmet features with top-of-the-line equipment or will a functional kitchen be acceptable? What architectural and aesthetic preferences are important—single-level or multilevel, traditional or contemporary, bold and modern or warm and rustic? What about a swimming pool, a scenic view or a big yard—are any of these items a priority? If so, your real estate agent will need to know. A discussion about location or proximity to certain facilities and amenities is also an important conversation because it will influence a family’s opinion of a property.
It’s also important to note what you don’t like and communicate that to your REALTOR®
. If traffic noise near your home is a problem, make note. Is there adequate shade around the property so utilities won’t be high in summer? Is the potential home light, bright and airy or in need of immediate modernization? Is the property located in your preferred school district? Is it necessary to drive far to buy groceries or access services? Are there adequate roadways in and out of your neighborhood, especially during rush hours? Let these ideas help you develop your own list that you can refer to during the home-shopping process. This can help you avoid making an emotional decision.
USING THE WEB AS A RESEARCH TOOL
In addition to searching for properties and real estate agents in the Bay Area at the San Francisco Association of REALTORS®
), there are national real estate websites that list homes for sale and provide information and tips but don’t handle transactions. These include Zillow.com, Yahoo Real Estate and MSN Real Estate. At these sites, you can learn about individual neighborhoods, school districts, local area statistics and home values as well as gain access to current real estate market reports.
SELECTING A REAL ESTATE AGENT
Before you relocate to the area, it is a good idea is to find a real estate agent who is a relocation specialist or a buyer’s agent. A relocation specialist focuses on helping people move to a new area, and many are available through nationwide real estate brokerages. If you’re unfamiliar with real estate companies in the San Francisco region, you can ask a real estate agent you know in your current city for a company recommendation or affiliation. You can go online and search for companies that meet your needs and geographic location. You also can contact the advertisers included in this relocation guide.
Selecting the right real estate agent or REALTOR®
is important because you will be working closely with that professional on one of the most important financial transactions in your life—the purchase of your home. When interviewing real estate agents, include these questions to ask:
- Is the real estate agent a certified REALTOR®?
- Does the REALTOR® have any additional training or designations? Does the agent’s business card and website information reflect this?
- How long has the agent been in the business?
- How well does the agent know the San Francisco real estate market?
- How many transactions was the agent involved with last year?
- Does the agent work full-time or part-time?
- Is the agent a good communicator and present himself professionally? Which tools does the agent use to communicate—by phone and e-mail?
- How accessible is this person during the workweek and the weekend?
- Does the agent know the community you may be interested in?
- Is the REALTOR® a buyer’s agent, a seller’s agent or a dual agent?
- Does he or she have recent client references?
After deciding on the right agent, it’s important to remember to keep communication lines open, sharing any thoughts, concerns or reservations at any point along the way to ensure the best homebuying experience.
As you interview and speak with real estate agents and REALTORS®
, you’ll start noticing acronyms, such as CRS and ABR, on these professionals’ business cards. What exactly do these designations mean to you and the homebuying process? Once you’re aware these specialties exist, it may influence your selection process.
— CERTIFIED RELOCATION PROFESSIONAL (CRP)
Through training courses, a real estate agent can become accredited as a Certified Relocation Professional (CRP), Senior Certified Relocation Professional (SCRP) or a Global Mobility Specialist (GMS), which entitles the agent to include the professional designation of CRP, SCRP or GMS after his or her name. These specialists are experienced in assisting families in their relocation needs whether the move is within the United States or internationally. In addition to helping you find a home, a relocation specialist can provide information about schools, daycare and senior care, recreation opportunities, spouse employment, cross-cultural issues and cost of living. Usually, each large real estate firm has relocation professionals on staff to assist relocating families.
— CERTIFIED RESIDENTIAL SPECIALIST (CRS)
Certified Residential Specialists (CRSs) have completed advanced training in residential real estate and in related areas, such as finance, technology and marketing. These specialists have a proven track record of sales transactions required to earn the CRS designation. In addition, less than 4 percent of all licensed REALTORS®
are CRS designees. In working with a CRS specialist, buyers are glad to know that every CRS designee is required to maintain membership in the National Association of REALTORS®
and to abide by its strict subheader of ethics.
— ACCREDITED BUYER’S REPRESENTATIVE (ABR)
An Accredited Buyer’s Representative designation represents best-in-class buyer services because they have made an extra effort to raise the bar with additional training in serving you, the homebuyer. A buyer’s agent is someone who represents only the buyer’s interests in the negotiations and has the understanding to better recognize homebuyers’ particular needs. Plus, a REALTOR®
who has an ABR designation also has an established track record with proven experience in representing the concerns of homebuyers.
Real estate agency relationships, like all business relationships, can be formed in a number of ways. To help talk through your options, here are several questions to ask your buyer’s representative:
- Do you represent buyers, sellers or both?
- What services are provided to (or excluded from) me, based on my status as a buyer-customer or buyer-client?
- When does representation begin? When does it conclude?
- If I’m not ready to commit to your normal term, can you offer me a one-day buyer agency agreement or a 24-hour opt-out clause?
- How is dual agency addressed in your firm?
Once you’ve formalized an agency relationship—typically by signing an agreement with a buyer’s representative—you should expect him or her to understand your specific needs and to locate appropriate properties. The representative often previews and/or accompanies you when viewing properties and researches these properties to identify any problems or issues you should consider. The buyer’s representative will be able to assist you in determining how much you can afford if you have not already prequalified your mortgage and will advise you in formulating your offer as well as developing your negotiation strategy. It is typical for the buyer’s representative to provide a list of potential qualified vendors, such as inspectors, attorneys and lenders, for other related services that may be needed. All details of the entire transaction, from closing to beyond, should be tracked by the buyer’s representative.
REAL ESTATE AGENT’S ROLE
In addition to helping find you a home, an agent serves as the “manager” of a larger team and is responsible for coordinating other team players at the appropriate time in the process. These other team players include the mortgage company, inspectors, the title company, insurance company and possibly an attorney.
Your agent should be able to perform the following as part of his service to you:
WHY WORK WITH A REALTOR®?
- Be knowledgeable about and be able to explain the property tax system in California.
- Provide assistance in creating a budget that ultimately will set the home price.
- Explain deed restrictions, homeowners associations and zoning.
- Be knowledgeable about California exemptions and community property laws.
- Guide you on purchasing a new or resale home.
- Ensure that you view neighborhoods and homes within your price range.
- Be able to negotiate not only home purchase price but financing, terms and date of possession.
- Be able to properly communicate requirements and explain the contract and other required documents.
- Be able to attend all inspections.
- Be able to monitor, follow up and expedite paperwork among all parties involved.
The National Association of REALTORS®
(NAR) provides this list of important differences to consider when selecting a real estate professional to represent your homebuying interests. All real estate licensees are not the same. Only real estate licensees who are members of NAR properly are called REALTORS®
. When you begin your home search, consider using a member of SFAR.
Your REALTOR® can help you determine your buying power.
Buying power is your financial reserves plus your borrowing capacity. If you give a REALTOR®
some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders—banks and mortgage companies—offer limited choices.
Your REALTOR® has many resources to assist you in your home search.
Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.
Your REALTOR® can assist you in the selection process by providing objective information about each property.
Agents who are REALTORS®
have access to a variety of informational resources. REALTORS®
can provide local community information on utilities, zoning and schools. There are two things you’ll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
Your REALTOR® can help you negotiate.
There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs, furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to what is recommended or required.
Your REALTOR® provides due diligence during the evaluation of the property.
Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests. Your REALTOR®
can assist you in finding qualified, responsible professionals to do most of these investigations and provide you with written reports. You also will want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®
’s title company or attorney can help you resolve issues that might cause problems at a later date.
Your REALTOR® can help you in understanding different financing options.
can provide these as well as identify qualified lenders.
Your REALTOR® can guide you through the closing process.
makes sure everything flows smoothly.
Your REALTOR® can give you up-to-date selling information.
knows what is happening in the marketplace and the price, financing, terms and condition of competing properties.
Your REALTOR® will be helpful to you if you’re new to buying real estate in California.
He or she can provide more information on many topics as they arise.
Now you’re ready to look for your dream home. You know your budget and have identified the general location for your home. Without leaving your home or office, you can view details of just about every home for sale via the Internet by going to www.realtor.com
, which is one of the most popular home-search sites.
Once you have selected homes you want to visit, the real estate agent will schedule viewings, typically three to four showings at one time within an area. This allows the buyer to see different neighborhoods and their proximity to work, schools, parks and any other places you consider important.
You are in a strong bargaining position and will look particularly welcome to a seller if you’re an all-cash buyer, you are already preapproved for a mortgage and you don’t have a present house that has to be sold before you can afford to buy.
In those circumstances, you may be able to negotiate some discount from the listed price. On the other hand, in a “hot” seller’s market, if the perfect house comes on the market, you may want to offer the list price (or more) to beat out other early offers. It’s very helpful to find out why the house is being sold and whether the seller is under pressure. Keep in mind that every month a vacant house remains unsold represents considerable extra expense for the seller. Some sellers are motivated to get out quickly, such as if the sellers are divorcing. Also, estate sales often yield a bargain in return for a prompt deal.
MAKING THE OFFER
You have found the home you love, and now it is time for the agent to make the offer. Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with your written proposal. This proposal not only specifies price, but all the terms and conditions of the purchase. If the sellers said they’d help with $2,000 toward your closing costs, be sure that’s included in your written offer and in the final completed contract or you won’t have grounds for collecting it later.
usually have a variety of standard forms (including Residential Purchase Agreements) that are kept up-to-date with the changing laws. When you use a REALTOR®
, these forms will be available to you. In addition, REALTORS®
cover the questions that need to be answered during the process. In many states certain disclosure laws must be complied with by the seller. REALTORS®
will ensure that this takes place.
If you are not working with a REALTOR®
, keep in mind that you must draw up a purchase offer or contract that conforms to state and local laws and that incorporates all of the key items. State laws vary, and certain provisions may be required in your area.
After the offer is drawn up and signed, it usually will be presented to the seller by your REALTOR®
, by the seller’s agent if that’s a different agent or often by the two together. In a few areas, sales contracts typically are drawn up by the parties’ lawyers.
WHAT THE OFFER CONTAINS
The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest money agreement or deposit receipt). It’s important, therefore, that it contains all the items that will serve as a “blueprint for the final sale.” According to NAR, these purchase offer items include the following:
- Address and sometimes a legal description of the property
- Sale price
- Terms (for example, all cash or subject to your obtaining a mortgage for a given amount)
- Seller’s promise to provide clear title (ownership)
- Target date for closing (actual sale)
- Amount of earnest money deposit accompanying the offer; whether it’s a check, cash or promissory note; how it’s to be returned to you if the offer is rejected or kept as damages if you later back out for no good reason
- Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller
- Provisions about who will pay for title insurance, survey, termite inspections and the like
- Type of deed to be given
- Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses
- A provision that the buyer may make a last-minute walkthrough inspection of the property just before the closing
- A time limit (preferably short) after which the offer will expire
This is a deposit that you give when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a cash deposit to show “good faith.” A real estate agent or an attorney usually holds the deposit, the amount of which varies from community to community. This will become part of your down payment.
If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. The following are two common contingencies contained in a purchase agreement:
THE SELLER’S RESPONSE TO YOUR OFFER
- The buyer obtaining specific financing from a lending institution (If the loan can’t be found, the buyer won’t be bound by the contract.)
- A satisfactory report by a home inspector “within 10 days (for example) after acceptance of the offer” (The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure that all the details are nailed down in the written contract.)
You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that, and the sellers could not later change their minds and hold you to it.
If the seller likes everything except the sale price, the proposed closing date or the basement pool table you want left with the property, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own counteroffer. For example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”
Each time either party makes any change in the terms, the other side is free to accept or reject it or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal.
Before purchasing a home, you want to ensure that it is in good condition. A home inspection is an evaluation of a home’s condition by a trained expert. During a home inspection, a qualified inspector takes an in-depth and impartial look at the property you plan to buy. The inspector will evaluate the physical condition: the structure, construction and mechanical systems. Inspectors also will identify items that should be repaired or replaced and estimate the remaining useful life of the major systems (such as electrical, plumbing, heating and air conditioning), equipment, structure and finishes.
After the inspection is complete, you will receive a written report of the findings from the home inspector, usually within five to seven days.
It is important to note that an inspection is not an appraisal. A property appraisal is a document that provides an estimate of a property’s market value. Lenders require appraisals on properties prior to loan approval to ensure that the mortgage loan amount is not more than the value of the property. Appraisals are for lenders; home inspections are for buyers.
— FINDING A QUALIFIED HOME INSPECTOR
As the homebuyer, it is your responsibility to carefully select a qualified inspector and pay for the inspection. The following sources may help you find a qualified home inspector:
WITHDRAWING AN OFFER
- State regulatory authorities. The law in California prohibits unethical home-inspection practices, including repairing properties have been inspected in the previous 12 months. The law encourages courts to consider the Standards of Practice and Code of Ethics of ASHI and the California Real Estate Inspection Association when determining whether an inspection meets the required standard of care. However, inspectors are not regulated or required to be licensed.
- Professional organizations. Professional organizations may require home inspectors to pass tests and meet minimum qualifications before becoming a member. Such is the case with the California Real Estate Inspection Association (CREIA).
- Phonebook Yellow Pages. Look under “Building Inspection Service” or “Home Inspection Service.”
- The Internet. Search for “Building Inspection Service” or “Home Inspection Service.”
- Your real estate agent. Most real estate professionals have a list of home inspectors they recommend.
Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted or even in some cases if you haven’t yet been notified of acceptance. If you do want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don’t want to lose your earnest-money deposit or find yourself being sued for damages the seller may have suffered by relying on your actions.
Purchasing a home is typically the single largest investment most people will make in their lifetime. This is one good reason to have an attorney review and explain all of the documents before the signing. The buyer’s real estate agent can recommend a good real estate attorney.
Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.
Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys, and the seller receives payment for the home. From the amount credited to the seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers and other documents are prepared, signed and filed with local property record offices.
What you need to do:
One of the best parts of settlement is that buyers and sellers need to do very little. Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not changed materially since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes.
ALTERNATIVE BUYING OPPORTUNITIES
While alternative real estate buying options are limited to a small percentage of transactions, they can arise. Foreclosures, short sales and auction sales are some of the types of listings you may encounter in the marketplace so be sure you understand the nature of these sales when deciding how to proceed. Always consult with your real estate agent or an advisor if you need of more information.
— Foreclosure Properties
While foreclosures initially may appear to be an appealing homeownership option, it’s also essential to recognize that investing in foreclosure properties is not a simple process. This is a niche market with many subtle but important nuances, requiring considerable specialized knowledge, experience and contacts.
If you decide to pursue a foreclosure purchase, you’ll want to work with an experienced REALTOR®
who can educate you on the process. He or she can help you crunch the numbers, determine a logical purchase plan, avoid potential setbacks, and assist you with all the unique processes and paperwork involved with foreclosures.
— Short Sales
The short-sale buying option is becoming more common in places where homeowners paid higher prices for their homes a few years ago than the homes are currently worth now. Short sales are an alternative to a foreclosure. When the borrower can no longer make the mortgage payments as agreed, he is faced with many decisions. One is to allow the lender to foreclose. Another is to get the lender to agree to accept a payoff of less than the balance owing on the loan.
— Auction Sales
Auctions have become more popular, in part, because property owners recognize that taxes, maintenance, financing and other costs can significantly erode their equity, especially if the property sits idle for many months. Auction sellers effectively can pick their sale date. They also may be sending a strong signal that they’re motivated to sell, depending on the type of auction method chosen.
As a homebuyer in the auction process, you are able to determine the price you will pay. The seller may set a minimum price, and you will still have to compete with other buyers, but the actual selling price is ultimately set by you, which differs from houses listed for sale through brokerage firms where the seller sets the price and the rest of the purchase process is about negotiating a sale.
Even though auctions are managed differently than traditional brokerage sales, it’s still a good idea to engage the help of a qualified ABR®
. Your agent can assist you by providing a competitive market analysis and other information that will be helpful in developing your pricing strategy. He or she also can help you review the disclosure package, accompany you to any presale inspections, explain the sales terms and auction procedures, coordinate attorney reviews, assist in prearranging financing and act as your representative in managing transaction paperwork with the auction company.
BUYING REAL ESTATE IN CALIFORNIA
Real estate taxes and laws vary greatly from state to state. If this is will be your first property purchase in California, it is best to get acquainted with a few of these common regulations and factor them into your homebuying decisions.
— DEED RESTRICTIONS
You may decide to live in a subdivision or a master-planned community with deed restrictions, which appear in the real property records of the county in which the property is located. They are private agreements and are binding upon every owner in a subdivision. All future owners become a party to these agreements when they purchase property in deed-restricted areas. That’s why it’s important to review the deed restrictions in a restricted subdivision or community you’re considering so you’re aware of the residents’ obligations and responsibilities.
A primary purpose of most deed restrictions is preserving the residential character of a subdivision by keeping out commercial and industrial facilities. For people who prefer to live in a wholly residential environment, deed restrictions are desirable. Deed restrictions legally may prohibit a person from operating certain types of businesses from their home.
— HOMEOWNERS ASSOCIATIONS
When you buy a property in a deed-restricted community, you are automatically a member of the community or homeowners association. It is your responsibility to adhere to the standards and rules set by the association as well as pay an annual fee or assessment for the maintenance of the community’s common areas as well as parks, pools and recreational facilities.
— COMMUNITY PROPERTY LAWS
Ownership in California falls under the law of community property for married people. This means that each spouse owns an undivided one-half interest of all property accumulated during the marriage except for separate property that was owned before the marriage or was received by gift or inheritance during the marriage.
When purchasing a home, there is a lot to consider. Knowing what it entails and what options you have can make the experience rewarding as you settle into your new home.