As you are home shopping, KEEP IN MIND... the difference between "STYLE" and "SUBSTANCE".  Substance is the things you cannot change, such as location, view, lot size, area noise, schools, floor plan (well maybe).  Style can always be changed.  And don't let the style overwhelm your substance considerations!

SUB-MENU:

10 MISTAKES TO AVOID WHEN BUYING A HOME!!
10 TIPS FOR FIRST TIME BUYERS
10 QUESTIONS TO ASK LENDERS
HELPING YOUR CHILDREN MANAGE A HOME MOVE
GETTING THE BEST DEAL IN TODAY'S MARKET
CONTINGENCY SALE
IMPORTANT THINGS TO KNOW WHEN BUYING PROPERTY IN SAN DIEGO COUNTY
PROPERTY TAXES IN SAN DIEGO
2 SIDES TO YOUR DECISION - Large Down Payment vs. Small Down Payment

FIVE STEPS TO REAL ESTATE PURCHASE:

STEP 1 - GETTING READY (What will it cost me to buy?)
STEP 2 - THE SEARCH (Investigating the neighborhood)
STEP 3 - THE OFFER
STEP 4 - THE ESCROW (the process)
STEP 5 - MOVING (moving with children - moving checklist)

 

BENEFITS OF OWNERSHIP 1. Appreciation and equity accumulation. 2. Tax deductions make Uncle Sam subsidize your ownership. 3. An investment you can live in. 4. Control. 5. Roots and belonging. 6. Upgrades benefit you!

 10 Mistakes to Avoid When Buying a Home

1. Looking for a home without getting pre-approved. This written letter from a lender demonstrates to a seller that you are a serious and qualified buyer, and gives you more clout in your negotiation and greater peace of mind.

2. Making oral agreements. Since your written contract will probably prevail, all your commitments should be in writing. This provides clarity as well as proof.

3. Choosing the wrong lender. In addition to the best rates quotes (remember the "promise her anything" commercials!), you want a lender with the intention, knowledge and clout to perform whatever they promise. On the day or week before closing you don't want a lender to say they can't deliver and find yourself squeezed into taking what's left or losing the property. Discounts DO happen, but often they are made to "buy" business where the business is not "earned".

4. Failing to obtain a lock on your loan in writing. Specifics on your interest rates, terms and loan amount can be "locked" for you for a period of time to allow you to shop without concern about market rate fluctuations. Talk to your lender.

5. Using a dual agent. Your agent has a "fiduciary" duty to act in your best interests. The seller's agent has the same duty to his client. Unless negotiating for your best price and terms is not in your best interests, or the agent's skill in negotiating is negligible, the conflict of one agent representing both seller and buyer is inherent. Using agents in the same office is not a problem, however, since 1) not doing so would limit your choices too much and 2) the office has enormous liability to protect the interests of both and makes extra effort. Your best choice is an agent with integrity and skill. The rest is just work.

6. Thinking you are saving by not hiring a professional home inspection, or hiring the cheapest. If you don't squeeze a melon you lose $2.00. A house is not a melon. Many problems that are safety or operation issues can be negotiated with the seller. It is also an excellent learning experience for future improvements and maintenance.

7. Signing documents without reading them. Your purchase contract, escrow instructions, written agreements for repairs, credits or other amendments, loan documents - all should be read to verify that the writers have the same understanding, and that they correctly express your wishes.

8. Expecting everything to be smooth. Don't wake Murphy! The best transaction is a coordination of dozens of minds and matters. There will be another day. Keeping a sense of humor, a sense of balance, and an open mind will not only preserve your mental health, but probably earn you a much more successful purchase. Good will is always more effective than pressure and tension.

9. Scheduling your moving day too tightly. Most purchases "close" when they are expected to do so, but everything from computer snafus to banking errors (when they lose things!) can cause delays. Giving yourself a week overlap can also give you time to move safely and orderly and to enjoy the well-meaning interruptions of friends.

10. Being afraid to ask. You are the Principal. You are the client. You are the person with the money. You are the person who is giving the seller a reason to move. You have the right to understand and the right to be heard. You do not get to dictate, because there are other people involved, but you should have a sense of what happens and why. And you should have a feeling of being well served by your Agent and Brokerage.

 10 Tip For First Time Buyers

1.   THINK CREDIT. See a recommended real estate loan officer to get “pre-approved” (so you know what your limits are), to learn the many options that are available for you, and to address any credit issues. Poor credit will make you a bigger risk in lender eyes, which means higher rates and higher monthly payments. Make a point of paying credit card bills, auto loans, rent and other payments on time, and if you have had a problem or several, talk to a loan officer about how to “clean” that up. Ask your lender and/or agent to explain the benefit of “leverage”, so you can consider that in making loan decisions.

2.   LEARN THE TAX BENEFITS. Most people appreciate the shelter, investment, independence, and security benefits of owning their own home. But many people do not understand the financial benefits of tax savings. For example, all the interest and property taxes paid, are deductible on your annual tax filing. This is generally MOST of your mortgage payment the first half of the loan and a big savings after your add your tax savings back into your monthly income. Furthermore, most of the gain in a real estate investment will go into your pocket – if it is your primary residence, you might keep ALL the gain; if it is an investment, capital gains taxes are significantly lower than income tax rates, so you can keep most of it. See your tax professional.

3.   Become clear about the role of your real estate agent, what they do, how they will represent YOU, how the system works. Your choice of agent can make a HUGE difference in the dollar and peace of mind results of your purchase. There are so many of us, it shouldn’t be hard to find one that will give you confidence, support, integrity, information and success in the way YOU define it!

4.   Location. The last part of your getting ready work is to explore different neighborhoods in your anticipated price range, and determine what will work best for your household needs – commuting, schools, shopping, recreation, social activities – and start focusing on those communities.

5.   Once you have chosen the home, be clear about your offer. There are few rules, since almost everything is negotiable. The most important thing to keep in your mind is your objective. Personalities, niggly irrelevant details (in YOUR judgment) will come up and skew your thinking. Keep the big picture in mind. Just because the seller comes down doesn’t mean you have to go up, if you are already at what that house is worth to you. BUT if the process gets stressful, don’t give up a good counter offer because the seller (or it could be his agent) is unpleasant or antagonistic or whatever. When the house is yours, they will be gone! And don’t let time become your enemy. People under pressure usually make less reliable decisions. Give yourself and your seller enough time, AND respect those commitments you make. The best friend you have in your negotiations is good will.

6.   Work closely with your agent to be sure that all your concerns are addressed and satisfied during the early "contingency" period. Saving $100 on a home inspection can cost you $1000's later, this is one place you don’t want to go for the cheapest, get excellent! Any questions you have should be discussed with your agent, so that he or she may advise and work with you on their resolution.

7.   Your lender should start your process immediately and keep you informed. When to "lock in" your loan is something you should discuss with him, but remember, no one has a crystal ball. Be sure to explore all your financing options. And don’t do anything to deplete any of your cash on hand until you have closed the purchase unless your lender approves it first. Running out a week before close to contract for a new car with gravely shift your financial picture and may jeopardize your purchase.

8.   Look for gifts and grants. Some loan programs provide assistance to buyer with grants for down payment and closing costs. There are employee incentives, some community groups, and the federal government has special loans for veterans, teachers and police officers.

9.   Try to stay relaxed. There are a lot of people and elements in a purchase transaction that could cause delays or problems. Even in this high-tech world a power or personnel failure can cause problems. You might ask your agent for a check list so that you can track what is happening, keep ahead of your obligations. And be good to you. Soon you will be unpacking in a wonderful new home which, in San Diego, is bound to be not only your personal nest, but a source of great dollar return at some future date.

10. The time to start is now. Getting ready is also getting wise. As you explore you will meet people you KNOW are the answers you seek. It’s like love, you know when you know. No one owns you until you sign a contract with them. YOU are the client. You decide who and when and how much!

HAVE FUN, THE TRIP IS A GREAT RIDE AND WORTH TAKING!

HELPING YOUR CHILDREN MANAGE A HOME MOVE

Routine makes all of us comfortable, but change can make us alert, fresh and moving forward.  Moving to a new home can help children learn this, if they are shown how to focus on the “to” and not fret on leaving the “from”.  You can help.

1.       Tell them as soon as possible, so they don’t find out by accident.

2.       Discuss the benefits – a “do-over” for anything they want to change, keep the old but add the new friends, how to prepare for that first day in new school – possible answers, topics. 

3.       Make time for them to work on their best new first impression.

4.       Listen to them.  What are their concerns.

5.       Involve them in the process so it doesn’t feel like it is happening TO them.  Provide change of address cards for THEIR friends.

6.       Make a First-to-Unpack Box for the new home, including a few special “more grown up” surprises? 

7.       Get as much information from the new destination about activities your child(ren) likes, the school, perhaps a talk with a new teacher ahead of time or a student pen pal before the move?  Your new Realtor might provide photos of how the kids look/dress at school.

 10 QUESTIONS TO ASK LENDERS:

1. What are the most popular mortgage loans you make?  Why?

2. Which type of mortgage plan to you think would suit us?  Why?

3. Are your rates, terms, fees and closing costs negotiable?

4. Will I have to buy Private Mortgage Insurance?  If so, How much will it cost and how long will it be required? 

5. Who will service the loan?

6. What escrow requirements do you have – such as number of days in advance of closing that money has to be deposited, time for review after documents are signed, etc. etc.

7. How long is your lock-in period?  Will I be able to obtain lower rates if they drop during the lock in period?

8. How long will the loan approval process take?

9. How long will it take to close the loan?

Are there any charges or penalties for paying off the loan before its final due date?

Source:  www.Realtor.org magazine.

FIRST TIME HOMEBUYER FINANCIAL HELPS

            There are some great programs available to help people get into the expensive California real estate market.  First, a “First Time Homebuyer” is defined as someone who has not owned a principal residence in California in the past 3 years”, and this is verified by their reviewing your tax returns for deductions for property tax or mortgage interest. 

            Adding several hundred dollars to your monthly income (or conversely taking several hundred dollars off your mortgage payment) is the MCC or MORTGAGE CREDIT CERTIFICATE.  This program allows an accepted participant to take a direct credit against his taxes for 20% of his total primary residence mortgage interest.  If your loan is $400,000 at 6.5% for example, that is $26,000 in annual interest.  A 20% credit would mean $5200 off the federal taxes (state does not participate) you would owe for the year or a monthly saving of $433.  That’s a lot of money. 

            It is important to note the difference between Credit and Deduction.  In this case you still get to deduct 80% of the total annual interest from your annual taxable income, which gives you a savings in ratio to your tax rate, or something between 10% and 35%.  A credit gives you total $1 for $1 savings off the tax you owe, 100% savings.  AND this credit stays with you for the entire time you reside in that property. AND if you refinance for any reason, you can extend the MCC benefits by RE-applying for the program under the new loan program even though you are no longer a first time homeowner. 

            This is not new.  The MCC program has been in effect since 1986 and is fully familiar to tax and IRS professionals.  Of course this is not for the wealthy among us.  To qualify your household income must not exceed $82,800 for 1-2 persons, $95,220 for more persons, and the price of the property must not exceed $508,700 resale, $490,000 new, or $567,166 for a duplex and the duplex must be at least 5 years old.  All of San Diego County offers the MCC except Del Mar and Solana Beach, but their prices are probably too high regardless.  You obtain this MCC certificate by applying through your lender, and it must be an approved MCC lender.  You can go to www.AHAhousing.com or call Kathy Stone at AHA 619-469-2002 for details and lender names.  Occasionally the municipalities run out of funds, but only briefly.  There are some limitations such as no CalHFA, negative amortizing, adjustable loans that change rate within 3 years or less, or interest only that change payments within 5 years, loans, but most regular financing qualifies.  AND once you have qualified income improvements do NOT disqualify you!  And there are some prorated payback taxes if you sell before 9 years but they are pretty minimal and prorated.  See the website for details. 

            Another First Time Homebuyer help is through Downpayment Assistance Programs.  These change all the time, so it is necessary to talk to a qualified lender who specializes in these program.  But examples are:

            Low Income (80% of your Median Area Income – google “American Fact Finder” to get yours):  will provide downpayment required above of 1% buyer contribution of purchase price at very low or 0% interest, sometimes these include equity-sharing or appreciation-sharing paybacks at sale, but again, PART OF SOMETHING IS BETTER THAN NONE OF EVERYTHING.   There are also programs for Moderate Incomes (110-115% of Median Area Incomes).  In the City of San Diego, contact www.sdhc.net,

San Diego Housing Commission, Vicki Monce  619-578-7491.  These downpayment assists can be huge to make loan payments affordable for the homebuyer.  Do not miss out! 

            Layering programs.  It is possible and in fact ADVISED to use the MCC and Downpayment assistance.  Some people have been able to use 3 or 4 programs at one time.  This is why you want a savvy lender.Best place to find these savvy lenders is to write Kathy Stone at ahahousing.com or call her at number above

GETTING THE BEST "DEAL" IN TODAY'S MARKET

Girl Scouts and Boy Scouts are right. It is always best to be prepared. If you are a buyer in today's housing market, it only makes sense. When the good ones are gone in a matter of several days, to take advan-tage of the BEST opportunities a buyer needs to be prepared, act fast, know where he can be flexible, and understand the process.

Preparation means:

Starting with a "Pre-Approval" letter from a reliable lender. This free, no-obligation, information-full process will tell the seller your offer is worth giving serious consideration because you CAN perform. It also gives you the power of being armed with confidence and knowledge of the financing options at your choice and how they suit your financial picture.

Being familiar with the community. Will the schools suit my children? Where will we shop? How is the commute? Does the social, economic, and demographic structure fit my lifestyle? What are the community concerns and benefits? Are the worship, health, leisure and other issues in line with my priorities?

Understanding personal and household priorities. This is a great personal or family experience if you all share and listen to each other's priorities. Acting Fast may require some critical adjustments.

You can't make a quick decision if you are not versed in the market, confident in your lender, and managed with related issues like the sale or rental of your existing home.

Can you talk with your employer about PRE-arranging permission to run out the door and make up time later when your Realtor calls with "this is it!"

Flexibility can be a huge negotiating factor. We have a client in a home today in spite of multiple offers on the same home, because that client could say to the seller, yes, we will close in 30 or 90 days, whenever you find a home. We made a sale that was well under asking price because the buyer could offer the seller completely "as is" including accepting all the responsibility for termite, smoke detectors, hot water heater strapping, toilet retrofitting and similar details that just were too "complicated" for this particular seller with an entire life to move across country. Another area of flexibility might be allowing the seller to close, pocket his money, then rent back until job change is complete, new home is finished, baby is a month old, etc.

Understanding the process, all the above and all the after, means having a perspective on what is "typical", what is "next", what is really important right this minute. People lose chances, because they have to finagle their best nickel right now, because they feel emotionally put out, because they lose sight of their priorities in the rush to "win". While good counseling is cones-quential through-out the process, it is critical at this time. A buyer's first job is to "Get the Accepted Offer". His next job is to complete his knowledge of the property (too expensive and involved to do ahead of time on every prospective property) and to refine the purchase contract. And finally, to close, to fine tune, arrange and manage all the details and created obligations.

It is said that making money in real estate is not in the Selling, but in the Buying!

CONTINGENCY SALES

Contingent offers are a fairly normal part of the residential sales world. Most buyers are living somewhere when they go to buy a home. Realtors, escrows, and lenders are all familiar with these transactions and know exactly what and how to do it. Buyers and sellers are not. Sellers, predictably, prefer offers without contingencies for sale, because this contingency in effect adds the if's and but's of another entire transaction, which must close in order for the seller's deal to close. Usually therefore a seller will agree to a contingency sale if he is given a little compensation...usually a little higher price or something else. Seller's with difficult to sell properties will often accept a contingency. Many buyers can avert contingency purchases by arranging "interim" or "bridge" financing to carry them for 1-3 months from the close of the new property to the closing of the sale of the old property. This adds the dollars to their cost that might otherwise go to the seller for allowing a contingency.

Contingency offers generally carry a "72-hour Clause" as part of the agreement, under which clause the seller has the right to continue to offer the property for sale and, if he receives another acceptable offer, to issue to the Buyer a 72-hour notice to release his sale, financing and other contingencies and prove he can perform or release the contract within 72-hours. Since a NON-contingent-for-sale contract has a 17-days for inspections and financing and all other investigations period under which the buyer can withdraw with no loss of deposit, I generally try to make the 72-hour clause effectible AFTER the release of all other contingencies, but I don't always get my way.

The point of a contingency is to protect a buyer's deposit. so as long as any contingency stands the buyer is protected from loss. Generally, a contingent buyer would be smart to obtain a good deposit from HIS buyer so that if he has to default because his buyer defaults, the deposit lost is effectively paid by his buyer. And risks are always more or less in any specific situation, the only sure escrow, we say, is a closed one.

 IMPORTANT THINGS TO KNOW WHEN BUYING PROPERTY
IN SAN DIEGO COUNTY.
 

·     San Diegans benefit from California’s Proposition 13 Tax Law.  This means that all property taxes are assessed automatically at 1% of the purchase price and cannot be increased more than 2% a year, unless by special vote of the people.  Therefore, property taxes are stable and become a lesser part of your budget at time goes on and property values go up!

·     San Diego law in general promotes transactions with informed buyers and informed sellers, with detailed disclosure laws in place, and courts that frown on “tricks” or “deceit”.  Inspections and investigations are supported and even, in the standard contract form provided by the California Association of Realtors, enumerated for people’s easy consideration.

·     If you are over 55 and have moved from another California county and buy a new home in San Diego at not more than 105% (- 110%) (or after a year of the price of the home you owned previously, you may qualify to bring your old, assumedly lower, property tax base with you. 

·     The Code of Ethics and Law in California allows buyers to be represented by their agent, rather than seeing the commission as paid by the seller and all agents’ fielty, therefore, to the seller.   I personally believe it is wise for a buyer to be represented by an agent OTHER than the seller’s agent, but dual agency is allowed in California. 

·     We work with Escrows in California, rather than attorneys, who process our transactions.  The Escrow is a neutral professional third party, holder of money and deeds and documents, who will manage the “closing” as a process of getting things done, so that on the Date of Closing, there is no table or meeting, and the finality is the administrative recording of the deed and transferring of funds.  Buyer and Seller are not present.   

·     Owning property in California, particularly in Southern California, and MOST particularly in San Diego, which has yet to be spoiled, is like owning a commodity.  While homeownership is indeed the traditional shelter and center for family and friends, it is also a very high demand investment vehicle.  With its significant tax benefits and exemptions, its worldwide recognition for livability and desirability, and reflecting one of the country’s most diverse and successful economies.  You can expect your home here to exceed the return on most other investment substantially!

 PROPERTY TAXES IN SAN DIEGO

In the early 80's the citizens of California voted for "Proposition 13" which became law. This means that our property taxes are NOT subject to periodic assessment, are NOT subject to the whimsical decisions of politicians, are NOT determined by complicated formula. Property taxes in California are established at 1% of the Purchase Price of the Property, and subject to a minimum 2% annual increase. Neighborhoods or municipalities can vote to increase their own taxes by agreeing to add bond issues for special improvements, but history is showing the citizenry slow to do this. You will notice that your property taxes will be slightly more than the 1% figure, because there are a few old outstanding bond issues that predated Proposition 13. However, they usually don't exceed 1/10th of a percent. This does mean that your neighbor pays lower taxes than you do, assuming values and purchase prices have increased, but your new neighbor will pay more than you. What it does is give stability and plan-ability to your budget.

Example.

Purchase price $500,000 1% Property Taxes = $5000 first year
$5000 + 2% max. increase = $5100 second year

San Diego County Tax Assessor GREG SMITH has a wonderful office ready to answer questions kindly and carefully at any time. Feel welcome to call them with any questions at 619-505-6262.

 TWO SIDES TO YOUR DECISION

Large down payment - vs - small down payment
Pay off early - vs - stretch to term.

*Best person to discuss this with is your financial advisor.

Your "mortgage" (now called Deed of Trust) performs several functions, and giving your consideration as to how to best maximize this performance is the question at hand.

Your mortgage is temporary lump of money that permits you to pay enough to the seller to take over "ownership" of the property. In many cases, mortgages are not forever commitments, because the borrower will not be living in the property long enough to pay it off. The borrower is using the mortgage until he moves out and pays off the mortgage through his sale. For these people, making additional payments with the intention of paying off the mortgage may not be relevant. For those who intend the property as their forever home, paying down and eventually off the mortgage may be a primary goal. Which are you?

Your mortgage also entitles you to a tidy little tax savings from Uncle Sam. Since you are allowed to "write off" the full amount of the interest paid on your primary residence and second home during your tax year, as well as your property taxes paid, this generally major portion of your mortgage payment is effectively subsidized by the I.R.S. For example, if you have a $250,000 mortgage balance at 8% interest, your interest for the year would be around $20,000. Deducting $20,000 from your annual income is significant. For those in the typical 28% (federal) + 9% (state) brackets, this would result in a reduction in taxes due of $7400. Now that is better than mud in your eye, no? And when you calculate that saving over the year during which it is earned, it effectively reduces your actual monthly payment by $616 per month! Another way to look at this is that after the tax saving, your effective interest rate because of Uncle Sam sharing the cost is more like 5.04% (8% - 37% deducted = 5.04%) The point is that the sooner you reduce the balance on your mortgage, the sooner you reduce your I.R.S. subsidy.

Well yes but......

Okay, point two. Your mortgage allows you to keep your money somewhere else. Where you keep it is between you and your financial counsel, however, IF you keep it in a vehicle that is paying you the same rate that you are paying out, you are breaking even AND you are keeping your money liquid in case of emergency AND you are having an opportunity to make money with that money.

It comes down to philosophy, life timing and comfort decisions.

And finally, I always think it is wise to pay more than your mortgage payment every month. And I recommend that this payment go into a special account for "reserves" against maintenance costs, just as you would do with a condominium fee, and savings toward transfer to a smart investment/savings. Some people take their estimated property tax 1/12th, homeowner's insurance 1/12th, and an extra $100 - $200 per month and write it automatically to a special account for "when". Some people choose to pay these tax and insurance dollars to a lender impound account and supplement each monthly principal and interest to pay down their loan faster. It's a choice. And each way is better for some people. Just know that there is a choice.

*See your financial expert for limits and exceptions if your numbers are very high.

BENEFITS OF HOMEOWNERSHIP

It is sometimes hard to look at the mortgage bill when it comes in and not flinch a little.  But the benefits, especially when you live in Southern California, the greatest commodity market there is, not to grin a little arrogantly.  For our dollars we get:

• Investment return.  And not only on the equity we build with improvements, not only on the appreciation we get to keep as the values continue to go up, but leveraged , meaning that if your home appreciates 10% and you have only 25% in equity and the rest is mortgage, that 10% is still all yours, and your 25% investment is returning to you a total of  40% return on your money! 

• Income tax savings.  Absolutely deductible from your income earned every years is the total of the annual interest on your mortgage (up to $1,000,000 mortgage amount or the original purchase mortgage amount + $100,000 new mortgage, whichever is less) and the total amount of your property taxes.  In the early years of a mortgage this is about 90% of your monthly payment and makes a substantial difference in our net income/tax status. 

• Stability.  It is possible to plan, since you know your housing costs and occupancy.

• Savings for the Future.  Just making the payments on the mortgage builds equity, money that you can depend on should you ever need to.  And yes, we in San Diego may have a little more than the friends and relatives in other parts of the country, whose prices are more sluggish in appreciating. 

• Roots.  One of the reasons our government made tax deductions for homeowners decades ago, is that having a “place of our own” enhances our attachment to, sense of belonging and sense of responsibility for the home, community, town or city, state and even country we live in.  Sociologists find that children are much more confident and happy when they have a sense of their own place. 

• Freedom and expression of individuality.  When you rent, you are always subject to the judgments of your landlord.  When you own, you can, within zoning and neighborhood restrictions, develop and dress your home to suit your personal tastes and needs.  And the money you put into doing so goes into your pocket, not someone else’s. 

Control.  You decide when, you decide who, you decide how much.  No landlord tells you to move.  No landlord tells you what to do or not do.  And over time, you silently increase your control, so that someday, when the mortgage is paid off, the property can become your retirement nest, all paid for and done the way you wish it to be. 

5 STEPS TO A REAL ESTATE PURCHASE

Step 1: GETTING READY

1) Analyze what is most important to you: (for example)
Location____ Space____ Style____ Condition____ Investment Value____ Land____ Functional Use____ Other______________________________________

2) Explore Neighborhoods: Prices, Convenience, Schools, Services, Amenities, Noise, Economic Trend, Safety, Other. Driving various communities to look them over, talking to homeowners and shop owners, visiting open houses and yard sales, interviewing police and school personnel, attending religious services or enjoying local events, testing the local favorite restaurants and asking for the best auto service shop, for example, are ways of "trying on" a community to see if it fits your pictures and lifestyle.

3) Talk to Lenders: Lender prequalification is a brief, non-obligation meeting
with a loan specialist to determine what size financing you can qualify for and to learn of the many loan types available. I usually recommend talking to at least two lenders, as a double check on the communication. You will depend on this prequalification information, and you want to be sure it is clear. You should learn about current loan types, down payment requirement, loan costs, property requirements (some loans have restrictions against "fixers", for example). You need NOT pay any credit or application fee or lock feeds unless you CHOOSE to commit to one lender, because you feel he/she will serve you and take care of you especially well as YOU want. You may ask the loan specialist to run your credit report (which will cost you about $50) if you have any concerns. Your loan specialist can advise you how to clear up credit issues or direct you to lenders who make loans to people with significant credit defects. Ask one lender to provide you a letter of prequalification (or pre-approval, depending on how thoroughly your provide him with documentation), which can really work in your favor if you are bidding on a very competitive property. Rates are not the only important factor in choosing a lender. You want one who can deliver, who will live up to the promises. And one who will treat you like a client and put your best interests first in seeking out the best loan sources.

LENDERS I KNOW YOU CAN TRUST :

Gary Scherrer, The Lenders Group, (619) 574-6543, all service mortgage broker

Coldwell Banker Mortgage, -888-240-8862, one of largest in nation

Robin Mentzer, San Diego National Bank 619-461-7590 x5092, portfolio lender

4) Choosing a Realtor. Any time during the explorations, whenever you feel ready, you will want to choose a real estate agent to represent YOU. This may be someone a friend or family member has referred you to, someone you meet at an open house, or someone who does a great job when you call on an ad or a sign. This decision can make an enormous dollar and peace of mind difference. It is appropriate to interview Realtors before making a commitment to work with them. The best negotiator you can have is one who is committed to YOUR best interests, who is thoroughly familiar with the subject neighborhood and the in's and out's of comps and recent transactions, who works full time and is completely up to date on our new laws and contracts, and whose mission is to make you the success on which they build future business. You will want to discuss the exploring you have done, your expectations, your financial parameters, how you would like your Realtor to manage your search and resulting transaction. Do you feel the agent you are interviewing is the person who will be aware, conscientious, knowledgeable, and absolutely trust-worthy in taking care of YOU so that you can concentrate on choosing your best home. ( NOTE: Your Realtor's job is to serve your best interests. You may be wise to consider whether the listing agent on a property you want to buy, who is already contracted to serve the seller, can also negotiate for your best deal? If you want the best home and the best price, look for the agent who gives commitment to your best interests first.

EXCUSE THE COMMERCIAL, BUT WHY WORK WITH GINNY OLLIS?

* Your Success is my future. 25 Years of Leadership, Knowledge and Experience.
* Committed to my client's best interest, not getting "both sides of the deal".
* Full Service from Establishing Priorities to After Close Settling and Follow up.
* Reputation and Brokerage you can Count On!
* Referrals to Realtors in other disciplines or areas, to service people and professionals you can trust.
* Expert Counseling and Negotiation Skills, Absolute Client-First Commitment.

WHY WORK WITH ONE REALTOR. The fact is that the "hot" property, one that not only looks good but is priced well, is FIRST going to be presented to clients whom agents expect to buy through them, and later, if not sold, to those who might be shopping around. It is also true that the search process is a deeper learning time, and the agent who has your whole experience can better service you. You will also find that when you are buying a home, you will begin getting advice from everyone. Although these are people you trust, please keep in mind that old maxim "A little knowledge can be a dangerous thing," and check any concerns with your Realtor, who is a full-time, up-to-date and inside-resource professional.

How Realtor's work. Most of what Realtors do is "behind the scenes". Previewing homes, researching new listings and comparable sales, gaining market knowledge, keeping current on laws, financing, practices and trends, all adds up to about 10 hours "off stage" for every hour "on stage". Realtors are traditionally paid entirely on commission, which we receive only when your needs are met and you are satisfied. We are generally paid from the seller's proceeds at the close of escrow. It is also possible to sign a "Buyer Broker" contract, which will mean you are paying the commission to your agent. You can build the commission into the purchase price, just as the seller does with his brokerage fee. Talk to your agent about limits of his/her service, what you can and should expect, the best way for you to get what is most important to you.

UTILIZING MY SERVICES IN ACQUIRING YOUR HOME:

NEW HOMES

Often builders work with Realtors in marketing their homes to buyers. This gives
the builders access to broker clients, and to buyers who may not be confident buying directly without a representative. There are few new home subdivisions in the "metropolitan" /coastal areas I serve, but we can be sure you are informed about those developments.

RESALE HOMES

Most of our inventory is resale homes. This inventory is available to us through the "MLS" (Multiple Listing Service), through networking with agents who share properties they are going to be representing (vital in this extremely tight market and a benefit when really "good" things are about to come on), by staying alert to For Sale By Owner properties, and frequently by making direct approaches to owners.

OUR BUSINESS APPROACH

Our business approach is a little different than most Realtors. We believe absolutely in 1) designing our efforts to suit the needs and preferences of our clients, rather than following a "standard" program of operation. And the other primary difference is 2) we do not represent both buyer and seller in the same transaction. We believe the ultimate objective is the client's peace of mind. If the transaction is well managed so that the client feels his needs were served first and he was counseled toward wise decisions, he has confidence that he did the best he could have done.

WHAT WILL IT COST ME?

Buying a home, like buying a car, is both paying the cost of the property you purchase and the cost of the fees and expenses associated with the purchase and subsequent support of the property. While each transaction varies according to its specific agreement and particular issues, following is a general approximation of costs:

Purchase Price $________________Down payment $________________ (most usually 5-20% of the price)Loan Amount $________________ (remainder of purchase price) Estimated Interest Rate _____% [ ] Fixed [ ] Adjustable [ ] Other Term of Loan in Years _____

Estimated Closing Costs:
Loan Costs *These costs vary greatly among lenders and loan types. The best source of an estimate on your costs is your lender, when you prequalify.

$_____________	Origination Fee/Points (today 0 points are typcial)
$_____________	Appraisal Fee (typically $250-400, higher for luxury homes)
$_____________	Credit Report (typically $45-75 per person on loan)
$_____________	Document Preparation Fee (typically $200-250)
$_____________	Underwriting/Processing Fee (estimate $600)
$_____________	Tax Service ($75, pays for life of loan
$_____________	ALTA Lenders Title Policy (Loan Amount x .0011 - .002)
$_____________	Loan Tie In Fee (approx. $50-100)
$_____________	Condominium Homeowners Association Certification ($75-$250) in general, usually paid in advance of closing.
$_____________	Flood Certificate (if relevant, approx. $30)
$_____________	Prepaid Interest (from date of "closing"/recording to 30 days before first payment date.)
$_____________	Private Mortgage Insurance (if loan more than 80% of Purchase Price, = .5% +/- of Loan Amount)
$_____________	Reserves: * if loan more than 80% of Purchase Price:
$_____________	2 mos. PMI (2/12th above)
$_____________	2 mos. Homeowner's Insurance
$_____________	2-6 mos. Property Taxes
$_____________	total loan costs

Settlement Costs *These costs vary slightly among provider companies.

$_____________	Escrow fee (seller and buyer each pay 1/2, approximately .0025 at $200,000 purchase price per half,%-age decreasing slightly as price increases)
$_____________	Homeowner's Association Document and Transfer Fee (typically $75-125)
$_____________	Recording Fees (Typically $50)
$_____________	Notary Public Fee ($20 typical)
$___________	total settlement costs

Other Costs associated with purchase

$_____________	Inspecting Contractor ($275-450, can double if engineer is recommended, some allow payment through escrow, most require payment at time of inspection.)
$_____________	Prepaid 1-year Homeowner's Insurance Policy, providing warranty on major components of the property.
$___________	total other costs

VA and FHA loans have requirements for sellers to pay certain "buyer" costs, and have some additional fees. Check with lender.

TOTAL CASH REQUIREMENT:

Step 2: THE SEARCH

The best plan is a team effort. Your Realtor will review all available properties on the multiple listing service and other sources to show you the best "matches" to your priorities and best values. However, your keeping your ear to the ground can not only serve to freshen his mind about features you desire, but can often develop new communication and ideas.

You can choose whether you want information to drive by or make appointments to visit each prospective property (exteriors can be significantly misleading) with your Realtor. At each property take note of the neighborhood, condition, livability, improvements you could make to enhance your investment, other vital features to you.

The Search continues until you find the RIGHT home AND until you have sufficient information in your own mind to feel reasonably confident about values, how much home you can get for the money you wish to spend.

INVESTIGATE THE NEIGHBORHOOD AS WELL AS THE HOME

Talk to at least 5 neighbors and merchants

Attend a local community meeting, if possible, especially if buying a condominium

If you are involved in any religious group, sport or other association, attend the local group.

If you have school children, visit the local schools. Statistics don't tell the full story!

Enjoy a meal at the local restaurants, coffee shop, and listen in to your fellow diners.

If there are local newspapers, community publications, community centers or descriptive materials, check them out.

A stop at the local library is always a site to find helpful people.

Call the community police liaison.

NOTE: An offer is made on your price and terms and preserves your right of choice. It does not bind you until it is accepted and that acceptance is communicated to you. Therefore, sometimes it is wise to make an offer as quickly as you can feel ready to do so, to preclude losing your right of choice to some other buyer who makes a deal while you are researching or thinking. The new California Residential Purchase Contract, initiated in the fall of 2002, provides that a buyer has a 17 day period (and this time period may be lengthened or shortened in negotiations) in which to satisfy ALL this questions, concerns, conditions. This may include satisfying himself with respect to physical condition, neighborhood issues, and getting a final loan commitment. During this "contingency period" the buyer may withdraw from the contract without loss of his earnest money. After this period, the buyer's deposit, unless specified otherwise in the contract, will be forfeit should he default. Historically a buyer needed to have a reason to withdraw during his contingency period. Under our new contract his reason may be as simple as "changing his mind". This creates a clear opportunity for a buyer to "second think" his decision, and creates a concern for the seller that when looking at an offer he try to establish a buyer's real ability and commitment to the property.

Step 3: THE OFFER

An offer states your price. Contrary to buyer mythology, there IS NO formula as to how much to offer, since sellers do not list with a consistent relation to value. It is usually true, however, that a property which has been on the market for a period of time may be more flexible than a "new listing", unless the seller has already decreased his price appropriately. Recent "sold" prices on similar properties is your best guide.

An offer also presents your terms of payment (deposit, down payment and loan type or cash) since some loans are less costly and "iffy" to sellers than others. It will include your dates of closing and possession, and all requests for conditions you want to have clarified or managed by the seller. It also addresses who pays what fees, disclosures by the seller and/or agents, personal property (usually unattached appliances), procedures and legal recourses, time limits.

In California our legal system presupposes fully informed and knowledgeable transactions. You will notice as your offer is prepared that there are many conditions for your investigation and full disclosure by owners and agents or severe penalties. California's real estate laws are very buyer-friendly and protective.

In California Realtors are presumed to have a “limited license” to write purchase contracts. However, because they are not attorneys, we do not create these documents, they are provided to us and we fill them in, holding responsibility (which is why our incessant Coldwell Banker legal training is so important!) for doing so in agreement with our clients wishes and best interests.
The forms are a MINIMUM of 10 pages, and include (but are not limited to):
Venue and date, buyer’s names, property identification, price, earnest deposit amount, down payment amount, financing amount and terms, close of escrow date, possession date, termite inspection and correction terms, escrow and title insurance providers, personal property, contingencies – generally for inspection(s) and sometimes for buyer or seller to sell or purchase other property or for release of other contracts or… -- and dates for contingencies to be satisfied and released, mediation and arbitration clauses, fine print requiring sellers to do any repairs or modifications to the existing standards of quality and appearance and to code, and the like. The California Association of Realtors, which provides our forms, is constantly reviewing and revising so that there is little probability of there being an issue that won’t be in front of us on the form so that we are sure to address it.
 

Your agent will usually take the completed offer and "present" it to the sellers and their agent. The timing for presentation will depend on particular seller circumstances. As soon as possible the sellers will respond. Because of all the technical detail in our contracts, rarely is an offer simply accepted without at least some caveat addendum or minor change. Most likely you will receive a Counter-Offer. The Counter-offer accepts all the terms of your offer except the items addressed in the Counter. You may counter the Counter-offer or accept it as is. And back and forth. It can take a few hours, days or weeks to complete the "negotiation" of an offer. This will depend on geography, competition, and complexity of the transaction. Some offers just do not work out, and, in this case, your deposit is immediately returned to you by your agent.

(ANOTHER NOTE: Protracted negotiations seem to generate more assumptions and suspicion between the parties. Negative thoughts cost money on both sides as trust erodes and fear breeds protection issues. So most agents try to conclude negotiations before hackles interfere with logic and reason.)

CALL OR E-MAIL ME IF YOU WOULD LIKE A SAMPLE PURCHASE CONTRACT.

Step 4: THE ESCROW

"Escrow " is a process and an administrator of your contract. An Escrow Company will receive your deposit and the seller's deed, and be the administrator of all conditions in the contract until satisfied. When you have been satisfied on all your contingencies and negotiated any new issues with the seller, when you lender has approved you and appraised the home to at least the value you are paying, when your new homeowner's insurance is ready, when you have signed all final escrow instructions and loan documents, and when seller's title is ready to be cleared, the escrow will order the lender to produce your loan funds and will record the deed to your name. Upon "confirmation" of recording clear title by the Title Company, you become the owner!

During escrow you will:

1. Execute instructions to the Escrow Company, who, as the impartial "stakeholder", will administer the terms of your contract. Unlike your agent, who is an advocate for you, escrow can only operate under mutually agreed instructions from Buyer and Seller (or a Court Order).

2. Complete loan application, verification authorizations, and supporting data. Your lender will order the appraisal and coordinate all loan requirements. You may anticipate a few additional requests as the underwriting progresses. Hopefully you have chosen a loan agent who can wisely guide your application and counsel you on the management of any problems. When loan approval is communicated (generally 14-21 days), you are then poised to finalize your personal arrangements for readying balance of funds, moving arrangements and scheduling any work you want done after close but before move-in. (see below).

3. Receive disclosures. By law sellers have a responsibility to reveal to you the
true condition of the property as they know it. "As is" in California does not mean buyer be fool". It means the seller does not PRE-agree to fix or warranty, but he is still responsible for providing disclosures, and can agree to provide termite certification, specific repairs, or credit for work not to be done, which can be negotiated or RE-negotiated after inspections are completed.

4. Arrange and pay for inspections of structural stability and operating condition of the home by a licensed contractor, and optionally, engineer, toxic hazards specialist, repair or remodeling contractors, heating, pool, and professionals for any other concerns you may have.   Hiring a Professional Property Inspection is crucial to your future comfort and ease as a property owner.
Qualified inspectors will have the following: 

• Membership in at least one of the following professional organizations:  CREIA, ASHI, NAHI, which set standards of  practice and Codes of Ethics.

• Errors and Omissions AND Liability Insurance

• Legible (preferably computer generated with photos) report format.

• Years of experience as an inspector (someone else can train the new guy, you have a lot at risk here!

If you choose to have a non-qualified friend, we will ask you to sign a waiver relieving us of responsibility. Usually (depending upon contract terms) the seller will provide a termite inspection for your review.  You will also receive disclosures from the seller and agents.  All of these issues are to be studied and clarified so that by the end of your "inspection contingency" period, generally 17 days, you can deliver to seller an acceptance, cancellation, or request for repairs/credit.  Neither your request nor his response is absolute, and negotiations are sometimes reopened in light of new information.

5. Depending on the property type, condition and location, a Buyer may wish to hire I inspections in addition to a general inspection. First there may be issues raised in the general inspection such as recommendations for an engineering review, or a foundations specialist, fireplace expert, or an electrician, etc. A buyer may also wish to investigate existing building permits, hire a survey (although this is less typical in the metropolitan areas), pool inspections, well or septic inspections, environmental concerns such as asbestos or mold or other environmental issues, and ANYTHING that is important to the buyer. Buyers generally hire and pay for these investigations so that the inspector specialist is responsible and liable to the buyer for his expertise and results.

6. The title company will provide a report showing the current condition of title, which serves as a road map for Escrow to clear off all unagreed liens. This includes loans, judgments, easements, restrictions and covenants, who is currently in title, taxes and special assessments and their payment status, and any other issues that could affect your receiving clear title. Easements and covenants, conditions and restrictions are most important for you to review, since they usually "run with the title". Liens and other encumbrances may be eliminated by escrow.

7. A Home Warranty Plan may be paid by either buyer or seller, or waived, and is a 1-year warranty (renewable) for major systems of a home. If you choose to have one, you will want to select the company and advise escrow before closing.

8. Loan approval is usually the last contingency to be satisfied. At this point the seller is able to be fairly certain everything is in place to make the sale go through. He will do the agreed repairs and order the termite work completed. Within the week prior to closing, you will do a "Walk-Through Inspection" with your agent, to determine that the home has been maintained according to the contract, that Seller repairs are complete. Buyer then signs an Approval of the Walk-Through. Loan Approval is also the appropriate time to make appointments with your movers for the possession date, to contact utilities, phone, cable TV, newspaper(s), alarm company, if any.

9. When all the elements of the contract are completed, escrow will verify that they are complete. Then escrow will order the lender to deliver their loan documents for Buyer execution, and Buyer will be contacted to arrange a sign-up meeting. At this time escrow is able to make a final estimate of funds the buyer will need to provide to cover the balance of down payment and closing costs. Most closing funds need to be in the form of a Cashier's Check or wired funds, check with escrow to determine your requirements.

10. Recording ("closing") usually takes place at 8:00 AM and the title companies notify the title officers, who notify the escrow officers, who notify the agents of "Confirmation". You will be entitled to keys and possession according to your contract, usually through your Agent. Escrow will provide a settlement package to you with a summary of their Financial Transaction Record for your files and tax advisor, usually a small refund check on closing funds (which they always overestimate to allow for a day or two delay and change in proration monies) of $1-200, and copies of final papers you may not have in your file. Your Deed will be mailed to you by the County Recorder. The Title Company will mail your Title Insurance Policy to you.

Step 5: MOVING 

A trauma equal to nothing short of death and taxes. That occasion when you discover everything you own is also overweight, uncoordinated and at the same time too-much and too-little. The event immediately preceded by a gala visit from the dirt fairy and immediately followed by a simultaneous breakdown at the phone company, cable tv company and your hot water heater! Your Aunt Sadie's handmade baroque umbrella stand survives a five-story fall and being loaded on the van under the piano. Your only real Rosenthal china shatters as the truck shifts gears. Your old carpet reveals sun-bleached patches of memories. Your new floors stain instantly with the dog's displacement anxiety just where you don't want to put furniture. Boxes shrink as you pack and swell on the trash curb. The mailman never did get it right when he knew your address!...and the newspaper boy at your new home arrives with the automatic sprinkler "on" button. The spare tire on your car is under the load. And a new neighbor arrives with a casserole and warm hand. Your coffee pot shows up in the nick of time and your daughter wanders in with a new best friend from across the street. And you begin to suspect you may live as you unpack and enjoy things you haven't noticed in years. It could be worth it!

MOVING WITH CHILDREN

Children are generally more adaptable than adults, but some preparation and consideration can enormously enhance their experience. Many experts, contrary to expectations, recommend MOVING DURING THE SCHOOL YEAR to help children get acquainted with new friends, rather than during vacation and ensuing lonely months. The social support can impact the academic recovery more than the other way around. Experts also advise that MAKING A FAMILY PROJECT OF THE MOVE, rather than treating the children as "chattels", who are simply packed and picked up, gives the children the security of being informed, a chance to express their concerns, and even an opportunity to vent emotional energies. But rather than concentrate on problems, FOCUS ON SOLUTIONS, NEW POSSIBILITIES, FRESH STARTS.

TALK TO YOUR CHILDREN ABOUT: What to pack and what to throw away. The new school. If you live in a different town, can the school provide you with photos showing the current dress modes, lists of sponsored activities, even a pen pal. How to keep in touch with old friends. History, activities, events, points of interest at the destination. Past successes they experienced in solving challenges. Distractions with introductions to new activities, lessons, skills they can learn BEFORE they get to the new school and be ready to expand their capabilities. If you would like a very helpful videotape, "Children On The Move", please call me. It's had excellent user reviews!

CHECKLIST - BEFORE YOU MOVE...