Tag: first time homebuyers

Before Google Maps, and it is hard to imagine a time without it, we would have to have a map with us in the car.  Thomas Guides graced the glove compartments of every vehicle on the road and spinning map displays greeted you at the checkout stand of every gas station.  The gas station clerk was expected to know how to get you back to the Interstate and yes, us men were supposed to be hesitant to ask him for directions.  So here I am a gas station clerk/REALTOR® at your service, ready to tell you to just take a left at Pre-Approval Street and a right Dream Home Drive.  All you need to do is summon the courage to suppress your manhood (fellas) or leave hubby in the car and handle business yourself (ladies).  I picture the conversation going a little something like this:

Hey Mister, you mind pointing us in the right direction to buy our first home?

Sure can Mr. & Mrs. First Time Homebuyer and better yet, in the time it would take to fill your tank l’ll give you a roadmap which will have a series of steps that will get you there safely and most importantly, successfully.

Alright, here we go.  Turn by turn.

Turn 1: Pick Your Road Dog

A road dog, also commonly known as wing man, is your trusted companion and guide on a journey.  In a real estate transaction that is what your real estate agent should be.  Road dogs don’t disappear when things get hard or just tell you things you want to hear.  They stick with you from the start of the journey to the end and look out for you.  Make sure you start things out right and pick an agent who has those types of principles.  Are you going to be handed off to an assistant?  Do they have time to answer your questions and really guide you through the process?  These are a few of many questions you should ask before making a decision on who you choose to hit the road with.

Many buyers make the mistake of taking to the internet first and get lost in the sea of real estate portals which tend to mislead and misinform their visitors.  Zillow, Trulia, and the like have good intentions but when you don’t know what you are looking for or understand the communities you are considering you are better off working with an agent who can provide you with accurate insight and direction as we have our feet on the ground and really know what is going on in the market.

Turn 2: Get the Moola

First, let me tell you why I said ‘local’.  I’ve seen enough dancing alien pop-up banner ads on websites from lenders pushing low rates and promising out-of-this world loan programs than I’d like to in this lifetime.  Many of these companies aren’t in the area and don’t get what it takes to loan on a property in a local market.  They will feed your mind with unrealistic information and say anything to get you on the hook.  I’ve had a recent experience with a client who’s also a close friend that worked with a company like this and just a few weeks from closing told us they couldn’t make the loan work and forced my client to lose her deposit.  I’m still haunted by this experience to this day and don’t want to see it happen to anyone else.

Before you set foot in a home that’s for sale you need to know what your budget is.  You don’t want to experience the disappointment that comes with finding a home you love and finding out you can’t afford it.  On the flip side you might be able to afford more home than what you’ve been looking at.  No matter what, knowing what your price range should be is better that not knowing.  As your agent it helps me narrow down the communities you can choose from and only show you homes that are in that comfort zone.  You too will be able to focus more on the homes that work for you, and just like those crazy couples on HGTV’s House Hunters, start working on your ‘wish list’.

At this meeting with the lender they will review your credit scores, talk about different programs available, and after reviewing this information, will be able to give you a pre-approval letter that shows how much home you can buy.  This is important to have at the ready because when homes come on the market that are priced well, they move fast.  If you try to meet with a lender after you’ve seen the home of dreams you’ll likely lose it to another buyer who has completed this step already that was able to make an offer immediately.

If you are thinking about taking this turn, please make sure you reach out to Dawn Peck from Guild Mortgage and say Sam Benner sent ‘cha.  She is especially great with first time homebuyers.

Turn 3: Find ‘The One’

Now that I have your ‘wish list’ it is time to find your dream home.  What I do is put your criteria into the MLS (Multiple Listing Service) where homes are put up for sale and I’ll comb through it to find any possible suitors.  Most of the time we have a few promising ones to choose from, but if we don’t I save your criteria in the database and anytime something new comes on the market that matches you get an email instantly.

Let’s say we find a few that work?  Now it is time to test your sense of smell…

The ‘Smell Test’ refers to the very important step of seeing a house in person, of course then is the only moment you have a chance to smell it.  This is your chance to really get a feel of the home, very different than experiencing it online.  There have been many occasions where buyers I’m working with will dismiss a home based on how it looks online and have been quick to regret that choice once they are able to see it in person.  It doesn’t hurt to take a chance on a home that might need some cosmetic work, but has the location and floor plan you are really after.  Also, some agents don’t take the time to have professional pictures taken which might not present a home in its best light.

How many homes should you ‘smell’?  It is hard to average out how many homes you should see before deciding the right one, but given too many to choose from a buying decision will not likely be made.  It helps to be very specific with your agent as to the key features the home needs to have for you which can shorten the buying circle considerably.  Once I have that in mind and start searching for potential candidates, I tend to focus in on 3 to 4 homes to take a whiff of.  From there it is easy to compare them against each other and a clear front-runner presents itself.

A passionate love affair has begun and the process to making it all yours has begun.

Turn 4: Make ‘Em An Offer

Once you’ve selected the home of your dreams and it smells oh so perfect it is time to write an offer.  This also tends to be your first interaction with the seller.  After studying recent sales in the neighborhood the home is in I will make a recommendation on what a fair price to offer will be.  This is one of the more tense moments of the transaction as the number being offered and what the seller thinks his home should sell for might be a bit off from one another.  Also, we might have other buyers we are competing against that will influence how aggressive of a price you’d like to offer as you wouldn’t want to miss out on the home over a small difference in offer price.  I usually recommend to write the offer in a way that shows that you really want the home which sends a message to the seller that you are serious and will make the process of closing the deal as painless as possible.

The offer itself is made on a purchase contract frequently referred to as the RPA (Residential Purchase Agreement).  This lays out in great detail every step of the transaction and what each party will be responsible for.  Timelines are also set here which are very important to adhere to.  A key section is the allocation of costs which stipulates who is going to pay for what during the escrow.  For buyers I recommend asking the seller to pay for a home warranty which covers anything inside the home breaking down after the sale closes.  These can usually cost around $450 for the average single family home and can be upgraded to cover air-conditioning and pools and spas as well.  It is a great way to make sure you are covered from anything going wonky right after you buy the home and covers you for a year from the close of escrow.

Once the RPA has been signed it is packaged with your pre-approval letter (see Turn 2) from the lender and I like to add something a little extra.  I write a cover letter and enclose a photo so the seller can really see who they are going to be working with and get to know you a little bit.  I’ve had many instances where I was working with a buyer who didn’t write the strongest offer, but chose us because of what was said in the letter.

The package is sent to the seller’s agent who sets a time to present it to his client.  The standard waiting period to get a response is 3 days but that can be shortened or extended depending on the situation.  At this point all that can be done is sit, wait, and cross your fingers.  Picture yourself in the backseat of your parents’ car on a road trip trying to fight the urge to say, “Are we there yet?”.  That 72-hour period sure feels like that.

Turn 5: Escrow Puts It in Neutral

In the car world neutral is one of the more underutilized gears available to the driver.  The N on your gearshift doesn’t exactly make you think about things moving in the right direction, but in the real estate world the neutral third party, also known as escrow, is all about keeping the parties involved in the purchase of your home on the road to close.

Best way to understand escrow is to think Switzerland.  They have no dog in this fight and are the ideal intermediary to make this process work.  It handles all the money, documents, and the like in a secure place until at just the right moment they turn the property over to the buyer and the money to the seller.  As you might imagine there is a lot of opportunity for people to do some pretty evil things during the course of a real estate transaction so it is great to have the escrow officer on your side making sure all of the proper steps to transfer the property from the seller to you are done correctly and ethically.  Many of the future turns to be discussed here happens during the escrow process, so keep your hands and 10 and 2 and keep your eyes on the road.

My favorite escrow officer is Dora Vasquez at WVC Escrow.  If you’d like to meet her, check her out here.

Turn 6: Look Under the Hood

Ever seen the movie Money Pit?  Tom Hanks & Shelley Long’s characters purchase a home that on the surface appears to be the perfect home and over the course of the film turns into a complete disaster.  Tom Hanks’ character reaches the peak of his madness when he watches his bathtub drop through the floor and crash into his living room.

You don’t want to go through a situation like this.  It is so important that you have a licensed professional inspect your home thoroughly.  These guys know their stuff.  They look the home over from roof to crawlspace, attic to garage and noting all potential issues that the home presents.  A report is generated which covers all of these problems in great detail and ranks them so you can see which issues present the greatest concern.  There are times when a professional from a particular field might need to be brought in to give a more detailed opinion on an issue like an electrician or a plumber.

With a clear picture of the condition of the home in front of you we sit down and decide what we should ask the seller to fix for you.  Where you have the best success here is asking the seller to repair any items that provide a potential health or safety concern in the home.  Sellers tend to accept the responsibility for faulty electrical work or missing smoke detectors much more so than you asking for a new big screen television as you might imagine.  This can be one of the more challenging steps to the transaction and where many deals cancel as buyer and seller can’t come to terms with who is responsible to handle that particular repair.  As long as you make reasonable requests and don’t have a long line of buyers behind you waiting for you to get out of their way to buy the home, most sellers will bend just enough to keep the deal together.

You can elect to have the seller do the repairs in advance of the close of escrow or the seller can credit the cost of what the repairs will be and you can do them on your own time.

Repeat, do not purchase a home waiving your right to a home inspection.  Peace of mind usually costs around $450 for an average single family home.

Turn 7: The Appraisal – A Number’s Game

When a loan is involved with a purchase of a home and let’s face it, most first time homebuyers are not buying a property in all cash, the lender requires an appraisal of the home to determine its value.  The bank does not want to loan on a property for more than its worth. Seems fair right?  Here’s where it gets tricky.

Let’s say you are buying a home and have offered a price of $500,000.  Then, the appraiser comes in and based on his research of recent sales in the neighborhood and condition of the home that it is really worth $475,000.  We now have an issue of value and it must be resolved in order for this deal to close.

There are 4 possible outcomes here.  One, the seller reduces the price to the appraised value.  Two, the buyer puts an extra $25,000 in cash into the deal to make up the difference (most first time buyers have and extra $25,000 laying around right?).  Three, the buyer and seller split the difference or four, both parties cancel and move on.

Which outcome happens most?  This totally depends on the situation.  Again, if there is other buyers out there willing to put in the extra dough then the seller might not be that inspired to take the price reduction, however if you are the only buyer on the hook the seller might be more amenable to taking the hit so that the deal stays together.

Turn 8: Sign Your Life Away

The onus now moves to your lender who is working feverishly to get all the conditions of your loan covered so that your loan documents can be drawn.  When the loan documents are ready you will most likely go the escrow officer’s office and sign them with a notary present.  Once you sign your name, many times I might add, you have made a binding contract with your lender and once processed by the lender they fund your loan and the money goes into escrow.

Turn 9: The Home Stretch

You must, must, must do a final walk-through of the home before it closes.  This is done 3 days before your escrow is set to close.  This is your opportunity to make sure the house is in the same or better condition since your home inspection.  The final walk through is especially important if you asked for repairs to be completed prior to the close of the sale or if the seller had a tenant living in the property.

I had one instance, my first ever transaction actually, where tenants were not very happy about their home being sold.  They begrudgingly cooperated with every step of the sale and when it came time for them to move out, they did without a peep.  The next day we do the final walk through and our jaws hit the floor.  The tenants had spray painted profane wording and drawings all over the walls.  Fortunately there was still time for the seller to have a painter come in and restore the walls back to their original, non-offensive color.

All graffiti aside the final walk-through is mostly a fun and exciting moment.  You measure for furniture, decide where the TV is going to go, and start planning the soon-to-be epic housewarming party (I bring the taco guy…seriously).

Turn 10: You’ve Reached Your Destination

Ladies and gentlemen it is closing time!  You now have a home and you can stay there.  See what I did there?  A little last call levity.  But seriously, your documents have been recorded at the County Recorder’s office that say you are now the owner, your first mortgage payment is due, and I have the amazing pleasure of handing you your keys for the first time.

My recommendation on moving day?  Hire movers!  It will keep your back pointing in the same direction is now.  Save precious friendships and quite possibly your relationship with your significant other from falling victim to moving day mania.  It’s a thing.  Look it up.

My go to in this arena is Coast Transfer & Storage.  They are based in Ventura, CA and can move you across the street or across the country.  Family business too which is extra cool.

I Call Shotgun!

There are few experiences more rewarding as a real estate agent than working with a first time homebuyer.  To embark on a journey with someone who has never purchased a home before and see them through the eventual ups and downs to a successful close?  Now, that’s why I chose this profession.  The unfortunate truth is that many first time homebuyers feel lost, confused, and uncertain about how to purchase a home.  I hope this roadmap has been helpful and if I can be of any help to you on your journey be sure to reach out to me, I’ll even chip in for gas.