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BUYING
101
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WESTSIDE
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BUY
NOW |
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THE
BUYING PROCESS A - Z
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Introduction
| Understanding
the Loan Process
Educate Yourself About the Homebuying
Process
Understanding
Property Taxes and Insurance
| Selecting
a Real Estate Agent
Starting
the Actual Property Search
You've Found a Suitable Home or
Condo, Now What?
Preparing and Submitting the
Offer | Congrats! Your Offer Was
Accepted. Let's Open Escrow
Disclosures, Reports, Other Misc Forms |
Condominium or Townhouse Forms and
Disclosures
The
Termite Report |
Title Insurance | The
Appraisal Process
Other Property
Requirements Prior to Sale | The Buyer's Final Walkthrough
What Happens at the Close of Escrow |
What to Do After the Close of Escrow |
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In my opinion, getting pre-qualified or pre-approved by a mortgage lender is the most important step to take after you've decided you want to purchase real estate.
is the most important step to take after you've decided you
want to purchase real estate.
Why? Because
it eliminates the anxiety of wondering if you will be able to
get a loan. You'll know how much you can borrow, how much
house you can afford, how much cash you need to close escrow,
and what your payments will be. Most good agents and sellers
won't bother with a buyer who as not been thoroughly checked
out by a reputable lender.
Let's
discuss the aspects of the loan process start to finish.
Choosing
a Reputable Lender
Get Your Records Together
The Pre-Qualification
Process
The Pre-Approval
Process
Good Faith
Estimate
The Credit Check
and Your FICO Score
Clearing
Mistakes on Your Credit Report
Settling
Old Derogatory Accounts on Your Credit Report
Downpayment
Discussion
Full
Documentation Loans
"Stated
Income" or "EZ Qualifier Loans"
Understanding
Mortgage Insurance (MI)
Fixed Rate vs Adjustable
Rate Loans
Locking Your
Interest Rate
Understanding
Closing Costs
Understanding Loan
Points
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EDUCATING YOURSELF ABOUT THE HOMEBUYING PROCESS
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Ok, you've spent time learning about the loan process and you've been pre-qualified or pre-approved for a loan. You know how much cash you need to come up with and you know what your total monthly mortgage payment will be.
You're ahead of the game at this point. Especially when competing with other buyers for the choicest properties. I know your probably anxious to get started looking at homes. But first spend some time educating yourself about the homebuying process.
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Talk to Friends and Family Who Have Recently Purchased a Home
Real Estate Books
Web Sites
Read the Los
Angeles Times
Tools You'll
Need to Find Your Property
What is the Multiple
Listing Service (MLS)?
Understanding
the Tax Advantages of Homeownership
Get a Copy
of the CAR Purchase Contract
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UNDERSTANDING PROPERTY TAXES AND INSURANCE
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Understanding Property Taxes
Homeowner's Insurance - Mandatory if you have a loan on the property
Earthquake Insurance - Optional
Flood Insurance
Condo Insurance
For more insurance information try these sites:
California Department of Insurance
Insurance News
Network
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SELECTING
A REAL ESTATE AGENT
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Selling real estate is tough. It can be intimidating and stressful. There are no benefits, no comp plans, no 401k's, no stock options, and no paid vacation. Health insurance? Fuggedaboutit! And don't forget it's straight commission with 60-hour workweeks including weekends. Sounds great huh?
Well then why do so many people get in to real estate?
First, it's easy to get the license. Study a few weeks with a mail order course, take a $139 test, and pay $295 for the license. Heck, you don't even need a high school diploma much less a college degree. However, the Department of Real Estate does draw the line at convicted felons.
Second, most companies will hire anyone. You got a pulse and a license? Great you're hired! Got no money, no experience, no car? Hey welcome aboard! Have you been run out of every other real estate company due to shady ethics? Right this way! You get the picture. I remember a broker in my area that hired an agent who was living in her car! No offense to those of you that are forced to dwell in your vehicle, but would you want to trust the biggest financial transaction of your life to someone who lived in her car? Me neither.
Third, if you do it right and treat people well, you can make a good living. The true professional that is organized, focused, intelligent, ambitious, and treats his or her clients well can make a great living selling real estate. Having a thick skin and a competitive nature doesn't hurt either.
Unfortunately, not enough people have all of these qualities. Read on to learn how to find a good real estate agent.
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Finding a Good Agent
Things
to Investigate When Choosing an Agent
Understanding
Real Estate Agency
Understanding
How Agents Get Paid
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STARTING THE ACTUAL PROPERTY SEARCH
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It can be tough out there in homebuyer land. The best properties sell quickly, prices are up, and it can be tough to find a home with just right mix of size, location, amenities, and emotional appeal. Let's face it, buying a home on the Westside can be gut wrenching experience. In fact, it's not uncommon for buyers to experience nightmares (literally) about the whole process. So what do you do to minimize your stress?
Well I'm assuming you've already filled out a loan application, been pre-qualified, and selected a competent agent. What I want to discuss is the mindset you need, how to work with me, and other sources of properties for sale.
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The Mindset You Need to Find a Home
Devoting Proper Time to Your Home Search
VIEWING
HOMES FOR SALE
The Old School Way
The New Economy Way - Working with Derrick Ruiz
More Thoughts on the Viewing Process
Other Sources of Westside Property for Sale
What to Do if You Discover a Home You Like on Your Own
Open House Etiquette
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YOU'VE FOUND A SUITABLE HOME OR CONDO, NOW WHAT?
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Ok, you've found a home you like. It fits your needs and is in your price range. Before you write an offer, here's what I recommend you do to make sure you are paying a fair price for the home and you know what you are getting into.
IMPORTANT NOTE: IF THE MARKET IS HOT, YOU BELIEVE THE HOME IS FAIRLY PRICED, AND THERE ARE OTHER BUYERS LURKING, YOU MAY NOT HAVE THE LUXURY OF TIME TO TAKE THE FOLLOWING STEPS. PLEASE CONSULT WITH YOUR AGENT AND USE COMMON SENSE.
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Checking the Sale Comparables (Comps)
Investigate the Neighborhood
Investigate the Seller
Talk to the Tenant
Permits, the Certificate of
Occupancy (C of O), and Illegal
Additions
Check the Commute
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PREPARING AND SUBMITTING THE OFFER
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This next section deals with further concepts and issues I feel
are important for a buyer to know.
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What Are Contingencies?
Reducing the Cash Needed to Close Escrow
Ask For A Home Protection Plan
Presenting Your Offer the Correct Way
The Counter Offer Process
What to Do
in Case There are Multiple Offers on the Property
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CONGRATS! YOUR OFFER WAS ACCEPTED. LET'S OPEN ESCROW. |
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Many
people only have a fuzzy understanding of escrow and the escrow
process. I remember a client whose offer was accepted. I told
him we would open escrow immediately and he said to me,
"Derrick, just what exactly is escrow? As I explained the
process to him, I realized that to many people, escrow is kind
of a mystery, especially to first time homebuyers. Hopefully
this section of my site will shed some light on the mysteries of
escrow.
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What
is Escrow?
Who Picks the Escrow Company?
Opening Escrow
Escrow Company Fees
Certified Escrow Instructions
Statement of Information (SI)
The City Report
Change of Ownership
Preliminary Title Report (Prelim)
Deciding How to Hold the Title
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THE
PHYSICAL INSPECTION PROCESS |
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Whenever you purchase real estate, it's crucial that you hire a
home inspector to inspect the home for any and all defects. If
you forgo this you will be asked to sign a waiver that says that
you hold the brokers harmless. This is serious stuff.
Fortunately most buyers heed this advice. The exception?
Contractors buying their own homes will sometimes do their own
inspection. But if that is not you, please be sure to get your
home thoroughly inspected.
Basically the inspector will check the home from the roof to the
foundation and everything in between. He will run the
dishwasher, check the heating and cooling systems, check the
plumbing, electrical, check for leaks, etc. He will then either
give you a written report on the spot or fax or mail you the
report within 2 or 3 days. He will generally send your agent a
copy as well. The seller will generally not get a report unless
it is requested you decide to give him or her a copy. The
seller's agent may request a copy for his or her file from your
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Picking an
Inspector
Who Pays
for the Inspection and How Much Does it Cost?
The Actual
Inspection
Analyzing the
Physical Inspection Report
What Are
Your Options if there are Significant Defects to the Property?
Should You Negotiate Repairs or Take a Cash Credit?
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DISCLOSURES
- REPORTS - OTHER MISC FORMS |
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In addition to the purchase contract and any counter offer
forms, there are a plethora of disclosure forms and reports that
must be filled out by the brokers, sellers, and buyers. These
forms are used to disclose material facts about the property so
that the buyer is aware of known defects or issues impacting the
property. There are various time periods in which a buyer is to
receive these disclosures.
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The Agency
Disclosure Form
The
Transfer Disclosure Report (TDS)
Smoke
Detector and Water Heater Statement of Compliance
Combined
Booklet: Environmental Hazards: Guide for Homeowners and Buyers
and The Homeowners Guide to Earthquake Safety
Residential Earthquake Hazards Report
Natural Hazard Disclosure Statement (NHDS)
Lead-Based Paint and
Lead-Based Paint Hazards Disclosure (Property built prior to
1978)
Gas Shut Off Valve
Disclosure
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CONDOMINIUM
OR TOWNHOUSE FORMS AND DISCLOSURES |
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Owning a condo or
townhouse is different than owning a single-family residence
(SFR). There's less maintenance, less privacy, and less
responsibility. Owners pay monthly homeowners dues (HOD) to
maintain the property. There may be restrictions such as the
number of pets you can have or what you can put on your balcony.
Many condominium projects are managed by professional Home
Owner's Associations (HOA)
Buying a condo is also different. There are a number of condo
documents that must be read and approved. Approval of these docs
is a contingency of the sale so you have to approve them in
order to complete the sale of the unit. Below is a partial list
of some of the documents that a buyer receives when purchasing a
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Conditions, Covenants,
and Restrictions (CC&R's)
Articles of Incorporation
Operating Budget
Reserves
Pending or Contemplated Assessments
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THE
TERMITE REPORT |
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Is a Termite Inspection
Required?
Who Picks the Termite Inspector?
Section One Work vs. Section Two Work
What to do if You Are Unhappy With The Termite Report
Termite Notes for Condominiums or Townhouses
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TITLE
INSURANCE |
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Title insurance provides
the buyer with complete assurance about the validity of the
title relieving both buyer and seller of liability for title
problems such as fraud, improper transfers, undisclosed heirs,
and human error in transcribing information. If someone claims
they have rights to your property and you are covered by owners
title insurance, the Title Company must defend your interest in
court. Owner's title insurance covers you for as long as you own
the property. To insure that the seller has a clear title, a
search is done of the offices of the recorder of deeds, county
clerk, tax assessor and surveyor. There is also a search of
legal rulings concerning the property and prior owners.
There are a number of reasons why there might be a title problem
(known as a "cloud on title"). The most common reason is that
the paper work in a divorce wasn’t filed correctly when the
house was sold and both of the former owners didn’t sign the
title over to the new owner.
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What
Protection Does Title Insurance Give?
What Risks Are
Not Covered?
Can Protection
Be Obtained Against Matters Not of Record?
Who Pays for
Title Insurance?
Who Picks the
Title Insurance Company?
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THE
APPRAISAL PROCESS |
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Banks require an estimate
of value prior to making a loan because they don't want to loan
on a property worth less than the contract price. So an
appraiser is sent out to the property to appraise the property
and make sure the value is in line with the sales price.
Appraisers inspect and measure the property and check the sales
comps in the immediate area. |
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Who pays for the appraisal and how much does it cost?
Does the buyer get a copy?
What happens if the appraisal comes in too low or too high?
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OTHER
PROPERTY REQUIREMENTS PRIOR TO SALE |
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Smoke Detectors
Water
Heater Bracing
Certificate of Compliance (Water Conservation)
Impact
Hazard Glazing
Gas Shut Off Valve
Disclosure
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THE
BUYER'S FINAL WALKTHROUGH |
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The buyer's walkthrough prior to the close of escrow is to
verify the repairs (if any) have been done in a workmanlike
manner. I also use it to verify if the tenants are out if the
property was tenant occupied. While I'm there I also want to
check that the seller has not removed any fixtures
that are included in the sale like draperies or light fixtures.
I also verify that the seller has removed any junk or trash from
the property that was agreed upon (rusted out swing-set, junked
appliances from the garage, etc.).
The walk-through is also a good time to check out the repairs
done by the termite company. If the termite repairs called for
any wood repair or replacement or a shower pan replacement, I
want to verify the work was done properly and to my buyer's
satisfaction. |
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When does the
buyer do the walkthrough?
What if
something is missing or the repairs are not completed or done
correctly?
How to Use Your
Leverage Near the COE
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WHAT HAPPENS AT THE CLOSE OF ESCROW?
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OK, you're in the home
stretch. There's just a few more things that you need to do to
get the escrow closed. |
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Coordinate
Your Hazard Insurance
The
Estimated Closing Cost Settlement Statement
Final Loan
Approval
Signing Your Loan
Documents
Bringing in the
balance of your downpayment
Funding the Loan
Recording the
Deeds
Change the
Utilities to Your Name
Get a Copy of
Your Home Warrantee Policy
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WHAT
TO DO AFTER THE CLOSE OF ESCROW |
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Examining Your Hud-1 Settlement Statement
Your Paperwork File
Changing Your
Locks
If Your Agent Did a Good Job
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FINAL
THOUGHTS |
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Well we finally got through the long process of selling a Westside home. I sincerely hope that the information provided in my web site was of value to you. Please feel free to call me at 888-276-0656 or email me if I can be of service to you or your friends or family.
Please let me know if you come across any mistakes or would like to see other issues about the selling process included in this web site. Feedback from you is very important. This web site will continue to evolve. If you think the information on this site would be of use to anyone you know, please tell him or her about it, thank you.
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