What to expect when buying a home in Los Angeles?
So…
You have been looking at homes in your neighborhood on Zillow and Redfin for a while. You think, damn these houses are expensive. You start looking in other areas. Widening the search. Townhomes. Houses with pools. Could I live in Altadena? Hours pass. Weeks pass. You are checking the sites daily for new properties. Uh oh —sounds like you really want to buy a house.
That’s when you’ll want to partner with a real estate agent — hopefully me. Let me walk you through the process. I am a natural researcher, I want to read reviews and get a sense of what to expect before jumping into anything. Use this guide before “jumping” but please know you can reach out with questions anytime. I would be more than happy to chat.
Step 1: Consultation
Our first meeting will be all about getting to know each other. We can chat on the phone, meet at my office or perhaps an open house.
We will discuss your wants and needs and areas of flexibility. Need a certain neighborhood? Great! Only Spanish-style homes? Love that for you! Everyone’s home buying journey is different but I believe that really having a clear vision of what you are looking for from the beginning will put you leaps and bounds ahead other buyers in the market.
I’ll start sending you some homes. Get some feedback. Rinse and repeat until something really catches your eye.
Question: “off market” vs “on market” ???
Properties “on the market” are listed publicly on The MLS and are syndicated on our good old friends Zillow and Redfin. Working with a connected Compass agent (like moi) has an advantage here because I can also share with you “off market” properties that are exclusively for Compass agents and their clients. Hit the button below and I would be happy to share more info on Compass Private Exclusives.
Compass Exclusives
Step 2: Financial Check
You are looking at the houses I’m sending you. You have started going to some open houses and it’s starting to feel real. Now its time to talk with a lender.
Actually you will benefit from speaking with a few lenders— shop their rates and ask them questions based on your financial situation. Get comfortable with the documents they will need to assess how much money you can borrow.
In Los Angeles, a good lender is integral to a smooth transaction. They will be arranging the loan and appraisal so a lot rides on their responsiveness and care. I would be more than happy to recommend a few different lenders who are excellent at what they do. I always chat with your selected lender as well. Since my job is to treat your money as my own, I want to make sure the lender can meet the timelines they promise.
Once you select a lender, they will process your application and give you a pre-approval. This pre-approval will state your approved loan amount, purchase price and what type of loan (for example: 30-year fixed loan).
With this pre-approval in hand, you are ready to start shopping. Officially.
Step 3: We found THE ONE. Now what?
You found the house that makes you feel, oh this is home. That’s great! First things first, I’m going to speak to the listing agent. Get the intel. What is the seller looking for in an offer? Terms and price.
Terms: length of escrow, does the seller need to stay in the property after escrow closes (leaseback), does the seller need to find a replacement property, contingencies*
Price: all listing agents are different. Some love to discuss price, some give nothing. You and I will discuss price based on comparable sales in the area and up-to-the-minute market trends.
*What the f&%$ is a contingency?
A clause in the offer that allows the buyer, who is acting in good faith,
to back out of the purchase if the terms of the clause are not met.
Once we are set on price and terms. I will send over a draft of the purchase agreement so you get familiar with the paperwork and give you time to review everything. Ask all the questions and be wowed by my knowledge of the contracts. You will sign the purchase agreement via DocuSign and I will package it up neatly with a cover letter, your pre-approval and verification of funds. Verification of Funds aka bank statements that show you have funds to cover down payment and closing costs (2-3% of purchase price).
When you put in an offer, there will be 3 possible outcomes:
the offer does not receive a response. The seller perhaps has a higher offer or the seller is waiting for a higher offer so they simply don’t respond. Not ideal but it can happen.
counteroffer. Quite common here in Los Angeles. Two types:
single party counter offer- congrats you are the only offer! But the seller wants to counter some element of your offer. This is great— time to negotiate and see if there is some common ground.
multiple counter offer - as a buyer this is a bit stressful. You now have to compete with the other buyers to be the seller’s choice. Will it likely come down to price? Yes, but not always.
****Counter offers could go back and forth many times until there is agreement. Or possibly things are settled with the first counter. Variety is the spice of life!
offer accepted! Ok this is a major celebration! The seller has signed the offer and you have a deal.
Step 4: Escrow time!
The listing agent opens escrow and you will receive many many emails in the first 3 days. I am warning you now. You will be intro’s to your escrow officer, title rep, lender’s team and agent’s team.
Your first task will be to wire the earnest money deposit (3% of purchase price) into the escrow account. This is held in escrow as a deposit for the transaction.
Also this first week, I suggest you start looking into home insurance, fire insurance and earthquake insurance. You will want to know right away if the home you are buying is insurable. Talk to your lender — insurance is required in order to process the loan.
I will review with you the different inspection options you have during escrow.
Common inspections I recommend:
General
Sewer line
Chimney/fireplace
Roof
Termite
These are typically the biggest ticket items in home repair. You are going to want to know if there any issues now before you officially purchase the home.
I will schedule the inspections and we will review the reports together. Listen, I’m not a sewer line expertise. But I can introduce you to the appropriate licensed professionals. With the inspection reports in hand, you will now assess if you want the seller to fix any items of concern or ask the seller for a credit to cover the cost down the line.
I will write up a Request for Repair and send it over to the sellers side. The sellers can agree to your request, deny the request or propose a new solution. This part of a escrow is always a little dance.
This might be a good time to bring up those contingencies again. Remember a part of your terms you offered included your contingencies:
-inspection- I will always prep you to have all inspections in the first week of escrow. It is very common in our market to shorten the inspection contingency. You will need to review all inspection reports and feel confident in your due diligence before removing the inspection contingency.
- loan - I told you back in step 2 how important the lender is. Well in escrow, it’s your lenders time to shine. They will be putting together the loan and their responsiveness will be totally necessary. You will need the lender to advise on the status of your loan and when they feel comfortable with you removing the loan contingency.
-appraisal - An appraisal will be ordered by the loan company in the first week of escrow. The appraiser walks thru a home and decides it’s market value based on the homes specific features and recently sold comparable properties. As a buyer, you will be notified of the appraised value and we then discuss removing the appraisal contingency.
By this point, you have done all your due diligence. You know the home is insurable, the inspections look good, the home appraised and your lender is feeling solid. We send a full contingency removal and you are ready to roll my friend — this home is about to be yours.
FINAL DAYS !!!
The last few days of escrow pick back up again in terms of lots of emails and things to do.
5 days before closing, you and I will walk the property one last time to make sure everything looks as it was on the day we opened escrow.
About 4 days before closing, the escrow officer will arrange a time for you sign the loan docs. You can do this at the escrow office or have a mobile notary come to you. You will also wire the closing funds to escrow at this time.
REMINDER: Set up your utilities. Certain services take 48 hours to turn on so plan ahead to ensure you have electricity on move-in day!
The day before escrow closes, your loan will fund and you are about to be a homeowner!
Step 5: Close & Celebrate
On closing day, escrow will record the sale at the County Recorder’s Office. They will typically do this first thing in the morning and we should receive word by early afternoon.
I will give you a call with the good news and arrange a time for you to pick up the keys and BOOM, thats it. You bought a house!
Next you will throw a housewarming party and I will bring the wine — sound like a plan?