5. Opening Escrow and Due Diligence

Now that your offer has been accepted, an escrow can be opened.

Escrow is a legal arrangement in which an asset (in this case real property) is deposited into safekeeping under the trust of a neutral third party (an escrow agent) pending satisfaction of contractual agreement. Once the agreement has been met, the escrow agent will deliver the asset to the party prescribed by the contract. Basically, escrow is a third party that collects all the funds and paperwork and handles the recording of the transaction. They usually last between 30 and 60 days.

Once you have opened escrow, we mentioned in the last step, your deposit check will be cashed into an escrow account. This deposit (usually 3% of purchase price) will also supplement your down payment that you arranged with your lender. For instance, if you arranged to get an 80% loan, your down payment will be the remaining 20%. Since you have given a 3% deposit, you will only need to supply the remaining 17% for your down payment.

The escrow period also allows time for you to complete your contractual obligations and do your due diligence. According to a normal purchase agreement, you have 7 days to send your loan application to the lender and provide proof of funds. If you followed our steps correctly, this is already done! The purchase agreement also states that you have 17 days to complete all your inspections and release your contingencies.

What’s a contingency? When you write an offer, you are making an agreement with that seller that you will buy the house contingent upon the fact that certain aspects fall into place. For instance their is a loan contingency that says you are making this offer based on the fact that your lender can get the loan that you applied for. If you can’t get the loan, you most likely would need to cancel out of the agreement. If you can get the loan, you will need to remove that contingency with 17 days. When you remove a contingency, the offer is no longer contingent on that factor. There are also many other contingencies like inspections, termite repair, etc. Make sure that you are absolutely certain you want to remove all your contingencies. Once you do, you are locked into your purchase agreement and if you decide to cancel later, your initial 3% deposit could be at risk.

Your inspections are also done during escrow. It is your choice to have as many inspections as you want (on your dime). Usually your agent will have inspectors to refer to you to get your basic home inspection complete. Your home inspector is not a specialist in a given area of your home. All he/she may do is point out code violations, problem areas and may refer you to a specialist designed to handle problem areas such as mold issues, roof issues, land issues, etc. It is your choice to decide if these issues need to be inspected further with a specialist (again, your dime). It is also your choice to request any repairs from the seller that the inspector has found. This is also a place where your agent (hopefully us) will have the expertise in negotiating repairs. Again, inspections are also a contingency and if something is not to your liking, you have the option of backing out. If you remove this contingency, the sale of the home is no longer contingent on this factor. Again, make sure you are absolutely certain you want to remove this contingency.

Wait there’s more… The escrow company will be contacting you many times requesting signed documents, setting up dates for signatures and sending you an assortment of disclosures and reports. Be prepared to read all the disclosures and reports so that you fully understand everything about the property. Disclosures are also a big contingency. Make sure to keep this collection of documents somewhere safe and readily available.

Once you have completed your contractual obligations, your due diligence, your inspections, your request for repairs, your contingency removals, received your assortment of disclosures, documents and reports, signed the escrow documents, your lender will fund the loan, escrow can close and record a shiny new property in your name.

<<< Step 4: Submit Your Offer Step 6: Close Your Escrow – Celebrate! >>>

4. Submit Your Offer

Now that you and your agent (you know who) have found the perfect home, it’s time to writer an offer.

In this step, your agent will provide all the necessary data about the home you are interested in. The data will include statistics of home sales, prices, days on market, etc. This data will assist you in making an educated offer amount.

At this time your agent will also request a few things to be submitted with the offer:

*Pre-qualification letter: We mentioned in Step 2: Choose Your Lender, that you will receive a pre-qaul letter.
*Proof of funds: When you write an offer there is usually an amount that will be paid as a down payment. According to the contract that you sign, you need to show proof that you have the funds available to close. A bank statement will suffice.
*Deposit check: When you write an offer, a deposit is made to the seller (usually 3% of purchase price). The deposit makes the seller aware that you are a serious buyer and can risk taking the home off the market. This check is not deposited until escrow has been opened.
*If we are your agents, we will also submit a little background information about you so that the seller can get an idea of who is buying the home.

Gathering this information makes for a very strong offer!

What about the offer? Here is a list of all the document required to submit an offer. There’s a lot of signing, repeating, disclosures, addenda, advisories and so forth. Your agent will be able to walk you through the whole thing and make sure you know what it is your are signing.

Once everything is in place, your agent will submit the offer to the seller. The seller then has the option to reject your offer, accept your offer, or more commonly, counter your offer. This is where your agents expertise and professionalism in negotiating comes into place. Once you and the seller have agreed on all the terms and price, escrow can be opened.

<<< Step 3: Find Your Home Step 5: Opening Escrow and Due Diligence >>>

3. Find Your Home

Now that you and your agent (hopefully us) have found a good loan program with your lender, it’s time to go shopping!

Based on your loan amount, you should have a pretty good idea of what price range to look for, but what about other amenities? How many bedrooms and bathrooms do you desire? What size of home and lot would you like? What area are you interested in? During this step, it is crucial to be open and honest about what kind of home you would like to live in. Knowing these details will help your agent pinpoint your perfect home. Once you have seen a few properties, share with your agent all your likes and dis-likes.

What is the benefit of having an agent show you properties?

*Years of experience have taken us inside of thousands of homes. Our knowledge of these homes and neighborhoods can assist you in your search.

*We have the tools that are needed to capture the most current information, make appointments and show you the property in person.

*We encourage using third party sites such as Realtor.com or Yahoo.com to assist in finding homes, however, these third party sites pull information directly from the Ventura County MLS (Multiple Listing Service). This leads to incorrect data or data that is out of date. We have direct access to the Ventura County MLS and can provide accurate and timely data. Also, pictures and descriptions of properties that are found online do not show the true image of the home. Please refer to your agent for a reliable description.

<<< Step 2: Choose Your Lender Step 4: Submit Your Offer >>>

2. Choose Your Lender

Now that you have created a relationship with an agent (hopefully us), the next step is to choose a lender. Why is the next step to find your lender important?

Your lender will be able to let you know if you can qualify for a loan. If you do not qualify, there is no sense in continuing this process until you do qualify. If you do qualify, you and your lender will work out a plan to get you the best possible loan. The loan amount determines what price range you should be looking at. There is no sense in looking at properties until you have established what loan program you are going to use. Not only will it avoid the heartbreak of falling in love with a home out of your price range, but it will save your time and your agent’s time.

*IMPORTANT* When you qualify for a loan, your lender sends you a letter of pre-qualification. This letter makes you a stronger buyer in the seller’s mind as it says “you’ve done your work and are a serious buyer.” Some seller’s will not even consider an offer without this letter. Also, finding a lender, get pre-qualified and receiving the pre-qual letter takes time. If you find your home first, then take the time to go through this process, you might miss out on your perfect home.

We strongly believe that this step is a must before looking at any properties. As your agents, will can assist in finding the right lender for you. We can refer some highly qualified lenders to you as well.

Here are some things to consider when choosing your lender…

*Find a lender that is a reliable communicator.
*Find a lender that makes you feel comfortable.
*Don’t hesitate to ask lots of questions, DUMB questions, over and over again.
*Learn your options (Fixed Rate, ARM, 3-2-1 Buy Down, Special Assistance).
*Shop the rates (different loan options have different rates).
*Find out the lender’s costs up front and negotiate.

<<< Step 1: Choose Your Real Estate Agent Step 3: Find Your Home >>>

1. Choose Your Real Estate Agent

Why is choosing your real estate agent the first and most important step in this process?

Your agent acts on your behalf coordinating, controlling and managing your whole home buying experience.

Every real estate agent should do the following:

Guide you in finding a lender and obtaining a pre-qualification letter.
Listen to your needs in your search for your home.
Advise you through your offer and negotiation.
Supervise your escrow and due diligence.
Oversee your loan funding and close of escrow.
Pledge a fiduciary duty to you.

Our Pledge…

With your consent, we can agree to act as your buying agent. As your agent, we have a fiduciary duty to treat you with utmost care, integrity, honesty, and loyalty when dealing in a transaction. We are obligated not to reveal confidential information to other parties. We will be diligent in finding the right home for you to purchase. We will negotiate, to our highest ability, the best terms and purchase price. We will provide information for what comparable homes are selling for. And, we will assist in all the paperwork.

<<< Back to The Home Buying Process Step 2: Choose Your Lender >>>

The Home Buying Process

Please use these steps as a guideline for purchasing real estate. Following this process in order will ensure a quick and easy transaction.

1. Choose Your Real Estate Agent
2. Choose Your Lender
3. Find Your Home
4. Submit Your Offer
5. Opening Escrow and Due Diligence
6. Close Your Escrow – Celebrate!

Click here for Step 1: Choose Your Real Estate Agent >>>

What is a Short Sale or Short Pay?

To clarify, when someone mentions short pay or short sale they are talking about the same thing. We have heard both terms used for the process we are about to define from all aspects of the industry including lenders, REALTORs, investors, etc.

A short sale is when an owner needs to sell his/her property, but the property is worth less than what is owed to the lender. This is common in this type of market where the buyer purchased the property when prices were high and now needs to sell (due to job transfer, etc.) when prices are low. The lending company has to agree that it is okay for them to be paid “short” of what is owed.

Why will lenders agree to being paid short? Their other option is to foreclose on the property and assume ownership. Foreclosures take time, lots of money and in this type of market, property values are still somewhat declining. Lenders would rather take a short pay instead of owning the property and possibly losing more money.

For Buyers: This looks appealing doesn’t it? You now know that lenders don’t want to foreclose, why not ask for the cheapest price possible? In actuality, this is a very cumbersome transaction and we do not recommend it for any buyer.

Reason: At this point, the owner of the property does not care for the price of the property, as they are not making a penny. The lender who now has everything at stake has to agree to the price and all terms and conditions. When an offer is submitted for a short pay property, the average time it takes for a lender to respond is about three months (90 days!) And that’s just their response! They could accept the offer, they could decline it or most commonly counter the offer.

Why do they wait so long? In this market, they have a gazillion short pays to respond to and more importantly, they are waiting to receive all the offers they can in that 90 day period. Your offer is not the only one they will receive and they will most likely counter all offers received to attain the highest price.

Once they have accepted your highest and best price (which now, by the way, is probably equal to or higher than what the value of the property is actually worth) you still have to go through an escrow process (another 30 – 45 day period.) During escrow it is common that the bank will NOT do any repairs for the property.

In short, there are no deals here. The price you end up paying is going to be the price that the property is actually worth. The time spent waiting is time allotted for other “real” deals to pass you by.

Having said all that, if you have your heart set on a particular piece of property that is a short sale, we will be more than happy to accommodate your needs.

Median Sales Prices – June ’08

Here are the median sales prices recorded in June for single-family homes, condos and
new construction in the following communities:

$763,500 Agoura Hills
$1,435,000 Calabasas
$452,500 Camarillo
$363,500 Fillmore
$525,000 Moorpark
$655,000 Newbury Park
$475,000 Oak Park
$347,000 Oxnard
$219,000 Santa Paula
$420,000 Simi Valley
$500,000 Thousand Oaks
$420,000 Ventura
$840,000 Westlake Village
$535,000 Woodland Hills

Source: Data Quick

Simi Valley & Moorpark Real Estate Stats – July ’08

Detached Properties

Simi Valley & Moorpark 2007 2008
Total # of Listings 895 603
Average DOM* 79 73
Number of Short Sale/REO Listings 240
% of Short Sale/REO Listings 39.8%
Total Actual Unit Sales 99 120
Number of Short Sale/REO Sales 4 59
% of Short Sale/REO Sales 4.0% 49.2%
Average Months of Inventory 9.0 5.0
Average List Price $669,759 $535,867
Average Sales Price $652,177 $518,112
SP/LP Percentage 97.4% 96.7%
% of Listings Selling 11.1% 19.9%

Attached Properties

Simi Valley & Moorpark 2007 2008
Total # of Listings 221 159
Average DOM* 84 65
Number of Short Sale/REO Listings 68
% of Short Sale/REO Listings 42.8%
Total Actual Unit Sales 19 20
Number of Short Sale/REO Sales 1 12
% of Short Sale/REO Sales 5.3% 60.0%
Average Months of Inventory 11.6 8.0
Average List Price $419,501 $268,035
Average Sales Price $411,952 $258,565
SP/LP Percentage 98.2% 96.5%
% of Listings Selling 8.6% 12.6%

Based on info from the VCRDS MLS for the month of July 2007/2008. Short sale/REO listings unavailable in 2007.
Display of MLS data deemed reliable but not guaranteed accurate by the MLS. * Avg. DOM are based on sales for the
month of July 2007/2008.

Conejo Valley Real Estate Stats – July ’08

Detached Properties

Conejo Valley 2007 2008
Total # of Listings 939 695
Average DOM* 77 86
Number of Short Sale/REO Listings 118
% of Short Sale/REO Listings 17.0%
Total Actual Unit Sales 137 124
Number of Short Sale/REO Sales 4 27
% of Short Sale/REO Sales 2.9% 21.8%
Average Months of Inventory 6.9 5.6
Average List Price $1,055,508 $937,061
Average Sales Price $1,016,912 $894,237
SP/LP Percentage 96.3% 95.4%
% of Listings Selling 14.6% 17.8%

Attached Properties

Conejo Valley 2007 2008
Total # of Listings 313 251
Average DOM* 68 86
Number of Short Sale/REO Listings 82
% of Short Sale/REO Listings 32.7%
Total Actual Unit Sales 42 41
Number of Short Sale/REO Sales 3 8
% of Short Sale/REO Sales 7.1% 19.5%
Average Months of Inventory 7.5 6.1
Average List Price $547,060 $489,697
Average Sales Price $534,732 $466,215
SP/LP Percentage 97.7% 95.2%
% of Listings Selling 13.4% 16.3%

Based on info from the VCRDS MLS for the month of July 2007/2008. Short sale/REO listings unavailable in 2007. Display
of MLS data deemed reliable but not guaranteed accurate by the MLS. * Avg. DOM are based on sales for the month of
July 2007/2008.