The Home Buying Process

Welcome to our Home Buying Process thread.

This Home Buyers Guide prints very well. Print it duplex (two-sided).

Buyers: Search for properties on the MLS here

The entries to this section of our blog this will expand upon each step in the home buying process as illustrated below. How it works in the real world and how we do things so that our buyers are always in the strongest position possible to get the property they want.

Please contact us at any time to talk about buying and financing property, our mortgage/budget worksheets or for anything else real estate related!

Home Buying: Step 1 - Initial Contact / Commitment to Agent / Financial Qualifications

Technically, your visit to our website and blog could be considered an initial contact! Of course we hope that after you read more about us through our blog that you will contact us personally to set-up a meeting in person!

During our first or initial meeting with people who are thinking about buying, we discuss the entire market from credit scores, interest rates to writing strong offers and how escrow works. We will answer a lot of questions you will already have, and we will answer all the rest for you. You will be able to challenge what we say and come away with the best understanding of the entire market and process possible (Read Scott Pierce's Bio and other information here).

Ye Gong (Guarantee Mortgage) will also ask you some basic questions regarding the financial side of things. After getting the basic information, she will analyze your credit score and credit history to see where it can be improved. Everyone always thinks they have the one situation that is beyond help. And, probably because of her background, she always gets things fixed, resolved and repaired! She will also set you on a plan so that you increase your credit score during your home hunting process so that you are always working to lower the interest rate later.

Ye has produced this phenomenal excel worksheet that everyone from our software engineer to our finance/accounting clients love. You can see it here as either a webpage or as an excel file.

Ye's philosophy is that every dollar you spend should be accounted for in this worksheet. The goal of this worksheet is to show you the price range that you can afford while keeping your life. It runs all your expenses through factoring in tax deductions, taxes, etc. to give you a real and honest look at your finances when owning your first home.

It is amazing how at ease this worksheet and process makes buyers. From first time buyers to millionaires buying multiple properties, everyone says that this is the best tool they ever had to analyze how it actually affects them financially.

Ye will prepare the worksheet for you and then email it and explain it while walking you through it. Once you understand how the formulas and cells work. After that you will have the ability to change various numbers to see how they affect other numbers. How does more down payment affect the interest rate which affects your monthly payment? There are countless number of scenarios that our clients tell us that they run through with the worksheet.

Home Buying: Step 2a - Market Education / View Property

Once you have an initial price range from Ye, we will fine tune what you want to buy and where you want to live. I will select as many places as possible in the market to show you. When you begin your search, we will stay in your price range, while looking at areas and places you like, as well as those that you might not have thought to consider. You will most likely learn about new areas of The City during the home buying process. And I know most of them!

I will set you up on my email Listing Alert so that whenever a new property comes on the market that fits your profile, we will both get an email or text message with pictures and detailed information. With one click you can delete it, request a showing or let me know that you are interested knowing more about the property. Listing Alert is licensed under the San Francisco Association of Realtors (San Francisco MLS has an agreement that covers all of the Bay Area). Only a Realtor / SFAR member can give you access to 100% of the listings in San Francisco and the Bay Area. I was told once, but forget exactly why. I will try to find out and post it here.

The reason that I work at Vanguard Properties is that they represent the sellers of the best properties in so many different market segments. Vanguard Properties is also the real estate company in San Francisco that brings more speciality and boutique condo and loft buildings to the market than anyone else. All of our clients get access to these properties, often times before they are made available to the general public.

As you begin to see places that interest you on the Listing Alert emails, you can call, email or text me, and I will set appointments for us to go see them during the week or you can see them on Sundays.

As we begin to look at properties together, you will learn quickly what I am looking at as a professional vs. what you might be seeing as a buyer. You will learn a lot about what things make some properties worth more, what makes other properties challenged and how to tell a diamond in the rough.

By always having the new listings sent to me on my Blackberry, laptop and desktop, I am always in a position to get you in first to see a property. Many times our clients were first to see the property that they made an offer on and bought. I will make sure to ask some of them to post there comments about that below!

AT THIS POINT..........

...you will know what your monthly mortgage payment will be and how much discretionary income you will have at the end of the month based on various purchase prices, you will constantly be one of, if not the, first person to see new properties that fit your profile and you will be ready to write an offer as soon as you see the home you want. In other words, you will be in the best and strongest position possible....and we have hardly started yet!

Home Buying: Step 2b - Write offer with Agent

Comparative Market Analysis: The Price

A Comparative Market Analysis (CMA) is a report that is produced to help you to come up with the price that you want to offer for the place you want to buy (a CMA is also used for sellers to determine the listing price of their property).

The first steps are to get all the basic information on the property and to compare that against all the other similar properties on the market and in the MLS, and to get the disclosure package.

Then I call the listing agent and find out if there is anything we should know about the property that you would want to know before writing an offer on it. The agent will tell me anything that is wrong as they know that we will find out about anything in the disclosure package, and if not there we will find out about it during the inspection and then we will have problems. And we do not want any surprises or problems.

I read through the disclosure package, review the numbers and come up with a number that I think would be good. Then we consider other factors such as the market in general and for properties like this one and come up with a price that you are going to offer.

On pricing, my general goal is that if you are the highest, that it is just by a little. And if you are not the highest, that you get a counter offer, or that you actually get the place based on the Purchase Contracts Terms & Conditions. This last option has happened a number of times for our clients.

Terms & Conditions

There is an old story about two business people negotiating a deal. Finally the one says to the other, "Fine, you can name your price, but I get to set the terms!" While that is not how we do business in the world of San Francisco Real Estate, there is a lot of truth to the greater point that the 'terms' of the deal can be as important as the price itself.

Click here for a PDF of the Contract for the Sale and Purchase of Real Property

Our goal is to make the terms of the contract as strong as possible from both the financing and the contract contingency sides. We have had numerous clients who did not have the highest offer price get the property they wanted because the way were wrote the contract. And the terms made our clients overall offer stronger than another higher priced offer. How would you like knowing that someone else offered more for your place, but since we wrote a stronger offer, you got the place you wanted?!

One of the first things you will notice is that there are a lot of spaces/blanks where dollar amounts go. At a minimum you should make sure that your mortgage agent will be available when you write the offer to tell you what to put in the financing part on the first page. It would be best to get a commitment from your mortgage broker to be with you and your Realtor when you write the offer the way we do.

This will be the first thing the seller and listing agent look at when reviewing the offers. What price did you offer? How much are you putting down? How much will your first (and second) loan be and what are the rates? These change almost daily. Is there any non-contingent financing, other financing or a cash balance to be paid by borrower before the close of escrow? You can see why having a smart mortgage agent with you can be key.

After the financing part of the contract is completed, we will finish the rest of the contract making sure that we write it as strong as possible while protecting your money and options.

One thing that I do (this is only one small thing.....I am not going to give out trade secrets online, but when we go to write offers, you will find out how detailed and nuanced we will get on each item) is to schedule a tentative Property Inspection when we write the offer and then shorten the time when we will remove the Property Inspection contingency. On page 3 of the Purchase Contract, item 12. C. you have a default of 15 days to do this contingency.

Agents usually wait until after they ratify the contract before they start scheduling inspections and other things. I schedule a tentative property inspection for 2-3 days after we submit the offer. When we present the offer to the Listing Agent and/or Seller, we make sure that we highlight that we have this scheduled. Listing Agents and Sellers love it when you have this stuff lined up and ready to go. It sometimes makes them want to hurry negotiations in order to keep the schedule I think. Which is great for you.

By having the property inspection already scheduled for 2 days after we ratify, you will have more than enough time to satisfy yourself about the condition of the property in 7-10 days vs. the normal 15 days it takes when it takes an agent a week just to get an inspector to the property!

After we write the offer, we will present it to the Listing Agent.

Home Buying: Step 3 - Present Purchase Offer to Seller

As with so many things these days, it is often the little things can make the difference when sellers evaluate multiple offers or when you want to offer less than the price that they want to sell.

One great thing is to have Ye with me when we give the Listing Agent and/or Seller your offer. Depending on how the Listing Agent and Seller review the offer(s), one of the first things that the Listing Agent will do is to call the Mortgage Agent in the pre-approval letter. If this happens in the evening, it can be 6-7pm by the time the Listing Agent calls the Mortgage Agent to confirm that the buyer is pre-approved and to make sure that there are not any issues or anything. When Ye and I present your offer together to the Listing Agent, Ye goes over your pre-approval with them and answers any questions as appropriate.

Compare this to another offer with with a similar price, but where the mortgage agent could not be tracked down to confirm the pre-approval...and you can guess which client gets the property!

Home Buying: Step 4 - Negotiation of Terms (the Counter Offer)

Sometimes, even after submitting a fantastic offer on a property, you can get a counter offer in return! But this is where we add some of the most value in the entire transaction. By working together, we are able to negotiate with the Listing Agent and Seller better than most agents. And because we are together a lot, we tend to strategize about our client's offers and terms to see how we can always put you in the strongest position.

The "Regular" Counter Offer:

The seller may counter for any of a thousand reasons. Many have little or no material impact on your monetarily. Many times the counter offer will deal with contractural items that will not affect you financially. And other times the Seller just wants more money. A recent offer made by our buyers received a counter offer with a long list of items. I almost had a heart attack when I first saw the faxed counter offer. But they were all little contractual things that did not affect anything financially or monetarily. After I explained each item to the buyers, they happily signed the counter offer are looking forward to closing on their new home soon.

(Click here for Counter Offer)

 The Multiple Counter Offer:

This is when the seller receives mutliple offers on their property and they counter two or more of the offers. The Seller can counter in price, terms or both. The counter offer (in all forms) is essentially the "new price" for the property. Buyers can 1) walk away and make no offer, 2) meet the counter offer at the terms stated in the counter, or 3) offer a higher price and/or better terms. Each property, offer and situation is so different that you will probably do one thing in one circumstance and another thing in another situation. We will always give you all the information and data you need to make the best decision possible. To date none of our clients have ever regretted buying their place for the price/terms they bought it for!

(Click here for Multiple Counter Offer)

Home Buying: Step 5 - Accepted Sales Contract

Accepted Sales Contract is more commonly refered to as the "ratified purchase contract" in San Francisco. Real Estate in San Francisco is similar to dialects in language. Similar, but different.

Home Buying: Step 6 - Open Escrow / Deposit Earned Money

Once the Purchase Contract is ratified, I will take the initial deposit check to the title company and "open escrow."

This is a great explanation regarding the functions of the escrow/title company.

Home Buying: Step 7a - Inspections / Disclosures / Financing

Once escrow is opened, we will start to fulfill the obligations of the contract (most notably completing inspections, disclosures and getting the loan finalized).

Inspections:

Click here for the entry on Property Inspections. We will find out if we need to have any other inspections performed during the property inspection. If the inspector notes termite, water, roof or any other type of damage, he may recommend further specialized inspections such as a termite or roof inspection.

This is another benefit of having the property inspection scheduled the way we do it. It gives you more time to complete the inspections before you have to remove contingencies and close escrow.

Disclosures:

Going through the disclosures is the funnest part of the entire process ;-) The good news is that I will review them first, make notes and get clarification on any points that are not clear or acceptable and then I will go over them with you.

It is best to go over the disclosures before we write the offer, but often times this is not possible. As long as you go over them before the property inspection though, you are fine. I will also send any pertinent information (like any previous inspections on the property) to the property inspector, along with any concerns that we may have so that when he gets to the property he knows which areas in which to pay particular attention.

The documents that you need to pay particularly close attention to are the Transfer Disclosure Statement (TDS), the Sellers Supplement to the TDS, the Preliminary Title among others.

The TDS and the Sellers Supplement are where the Seller has the most opportunity and obligation to make disclosures regarding the property for sale. If there are any problems or issues with the property, it is on these forms that we will probably find out about it. If during the inspection, or at some other point during escrow, we find out about something that is not on the TDS or Sellers Supplement, then we will have to deal with it then.

Example:

During the property inspection we find out that two doors are not hung properly, and then scrape across the hardwood floors leaving scratches. But the seller never mentioned it in the TDS or Sellers Supplement. Obviously normal use of the doors should not result in damaged floors!

I called a leading door repair firm in San Francisco and met him at the property to have him prepare a quote for us to fix the doors. He prepared the quote and I subitted an addendum to the seller along with the quote for fixing the door and we got the seller to credit the buyer the entire cost.

Loan / Financing:

During this time you will also be in constant contact with Ye regarding the various loan programs available at that time, and preparing the loan package for submittal to the lender you finally select. This is where Ye is so strong. Her background puts her in a similar position to many of the lender representatives. Most of them have banking, accounting or financial backgrounds which is the same as Ye Gong's. Her ability to talk "their language" or "talk shop" with them puts her in a position to get information first, help the most and to cut through the "advertised specials" that lenders push on mortgage agents, and to get to the program that is going to give you the lowest rate and best terms.

With so many mortgage programs in the market, and each one being essentially a specialized financial instrument, it is easy to see why you need an agent with strong finance and accounting background to essentially analyze the entire market and tell you which program is best and why.

Recently, Ye had a client that during the house hunting process got a job at Wells Fargo in San Francisco. When it came time to get the loan, her client said that Wells Fargo was offering her the "in-house"/employee rate. Ye asked her what it was. When the client got back to Ye and told her what the rate was that Wells Fargo was offering her, Ye was surprised to hear that her initial offer to the client was even lower than Wells Fargo's in-house rate to their own employees!

Home Buying: Step 7b - Inspections (cont.)

After the joy and panic of having your offer accepted (ratified) is typically the property inspection. Most Purchase Contracts will have a Property Inspection contingency of between 3-15 days.

In order to make our client's offer as strong as possible, we always schedule a tentative property inspection for 2 days after we submit a client's offer. I let the Listing Agent know that we have it scheduled and that we are ready to move fast! When Sellers evaluate similar offers, or when a Seller thinks about a counter-offer, our having the Property Inspection already scheduled lets them know that we are serious. We have had clients/buyers get the property they wanted when they were not the highest offer numerous times this way!! 

The inspection is an independent, unbiased evaluation of the property, including the following components and systems:

- Foundation	- Plumbing	- Electrical	- Windows
- Garage	- Attic	- Roof	- Doors
- Fireplace	- Walls	- Site Drainage	- Venting
- Heating	- Decks	- Ceilings	- Exterior

Depending on the size and condition of the property, the inspection usually takes one and a half to three hours.

For our buyers, I recommend using David Milazzo at Milazzo Inspection Services. Of course a buyer is free to use anyone they choose. For a more complete directory of Property Inspectors click here (and scroll to Contractors for Inspection). I use him mainly because he is very thorough, will answer all questions during the inspection, he provides a detailed written report (usually the same day) so that you do not have to take notes and he is insured. If the Property Inspector is not insured, what good are they?

David is also available for free follow-up telephone consultation. The written narrative report includes clear descriptions of what was found and identifies any material defects in the systems, structures, and components of the property. The report, which complies with California Real Estate Inspection Association (CREIA) and American Society of Home Inspectors (ASHI) Standards of Practice, is thorough, comprehensive, and easy-to-understand. It is delivered via email within 24 hours of the physical inspection, followed by a hard copy sent in the mail.

Click here for a sample report from David Milazzo for a Condominium and for a House.

What makes the property inspection useful to a homebuyer?

Are you buying a home or condominium, or investing in a multi-unit building? As you’re considering what may be one of the largest financial commitments you’ll ever make, you need to know the condition of the property and what to expect in terms of present and future maintenance and repairs. The inspection will cover these issues. If you have remodeling ideas in mind, you want to know whether they’re feasible. Feel free to ask questions during the inspection and afterwards.

The narrative report describes in detail the items already observed and discussed and other factors important for you to know. Your report – not a checklist, but a full, comprehensive narrative – is delivered via email within 24 hours. A hard copy follows in the mail.

Seller’s Disclosure Obligations

California law states that it is the seller’s duty to disclose facts concerning the property for sale through a Transfer Disclosure Statement (TDS). Basically, this means a seller of one to four residential units has a legal obligation to disclose to prospective any material defects known to him (or her). While the pre-listing inspection report is not a substitute for the TDS, it does allow the seller to provide prospective buyers with additional information, based on an unbiased, third party, professional inspection.

Home Buying: Step 8a - Title Search / Preliminary Title Report

The Title Search and Preliminary Title Report are critical items that are done mostly behind the scenes. You can read more about this here.

The point of it is, "Are the sellers legally able to sell the property and are you legally able to purchase it?" Or is there some old claim on the property from some relative who lived in the house 45 years ago that you would never know about? Is there a lein on the property from a contractor who was never paid for putting in that gorgeous new bathroom?

Title Insurance protects against this, and the Title Search and the Preliminary Title Report is what the insurance policy will be based on. It will protect you and your property, and the bank insists that you have it when you borrow money anyway.

Home Buying: Step 8b - Additional Negotiations (if necessary)

When the inspections have been completed, we will review them and determine if the property is in the condition that was represented and that you expected. If there are any problems, we will work to satisfy them.

This is one of the areas where having a good agent really pays off. Negotiations can go in 100 different directions at any time. You need an agent that knows how to negotiate with the other agent and that is not afraid to negotiate for you and get the deal done right.

I have a number of great stories about negotiating for my clients that I will share with you in person just enough of so as to protect the innocent!

Our clients agree that at the end of the day, they know and appreciate that we worked to get them the best deal out there. That is why most of our business is from referrals.

Home Buying: Step 8c - Inspections & Conditions Removal / Increase Deposit

After the property inspections and any other inspections (fireplace, roof, etc) are completed and you are satisfied with the condition or are satisfied with any negotiated settelments addressing the condition, we will remove our various contingencies.

Ye or your Mortgage Agent will confirm that you are good to remove your financing contingency as well.

If there is an Increased Deposit requirement in the Purchase Contract, this will be made as well.

Home Buying: Step 9 - Closing Procedure

A few days before you are going to close escrow on your new property and become the legal owner, you have to go and sign all the title and loan documents at the Title Company where escrow was opened (see Step 6).

Again, it is good to have both your mortgage agent and Realtor here with you (as we always are) as there could very easiley be questions or even mistakes in the documents. At the least you will feel better knowing that we are there even if there are no problems, which ususally there is not.

Signing the docments at escrow can take anywhere from 30 minutes to an hour or longer. Everyone is different when signing.

Home Buying: Step 10 - Loan Funds / Get Keys

After you and the seller sign the documents at title they are delivered to and approved by the lending institution, and then sent back to the city for recording. This usually takes a few days and is anxiously tracked by everyone.

At times this part of the process can tend to be Kafkaesque, which is again why having Ye can be so critical. Essentially the documents go to one large fortune 500 company and then to the government. Never a recipe for quick action!

There has been a number of times where a buyer will need to close on a particular day, but the documents are sitting on a desk in New York and if they did not get approved, signed and mailed by 5pm, the closing would be delayed. Being a top producer and having such a strong relationship with all her lenders, she is able to track down people and get what needs to be done, done.

When the documents get to the city and are recorded, you are then the new owner! On the day that we expect to "go on record" I will get the keys and any other items (garage door opener, other keys, etc) and arrange to meet you in order to give them to you.

Congratulations. You are now the new owner. But our service does not stop here. For anything that you need relating to your new place, you can always call us for referrals. Insurance, contractors, cleaners, etc. Advice on improvements or for a phone number for bulky item pick-ups. You are our client for life, and we will always be here for you.