Local Information for San Diego, Orange, and Riverside County – Axiom Real Estate Appraisal Blog, Blogging

Paul's Appraisal Blog

Buying your first house?

September 8th, 2008 4:34 PM

Someone contacted me stating that he was a first-time home buyer and asked what the process was. Here is my response. Not that I'm an expert, but I have purchased a few properties, so I am familiar with the process. I thought it would make a good blog post for those of you considering buying a home for the first time.

The first thing I recommend you do is get pre-approved with a lender to find out how much house you can buy. (They don't have to be local- you can get your loan from New York if you want, if they have the best deal. The thing is, most lenders have about the same rate, so one that is somewhat local makes it a bit easier at signing time.) Many people will not even look at an offer if you do not have a letter stating you are approved for a loan of a certain amount. Make sure it is a letter of pre-approval and not pre-qualification. You can always change lenders later if you decide to, the letter just states that you are good for the loan. If one pre-approves you on the low side, try another. That happened to me when I bought my first house- the first broker approved me at $170,000. Then I went to another that approved me for $210,000. Big difference!! (That was a long time ago......)

Next, you need to find a house. This is a great time to buy. I don't know if you read my last blog post, but I think we are really near the bottom of the market. Anyway, most people get a real estate agent to help them look for houses. You can do the auction thing, but I would be careful. I've done a couple of appraisals for purchases that were bought in auction, and it didn't seem like the people got that great of a deal- they just barely appraised for what they bought them for. Anyway, look at houses, have an agent look at houses, and wait until you find one you really like.

After you've found your house, you make an offer, which entails putting down some earnest money, from $1,000 to $5,000 or more, depending on the property. This is a buyer's market, so you can generally ask for anything you want. Have them pay for closing costs, throw in some appliances, give you an allowance for an upgrade- there is a lot of flexibility here. They may or may not go for it, but it won't hurt to ask. There are so many houses on the market right now, that if for some reason you don't get the first one, there will be lots more to choose from. If you have a good real estate agent, they will be honest and help you make a good offer on the house. It's kind of weird, though, that the buyer's agent gets a cut of the selling agent's commission, so the buyer's agent doesn't have a lot of incentive to try to get a lower price. Finding a good agent is the trick. I think with this downturn, most of the shady characters have gone out of business, which leaves mostly the reputable ones. This is true for lenders too.

Once the seller has accepted the offer, then you're off to the races! You generally have a 30-45 day window to close escrow, which means to close the deal. If you have a good agent, they will walk you through the process, as well as the loan officer. This is when the appraisal is ordered, the house is inspected, and any last minute details are worked out. I recommend that when you make an offer,that it be contingent upon satisfactory home inspection and appraisal. You want to be able to get out of it if it turns out to have some major defects. (You don't want to lose your earnest money!!)

I would absolutely get a certified home inspector to go through it and note any deficiencies. Around here in southern California there generally isn't a whole lot that can be that bad, but you never know!! It would be a shame to move into your new house to find out you have major foundation problems or other structural issues. If it is a Bank-Owned property, then generally there are no disclosures and you need to make sure nothing is wrong with the property. The owner has never lived in it! (i.e. the bank!!)

If all goes well, then you will get the keys to your new house at the close of escrow. Along with the keys, you will enjoy some nice tax breaks and piece of mind knowing your "rent" isn't going up in the next 30 years.

Anyway, this is basically it. If you're scared, don't be. I think you are buying at the perfect time of the market. (In my humble opinion) I've bought 6 houses, and the process is pretty simple. (If I had any money, I'd buy more.) It may be overwhelming at first- you have to sign and notarize a lot of paper, but it's well worth it.

Anyway, if you have any other questions, let me know. I think I covered all of the major stuff. Thanks!! Paul (Thanks for visiting my site!!)

Posted by Paul McEwen on September 8th, 2008 4:34 PMPost a Comment (0)

Subscribe to this blog