As a homebuyer, how can you prepare for the competitive jungle that is our market today? Here’s a real-world example to help you understand the home-buying process: I’m anticipating an appointment with a buyer client who has already had his funds and creditworthiness verified by a trusted lender (the key first step). As a pre-approved buyer, he’s ready to take a serious look at properties—like the one I’m standing in for today’s video. I know he’s going to love this particular house, so together we’re going to write an offer on it.
I brought my laptop so we can compare comps and come up with a strategic offer price. All the while, I’ll be establishing rapport with the seller and their listing agent to better understand why, exactly, they’re selling the house and which terms and conditions (beyond price) matter most to them. As your real estate professional, it’s imperative that I continuously ask the seller key questions so my buyer can craft the most appealing offer that best accommodates their needs. What happens when my buyer’s offer gets accepted?
One of the first things the buyer will have to do is make what’s called an earnest money deposit (often referred to as “good faith” money). This is sort of like a verification of funds that lets the seller know they’re committed to getting a win-win deal done. A strong earnest money deposit is usually around 3% of the purchase price (e.g., $30,000 on a $1 million property). But that’s just one part of the contingencies; next up is the loan contingency, the lead time of which normally takes 21 days in the state of California. (By shortening this contingency period to, say, 17 days, you can make your offer stronger in the eyes of a seller, but just make sure you’re working with a great lender who can actually get the job done in time).
Then come the general home and termite inspections, with the disclosure following close behind. Just like the loan contingency, these inspections have contractually allotted time frames within which they must be completed—the shorter you can make these time frames, the more you’ll put the seller at ease. Remember: Offer price obviously matters, but the seller might place even more value on the prospect of a quick close and fewer unknown variables. They may also respond well to a humanizing gesture on the buyer’s part, like a heartfelt letter.
I recommend my buyers write a letter that casually introduces them to the seller, enumerates the reasons why they love the house, and conveys the joy they see it bringing their family. Appealing to the seller’s emotions may not be the dealmaking factor in every instance, but it certainly never hurts to add some sentimental value to your offer.
The last contingency is critically important: the appraisal. We want to make sure that the lender’s appraiser can get out to the property within the expected time frame because, in this low-inventory market, properties are moving fast and mortgage/title professionals are swamped. Again, you need to be working with a lender who’s on the ball.
As your 30-day escrow period draws to a close and your lender finalizes the loan documents, you’ll have five days before the actual date of closing to inspect the condition of the property; basically, you’re verifying that nothing’s changed in the 30 days since you wrote your offer. If it all checks out, then you’ll be on to the best day of the whole process: closing day!
I hope you enjoyed this rundown of the home-buying process. If you have further questions about this or any other real estate topic, or are in need of vetted vendors, please reach by phone or email. I’m always here to be a resource for you!