The Buyer's Journey: Before The Offer
Homes fall out of escrow more frequently than you would think. Most people think that once an offer has been accepted and a purchase agreement has been signed, they are very close to the finish line; but in fact, the journey’s just started. The next 10 to 45 days can be one long emotional roller coaster ride for buyers, sellers, and their real estate agents!
The Buyer’s Journey is a series of articles that will focus on the residential real estate purchase transaction from the buyer’s perspective. Let’s begin by exploring 3 things all buyers should be prepared for before writing an offer to avoid “buyers’ remorse” and to ensure a smooth escrow period.
Homes in California are sold in “as is” condition
Once escrow has been opened, one of the first buyer tasks is to complete a home and termite inspection. Along with the inspection results, you will also be inundated with disclosures of house conditions, dangers, defects, and hazards. The buyer’s agent can then submit a Request for Repairs, but guess what - the seller is not obligated to make any fixes! While most sellers will be agreeable to make some reasonable repairs, offer a closing credit, or reduce the sales price to compensate for necessary repairs, buyers should not automatically expect this. Before making an offer, acclimate yourself to the notion that very few houses are “perfect” and that even a new construction often comes with a lengthy punch list of things to fix! A good home inspector should be very thorough so that you will have a comprehensive understanding of the property’s condition so don’t freak out if he turns up defects you didn’t even know could exist. During the inspection period, buyers will have an option to back out within the first 17 days of escrow, but before making such a drastic decision, see if your agent can negotiate some concessions and keep in mind that while the repair list may be long, some of the repairs are quick and inexpensive and can often to be handled by the new homeowner.
Be prepared to pay the total cost
The agreed upon sales price is usually not the total cost of the transaction. While sellers carry the burden of paying the agents’ commissions, buyers will most likely share the cost of escrow, pay their own lender and title fees, and cover various miscellaneous costs like county recording and notary fees. Real estate transaction fees are known as closing costs, the additional funds needed to finalize the purchase transaction at the close of escrow. Always ask your real estate agent for an estimated buyer’s closing statement before you make an offer. Some buyers may need to adjust their down payment amount to cover the closing cost. While there is no avoiding the fees, it’s important to be financially aware of your total cost in the home purchase.
Know what your prospective home is worth
Before sellers put their home on the market, their listing agent will prepare a comparative market analysis (CMA) to determine the right home pricing strategy. A CMA contains information on the active, pending, and sold listings. Active listings provide information on the competition in the market, pending listings speak to how many days are expected before an offer is made, and sold listings tell what similar homes sold for recently. Buyers should have the same knowledge of their prospective neighborhood before making an offer - just because the seller accepts an offer below asking doesn’t mean the buyer got a “good deal”; the original listing price could be severely overpriced. Lenders will require an appraisal to be completed prior to finalizing the loan, and may not approve the original loan amount if the home is not appraised for the purchase price. It is extremely important for buyers to have the right pricing strategy before entering into a purchase contract.
Working with the right real estate agent at the start of your journey is essential! Message me before your start yours.