10 Things YOU NEED TO KNOW Before Buying Your First House - Part 3

Are you hoping to buy a home soon, or in the future? Have you tried buying a home recently with no luck? You've come to the right place. Join me for part 3 of my series "How To Buy A Home". Today's real estate market is crazy, to say the least...It can be overwhelming and discouraging, especially for the first time home buyer. I'm here to you. This video series will take more of the guesswork out of the home buying process and give you the confidence you need to successfully buy a home. In this episode, I begin a series about the 10 Steps To Buying A Home In Orange County. This third and final part will cover steps 7 (Home Inspection and Appraisal) , 8 (Homeowner's Insurance), 9 (Do A Final Walkthrough) and 10 (Close On Your New Home). Even though I'm located in the Orange County real estate market, you can and should follow these steps everywhere. The steps to buying a home are no different, from city to city. Part 2 of this series will be release next week, so check back for more.

Ron Evans
Broker Associate
Amy Sims Real Estate Team
realestate101@ronevansrealty.com
949.929.2270
www.ronevansrealty.com


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[00:00:00] : Mhm Hi and welcome, this is Ron Evans and you've reached my podcast, real estate 101 by Ron Evans and uh also available on YouTube, same name. You can search either one on any platform that you get your content from and you will find me And today I am coming to you with the 3rd in a series and final in a series of how to buy a home. It's 10 steps to how to buy a home. I covered steps 12 and three on the first episode, Steps 45 and six on the last episode and this week I will cover the final four, steps 789 and 10 today. So just as a repeat Step one was checking your credit score, Step two is determining how much you can afford. Step three, choose a lender and get preapproved for a mortgage. Step four, find a real estate Agent. Step five, start the home search process and step six was make an offer today we are going to cover get a home inspection at home appraisal, purchase homeowners insurance, do a final walk through and close your new home. Alright, let's dive right in. Let me get to my notes here for step seven, get a home inspection and home appraisal. So a lot of times people think everything is a slam dunk once their offer is accepted and they've opened escrow successfully. But honestly, I think I even mentioned it in the previous episode when we covered step six, getting to that point is basically where the fun really starts, you have all of your different contingency periods. If you have them in your contract to go through and this is your time as the buyer to do your due diligence to make sure this home is going to suit your needs for the long term and you know completely eyes wide open as best as possible what you're getting into. So from this point there are a few critical steps that remain. You're going to need to arrange for a home inspection and appraisal. Now, home inspections completely on you. Hopefully the real estate agent that you have hired to help you has a list of vendors to call upon for home inspections that they trust that are good if you don't already have people in mind yourself. Um It's very important in this industry that as we work with people as agents um we keep we keep around the people that we trust and that we value um so that our all of our clients are treated the same and get a really good um experience. Now the appraisal on the other hand, while you as the buyer technically pay for the appraisal through your closing costs and stuff to the bank, the bank actually hires the appraiser orders the appraisal and conducts that on their own. So you don't actually need to schedule that per se. Um but there are things and maybe we'll get into it. Maybe we want on this particular episode, but there are and there are things that the agent should hopefully do or be prepared to do and to help out with the appraisal. Anyway, let's dial into the home inspection because that's going to be the meat and potatoes of this section of what's uh you as the buyer um should be doing um without fail. So at home inspection is important. Um, what does the home inspection do? Well, it helps identify areas where there might be major repairs or renovations that require immediate attention as well as any work that needs to be done or completed in the future. So if there's some just some deferred maintenance that needs to be taken care of before something breaks home inspection should hopefully reveal that You should be hiring a professional 3rd party home inspector. Um I know a lot of times. We have people within the family that we trust. Maybe uncle bob is a contractor. Maybe he is, maybe he isn't qualified to do an actual home inspection. Um I always recommend hiring a completely independent 3rd Party company. I keep several in my own roller dex that are available that I trust that I've used multiple times because you need someone that is going to be neutral. They are fact finding they are not trying to fact find things to convince you to continue purchasing the home and there, they should not be fact finding things to scare you from purchasing the home that you're in escrow on, they should simply be stating everything out was pretty much no emotion. Um At the end of the day if everything does look good on inspection you should feel more warm and fuzzy about it but you should never feel, even if it was the worst inspection ever. Hopefully the home inspector you have isn't scaring you to death, they are just putting everything out there. Um Because typically what happens is anything that the general home inspection calls out. You may now go back and hire an independent inspector that's more specific to an area like a roof, like an air conditioning, like a cool if they call out things that they just see um at their skill level you do deeper dive inspections. So you you never want a home Inspector general home Inspector that's going to make you feel over alarmed and you're not, you should never have a home inspector that comes back making you feel super syrupy. You can feel warm and cozy when you're done. If everything's gone more or less according to plan. Um But you should just be taking everything at face value with what they're presenting and hopefully that's how they're doing it. So if you've included a home inspection contingency in your contract which here in California it's boilerplate, you actually have to write it out of a contract. You'll have the opportunity to have your inspection and then maybe maybe you may or may not have the ability to ask for repairs to be made prior to your contract closing. What else can I tell you about the home inspection. Um While you're in the contingency period, if the home inspection reveals things that you're not comfortable with, as long as your contingency is still in place, you haven't released a contingency. That is your chances the buyer to withdraw your offer, cancel escrow and more often than not you get your deposit back as long as you've done everything aboveboard. Now there's other things that fallen into the home inspection, contingency and home inspection um timeframe that you as the buyer should be reviewing hopefully with your agent and that is going to be the seller's disclosures. Okay. I personally like to get the seller disclosures first and then have the home inspection at the same time we get them or maybe like the day after. So I've had a chance to kind of review the home inspection. The seller disclosures first. I want to see everything that the seller is disclosing about the home that they personally know repairs that have been made um remodeling that's been done known damage that hasn't been taken care of because I want to see what the inspection uncovers and see if it follows along with what the homeowner is disclosing sometimes. And I can't say that the homeowner has the intent of hiding things. Sometimes they do, sometimes they don't, but it's not always the case, but sometimes you look at a disclosure and they don't talk about oh well there was a repair made here or we had this over here last year or whatever. They they either purposely or accidentally omit things and then the home inspector comes through and it's like okay well there was this here there's evidence of this here. There's evidence of this here and now you as the agent with your buyer can compare and and then you kind of have an idea of okay we need to go back and question these things and aren't on the disclosure were they aware of that? Did they omit it purposely or accidentally Kind of just gives you more mindset is to as to how you're what you're dealing with in your transaction. So that's why I kind of like to have them done at the same time. Um So I can review them together and know what I'm getting into. Or I might even have the seller's disclosure there while the home inspection is going on. And if if they've noted things in the seller's disclosure of remodeling and things that have been done? I will call that out to the inspector to say hey do you see evidence of this? Um Can you tell what the quality was? We already know there was some stuff done here. Okay Or they're telling me um that maybe they got a quote to do some repairs on things that haven't been done yet? What do you see? Mr Inspector do you see the same types of damage? Do you see the same breaks things, things, things that need to be fixed or is it more or is it more than what they're letting us know or less than what they're letting us know? Just a way to be informed. Okay. That's the home inspection. Um It is the easiest way if you needed to cancel in my opinion, a transaction, the way to cancel a transaction not that you should ever have the intent of going into it an escrow or buying a home with the intent of hey we might need to cancel. Um It's canceling should always be a last resort. I just know that from my own experience using the inspection, contingency time frame and all the things that all into. It gives you the most opportunity um to cancel home appraisal. Now like I said, the process for home appraisal buyer pays for it, but you do not hire the appraiser, the bank orders and hires the appraisal. It typically comes from a group of appraisers in a pool so that there's no um for lack of a better term coercion um happening to where a bank says, okay, hey I really need this appraisal to happen. I have a feeling that used to go on years ago, No longer is that way the uh the, the bank and the lender typically don't know who the actual appraiser is until after it's been ordered and someone on the other end on the appraisal side has accepted the order. So it's not like they can just ask for, hey, I want mike to go to this appraisal because he's always pretty loose with them. Right? He, he always makes sure that even if it's an overpriced home it appraises and we can get this loan done, it doesn't work that way. So what happens then is it's incumbent on the agent, usually the listing agent, but sometimes as me represent the buyer, I've also gotten involved if it's been a transaction where we are having to outbid people um to get our offer approved and maybe this is the first home in the neighborhood that is going to sell for well over what the comps say. Um I helped the listing agent. We pull comps, uh, and we do math and we put things on charts and and really, really show what upgrades have been done or what upgrades haven't been done compared to other things to help the appraiser really have a full picture when he comes, she comes. Um with why we are in escrow at the price that we're in escrow. Another thing that helps too is if you're in a multiple offer situation, have the listing agent show the appraiser. Hey look, we had seven offers and all of them were within X. Amount of dollars of where we are in escrow. So obviously the market is telling us that's what this home is worth even if the comps, immediate comps don't necessarily support that because nothing has sold in the neighborhood for a while. So appraisals can be tricky. Um Now what happens if your home doesn't appraise? It happens, It happens even in this market where things are going crazy, It happens in all markets where sometimes things just don't appraise. Well, if you have your appraisal contingency still in place, you haven't weighed it. The buyer can have an opportunity to back out of out of the deal if they can't come to an agreement with the seller. Typically, what will happen is Before anything like that happens where escrow gets canceled. If something doesn't appraise, let's just say you're in escrow for $800,000 and the home appraises for $760,000. Maybe it was listed for 7:50 and you're in escrow now at 50,000 over list. But it appraises for 760. Let's just run that scenario. So you've got a $40,000 delta. Now, either The buyer can try to negotiate a new sales price for the home and get it down to 762 where they don't have to come out of pocket more. The seller can hold firm and say no Mr buyer, it's we're in escrow at 800,000. I'm going to need you to kick in 40 grand. Um, you can split the difference if the buyer has the capability for that. Sometimes it's a moot point in these scenarios because the buyer is already Tapped out, they don't have an extra whatever $1,000 to bridge an appraisal gap. Um, so it depends on the market that you're in on. If you would have to do that or not or be asked to do that or not. In today's market, you probably would be asked to bridge an appraisal gap if you can, or the buyer or the seller will just move on to the next best offer. Um, That happens. But I've had it happen in the recent past and in the distant past where my buyers have come out of pocket, decent amounts of money to bridge appraisal gaps. I've also had sellers credit back and renegotiate the list or the selling price of their home to accommodate because they just really wanted that buyer tip to have their home. I've also had both sides concede and meet in the middle. I've experienced all of that and I've had things that haven't appraised and the virus just walked away because they couldn't we come, couldn't come to an agreement. The buyer had no more money to put down all these things can happen. You just need to be prepared for all of that regardless of what the market is. If it's a seller's market or a buyer's market. These things just sometimes happen. Um, the type of market will dictate who has more leverage in negotiating for that right now, the sellers have all the leverage. So typically they're not going to adjust their price down, even meet in the middle because they have plenty of other offers that they can call upon. So that's that by your pace for appraisal, bank orders the appraisal, nobody knows who the appraiser is until it's ordered and accepted by an appraiser. And then typically the appraiser context the listing agent. If you've got a good core, uh, uh, communication with your lender and the listing agent as the, and you're representing the buyer, you can be asked to be brought in on the appraisal if you think it's going to be an issue and you feel like you need to help otherwise as the buying agent, you, you stay out of it. Okay. That's inspection and appraisal. So that's step seven, step eight. You are going to need homeowners insurance, especially if you have a loan on property they're going to require. So it's not only in your best interest, but it's gonna be required. Um, it works as a safety net that protects your home and your finances. Um, it's not legally mandated. Okay. But like I said, the lenders are going to require you to have an insurance policy on the home before giving you a loan. They're going to ask for when you go to close escrow and sign your loan, docs, you're gonna have to show your declarations page that you have insurance in place. Now. Homeowners insurance. What it does is it covers damage to your home and surrounding structures as well as stolen or damaged personal property. There are different types and levels of coverage ranging from basic to comprehensive. So what does that mean? Basic coverage might just be like liability coverage to where someone gets hurt on your property or you have some accidental damage that happens. And then more comprehensive would cover if you accidentally did damage to your property or someone else did damage to your property purposely um as well as theft and loss and things like that. Nature fire here in California earthquake. Um Now I can tell you and I don't know how this is in other parts of the country because I don't always know where we, there are a lot of wild fires here in California and I know in the pacific northwest we've been hit in the last several years, it seems with wildfire after wildfire after wildfire and Arizona where I'm from. And when these things happen, um, homes and neighborhoods get re rated by insurance companies and they might be in what's called the fire zone or a fire hazard zone and some insurance carriers will not issue fire coverage and that's always a sticking point with a lender. If you have to have homeowner's coverage, they're going to require you to have a fire policy because that's the the most common way that there could be a loss on the home is with the fire. So it pays again to have an agent that you're working with that understands this, that understands the neighborhood where you were buying and some of the challenges that you might encounter in the neighborhood I live in. We are a fire hazard. We back to a wilderness area, like a regional park. And while we have had Several wildfires in the 15, 18 years I've lived in the area, they've never gotten close enough to where any of our homes were immediately threaten. They've always been at least like a mile or so away. Nevertheless, that entire area, that entire zip code and the surrounding zip code is considered high risk fire area and it is difficult to get homeowners insurance to get a fire fire fire policy. However, there's at least one agent in our neighborhood. One insurance agent Who's lived there for 30 years. He understands how to get fire policies accepted and has access to do so. So he is like the go to person, if you were dealing with, if you were coming to buy a home in our neighborhood and you're working with an agent who's from out of the area, they may not know this guy, chances are, they're not going to know this guy to be able to get it. Um, if you as a seller. Our hey, I'm just going to deal with. So, and so is my agent let them list my home and they're not from the neighborhood a buyer comes in, can't get insurance on your home and has to back out what your listing agent, if they don't know the neighborhood and don't know this particular insurance agent may not be able to help keep your deal together. It's just one that's a very small reason that turns into a big reason of of why it's really important to know who you're hiring and expertise they have in your neighborhood. So that's homeowners insurance and what it covers. That's step number eight. Okay. So we've covered step number seven, home inspection and appraisal. We've covered step # eight which is purchasing homeowner's insurance. Next is Honestly one that could be one of the most nerve wracking points. Um It should be the most excited times and it starts out usually to be in a very exciting time, but it can't end up being nerve wracking. That's step # nine is doing a final walk through um, here in California within three days of the close of escrow, you, as the buyer are instructed to do a final walkthrough of the property. You can wave it. I've never had a buyer wave it. I've always instructed them make sure you're doing it and what's the final walkthrough four. Okay. Um, It's one last walk through the property to make to see a if something still needs to be fixed, whether it was agreed upon ahead of time or not or if there are things that were agreed upon if they were fixed and fixed to the satisfaction that was agreed upon before you close. Um, and lastly purchase contract here in California states that the property is to be delivered and no less, basically the same condition as when you, as the buyer first saw it. So when you saw that home, if you saw that home and it was like *** and span and clean and didn't have any clutter, there was no trash, windows were clean, nothing was left on the ground. And that's how you saw it when you first saw it. That is the reasonable expectation you should have when you were taking ownership of it when you were taking possession. So if you go in on your final walkthrough and it looks like they've already moved out and they left trash behind everything else, you need to bring that up because that needs to be, that's something that should and could be remedied um, before you take possession. Now, I do need to state that a final walkthrough is in no way shape or form supposed to be used as leverage to not close on time. Um, so that's safe for instance that you had seven items on a repair list from your inspections that the seller agreed to do before close and you come on your final walkthrough and you noticed that two things aren't done, Five of them are done, but there's two things that aren't done. Okay, well you can't use that as leverage as the buyer and threatened to say, hey, I'm not gonna go sign my final loan docs and close this and take possession until those things are done. That can't be done. Does it happen? Absolutely, buyers will use that as try to use that as leverage all the time. But technically contractually, you can't at least here in California. Um, it just needs to be negotiated, need to come to an understanding. Maybe the two items couldn't be done by the time of clothes and the seller just hasn't told you, hey, it hasn't been done. You know that windows on order or there's a screen on order or something like that. It'll all be done after. Well then it gets put in writing and you sign off on it on your final walkthrough form that okay. I understand is the buyer, these things aren't done, but they will be done with an X amount of days after. Okay. Or it could also end up being a last moment thing where the sellers just like, oh my God, I had to get all my stuff out and I couldn't get that screen ordered. Um, I have the contact order at MR buyer, but I couldn't get it ordered or um, I couldn't get whatever damage fixed in time or maybe it's damaged happened when they were moving out and they didn't realize that that the movers caused damage. Right? Well, it's a last minute time. You just call it the seller and the seller's agent, let them know and maybe they'll offer like an additional credit like when you're closing. Hey, you know what, well we'll still pay for it and we're sorry we couldn't get done that. That happens quite often very rarely as a seller just will, will a seller agree to do things like repairs and things of that nature up front and they don't get all done and it was done in a malicious intent. So that's another reason why you should never be looking to use those things to try to get out of a deal or to threaten to not close the deal. Um, These things happen. Um, Now if the home is not clean, that's a whole another story. Um, you know, I have had that happen before where sellers just in so much of a hurry, maybe they're moving out of town out of state, whatever. Maybe it was a short sale, it's an embarrassing divorce, Whatever you don't know what their circumstances are and they bolt in a quick amount of time or they're running late trying to get out and hand over the property and either they don't take the time to clean or they just don't have the time to clean or have the home clean. That happens, that happens quite often, um happens way more than you than walking in and noticing repairs are completed. I as an agent for my buyers. Typically when we go to the final walkthrough regardless of the condition of the home, even if it looks *** and span. I always as soon as we close escrow, have my cleaners scheduled to go in there and spend a few hours cleaning at home. Now if I if we go in on the final walkthrough and it's the day or two before and I notice there's junk everywhere, well I take it upon myself, I never count on the selling agent or the sellers to make things right. I go I go into things eyes wide open just like my buyers with the understanding that this is a business. This is just something I I know I may have to take care of now do I try to get them to take care of it? Absolutely. But I never count on. So I am always prepared to be like, hey I gotta call my junk hauler in here. It's gonna cost me X amount. I gotta bring my cleaners in here which I'm gonna do anyway. But I just may have to do more. May have to have the windows power washer may have to have the pool cleaned or whatever that the cost of doing business folks. So hopefully you have an agent that also sees those things and understands that so that's your final walkthrough. It's your last chance as the buyer to make sure the home is in the condition it's supposed to be in when you take possession at close of escrow, that's it. Things can be negotiated after that. But you can't use it or you're not supposed to use it as a means to cancel or threatened to cancel as the buyer. Alright, final walkthrough. That was step nine Recap. Step seven, get a home inspection and a home appraisal. Step eight purchase homeowners insurance. We covered that. Step nine we just covered do a final walk through. We're up to step 10. Closing on your new home and how the processes of that. So congratulations. You've made it to the final step. When the time comes, make sure you review your closing disclosure. The closing disclosure comes from your escrow company and it comes from your lender. It's got all of the credits and the debits of exactly what you're paying for and where your money is going and where the money's coming from. Either by loan or buy your down payment or whatever it balances out to zero at the bottom. So it outlines your final terms. Final closing costs, any outstanding charges or fees included on your loan. Um Your lender will send the disclosure to you at least three days. This is required by law before closing. Now, what happens during closing property title will pass from the cellar to you and whatever method you've chosen to vest the property on title. A closing agent, which in our case here in California typically is either an escrow company that's been hired or the title company. If you're doing your escrow through a title company here in southern California, 90 something percent of time. We use a third party escrow company who was neutral in other parts of California. It's still pretty typical to use the title company. Either there's no wrong answer there. So they act as the closing agent, they're going to make sure all necessary parties um have done everything they're supposed to do, sign what they need to sign and turn in what they needed to sign. They act as a mediator between you and the seller, you, the buyer and the seller. They confirm all required documents are signed and turned in once all the documents have been signed. The agent ensures that all the funds that are supposed to be in the escrow account. Are there including closing B's and escrow payments. And then they properly disperse the money during closing you, the buyer have to responsibilities. Okay. Number one signing all legal documents. This includes the closing disclosure, the promissory note. So that's your lending paperwork, the deed of trust. This is your deed, how you're holding title and your certificate of occupancy. The lender. If you're if you have a loan is going to want to know if you are buying the home to occupy or buying the home as a investment property. So if you're gonna be occupying it, you've already stated that you're signing your certificate of occupancy. The second thing you have to do is pay your closing costs. This is all pretty automatic but it's detailed out on the closing disclosure. This includes fees from your mortgage application, your appraisal. If that wasn't already collected ahead of time. Some during the appraisal process some lenders collect that fee upfront. Some don't if there was any survey done, title search, title insurance um and your down payment the remaining beyond your deposit. If your deposit doesn't cover your full down payment, the remainder of that gets covered by you in your closing costs. That's it. Once everything is done. Ah The money gets dispersed, title gets and the deed gets sent over to the county. It may take a few minutes. It may take a few hours but eventually the escrow or your closing agent here's back that the deed has been recorded. So it's one thing to have everything signed and funded. The last thing is that the d they get notification. The deed has been recorded. That's the final thing. Once the deed recorded, you own the home congratulations you are a homeowner and depending on how your contract is set up, that's when the taking possession starts. Okay. Some contracts start immediately upon the recordation. Some maybe you've given the seller a few days or a few hours or what have you to vacate property that they were going to need to do that. That's all in the contract. But just know that once the deed recorded you are the legal home owner of the property all responsibility shifts from the cellar to you. The buyer you are, you are now the owner. So all the things of uh Mhm utilities, uh the insurance, the taxes, everything. The moment it records all that stuff starts counting towards you. That's it. So the bottom line why I did this whole thing, These three episodes, these streets put these 10 steps together is no matter if you're a first time Homebuyer, long time home buyer Maybe bought your first home 30 years ago. Now you're downsizing. It's just been a while. It can be intimidating and you need to know the home process before you buy. Bye arming yourself with the necessary knowledge and resources. It doesn't have to be as intimidating by following all the steps I've outlined in these three episodes and working with a great real estate agent that you trust. You can focus on what really matters and that's enjoy your new home get with the right people understand this process and the others work for you. Offload the burden and have fun as always if you have any comments or questions, you can leave them in the comment section on youtube or whatever podcasting platform you were listening. You can also always email me directly at real estate one oh one at Ron Evans realty dot com. You can also text me Area code 9499-9-270. It has been a pleasure putting this together for you. Um, save it. Save all three episodes. Maybe you're not ready to buy today. It's going to be six months a year from now. Two years from now, five years from now, the process is not going to change. The process has been this way forever. It's going to remain this way for quite a long time and you'll be golden. Thank you again. See you soon. Hey!