In today’s episode, I will be going over part 2️⃣ of the 3️⃣-part series on how to buy a home in Southern California??. Last week we talked about creating a budget?, so especially if you are a first-time home buyer, if you haven’t seen that yet, I recommend going back to the last episode to check it out before moving onto this one. Today we will be going over⬇️:
✅ The process of setting up a search and the difference in using Redfin, Zillow, etc. vs. getting set up with direct access to the Multiple Listing Service (MLS)
✅ Figuring out your must haves
✅ How the searching process has changed because of COVID-19
✅ How to place a competitive offer in a seller’s market and how your agent and lender can make or break your offers chance of getting accepted
✅ Negotiating with the seller to actually get your offer accepted
This will hopefully give you a basic outline of what to expect when looking for and then placing offers on homes in today’s competitive market. Come back next Thursday to see the conclusion to the series where we go over the entire escrow process from when you open escrow, all the way through getting the keys to your new home handed to you when escrow closes.
Part 2 -
How to Buy a Home in
Searching and Placing
Hey everybody, its Josh Alexander from Orange County Real Estate News, I just wanted to pop on really quick let you know that today, we're going to be covering part-2 of the three part series of how to purchase a home in California.
So last week, we talked about the budgeting part. So if you haven't seen that yet, especially if you're a first time homebuyer, I suggest you go back and check that out before watching or listening to this episode, because that's going to give you the fundamentals and really the building blocks, you're going to need to have before we get into the process that we're talking about.
Today, which is going out and looking at properties, what has changed because of COVID-19 when you're doing that, because things have definitely changed dramatically in terms of how we did it before versus how we're doing it now. And then also some strategies about how to place an offer and how to place a competitive offer when we're in such a hot seller's market. So let's go ahead and get into it.
So now, let's start getting into the actual process of looking for your home. So you see this on HDTV all the time and people are always saying this or What are your must have. So you want to basically start out, before you set up any kind of searches with your agent is you want to start out and figure out what you aren't going to buy a property unless it has these things. So if you're buying the home with someone else, that could be two completely different sets of things on there. So you want to make sure that you're both on the same page. And know that these are the sort of things that are going to be non-negotiable. If it doesn't have this. Or if it does have this, we're not purchasing the home. So that's important for your agent to know because they're going to be able to make searches and recommend properties based on that. And you want to have that information readily available for them. And ideally kind of have those must have figured out before you really start searching for a property. So you're not wasting your time going to these properties that you know aren't going to work out for you. You really want to have that in your head and written down so your agent knows that as well of what are going to be those things you just can't live with or can't live without on there.
So once you start doing that, then you want to set up the search. So You can go ahead and use things like Zillow, Redfin, realtor.com, Trulia, all those different web searches out there they all link back into the MLS and kind of give you a good idea of what's out there on the market. However, the advantage of working with an agent is you do get direct access to the MLS. So even though over the years Zillow and Redfin have gotten much better at updating things quicker, and making sure that most of the properties on the MLS that you find them on Redfin and Zillow, as well, it doesn't update as quick as MLS. MLS is a little bit faster.
So the advantage of working with an agent is usually get the properties in your inbox a little bit quicker than what Zillow can offer and if you're getting it and finding information from the actual MLS, then you know the information is accurate and up to date. So I've seen it in the past. And again, this is happening less and less frequently now, but I've seen it in the past where you see a property that says available on Zillow, the buyer goes talk to the agents, "Hey, can we check it out", agent goes in MLS and it says it's already in escrow, so that kind of stuff does happen still, again, it's less frequent. But if you want to start your search out using Zillow and Redfin and not use the realtors MLS system, Feel free tool, it's still going to give you the majority of the results. The only other thing I would say that would be a benefit to you using realtors MLS access is they can refine the results a little bit better than those sites like Zillow and realtor.com. So they can filter things in and out based on only location. But you can go through and filter out pools, how many garages? Is that a enclosed garage? is it a carport? So there's a lot of different criteria you can use in there.
So that way, you're only seeing the homes again, you're actually interested in purchasing. And it just saves you time, only having to search through everything but then finding a home, sending it to your agent getting excited about seeing it only to find out it doesn't have one or two of those things you're looking for. So that's something that you do want to set up. After you have your must haves. You set that search up, you start looking for properties now, it's time to go out and actually Look at them. So the [Astros 4:02] buy this right now is COVID-19 has definitely changed this process significantly for buyers right now, in general before, you have open houses to go to every weekend. So you'd go from one open house to another open house to another open house. If the property wasn't having open house, your agent would basically go through and make a private showing for you. So you can go through the property and see it then. Right now with COVID-19 happening. open houses are still currently banned, they're starting to loosen up a little bit more you can register ahead of time and then go through the property without your agent there but it's still kind of in the gray area right now.
So for the time being right now, open houses are still really not allowed. So the only way to see property at this point is to make private showings with your agent. As well as that with some of the restrictions of COVID-19 you not to make sure you're wearing your face mask ,have hand sanitizer, have shoe booties on, gloves a lot of times as well. So you're protecting yourself as well as the seller. And then every time you visit a property, you're also required to fill out a form basically saying that you don't have any symptoms of COVID-19. And that you acknowledge that every time you go to a property, so it's a little bit more complex than it used to be to go look at homes. But hopefully as it starts to clear out, and hopefully we can start to return to normal sooner rather than later. Although the numbers aren't looking great right now, maybe by early next year, we'll have some normalcy set out hard to say. But for now, everything is pretty much private showings only. And there's a little bit more of a process you have to go through to arrange those, but that's the next step is actually going out and physically looking at properties.
So after you go through these open houses when you're allowed to or you're scrolling through these private showings, let's say you find a property, you love it and you're thinking of placing an offer on it. So that's where your agent comes in, and starts doing some research. And this is an extremely important phase right now. Especially because it's such a hot seller's market because inventory is extremely low and demand is extremely high because of low interest rates right now, it's extremely important. You have an agent that is going out there. And one, they're going to be talking to the selling agent. So they're going to figure out, Okay, what does the seller want to offer? They needed to move quick, they need to move slower. Do they need to find a new place before they can sell this place? What's their situation? What's going to make an offer look as good as possible to the seller. So your agent should always be calling the selling agent to figure that information out before you start looking at placing an offer. And then the agent is also going through and looking at information for you as well. So what is the tax rate in the area so you know, about how much you're going to be paying in your property tax? Are there any special assessments or mello-roos, those are basically fees on top of your monthly mortgage payment that you're going to be paying, if especially if it's a newer community this much more often. But you'll have to make sure that you know if there's any additional fees or anything else you'd be paying on top of what you're currently expecting to pay for your mortgage.
So when you do place an offer Not only you know exactly what the seller is looking for. But you also know if there's any other financial impact of purchasing this home versus one maybe a couple blocks down or a different city. And so you know, the total financial impact that you're going to have as a homeowner with that house on there. And then again, a big part of the important part right now for any kind of buyer out there is to make sure your agents talking to the seller agent. I can't stress this enough when I'm selling a home when agents to send an offers and they have no idea what the seller wants, then the agent for the seller has to go back and send counter offers a bunch of different terms. And it just puts a bad taste in the in the sellers mouth, puts a bad taste in the selling agents mouth and just starts the process off on the wrong foot. So you want to make sure you're giving your best offer you can to that seller, and that way when you when you actually submit the offer, you have a better chance of getting it accepted. So speaking of offers, that's going to be the next thing we're talking about.
Placing an offer
We talked about this a little bit on the last slide, but writing and submitting an offer. So the ideal offer is basically one you wanted to determine what type of market you're in. And then the offer needs to be competitive, and it needs to be protecting you illegally. So right now, like I said, before, we're currently in a seller's market, I don't see that changing at least until the end of the year. And even early in the next year. It's not going to be a buyers market anytime soon. So knowing that information right now, as as you know that it's a seller's market, you want to make sure you're doing everything you can to put your offer above everybody else's cuz most likely, especially in price points under $1.2 million in Orange County right now, if the home is priced correctly, and it was marketing is done correctly, that house is most likely going to have multiple offers right now. So you need to be able to compete and the thing about competing about offer on offers or now isn't it's not always about the price. So a lot of people think if I don't have the highest offer, I'm not going to be able to get this house. And I've seen that time and time again, be false.
So a couple things you can really do with that is,
One, you need to have a lender that understands what the markets doing right now, what I mean by that is lenders. And we'll go through some a little bit a little bit in terms of the contingency periods , but lenders have a lot to do with how strong an offer is going to be. So for instance, there's something called a loan contingency. And we'll get into the specifics again, a little bit. But a lot of lenders don't do much work up front, they're just going to run your basic financial information and say, based on the basic stuff, you can probably afford this much. If you're working with a lender that understands the current market condition, they're going to be going through and doing a little bit more rigorous looking at your finances. And that will basically enable them to say, "Hey, we don't need a loan contingency because we know you're going to qualify for this loan, as long as you don't go out and buy a Jet Ski in the middle of escrow".
So things like that, where you can remove some contingencies up front or shorten them for instance. So If you need an appraisal on the property instead of a 17 day appraisal, which is kind of typical appraisal period, you see, in a contract, maybe you can do it down to 10 days because the lender knows that the appraiser can get out there in two or three days report comes back two or three days later, and they'll be able to get that cleared much faster than 17 days. So those type of things you can put into an offer, or either take out contingencies or shorten contingencies, as long as it's keeping you safe, and the lender is confident and they've run the numbers to make sure they're confident they can do this, then it helps your offer be a little bit stronger. And then another thing you hear about this a lot, but writing a cover letter is extremely important right now because right now, especially if it's a seller that is living in the home, it's not an investor selling the property. Most sellers are going to have some type of emotional tie to their house. So if you're going through and placing offers on homes, and that seller was obviously trying to sell it but at the same time they're always going to have that thought in the back of their head is, "Oh, I have so many happy memories here. I really sad about selling this home", you want to be able to appeal the emotional side of them, basically go through and tell them, "Hey, I love what you do with the house, I'm glad that you took care of it, I want to do the same thing. So me and my family want to come in here, we want to continue taking care of the house, we want to go through and create more happy memories here".
And that can really appeal to the emotional side of the seller. And if you don't have the highest offer, but you're off by a few thousand dollars, I've seen this again, time and time again where the seller goes to the lower offer, because they have that connection with the buyer that someone that doesn't put one of those cover letters in isn't going to have. So it's extremely important that you write one for every offer you submit. But more importantly, you write one specific to the home and it's not just a generic form you're filling out so you want to be calling out specific things about the home you like and making sure that the seller knows it's just not a generic form. It's actually meant for their home and that gives them again that emotional tie to you and gives you a better shot of getting your offer accepted on there.
A couple of things. And again, I'm not going to go into our detail on this because I could in terms of what you can do on the contract to make it more appealing, that has nothing to do with the price is let's say the seller needs to find a replacement property before they can actually sell you theirs. So they're moving out of their house. They're buying a larger house and moving out of state somewhere, and they have to find a replacement property. Well, because the current market and most the United States right now is a seller's market, they might have some trouble trying to get offers accepted right now, when they have to place an offer and say, Hey, we'd like to purchase your house, but we can't purchase your house until we sell ours that puts them at a pretty big disadvantage in terms of them placing offers. So if you're able to go through and say, Hey, instead of a 30 day escrow, let's do a 45 day escrow and give you a little bit longer to find a home, or Hey, let's go through and do a 30 day escrow but then we'll do a rent back period, which basically allows the seller to rent the property back and you get paid for it and they're able to have that job. company because escrow closed at that point. And then they can place offers on homes that have no contingencies on them selling their property because they already did. So I hope that kind of makes sense. But those are some things in the contracts you can do. And again, this is all based off of getting that information from the selling agent, which again, is why it's so important to make sure that you're talking to that selling agent or your agent is talking to the selling agent to make sure that they know everything about the seller and can create the environment where if you don't have a highest price, you're still a very good shot of getting your offer accepted. So let's say you put in the offer to the house has multiple offers on it. Then you go to the negotiation phase. So once you put the offer in, the seller is going to either send back a counteroffer, or if there's multiple offers, they're going to send something back most likely called a seller multiple counteroffer. Now, the biggest thing to know as a buyer for this and the difference is if they send back a counteroffer and you agree to everything so let's say they asked you to raise the price By $3,000, and they want escrow for instead of 30 days to be 40 days, and you say, 'yes' to that, then you're going to be in escrow, you now have the opportunity to go in escrow on that property.
If they're sending you back a multiple counteroffer, which means they're sending this to other buyers as well. You can agree to everything that they're asking for, but the seller still gets to make the decision on who they accept. So you kind of get. You don't really have an advantage when you're looking at having to deal with a multiple seller offer compared to when you're dealing with a just a single offer on the property. So that's important to know because you don't want to get your hopes up. If it's a multiple counteroffer situation, and you agree to everything and you say, Okay, perfect, we're going to get into this home because someone else could agree to everything but they went above and beyond and said well, instead of $3,000 more, I'm going to say $5,000 more, and they might get the house instead. So it makes the situation a lot more gray. Unfortunately, when you have that multiple offers situation, but it's something that you want to know about because you want to know what type of counteroffer you're getting.
So let's say you get a multiple counteroffer, which is going to be probably the majority of homes you're placing offers on right now. In that case we'll go through, they'll give you a set of terms, they want you to change in the original contract that you gave to them. You can agree to all of them, you can agree to some of them, you basically want to put your best foot forward because usually in most situations, that's going to be your last and final chance to get the house, they're not usually going to go back and forth and back and forth and back and forth more than one or two times at most before, they select someone to go into escrow with so you want to make sure when you do get that counteroffer if you are going to be okay. And what I usually tell buyers is, Hey, they're asking for $5,000 more. You cannot you're only saying you want to put $3,000 more, that's completely fine. As long as you're okay with walking away if it ends up going for $5,000 more and you don't you don't really mind That $2,000 difference or that $2,000 difference was enough for you to walk away and not have any regret, because at that point, again, it's going to most likely be your best and final offer. So you don't want to say well, I'll do $3,000 now and then if they counteroffer again, I'll do another $2,000. I get sold depending on the situation, of course, and sometimes they can do that. But in general, when you get that multiple counteroffer, you want to make sure you're putting your best foot forward.
So now let's say you go through back and forth, back and forth, back and forth. You and the seller now finally agreed on terms everybody signs it. Now you can officially open escrow. So that's the really one of the biggest parts of getting into escrow. One of the hardest things to do is getting into escrow once you're in escrow. there obviously is a bunch of things that could go wrong, but once you get into escrow, now, you are going to have the power and the transaction. So before the seller has all the authority except they can go through on who they accept, they can dictate the terms they want in the contract, and it's up to you To decide if you want to go with that or not, but the seller has a lot of leverage at that point, once you get into escrow, then the leverage most of it is going to go to you, which is going to make the transaction a little bit easier for you going forward.
Okay, so that's going to cover the very basic part about going through and looking for a property, especially some of the changes that have been made because of COVID-19. And then also at least a little bit information about how to place a more competitive offer when we're in such a hot seller's market. Now, speaking of competitive offers, this is only the tip of the iceberg in terms of what you can do to make your offer more competitive that have nothing to do with the price. So if you want some more information that's going to be more individualized for you specifically, feel free to contact me all my information will be in the show notes below. And we can go over different strategies that you could do based on your finances and flexibility. That's going to make your offer even more competitive. So when you do start placing offers, you're going to have a high chance of success and be able to get into a property Faster.
Now again, this is on the second part of the three part series. So next Thursday, we're going to go and pick up where we left off today. So basically we're escrow starts, I'm going to walk you through the entire escrow process. And then we're going to end at the very end once you get your keys handed to you when escrow closes. And again, if you haven't seen the first episode about budgeting, especially if you're a first time homebuyer, I really suggest you go back and look at that episode, because that's going to set up those fundamentals to make sure that when you are ready to purchase a home, you can do so and financially you're able to so other than that, I hope you stay safe. And I'll see you next week. Bye.
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