Buying a Home in California

By Boris Gurfinkel, Realtor CA BRE 01280534

Tel.: (323) 578-3576; Mail: boris@borisrealty.com; WEB: www.borisrealty.com

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Making an Offer, Counter-Offer, Opening Escrow ...

Making an Offer

Here is where your agent really begins earning his keep. After you have found the home you want to buy, it's time to make an Offer. Offers are always in writing. There's a saying in California that “an offer is only as good as the paper it's written on”. The paper used in California is called a Residential Purchase Agreement. All details of the offer are entered on this form, including the description of the property, price offered, financing terms, duration of the offer, rights of the buyer to inspect the property, which party will pay which fees, etc. Your agent will assist you in setting an opening offer price by providing a list of homes sold recently similar to the one you are interested in buying. Along with your offer it is customary to provide a "good faith" deposit check of at least 3% of the offered price. Your agent will then present the offer to the sellers and their agent.

The Counter-Offer

There are two parts to an offer: the Price and the Terms. Usually you will offer less than the asking price. If it's a Seller's market, meaning there are many buyers vying for the same property, you may offer more. In many case, there will more often than not be a Counter-Offer. The Sellers will counter your offer in writing. The counter-offer will say, in effect, "I agree with your offer except as follows: ... (Enumerate the changes the seller requests)." The buyer can respond with a written "Counter-Counter-Offer," and the offers can go back and forth until there is final agreement, or until one of the parties will no longer respond.

Opening Escrow

Once the offer is agreed to by all parties concerned, the agent will take the written final agreement and the deposit check and deposit them in “Escrow.” Escrow will then be deemed open. Escrow in essence is an unbiased 3rd Party. The purpose of an escrow is to enable a Buyer and Seller to deal with each other without risk. Before title to the property can be transferred to the new Buyer, the Buyer must deposit into escrow all monies necessary to pay for the home. Then, the Seller must be paid, the Seller's old mortgage paid off, and any other liens on the property must be paid off. All responsibility for handling funds and documents is delegated to the escrow holder, a neutral third party, which is usually a Title Insurance Company or Escrow Company. Your title insurance officer can answer many of the frequently asked questions about Title Insurance, Preliminary Reports, and alternative ways of holding title to property in California. In a simple transaction, the Buyer delivers the agreed upon funds to the Escrow Holder (Escrow). The Buyer also instructs the Escrow Holder to deliver to the Seller the stated sum only after all conditions have been met, and title is vested in the buyer. Concurrently, the Seller deposits his Deed and other documents with the Escrow Holder, authorizing their delivery when the Buyer has deposited the agreed purchase price. The contracting parties deposit funds or documents with the Escrow Holder, for delivery to the respective parties upon performance of all conditions of the agreement.

Inspections, Title Reports and Title Insurance, Close of Escrow

Buyer's Inspections

Most contracts (purchase agreement) provide that the Buyer may, at his own expense, have the house inspected by professionals. Typical inspections include pest (termite) inspection, contractor inspection (includes electrical, plumbing, heating systems), roof inspection, swimming pool inspection, foundation and soil inspection. While buying a house on hillside it has highly advisable to seek for a professional opinion about condition and stability of the site by obtaining Geological and Soil Reports and conducting Topography Survey and other related reports. Depending upon the terms of the Purchase Agreement, the Buyer may request the Seller to either fix the defect, or provide funds so that the buyer can correct the defect after close of escrow. Your agent can assist you in choosing competent inspectors and will arrange their appointments and be present while the inspections are being conducted.

Title Report and Title Insurance

In California the title of the property is searched by a title company and a preliminary report is issued on the condition of the title, for the Buyer's approval. The report would include such information as present ownership, legal description of the property, any existing liens or unpaid taxes, any easements, and other covenants, conditions, or restrictions. A policy of Title Insurance will usually be issued at close of Escrow. A title insurance policy insures the Buyer's interest in his purchase, and the priority and validity of any loan. It is a contract to indemnify against loss through defects in the title.

Close of Escrow

After both the buyer and seller have complied with all agreed-upon terms, the escrow is "closed," and the deed is recorded with the County Recorder. The escrow company notifies the agents that the title is recorded and on that day the property belongs to the Buyer. There is no need for a final meeting of the parties, since all documents had been signed prior to the close of escrow, and had been delivered to the Escrow Holder. After the close of escrow the parties will be given a settlement statement, showing the charges and credits for each party. Your title insurance officer can answer many of the frequently asked questions about title insurance, preliminary reports, and alternative ways of holding title to property in California. In a simple transaction, the Buyer delivers the agreed upon funds to the Escrow Holder. The Buyer also instructs the Escrow Holder to deliver to the Seller the stated sum only after all conditions have been met, and title is vested in the Buyer. Concurrently, the Seller deposits his deed and other documents with the Escrow Holder, authorizing their delivery when the Buyer has deposited the agreed purchase price. The contracting parties deposit funds or documents with the Escrow Holder, for delivery to the respective parties upon performance of all conditions of the agreement.

To Wrap Up

The above description covers the customary steps in buying and selling a home in California. Most California residential transactions are completed without the assistance of an attorney. However, buyers and sellers who have legal or tax questions are urged to obtain advice from their attorney or tax professional. While the above material is summarized from sources deemed reliable, it is not guaranteed to apply to all transactions, since other conditions may apply, and each real estate transaction has its own unique characteristics.

Cost to Close the Transaction

Buyer’s closing costs typically consist of Escrow Fees, Title Company Charges, cost of Financing (if involved), and costs of Inspection(s). Escrow and Title fees can vary and can be estimated at approximately 1.25% -1.50% of the Purchase Price. It is impossible for me to estimate total cost of inspections in this article as it is unknown what particular inspection(s) will be chosen or required. Once we have a property that is considerable of making an offer I will provide you with itemized list of your estimated closing costs.