“Mr. Los Angeles ”
Hello, my name is Sky Minor and I would like to be your REALTOR.
Buying or selling a home is one of the biggest financial steps you'll ever make. You need a professional who has innovation, experience and a proven track record. As an energetic broker with almost 200 transactions under my belt, I've learned the most effective ways to “work the market”, helping you emerge happy and blissful at the conclusion of the entire process. As a resident of the LA's East Side since 2003, I have seen Silver Lake, Echo Park, Eagle Rock, Los Feliz, Atwater Village, Highland Park, Glassell Park, Mt. Washington and Downtown L.A. grow into the most electrifying real estate sub-market in Los Angeles. I am excited to introduce you to great areas that you might not have known about or had forgotten. I am your East Side Los Angeles real estate expert, and I am eager to get to work for you.
I'd be honored to help you buy or sell your property. Please call, text or e-mail me for information or listings or for an appointment to go see property. For first time buyers, I recommend visiting my mortgage qualification link and get an idea what kind of mortgage loan you can qualify for.
What more is there to say about me that hasn't been said by my satisfied customers on Yelp? Thanks for stopping by my Real Estate site. You can also see my specific site about Silver Lake Real Estate here.
How to buy a house, part 1
First Time home buyers or people who haven't bought in a while are curious about the procedure of buying Real Estate. Many new buyers tend to underestimate the amount of work that is required to get the keys to their new home. After they have successfully closed many of our clients have commented about how they had no idea the obstacles and important choices that would come up during the process. Even the most well researched first timer is usually humbled at some point along the way. The Los Angeles real estate market has always been competitive and when certain neighborhoods become fashionable (like Silver Lake, Eagle Rock and Highland Park are right now), the buyers will crawl over each other for properties even in the midst of a down market. Knowing how to position yourself ahead of the crowd is important as a buyer. Choose an agent that fits your personality and one who has experience with your specific area. You're going to be working closely with your agent and they will guide you through the inevitable ups and downs of every transaction. Remember to ask your REALTOR any and all questions you have about anything-that's what they are there for. Home Buying is a journey but with knowledge of the path ahead it can be navigated with confidence and poise.
Here is an outline of the home buying sequence in order from start to finish and what buyers can expect at all points of the transaction. .
1. Secure Financing.
Unless you are paying all cash, the very first thing to do is get a mortgage preapproval from a lender. To get a quick idea of what you could qualify for go here. The different banks and mortgage lenders are all underwriting their loans according to the same guidelines set forth by Fannie Mae and Freddie Mac. They all require the same things for a mortgage and they all offer about the same rates. The major difference between mortgage lenders is the individual loan officer's ability to get the loan closed. Obtaining a mortgage is tough for anybody in this tight credit market, so choose a lender with experience who is getting things done. Your lender will pull your credit and will want to see two years of your W2s or 1040 income tax returns. If you are self employed, the lenders will qualify you based on your NET income (after expenses). They will look at your down payment and give you payment options based on your goals. Once you've figured out what you can afford and want to pay with monthly mortgage payments your lender will write you a preapproval letter. The letter will be included with every offer you write as a real estate buyer. You'll be needing a certain amount of money for down payment and closing costs to complete your purchase, so have that money ready and don't leave your job or apply for credit from anywhere until your loan is closed. You'll get a Good Faith Estimate (GFE) from the lender for closing costs so you'll know what the bottom line to bring in will be. Typical buyer's closing costs are between 2-3% of the purchase price (4-5% for FHA loans) so make sure you have that amount in addition to your down payment available at closing time. Don't move money around, keep it in one place until you close. If you have to move any money keep the paper trail because the lender will need to account for every dollar going into escrow. Listen to your lender very carefully, they have many different underwriting rules and guidelines to follow and the loan will not fund until all of their requirements are met. In this post mortgage meltdown environment the lenders are always the ones holding up escrow closings.
2. Find the property, write your offer, get it accepted.
Finding the property is the fun part. Your agent should be showing you many properties, and you should be learning from each one. There is no better way to get a feeling for the real estate market then to go see many properties. Seeing, touching and smelling these properties first hand is the best way to learn exactly what things cost. The experience cannot be simulated on a computer screen (yet). I try to see at least 10 different properties each time I go out with a client. If you're going to look at houses, go look at lots of houses. If something feels right to you, it usually is.Standard California Residential Purchase Contract
Once you begin to write offers there are many things to be aware of in the fine print. These details can mean thousands of dollars coming from your pocket at closing so understand clearly everything you are offering to the seller. Some details that have popped up on my closing statements have been: unpaid city assessments, Mello-Roos taxes, City of LA housing department abatements, Hidden contractor liens and on and on. Once the contract is accepted then it is taken verbatim by everyone involved so make sure you are OK with what you are putting on it. Ask your agent what the protocol and customary fees are for the items that you are including, they will know and advise you. This is why they are getting paid.
It is impossible to know everything about the property when you are writing offers on it, so accept some uncertainties in the beginning. As knowledgeable as your agent is, they won't be able to tell you absolutely everything about the property's maintenance history, neighborhood information, etc. The successful buyer needs to be able to act quickly and decisively with limited information. The best properties never stay on the market long in Los Angeles, despite economic or market conditions. The early bird gets the worm with real estate so don't get "analysis paralysis" as Rich Dad calls it. If you know the property is right for you, write the offer now because you'll have time to think about it before you have to commit. Writing an offer does not obligate the buyer to anything until the seller accepts it. No money will change hands until buyer and seller agree on price, terms, repairs etc in writing and escrow is opened. That process takes 72 hours at the very least. It is not uncommon in seller's markets like Silver Lake and Highland Park to have to write multiple offers just to get one accepted.
After the offer goes in and a bit of luck, the seller will most likely counter-offer and request concessions. Higher price, shorter escrow, less closing costs etc. This negotiation is natural and should be approached with patience and serenity. Don't be flustered by aggressive counter offers, deal with them knowing that you are making progress. Too many times first time buyers bury their head in the sand at the first counter offer, probably because they feel intimidated not having negotiated much in their lives. That's perfectly acceptable, but I don't think any buyer should give in too easily to the sellers' demands. Many times the seller's agent will create inuendos about other buyers circling the property ready to pounce like well-funded lions, but in some cases it is a bluffing tactic. It's like a poker game. Keep a cool head and act rationally. This is another area where your agent has to earn their keep. They will be able to guide you, and should be heeded. After the dust settles and a counter offer is signed by both buyer and seller, notify your mortgage lender immediately and send them what they need right away to start underwriting the mortgage. Remember, the lender will be the slowest cog in the machine so get them started right away.
3.Open Escrow, put down deposit money.
Escrow is a neutral third party licensed by the state to carry out the contract. They ensure first that the seller doesn't take the buyer's money and the buyer doesn't take the seller's property. They see to it that all taxes get paid, all liens and any claims against the property get paid, every expense is accounted for and prorated up to the day the buyer takes title to the home. All money gets sent into escrow and sent out by escrow. The buyer will have to send in their earnest money deposit to escrow at this point. That is usually done with wire transfer or cashiers check. Escrows rarely accept personal checks. Wire transfer is easiest but it usually costs $30 each time. Escrow will send you out a small pile of paperwork to fill out. That paperwork needs to be returned to them as soon as possible. The buyer will need to determine their vesting, need to give background information and other questions. If your agent is not available, calling the escrow company for questions is perfectly acceptable.
Once escrow is opened, the clock starts ticking with the buyer's agreed upon Inspection and Loan contingency periods. Every day counts, so buyer's need to be ready to respond quickly to the requests of the lender, agent or escrow company. Email is the best way to send paperwork back and forth because it's possible to pull up what was sent and received by everyone involved. Make sure you keep or get copies of everything that you sign and keep it for your records.
4. Get a property inspection.
Getting an inspection is currently not mandatory in CA but it should be. I require all Preferred Realty and Loan buyers to get an inspection, even on new houses because you never know what you'll find. Inspectors are licensed and bonded professionals and hold insurance policies in case they miss anything in their inspection report. They never do. The agent will be able to recommend an inspector to you. They cost from $250-$450 on most houses and condos and are usually paid by buyer. If possible, go out and meet the inspector at the property when he's inspecting and ask questions. Inspector are typically contractors and they all know what to look for. They will provide you a large report outlining everything that is notable in the house. When you get that report, don't feel too broken hearted when problems are disclosed. Most houses have problems with them, especially in LA where most houses are 50+ years old. Things to pay attention to in inspection reports are:
-Foundations, especially on hillsides. Foundation ideally should be bolted to the piers (wood beams). Foundation problems are seen in cracks that go from ceiling to ceiling or floor. In hillside houses, it is natural for the soil to move 1/10" per year. Keep that in mind. Gravity always wins.
-Any leaking water in roof or pipes. Water entry is the biggest problem in houses. Even in the desert climate of Southern California water intrusion is still an issue, and anywhere that has water should be examined for dryrot. Mold is a frequent accomplice of water leaks, and should be examined (although there are hundreds of different strains of mold, only a couple of which people are allergic to.) Mold can pose a special problem for potential landlords with liability to the tenants. Also look for water coming off the roof and not flowing away from the structure. Water that pools next to walls will inevitably make its way inside those walls.
-Old elecrical systems if there are air conditioner units or other large power draws. An updated 220v electrical box on a 1500 sq ft 3+2 house will cost 3-4 thousand dollars. Look at the breaker panel. If you see cloth wires going to a fragmented, unlabeled center then it's probably going to need to be updated.
-Termite damage on wood frame houses. Termite inspections are often required by lenders. A termite company will go out to the property and give estimates. They are heavily regulated in California so estimates don't vary too much from one contractor to the next. Termite damage looks kind of like swiss cheese, poking holes in wood window frames, beams, eaves, joists, etc. Termite repairs come in two phases; phase 1 which is everything structural, anything that holds the house up. This phase 1 repair bill is typically paid by the seller. Phase 2 is anything cosmetic and is typically the buyer's responsibility. The most termite damage that we have seen was in 2008 on a two bedroom home in North Hollywood that had to be completely tented and some of the structural joists replaced at a cost of $3500. Most termite bills are around $1000 for houses under 1500 square feet.This is a robust example of a standard California termite damage report. The different types of termite damage are numbered and shown on the footprint of the structure. This foreclosed fourplex was crawling with termites. Cost to fix this severe damage was $5300.
Example of Termite damage on a wooden window frame. This would be Section 2
There are many more issues to discuss when seeing home inspection reports, but this blog is only so big. When you get the home inspection report back, look at the report closely and ask questions about everything that is unsatisfying. The requests for repair will be based on this inspection report, and that is an opportunity for buyers to negotiate for repairs or credits from the seller. Keep in mind that the inspector is working for you, the buyer, and will write up his report accordingly in your favor.
How to buy a house, part 2.
4.Get a property inspection
The home inspection report was received by the buyers. We noted items to look for that will cause concern to future owners-Foundation, Plumbing, Power, Any water leaking, etc. Once the buyer receives a copy of the inspection report they really get a good opportunity to "look under the hood" of the house. With the inspection report in hand, the buyer is given the power to do one of three things;
1. Request that the seller repair any items that are of concern.
2. Request that the seller credit the buyer the cost of repairs either from a reduction in the price of the property or by paying the buyer's closing costs.
3. Cancel the deal.
Most buyers I work with are too emotionally tied to the property at this point and do not want to cancel. So then the question becomes should they request repairs or money? Some new buyers who I see opt for the credit instead of asking the seller to make the repairs never get around to getting the work done. For items that are in serious need of repair, this is not a good thing. The long term cost of neglecting maintenance issues needs to be weighed by the buyer. If it doesn't get fixed now, it will usually cost a lot more to do later when the buyer wants to sell the property. I council my buyers to look at the property through the eyes of the seller, because one day they probably will sell it. Conservative bargaining and due diligence are very important. Again, it can be like a Poker game. The agent should be able to offer referrals to contractors who can give estimates. I find that Yelp is also a pretty good source for finding contractors, although many good ones are not of the internet generation and must be sought out other ways. The smart buyer will have made their own connections with contractors before entering escrow, so that they can give second opinions of the issues that come up. No buyer is an island.
When buying bank owned foreclosure REO properties, the seller will rarely make repairs unless there is a health and safety issue. The banks are reticent to negotiate much on repairs either, usually requiring buyers to accept the property as-is. This refusal to fix or credit is why REO foreclosures are sold at a discount. The bank is going to pass the problems to the new buyer.
So let's take a hypothetical example and assume that the buyer asked the seller for $10,000 in credit for closing costs for various maintenance items. The buyer will put that on their Request for Repair form (ROR), and the seller can accept, negotiate or cancel. I have rarely seen a seller cancel at this point, even if ROR was overkill. The seller in this example will counter back at $4,000 in repair credit and the two will eventually agree on $6,500. An addendum is drawn up and sent to escrow whereby the seller will pay $6,500 of the buyer's closing costs. The price will remain the same but the seller is going to be contributing the $6,500 to the buyer's expenses. The buyer is not receiving cash from the seller, they are only getting credited money to close. If they don't use all of that credited money at the closing, they lose any unused portion. It is very rare that lenders will let a buyer walk out of escrow with money in hand that they didn't bring in themselves. It is important buyers remember this and make sure they can spend all the money they are asking for as a seller credit! After the dust has settled and an agreed upon amount is credited or repaired, we move on.
5. Get an Appraisal.
This step is only for buyers getting a mortgage. The lender will always need to appraise the property. Appraisals are usually $350-$500 and usually paid by the borrower in the form of an Application fee. The mortgage industry became significantly more rigid and strict as a result of the 2007-9 mortgage crisis. Sweeping reforms have made the process more lengthy and has changed the role of the property appraiser. Before 2010, appraisers were only sent out to determine the value of the property but now they are required to comment on the condition of the property. Their comments are taken into account and input into a nationalized database with standards that are based on the average aged/sized/condition home in the USA. If the property has deferred maintenence that the appraiser deems worthy of mentioning in his report, the lender will typically refuse to fund the buyer's loan until the mentioned items are repaired. This can become a catch 22 situation, where the seller doesn't want to spend the money to fix the property up and the buyer doesn't want to pay to have work done on a property that is not yet theirs. Since the advent of the HVCC appraisal code, appraisers are not chosen by anyone who has an interest in the transaction. The intention to avoid potential conflicts of interest is good with this law, but the actual effect is that appraisal orders get farmed out to the lowest bidder and the resulting quality of the reports is equally low. Appraisers used to be local and knowledgeable about market factors in the neighborhood (Schools, Crime, Views, Amenities, etc). For the most part, they are not at all like that any more, and are only valuating the house based on price per square foot of nearby comps. This is an overly objective approach to valuating homes and can result in wild swings of variation, often lower than the asking price. If the property that the buyer has under contract does not appraise at the price that the buyer has on their contract, they can cancel (provided they did not waive that right on their offer). Alternatively, they can take the appraisal to the seller and request that the price be lowered to the appraised value. Since the seller will presumably have this same issue with any buyer, they have a reason to consider lowering their price. Buyers should ensure their agent evaluates the comps before writing an offer far over the asking price. A lot of time and heartache can be saved by doing some diligence. After the appraisal comes back to the lender they will issue a loan approval and will require conditions from the borrower, escrow and title companies. Time is of the essence, so when the agent or lender requests something it is important to get it to them right away. I always tell my buyers that when the loan officer says "Jump", they say "How High?".
6. Get Natural Hazard Disclosure report and Title Prelim.
The Natural Hazard Disclosure (NHD) report is not mandatory but is recommended. It contains 30+ pages of potential hazards in, under and around the property. The scope of the report is vast, covering everything from Radon gas to Seismic activity to landslide and liquefaction potential to airport noise. The reports are prepared by private companies who are responsible for the validity of their data so they always tend toward over disclosing. As before with the inspection report, some bad news is inevitable. Life kills and after seeing some NHD reports, it's a wonder how anyone could live in the houses. But they have, and in many cases the house has been there for 70-80-100 years and people have been living there. Don't get too flustered when the NHD comes back with some problems. At the same time, there are some important issues that should not be taken lightly. Some of those issues are;
1. Fire hazard area. In Southern California, If the property is in the hills or not surrounded by other structures in an urban setting, it is probably in a high fire area. The ramifications of this are higher homeowner's insurance premiums for life.
2. Radon Gas. Radon seeps in through the soil and collects, usually in ground level or basement areas. There are three levels of Radon gas disclosed. If it is beyond level 1, I recommend another Radon specific test. Radon is bad news, especially for young children developing.
3. Mello-Roos tax districts. Mello-Roos taxes and other supplemental tax assessments run with the land and can really break the bank. The NHD will have information on every expense that has to be paid with the property. Usually the Title report will have this data too, but the NHD is the most accurate source of information for this.
4. Proximity to old Oil Wells/Mining sites- This is most frequently associated with gas coming up from the earth. There are plenty of oil well sites around Southern California and some still leak off methane and other gases that can be dangerous, if not foul smelling.
5.Flood zone. If the property is in a flat area it may be in a flood plain and that requires higher homeowners insurance coverage.
There are many other issues that the NHD will touch on, and the agent will be the first point of contact for questions.
The preliminary title report is issued from the title company. This report shows the history of the property, sometimes going all the way back to the Spanish occupation of California. The title prelim shows any and all liens on title of the property. If the seller didn't pay taxes, had a contractor slap a lien on the property or borrowed money against it then all of this will come up on the title prelim. The title companies' job is to insure the homeowner against any defects in title, so if they miss anything at all they pay for it. They never miss anything. The lender will require a title insurance policy to protect their interest in the property. The buyer does not usually concern themselves with what is contained in the title prelim, if there are hidden costs then the agent or escrow will alert the buyer right away and the buyer can act accordingly.
After the buyer has these reports in and signed off and their appraisal is completed, they are almost done. Buyers will sign off on all of their contingencies, which means that they have to close or the seller can claim their earnest money deposit. There is usually a time in every transaction when all the contingencies are signed off, but the loan is not ready to fund. A skilled agent will negotiate with the seller to give them what they want, but buy more time for the buyer's loan contingency. The reality is that lenders are never 100% reliable and can back out at literally any moment without warning. Ideally, buyers want to keep their loan contingencies until they close but it is not always possible. If the time comes to take a leap of faith, rest assured that many before have done so successfully.
7. Sign Loan Docs
By week 3-4 into the transaction, the loan docs are usually ready to be signed. The buyers getting the mortgage will sign the docs in the presence of a Notary Public, often at the escrow company. Buyers should request an estimated HUD from the escrow company before signing their loan docs and compare it to the lender's initial Good Faith Estimate. Any increase in charges should be addressed to the lender as soon as they are discovered. Some charges are unavoidable but there should be no more than a couple hundred dollars difference. If the lender hikes up the fees then call them out on it and don't accept the loan. It is an age old trick of money lenders to wait until the borrower has no other options and then increase the fees and rate. Although this practice has lessened since the mortgage industry underwent a major overhaul in 2010, it is still prevalent at closing tables across the country. Because of this, I recommend applying for mortgages with two or more lenders if possible. Playing them one against another can lead to the best deal, but it is a lot to keep up with. If the buyer has any questions at all, ask! Don't be afraid to get answers from your lender. Remember they need to lend money to stay in business.
8. Closing Time!
After the loan docs are signed they go back to the lender and the buyer wires their money into escrow to close. There will be several lender conditions prior to funding-usually updating paystubs and bank account information. At this point many buyers are at the end of their rope but stay with it, the very end of the transaction is just as important as any other point. When the loan underwriter is satisfied, they fund the loan by wiring the money into escrow. Once the loan is funded, escrow disburses funds to the seller and deed to the buyer, gets the deed and mortgage information recorded at the county recorder and gives the buyers the keys to their new home. This is a happy time for everyone.
I hope I was able to shed light on the process of buying a property for first timers or anyone who might benefit from it. Buying your home is never a walk in the park and indeed it can be a stressful journey but in the end, all of my buyers unilaterally say that it was worth it. Home ownership is the biggest preserver of wealth for most American families. Right now is an ideal time to buy property. We have a perfect storm of real estate is in a downturn and interest rates are extremely low, the time is right for more people to take a step into home ownership.
For any questions, feel free to contact Sky Minor 310-709-8283