Although little can be done to alter the current home buying process, knowing as much as possible about this process in advance can add significantly to the likelihood of a successful transaction. The BUYING PROCESS oulined below was designed to help you understand the purchasing of a home from beginning to end.

An important element in the process of buying a home is checking the RECENT COMPARABLE SALES courtesy of HOME PRICE CHECK.

In an effort to help buyers obtain important information on homes in the Palos Verdes area, check out our PENINSULA COMMUNITY INFORMATION below. This information was compiled to help you better understand the various neighborhoods on the Peninsula, as well as to share information on the four peninsula cities and their services.

For a list of REAL ESTATE COMPANIES ON THE PENINSULA, check out this roster from the Palos Verdes Peninsula Association of Realtors. All of the member companies and their phone numbers are included.

For more information on real estate REALTOR.COM,   ,    OWNERS.COM,    HOMESTORE.COM,    DOMANIA.COM   and   ZIP REALTY.

To obtain information on how your credit score is established you can review the MY FICO web site!

For more information on property values the web site of HOUSE VALUES has more information.

Looking for information on financing options for buyers of California real estate? The web site of CALIFORNIA HOUSING FINANCE AGENCY is full of interesting information.

A good resourse for general real estate information is the INTERNATIONAL REAL ESTATE DIRECTORY.

And when you've gotten that special home in escrow and you are getting ready to call the moving van, drop by MOVING.COM for a database of moving companies. If you are in need of a temporary residence in between homes feel free to visit the web site of CORPORATE CHOICES.

For a wide range of insurance quotes INS-WEB lets you research prices on-line.

All moved in but running into maintenance problems around the house? Try THAT HOME SITE to share and communicate your woes with other homeowners.

Thinking about remodeling? The IMPROVE-NET web site is full of valuable information!

• 20% Escrow Fee Discount
• 20% Title Fee Discount
• 20% Home Inspection Discount
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• FREE Appraisal Service
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CHOOSING AN AGENT

ESTABLISHING A TIME FRAME

BECOMING PREQUALIFIED

SETTING A PRICE RANGE

DETERMINING LOCATION

LOOKING AT PROPERTIES

MAKING AN OFFER

COUNTER OFFERS

OPENING ESCROW

PROCEEDING THROUGH ESCROW

DISCLOSURE FORMS

BUYER'S INSPECTIONS

APPRAISAL

TERMITE CERTIFICATION

CLOSING THE ESCROW

FOLLOW UP

CHOOSING AN AGENT

The real estate agent you choose to work with can help simplify the buying process significantly. Think of the agent as a symphony "conductor". There are a host of "instruments" involved in the purchasing of a home and coordinating all of the variables in the correct fashion can make a world of differnce as to how the music "sounds" in the end. An experienced agent will usually resolve potential issues before they become problems, keeping the music beautiful from begining to end.

Many buyers think about hiring a real estate "company" to assist them in purchasing a property. Although the company is important, the bigger element in a successful transaction is the agent chosen to do the job. Some of the questions to consider when choosing an agent include... is the agent full or part time? Does the agent have sufficient experience to represent me properly? Will I enjoy working with this person? There are many other variables to consider when choosing an agent. When it comes to developing a working relationship with the agent you are entrusting with the biggest financial investment of your life, it is a good idea to choose an agent that you are 100% comfortable with.

ESTABLISHING A TIME FRAME

Timing can be critical when buying a home. Many different factors must be considered before actually starting the process. It is a good idea to start by determining when the buyer wants to be settled in their new home. From that point, a buyer can "back-step" the time frame to determine when the process should start. As an example, if a buyer has the goal of moving into a property by January 1, 2000, it would be necessary to have a home in escrow by November of 1999. To have a home in escrow by then, a buyer should have been viewing various properties in October, to fully understand the current real estate market. As mentioned below, it is a good idea to get pre-qualified for a home loan in order to provide a price range of properties to look at. So, taking this back-step process one step further, it might be a good idea to get the pre-qualifying process rolling sometime in September, to be prepared to look seriously at homes in October.

To summarize, a 90 day window of time is usually a safe period to get the ball rolling in most cases. Of course, this process can be rushed and shortened considerably. Some people make the decision to buy a home one month and are cleaning windows in the new home 30 days later. However, like many things in life, rushing can cause stress and buying a home can be stressful enough without adding a crushing time deadline to the process.

BECOMING PRE-QUALIFIED

Unlike the real estate days of old where the seller crossed his or her fingers and hoped that the buyer would not have any problems obtaining the necessary financing, today's sellers take a strong look at a buyer's ability to buy before moving forward with a sale. In fact, this concept is now so engrained in the process that the standard Purchase Contract has a pre-qualifying clause built right in. Even though this commonly used contract allows a buyer a 7 day time frame to become pre-qualified, savvy buyers understand that getting pre-qualified before their offer is presented can help considerably during the negotiating process. Most sellers and seller's agents look forward to seeing this pre-qualifying in writing and it often accompanies the purchase contract at the time of the initial offer presentation.

Taking this pre-qualification process to the next level, more homebuyers are now becoming pre-approved before they go house hunting. This loan approval gives the buyer's offer that much more credibility and has the added value of allowing the buyer the ability to close escrow in a relatively short time. Becoming pre-approved takes a bit more paper work than simply becoming pre-qualified, but the advantages usually make the extra effort well worth it.

SETTING A PRICE RANGE

Pre-qualifying for a home lets a buyer know the maximum amount of the loan they are able to obtain for the purchase of a new home. However, even though the buyer has the capability to qualify for a loan of such amount, they may not have the desire to purchase a home at this upper end of qualifying. Every buyer is motivated by a unique set of circumstances and all of the variables should be considered before establishing a price range.

Once a buyer has established the maximum amount they would like to dedicate towards housing costs, a general price range can be extrapolated from those figures. Total housing costs generally include payments on a new loan, payments for property taxes, and payment for fire insurance. Other variables might include monthly homeowner's fees for townhomes and condominiums and possibly P.M.I. (Private Mortgage Insurance) for home purchases with small down payments.

DETERMINING LOCATION

Location, location, location! You have heard it before and you will hear it again. Location is one of the most important factors to consider before you begin looking for a new home. Factors used to determine an acceptable location include schools, weather, proximity to freeways, employment centers, shopping, and beaches.

Once a general location has been determined, locations can then be narrowed down to specific neighborhoods in that particular community. The location of the home purchased is one of the few features a buyer is unable to change after the close of escrow, so it's importance cannot be over emphasized.

LOOKING AT PROPERTIES

The more properties a buyer looks at, the greater perspective that buyer can bring to the table when writing an offer on a property. On the other side of the coin, looking at too many properties in a short amount of time can be confusing. Looking at just a few properties per outing can help maintain some sense of perspective, while still allowing a diverse base of properties to choose from over the days or weeks of house hunting.

After looking at a few homes, it is common for the details of the different properties to start "running together". To try to alleviate this problem, many buyers take notes on each property they view and sometimes attach a photograph of the exterior of the property to the notes and fact sheets for the property. It is generally not an acceptable practice to photograph the interior of a property without the consent of the owner in advance.

MAKING AN OFFER

Now you are ready! You have done all of your homework and found the perfect house. It would be nice if it all came to a close here, but in actuality, this is where the important work begins. Before sitting down with your agent to write up the offer, it is a good idea to become familiar with the 6 page purchase contract. Key elements in the offer include sales price, deposit, down payment, financing, contingencies, escrow date, possession date, allocation of costs, inspections, disclosures and much more.

One important element of the purchase offer that should not be overlooked is the expiration date of the contract. This date is critical, as the seller must respond to your offer prior to this date and time. If the time frame provided is too short, your offer might expire before the agents have had a chance to present it to the sellers. If the time frame is too long, the seller could hold the offer to see if any better offers come in.

Purchase contracts in Los Angeles County follow a relatively specific set of regional traditions, such as who pays for the termite report and completion, city and/or county transfer taxes, and various other costs. A good agent will realize these traditional responsibilites and write up the original purchase contract with these normal terms included. Otherwise, these issues might have to be addressed in any subsequent counter offers, adding otherwise unnecessary terms to the contract being negotiated.

COUNTER OFFERS

It is a rare purchase contract that accurately addresses all of the concerns of the seller during the initial presentation. Provided there is enough time, it is usually a good idea for the buyer's agent to contact the listing agent prior to writing up the offer, to obtain general feedback about the seller's needs. This brief but informative communication can go a long way towards the buyer writing up a "clean" purchase contract the first time around. Even still, a seller will often give the buyer a counter offer, to negotiate price, as well as some of the other variables in the offer.

Just like the original offer written by the buyer, all counter offers have an expiration date, which can be a critical element of the contract. If the seller's counter offer expires before the buyer has the opportunity to respond in writing, the entire contract dies. It is also important to note that up until the time the seller receives notice that the buyer has signed the counter offer, the seller reserves the right to rescind the counter offer.

Once all of the terms and conditions in the original offer and subsequent counter offer(s) have been agreed upon, the next step is usually to open escrow.

OPENING ESCROW

The escrow company is a neutral third party whose services are retained by the buyers and sellers to carry out much of the paperwork involved in the sale of a property. The fee for this service is based on the sales price of the property and generally buyers and sellers each pay an equal escrow fee. The escrow instructions drawn up by the escrow company are usually a direct reflection of the terms and conditions previously agreed upon by the buyer and seller in the completed purchase contract. The time frame by which these instructions need to be signed and returned to escrow, along with the time frame by which the buyer must place the deposit in escrow, is established in the original purchase contract. This is usually within a few days of the final acceptance of the offer. Escrow is a bi-lateral agreement which becomes active upon the receipt of the signed instructions from both buyer and seller.

In addition to providing the buyers and sellers with the various escrow papers, the duties of the escrow company include opening the title order, providing demands for the payoff of any existing liens against the property, and organizing many additional paperwork needs.

PROCEEDING THROUGH ESCROW

The escrow company assists in the organization of many papers throughout the course of the escrow period. These duties include, but are not necessarily limited to, ordering a title search and providing the parties with a preliminary title search, providing the termite inspection and/or completion papers to the interested parties, providing a demand for the payoff of existing loans against the property, maintaining a line of communication with the buyer's lender to assist in providing for the buyer's loan, and much more.

DISCLOSURE FORMS

The list of disclosure forms required for a residential real estate transaction seems to increase each year. Although a few disclosure forms may be provided by the escrow company as a courtesy, most of the required forms are provided by the real estate agents involved in the transaction. Most agents try to have these forms signed by the buyer and seller during the first week of escrow.

The forms necessary for transferring the title of a property in Los Angles Country include:

* REAL ESTATE TRANSFER DISCLOSURE STATEMENT
* LEAD BASED PAINT HAZARDS DISCLOSURE
* SMOKE DETECTOR STATEMENT OF COMPLIANCE
* WATER HEATER STATEMENT OF COMPLIANCE
* EARTHQUAKE SAFETY BOOKLET
* RESIDENTIAL EARTHQUAKE HAZARDS REPORT
* ENVIRONMENTAL HAZARDS BOOKLET
* NATURAL HAZARD DISCLOSURE STATEMENT
* DATA BASE DISCLOSURE FORM

BUYER'S INSPECTIONS

A buyer's purchase of a home is usually contingent upon the buyer's approval of the condition of the property and most buyers hire a professional inspector to review the property. Amenities or improvements that require specialized knowledge, such as a pool, spa, roof, asbestos insulation, radon or a geology inspection, may also be inspected during this inspection time frame. These inspections are usually paid for by the buyer and the inspection is generally performed during the first week of escrow. Most inspections last 2 to 3 hours and a written report is given to the buyer, either upon the completion of the inspection or shortly thereafter.

If the buyer discovers conditions of the property that are unacceptable, the buyer has the right within the time frame specified in the purchase contract, to request that the seller correct the items in question. Depending upon the particulars of the contract, if the sellers refuse to correct the items, the buyer usually has the right to cancel the agreement and receive the entire deposit back. The buyer also has the option to go forward with the sale and accept the conditions that were discovered during the inspection.

PROPERTY APPRAISAL

If new institutional financing is a part of the purchase price, the lender will usually require an appraisal of the property to be included in the loan package. This helps the lender determine the value of the property and to confirm that the value of the property is within the loan-to-value ratios determined at the inception of the loan. The buyer often pays for the appraisal up front when the loan package is initiated.

The appraiser usually contacts the listing agent (the agent representing the seller) within the first week or two of escrow to arrange a time to appraise the property. If the amount of the loan is a large percentage of the sales price and the amount of the appraisal is important, the listing agent will quite often meet the appraiser at the property and provide the appraiser with recent comparable sales that justify the sales price. Assuming the property is sold within a reasonable range of these comparables, the value of the appraisal is usually the same as, or very close to, the sales price agreed upon by the buyer and seller. If an appraisal comes in low, it may still be possible to increase the initial evaluation, if the parties to the transaction can provide additional comparables to help the appraiser justify the sales price.

TERMITE CERTIFICATION

Most buyers want a property that is free from termites and other issues associated with a termite certification. The cost of the termite inspection, as well as the cost of the work necessary to provide a termite certification, is usually the seller's responsibility. Although the elimination of drywood and subterranean termites are two elements of a termite certification, other issues must also be addressed. Dry rot, moisture conditions, termite damaged wood, earth to wood contact, faulty grade conditions, and debris under a home are all termite certification conditions. If the buyer and seller have agreed that Section 2 termite work is the responsibilty of the buyer, as is usually the case in Los Angles County, the buyer may choose to ignore these Section 2 recommendations or have them repaired at the buyer's cost.

Once the work has been completed, the "Notice of Work Completed" is provided by the termite company to escrow, who in turn, provides copies for the parties to the transaction, including the lender.

CLOSING THE ESCROW

During the last week of escrow things get very busy. By this time the buyer has obtained a formal loan approval and the escrow officer has requested the loan documents from the lender. Once the buyer has signed and returned the loan documents and delivered the balance of the down payment (certified funds), escrow is ready to close.

The recording of the Grant Deed usually takes place at 8:00 a.m. on the day after the buyer's loan has funded. Confirmation of the recording is usually received by noon unless the closing takes place at the end of the month, which notoriously gets very busy. The buyer's possession of the property follows shortly thereafter.

FOLLOW UP

Chuck,

My wife and I will be buying a home on the Peninsula in 1999 and we don't mind buying a property that requires some fix up work. Once we have received the written results of the home inspection and the recommended work, is it acceptable to ask for cash credit from the sellers through escrow for the repairs, instead of having the seller actually fix these repair items? - John

John,

Asking for a cash credit from the seller for necessary repairs is acceptable under certain conditions. As a matter of fact, many sellers prefer to provide a cash credit rather than getting involved with the coordination of hiring contractors and handymen to correct these needed repairs. However, the repair items you are requesting credit for should only be items that were discovered during the course of the inspection. If you ask the seller for a cash credit on an issue that was easily visible during the initial negotiations on the property, the seller might feel you are using the inspection as a tool to create cash or an unwarranted discount. Not only is this unfair and not within the spirit of the purchase contract, but it could hurt the relationship of the parties in the transaction as they proceed through escrow.

The second guideline regarding cash credits from the seller has to do with the amount requested. It can be very easy for a buyer to "round off" the approximate cost of the repair items to a more convenient and higher number. This could also alienate the seller and work against the buyer's goal of creating cash for repairs. Obtaining more than one estimate on each repair item will help in defining a fair number for these repairs.

Before getting too far along with the dialogue about a cash credit, be sure to check with the lender to see if a seller credit is allowable. Some lenders don't want to see money credited in escrow from a seller to a buyer for repairs. For those lenders a specific credit for items such as "carpeting allowance" may be acceptable.

Also, keep in mind that even though you may want cash for some of these repairs, the sellers may prefer to take care of the repair items themselves, during the escrow process.

To summarize, your idea to take the responsibility for necessary repairs in exchange for a fair cash credit through escrow can be a creative way to meet the needs of both parties. - Chuck

Chuck,

We are trying to save up 20% for a down payment on a house, to avoid the P.M.I. (Private Mortgage Insurance) required for smaller down payments. Any suggestions to help us meet our goal of getting a good loan with minimal cash down? - Sally

Sally,

Your goal of maximizing your cash needs at the close of escrow is a good one. There are several things you can do to be more efficient with your cash at the closing table

* Utilizing a "no points" loan. Loan points can add a tremendous amount to a buyer's cash needs at closing. For most home purchases, the lender's points are the largest single dollar items necessary for buyer's closing costs. No point loans traditionally provide for a higher interest rate, but the trade off might be well worth it. Also, some lenders will build your loan points into the loan amount borrowed. This can make the monthly payments a bit higher, but it could be a valuable trade off for a buyer with minimal cash.

* Seller paying for buyer's non-recurring closing costs. This is another great cash saver, but it must be planned in advance to be executed correctly. If the seller is asked to pay for the buyer's non-recurring closing costs as a part of the original purchase contract and if the seller is compensated for those costs in some other fashion, such as a slightly increased sales price, this financial arrangement has helped many buyers save on the hard cash necessary for closing. - Chuck

Chuck,

We are considering buying a home in P.V. using the agent who has the property listed for sale. We are getting conflicting advice on whether or not we should use the listing agent, who is also representing the seller. Would we be wise to use this agent? - Mark

Mark,

The situation you are describing is called dual agency and has created much discussion over the years. Essentially, dual agency exists when both the buyer and the seller are represented by the same real estate firm.

Dual agency is very common within the real estate industry and can be an effective way to buy and sell property if done correctly. One of the most important elements of dual agency is disclosure. All parties to the transaction must be informed in writing of the dual agency relationship.

The big concern regarding dual agency is that either the buyer or seller (or both) might be concerned that the agent is not providing unbiased representation. If either the buyer or the seller feels that the agent is siding with the other party, the transaction could experience rough waters. However, if the agent is honest and represents all of the fact disclosed to him (or her), dual agency can be a very efficient way to proceed through the negotiation and escrow stages of a sale. - Chuck

Chuck,

A friend of mine just bought a home in Orange County. The agent who showed her property made her sign a Buyer's Agency Form. Is this also common practice in Palos Verdes? - Betsy

Betsy,

Buyer's Agency Forms are becoming more common in our area, but there are still many good agents who will work with buyers without such a written agreement.

The purpose of having a potential buyer sign a Buyer's Agency Form is to try to establish some type of committment from the buyer. Over the years many buyers have taken a somewhat casual approach to the agent showing them property, sometimes looking at properties with one agent and then actually purchasing a home through a different agent.

To provide guidelines for buyer's agency relationships, the California Association of Realtors currently has three different types of Buyer's Agency Forms, each one offering a different level of committment from the buyer. - Chuck

Chuck;

I understand that if a buyer tries to back out of a home sale after the contingeny periods have passed that the buyer's deposit is at risk. But what avenues are available to a buyer if a seller tries to back out of the sale? - Dave Berry

Dave;

Since a purchase contract is a legally binding instrument, buyers do have legal recourse if a seller tries to cancel the sale. The most common solution is for the buyer to sue the seller for 'specific performance' of the sales contract. A specific performance lawsuit is usually accompanied by a 'lis pendens' title action, which provides public notice of a title dispute. This legal action ususally forces the seller to resolve the dispute with the buyer so the seller can again have 'clear title'. - Chuck

Chuck;

In looking at new homes for sale on the Peninsula, my husband and I have found that these builders are not showing any flexibility on price. Why? - Candy