A Detailed Look at the Home Buying Process from the Buyer’s Perspective

1. Write an offer!

   Ok, so you’ve found your dream home. Now it’s time to make an offer to purchase it from the Seller. Your agent will type up an offer, using a form called the “RPA” or the Residential Purchase Agreement, and send it to you for signature. This document details the terms in which you are willing to buy the property. Surprisingly, the purchase price is just one of the terms detailed in this 14 page contract.

2. Seller’s response

   Once the Seller receives your offer, they have 3 options:

   1. Accept: This is where they accept your offer “as is”.

   2. Counter: They may ‘counter’ or negotiate portions of your offer they do not find desirable. You either accept their counter offer, or re-negotiate. Hopefully you can reach an agreement and move forward with the purchase.

   3. Reject: They reject your offer outright, and you start looking for another home. Alternatively, if they haven’t found another offer, you can re-submit a new offer with more desirable terms. Your agent can guide you.

3. Open escrow

   As soon as the Seller accepts your offer, you “open escrow”. Escrow is a neutral third-party company that holds the buyers funds until all terms of the Residential Purchase Agreement are fulfilled by both the Seller and the Buyer. They act as the transaction’s “referee” if you will.
   

4. Earnest Money Deposit

   Within 3 business days of opening escrow, you must wire your Earnest Money Deposit into escrow. Also referred to as the EMD, this typically amounts to 3% of the Purchase Price. This EMD represents the amount of money the Seller can retain, as liquidated damages, if you “default” or fail to complete the purchase according to the terms of the agreement.
   

5. Home inspections

   As soon as you open escrow, you should also immediately schedule all home inspections. These typically include, but are not limited to: General Inspection, Termite/Pest, Sewer, Foundation. Depending on the property (and what comes up in the General Inspection) you may also need to schedule a Geologic Inspection, Roof, Pool and HVAC inspection. Your agent should have excellent referrals for inspections and should be able to schedule these on your behalf, with your permission. You should ideally be present for the inspections, along with your agent. If you can squeeze them all in one day, prepare to be at the property for at least 3-4 hours.
   

6. Disclosures

   Part of your “inspection” period includes reviewing all of the Disclosures sent to you by the Seller. There are many in California, and you should read them all, but you want to pay special attention to the Seller Property Questionnaire and the Transfer Disclosure Statement. These disclosures reveal any material facts about the house the Seller is aware of including any insurance claims, repairs or upgrades.

7. Request for repair

   Once you understand the condition of the property, you may negotiate with the Seller to receive credit for any repairs required. It’s important to note that homes in California are sold “as-is”, so just because a bathroom is old does not mean the Seller is required to fork over money to update it. Also, just because something is broken or not working, does not mean the Seller has to pay to fix it. It’s a negotiation. The Seller can either accept your request by lowering the purchase price, giving you a credit at the close of escrow, or repair it themselves. Or they can reject your request, and you can cancel escrow or accept their decision and understand that is something you have to pay for out of pocket.
   

8. Loan application

   As you move through the escrow process, your lender will be working alongside you to help you complete the loan application process. They will gather from you a ton of financial documentation such as bank statements, pay stubs, tax returns, an explanation of credit inquiries, and substantiation of large cash gifts or irregular deposits.
   

9. Appraisal

   The lender will also send out an Appraiser to determine the value of the property. As you can imagine, before a bank issues a loan against a home, they want to make sure the home is worth what they are paying. The appraiser inspects the property visually and then runs comps (read more about comps here) and produces a report called the Appraisal. Hopefully, their valuation of the home lines up with your purchase price.
   

10. Loan approval

    After the appraisal, the loan application and all the supporting documents are submitted, you wait to hear back from the lender to see if you are approved for the loan. Typically, you should receive approval for your loan within the first 21 days of escrow.
    

11. Insurance

    You also need to purchase Homeowners Insurance and submit that to the lender.
    

12. Home warranty

    Per the terms of your Purchase Agreement, the Seller usually will pay for your Home Warranty. This will cover some major systems of the property including the HVAC and the pool if you request an upgraded Home Warranty. These cost around $600-700, but could cost as much as $1,000 depending on the size of the house. Escrow will furnish you with a confirmation that the warranty has been purchased.
    

13. Title review & insurance

    During escrow, a Title Rep will research the title of the property. The title refers to who has legal ownership and the legal right to use a piece of property. They issue you a Preliminary Title Report which should reveal any encumbrances or liens against title. Typically your Title Rep will be able to explain to you and review this title report so you can be sure no one else can lay claim to this particular property. The Seller usually will also pay for what is called “Title Insurance”, protecting you, the buyer, from any fraud, forgeries, or “hidden” encumbrances or liens.
    

14. Sign loan docs

    Assuming you have received your loan approval, the lender will issue the Closing documents. These docs outline the final details of your particular mortgage. You provide a signature for approval, so the final loan documents can be issued. You will typically go into the escrow office to sign the Loan documents in person with the escrow officer or their assistant.
    

15. Final payments

    Once the loan docs are signed, the bank will issue a bank wire to escrow for the amount of the loan. You will also send your final bank wire to escrow with the balance of your down payment and your closing costs.
    

16. Transfer title & officially become a Homeowner!

    A day after escrow has received all of the funds to complete the purchase, the Title Rep will submit the Grant Deed (a document used to transfer real property from one person/entity to another) to the LA County Recorders office. This process can now be done electronically and escrow typically receives confirmation that the Grant Deed has been ‘recorded’ within a few hours. Once that confirmation rolls in - CONGRATS! You officially own that property and you should receive the keys to the property that same day.