If you are a resident of California and want to buy a home for yourself, especially in the coastal
cities like, San Francisco or San Diego, you need to know the real estate property buying rules
involved in the state of California, so that, you can save yourself some time, energy and money.
Scenario of real estate market in California
After the recession of 2007, the real estate market in California is still on its way to recovery. In
comparison to income and rents, the price of houses are still high. Banks have announced that a
mortgage that is maximum of three times the home buyer's annual income which comes with a
down payment of 20% can be considered as safe.
On March 26, 2010, the governor of California, Schwarzenegger, signed the California Home
Buyer Tax Credit, which allots upto 5% of the sale price ($10,000), to certain home buyers.
It means that as a qualified buyer, you can get $3,333 as a credit, if you have state taxes
due. This tax credit is applicable to those homes that close escrow on or after May 1, 2010.
The total allocation of $200 million is divided equally between first time home buyers and buyers
of existing homes. But the main disadvantage of this offer is that, it is offered on first-come first-
served basis. The California Association of Realtors has predicted, on the basis of number of homes
in escrow, that, this fund will be depleted before the end of May 2010.
The home buying process
Though all the states in the US involves basically the same process in buying a home, still there is a
slight variation from state to state. The steps to buy a home in California are:
You should hire a buyer's agent: In California, you should hire a real estate agent, who
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will act as both buyer's and seller's agent. He will represent both parties to a sale and have a
fiduciary duty to look out for your best interests.
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Get yourself pre-qualified: After your agent has gone through your credit report and has
referred you to a mortgage broker, you have to ask the lender for a pre-approval letter,
which will be a verification of your income. You need to choose mortgage type and
determine the maximum amount you want to borrow.
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Search for homes: Ask your agent to search for homes that satisfy your needs and after you
have shortlisted a number of homes, you can see those.
Give a purchase offer: Give a purchase order in writing to the seller through your agent.
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Negotiate with seller: You should expect that the seller will give you a counter offer. You
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can negotiate with the seller and finalize a price.
Deposit money: If your purchase offer is accepted, you should deposit earnest money
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check with the appropriate party. In the contract it should be written that, the money will be
refunded to you,, if you wish to cancel the contract.
Open escrow: You should ask your agent to open escrow and title and get the detailed
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information about the escrow officer. You should pass on the information to your lender and
insurance agent.
Inspect home: You should conduct a inspection on the home by a professional home
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inspector. If there is any need for repair and renovation, request the seller to do so.
Deposit fund: You need to sign the escrow documents and deposit fund through a certified
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check.
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Close escrow: After the change of title, property deed, etc are recorded in the public
records, you have to close your escrow.
The process of buying a real estate property is very much laborious and discouraging. But, if you
have the proper knowledge and preparation, you will experience such a home buying experience
that will be smooth and pleasant.