Entire Home Buying Process Explained
Today I’m going to go into a brief timeline of what exactly happens during the typical 30 day escrow.
The answer is, a lot! And most people don’t know how it all plays out and can get surprised by different aspects as they come up throughout the process.
But not to fear, I’m going to tell you how the buying process works from a bird’s eye view.
Let’s start from before escrow actually begins, because I think the buying process truly starts once you find a home you actually would like to purchase.
You’ve been searching and you’ve identified what I like to call “the one”, it's the home that after you see it, you can’t stop thinking about.
It should feel like your stomach dropping on a roller coaster, that “uh oh” moment when things are about to get real.
It’s exciting and scary all at the same time, but the point is, you’ve found a home that “FEELS” right, and you see yourself living there.
So you put in an offer!
The first step is to work with me to craft your offer.
I advise my clients on price, time periods, contingencies, financial aspects, the possession date, conditions for sale, who pays for what, and many other small aspects to make sure the offer is perfectly fine tuned.
The seller can either accept your offer in full, reject it in full, or counter you.
Each time a counter offer is made it completely replaces the original offer and thus neither party can ever “go back” to a previous offer after they have made a counter offer.
If you are the only one bidding on the property at the moment, you work to come to terms for the purchase directly with the seller. If the seller has multiple offers on the property, they will issue what is called a “Multiple Counter Offer” in which they define terms to all of the offers that they wish to counter.
The seller does not have to counter all offers submitted, and you do not need to accept any or all of the terms the seller offers you in a multiple counter situation.
This is, however, mostly likely the opportunity to submit what is called your “best and final”. It is the offer you feel most comfortable with putting out there knowing that if you are beat by another offer, you gave it your best shot.
If your offer is accepted, escrow will tend to open the next business day, as escrow cannot open on a weekend, and the clock starts ticking for the escrow period, usually 30 days.
Your first order of business is to send escrow your Earnest Money Deposit.
This is due within 3 business days of opening escrow and it is 3% of the purchase price as is customary in Southern California.
Escrow will send you the opening package along with the wire instructions for the earnest money deposit.
The big thing to be aware here of is preventing wire fraud when wiring large sums of money.
You will go to your bank or set up the wire transfer online for the amount you need to send, and then before confirming the wire transfer, you will call escrow directly, speak to the escrow officer, and verbally confirm the wire instructions you were sent by email.
If they match up correctly, you can safely hit send for your earnest money deposit.
During this time I as the agent will be scheduling all of our inspections.
I’ve worked diligently and for many years honing my team of experts that I feel are the most knowledgeable and competent people to work with, and I start scheduling them as soon as possible.
You’ll first complete the general inspection which will look at many aspects of the home including the general condition of the property, kitchen appliances, bathrooms, visual inspection of the plumbing system, the electrical system, the roof, the grounds, the garage, the heating and cooling system, foundation, and any pool and spa equipment if applicable.
These are visual inspections as the general inspector will not open up any walls, so we also make sure to do a sewer inspection which involves sticking a camera down the main sewer line and taking a video of the condition of the pipes all the way to the connection to the city sewer line, which is usually the street for a single family home.
Finally, because southern California has termite issues, we will also complete a termite inspection which covers wood destroying pests and subterranean termites.
I call these the “Big 3” because on almost every property, you will be completing all three of these inspections, and they generally cover everything that you need to inspect on the property.
If you do need additional inspections, the general inspector will advise you on what you may wish to get above and beyond these three inspections.
The most common ones are:
an HVAC inspection for the heating and cooling
a foundation inspection for retrofitting or hillside homes
a structural engineer for soil and retaining wall issues, or cracks on the walls
a chimney inspection
an asbestos inspection if there are popcorn ceilings or old ductwork,
a mold inspection if there are dark spots near an area with moisture,
a septic inspection if there is a septic tank for the property,
And finally a separate roof inspection if the roof is badly in need of repair or inaccessible to the general inspector.
You as the buyer are responsible for paying the cost for all of the inspections out of pocket at the time of the inspection.
Yes that does mean that if you don’t end up purchasing the home you are out the cost of those inspections, but it is a small price to pay for uncovering major problems that could end up costing you significantly more down the line.
At this point, you have all of your “due diligence” in hand, everything that you as the buyer are required to do to know the full extent of the state of the property.
If you’re happy with the state of the home as is, you can comfortably remove your inspection contingency, one of the “Big Four” Contingencies that encompasses the inspection contingency, the disclosure contingencies, the appraisal contingency, and the loan contingency.
If there is anything that you would like fixed or would like to ask for a credit from the sellers to repair, you enter into a separate negotiation called the Request for Repairs.
Here you submit what you would like to have repaired, or more often, a request for a credit to do those repairs, at the close of escrow.
If the seller agrees to the request in full, you are required to remove your inspection contingency, so make sure that what you ask is what you would be very happy with.
The seller can either accept in full, reject in full, or counter your request for repairs with a different offer.
Should you be unable to come to an agreement about the request for repairs negotiation, you may exercise your inspection contingency and decline to purchase the home, receiving your earnest money deposit back in full.
During this same time, the seller is sending your a full list of many types of disclosures. You’ll find the disclosures fall under two main categories: seller disclosures and state disclosures. If you are purchasing a home with a Home Owner’s Association, you’ll have a third type of disclosure for all of the HOA documents.
The seller disclosures are very important, they are the ones the seller fills out by hand and details everything that they are required by law to reveal to you about what they know about the property.
Because they are the ones who lived there, they have the most intimate knowledge of the property and these tend to be the more unique things about the property that you’ll want to read carefully.
If the seller has not lived in the property within the last few years, either it is an investment property or being sold as a part of a trust, the seller may be exempt from many of these disclosures because if they haven’t lived there, they don’t have intimate knowledge of the state of the home.
You will also get statewide disclosures that cover everything from lead paint, earthquake safety, carbon monoxide detector requirements, water heater safety compliance, seismic shutoff valve information, market conditions, property use, legal requirements, neighborhood conditions, local area disclosures, title, escrow, and lender affiliations, and more.
You will also receive the preliminary title report from title and the natural hazard report from a natural hazard reporting company.
This is a lot to read through but again, it is important that you as the buyer do indeed read through all of these disclosures.
Finally, if the property is a part of an HOA, you’ll receive the full packet of CC&Rs which stands for Covenants, Conditions, and Restrictions, as well as the minutes for HOA meetings, bylaws, and financial information.
If you approve all of these disclosures, you may remove your contingencies regarding disclosures.
The next part of the process is the appraisal.
If you are an all cash buyer you will not have an appraisal or loan contingency, but if you do carry a mortgage on the property and have not waived your appraisal contingency, the buyer pays for an appraisal for that loan.
If the property appraises for the purchase price and underwriting has reviewed and approved the appraisal, you may safely remove your appraisal contingency.
You as the buyer don’t have to do much for this process, I handle all of this directly with the lender, the appraiser, and the appraisal company
If the property does not appraise for the purchase price, you enter into a separate negotiation regarding the appraisal.
You can ask the sellers to lower the price to the appraised value, you can make up the difference in cash, or you can split the difference through a combination of those two options.
If you are unable to reach a mutual agreement, may exercise your appraisal contingency and decline to purchase the home, receiving your earnest money deposit back in full.
If you want to know all about the appraisal process and the contingency, as well as you negotiation options, I did an entire video on the appraisal contingency which you should watch as well.
Finally, you’ll be working towards removing your loan contingency, likely the last contingency in place by now, so that you can become “non-contingent”.
At this point, the lender will tell you directly whether it is safe to remove the loan contingency. The lender will be working this entire time on your loan, collecting and reviewing documents, and making sure all aspects of your loan are buttoned up.
If they are, you can remove your loan contingency and your lender will issue you the CD, or the Closing Disclosure.
Please note that if you remove all of your contingencies, this is the only time in the process where you have absolutely no way of backing out of this sale.
If you choose to back out of the sale after you become non-contingent, the seller will keep your earnest money deposit in full and put the house back on the market, or in some cases force you to go through with the sale of the home.
That is why I’m always very careful to advise my clients on the impact of going non contingent when it comes time to do so.
But at this point, you’re likely happy with the purchase, excited to move in, and ready to close, so let’s talk about how you get to that point!
After you have signed the closing disclosure, you will schedule a time with escrow to go in and sign all of your final documents.
You will also schedule a time with me to do a final walkthrough of the property and verify it is in the condition you expect it to be, that nothing disastrous has happened as well as making sure things you expected to be there still are and things you expected to be moved out are gone.
You will also wire your final funds to escrow which will take place in the exact same manner that you did your earnest money deposit, receiving wire instructions, calling to confirm them, and sending the money.
This money is your down payment minus your earnest money deposit, while adding in closing costs and subtracting any seller or lender credits.
With the final funds in escrow and all of your documents signed, escrow will issue the file as “cleared to close” in which title will execute the recording of the deed, the action that legally transfers ownership to you.
You will always record on the next business day after the file is clear to close.
On recording day, the county recorder’s office functions as a lottery system. If you are clear to close, you are guaranteed to close that day, it is just a matter of when in the day. It can be as early as 9 in the morning or as late as 3 or 4 in the afternoon usually.
Once you receive official notice of recording confirmation, the listing agent can safely hand over keys, as this is the final step of the process.
Usually I get given the keys and meet with you to hand them over...with a gift as well!
There you have it, an entire walkthrough of exactly what happens during escrow of the purchase of the home. Now this is from the buyer’s perspective of course, a few other things happen from the seller’s perspective, but I’ll do an entire video on that as well.
Thank you so much for watching, I hope you learned a lot here. It can be a bit of an overwhelming and complicated process, but I’m always here every step of the way!
If you’re interested in purchasing your first home, I LOVE working with first time home buyers and taking a deep dive into what you’re looking for and how we can strategize to make that happen in this still very competitive market in Los Angeles. To be successful you need the right agent who can market you as the right buyer and understand how to craft the right offer.
And if you’re looking to sell your home, I have a fantastic program that really just blows what most other listing agents offer out of the water.
I pay for all of the aspects of digital marketing from photography, drone footage, videography, 3D walkthrough and virtual open houses right out of my entry level commission structure.
No other listing agent is doing this and if they are they’re going to pass the cost along to you or mark up their cost to you, but I pay for it, no questions asked.
It’s my way of bridging the gap between the virtual and the personal.
Thanks again for reading, and don’t hesitate to reach out if you’d like to chat