Congratulations! You've successfully negotiated a contract to purchase a home in San Diego! What's next? (A lot!...)
You will want to allow as much extra time as possible this week and the next to do your "due diligence" on the home. The hours you spend now will be well worth it in the long run. If there is a reason not to buy this home, you want to know now (not a year after you buy it). As your exclusive buyer's agent, I've made sure you negotiated certain terms to protect your earnest money (good faith) deposit and to look out for your best interests throughout this purchase. You have the right to do your "due diligence" regarding this property, and I've built in certain contractual contingencies to allow you to perform professional inspections, review disclosures and reports, and do your own investigation of the property (unless you decided beforehand to waive certain contingencies). As a reminder, we work as a team. My job is to help you find the home, negotiate the terms, and guide you through the escrow process (all the while keeping your best interests in mind). You are the one buying the home, so right now is the time for you to do everything in your power to make sure that you truly do want to purchase this place. I'll help you back out of the contract if you find something wrong, so now is the time to dig in. Be sure to be thorough. You hired me, so you're the boss. I'm here to help you through all of this, but in the end it's your money and your decision.
In a nutshell, you have a certain amount of time to do your due-diligence before you may be contractually obligated to remove the agreement's contingencies or cancel the transaction. The default amount of time in the California Association of REALTORS® residential purchase agreement (RPA) is 17 days before you could be asked by the seller to remove contingencies. This may have been adjusted in your specific transaction for various reasons, so be sure to check with me if you're not sure how much time you have. Time is of the essence, so it's imperative that you start your investigation of the property right away.
If you are purchasing a short sale, these may not apply to you, so be sure to check with me before scheduling appointments, etc.
Here's a list of things you should start doing as soon as you receive a copy of the fully executed contract:
(1) Send in Deposit Check
Mail your deposit check to the agreed-on Escrow Company (if you're not sure where to send it, ask me). Your contract most likely requires you to send this in within three days of receiving the fully executed contract. See Also: How Much Will I Pay for a Good Faith Deposit?
(2) Schedule Your Property Inspection
Order a property inspection by a licensed property inspector (and review the report). Check with me regarding a good time to schedule the appointment. Someone will need to be there to let you in. Ordering a property inspection is not required by law, but I advise all my clients to purchase one. If you decide not to, you are acting against my advice. You've already seen and signed the disclosures about the importance of property inspections, so you are informed about how crucial they can be. I can provide (on request) a list of inspectors that some of my past clients have used, but I recommend that you hire the inspector that you feel the most comfortable with. Be sure that the inspector is licensed and on good terms with the California Real Estate Inspector Assocation (CREIA). Also, if at all possible be sure to schedule your inspection at a time that you can be there with the inspector. You will surely learn something important about the home as you follow the inspector around for a couple hours. Ask the inspector to take time to explain everything he/she/s looking at to you. I believe it's even worth it to pay the inspector a little more for his/her time if he/she will let you tag along. See the BIA Form for a list of inspections you may want to perform on the property. Also, make sure the inspector will email you a complete report with color photos.
See Also: The Buyer's Inspection Advisory (BIA)
(3) Schedule a Termite/Wood-Destroying Pest Inspection
Order a wood-destroying pest inspection (and review the report). Again, not required by law (and the seller has probably already ordered one - be sure to review a copy of the seller's termite report), BUT I recommend that you hire your own inspector just to be on the safe side.
(4) Further Inspection
If an inspector recommends further inspection of any part of the property by a more specialized inspector, be sure to have it done immediately.
(5) Review Disclosures
Shortly, you will receive disclosures from the seller. Review the seller disclosures about the home. Address anything that raises a red flag with me. In some cases, the seller may not be obligated to provide disclosures (for example, you may not receive seller disclosures if you're buying a bank-owned foreclosure). If you do not receive disclosures, the property inspection becomes even more important for you to find out anything that might affect the value of the home in your own mind. If you get the disclosures before meeting with the property inspector, be sure to review any red flags from the disclosures with the inspector at the time of the property inspection.
(6) More Disclosures and Investigation
Shortly, you will receive more disclosures about the property/area.
- Review the Natural Hazard Disclosure report to see what natural hazards may be near the home.
- Review the Local Area disclosures from the San Diego Assocation of REALTORS® (SDAR) to see if there are any disclosures for the area the home is located in.
- Check what the current owner pays in property taxes to make sure it's what you expected. Find the link to the assessor's website and more about property taxes at: How much will I pay in property taxes?
- Review all the terms of the purchase contract.
- I also recommend that you check with the local municipality to review permits for the property. You are the one who needs to make the phone call, but I can certainly help you find the appropriate department to contact. This may/may not apply to you or your transaction, so let me know how you would like me to help.
- If room sizes or lot sizes are important to you, you can go to the property to take your own measurements. Sometimes, the information that listing agents put in the MLS (or that shows up in the tax records) can be inaccurate. A diligent buyer checks those himself/herself if that's important to him/her. I may need to schedule an appointment for that, so let me know.
(7) Yet More Investigation
Get to know the area around the home. Walk and drive the area at different times of the day (and night). Check out the home's Walk Score. Talk to neighbors. Ask questions. Search online for community forums with information about your specific neighborhood. Go to the local schools. Research the schools online (some clients like a website called GreatSchools.org, OR you may want to visit the school district website for local information and school testing scores. Research the crime in the area. Take a look at the Megan's Law (sex offender) Database. These are all things you can do in a relatively short amount of time to make sure you truly like the area. Do everything you can think of to get as familiar with the area as possible.
(8) Review the Preliminary Title Report
Shortly, you will receive a copy of the Preliminary Title Report (PR). Review the PR to make sure there are no unexpected liens that go with the home. Call the Title Officer (his/her name and phone number will be listed on the Preliminary Title Report you receive) and review the entire report to make sure that there are no red flags. If the title officer will not review the report with you, be sure to let me know. I can refer you to another title officer from a different company who would be happy to review the title report with you to show you what to look out for. Some buyers like to have a real estate attorney review the PR. If you've reviewed the report with two title officers from different companies, and both tell you that there is nothing out of the ordinary on the report you are probably safe. It never hurts, however, to shell out a small amount of money (in the big picture) up front to have an attorney review the report to look for red flags.
(9) Request for Repairs
In most cases you are allowed to issue a Request for Repairs to the seller. If you are interested in doing this, you should let me know right away. Of course, there are instances (such as with some bank-owned properties) in which you've been informed from Day 1 that the seller will not make any repairs. I encourage my clients to think about the Request for Repairs before submitting it to the seller. The fact is that some sellers get offended by too many repair requests (especially if they seem petty). I don't represent sellers, so it doesn't hurt my feelings if you offend a seller, BUT it can cause the rest of your transaction to be frustrating if you manage to truly offend the other party. Sellers are not obligated to perform any of the requests on the Request for Repairs (unless they agreed to specific repairs in the original contract you both already signed - in fact, if you know that there are repairs you want done before you write the offer, it's a good idea to include them in the original offer.). That being said, there are many times that a buyer finds out about (from the inspection report) something that hadn't been considered before writing the offer. In these cases, it's totally appropriate to ask a seller to fix something. If they say, "No," you'll have to decide if you want to move forward with the purchase, but you are allowed to ask, either way.
(10) Review the HOA Documents (if any)
Review Home Owners Association (HOA) documents (if applicable). Be careful to review each aspect of the HOA docs. Make sure that you are OK with all the rules and regulations, with the budget and forecasted budget (and reserves) of the HOA, and be sure that you are OK with any pending litigation the HOA may/may not be involved in. I can help you look at the HOA documents, but I am not a specialist at reading their reports. If there are red flags, I recommend that you hire a real estate attorney or CPA who has a lot of experience in reviewing HOA documents, etc. Call a few and ask them if they are experienced at reviewing HOA documents as well as how much they will charge you. For a list of local real estate attorneys, contact the San Diego Association of REALTORS®.
(11) Secure Your Financing
Last, but certainly not least, make sure that your financing is lined up for a prompt closing. If you are paying cash, you will need to take certain measures to liquidate your assets and accomodate the transfer of funds. Depending on your situation, this could take longer than a week to coordinate. If you are obtaining a loan to help with the purchase, then you need to inform your lender immediately about the accepted offer, and have him/her get the ball rolling right away for your final loan approval. This will most likely take more than two weeks to get completed, and if you plan on closing escrow in 30-45 days (and if you have a 17-day loan contingency), then every day counts. Your lender needs information about the property, a copy of the fully executed contract, updated information from you, and also needs to order an appraisal ASAP. Make sure you have a lender who is easy to reach and who is on the ball. He/she can make or break your closing.
(12) Secure Insurance for the Property
Your lender may require you to have some sort of insurance policy for your home, and you may also wish to look at other other insurance options (such as flood insurance, earthquake insurance, etc.). Call your insurance agent (and others) to get the best plan and rate for your home. Be sure to communicate the name and contact information of your insurance agent to the escrow company and to your lender. If, heaven forbid, you find out that the property is un-insurable, you will be glad you took care of this prior to removing your investigation contingency. Read this article for more detailed tips on finding the right insurance.
*NOTE: If you are buying a condo, you most likely only need to purchase an HO6 policy. This is a less expensive policy similar to renters insurance (since your HOA most likely has a master insurance policy for rebuilding the structure if the building burns down). Ask your loan officer what type of policy your lender requires, and be sure to still customize the policy to the specific upgrades and belongings that are in the condo.
Ultimately, this purchase is your responsibility, so don't rely on me too heavily during the due-diligence period. As I've said before, this is a team effort, and I will (of course) be there to help you through all of the phases of the transaction. I'll be monitoring the status of your transaction, and I'll remind you of important dates, etc. I'll also be coordinating with the listing agent to get you all the reports and disclosures as quickly as possible for your review. Never hesitate to call me at any point with questions. I'm here for you.
Exclusive Buyer Agents do not list homes for sale and never represent sellers. They have no "inventory" to try to sell you. I can represent you in purchasing any home or residential investment property in San Diego County. I am a specialist at representing buyers only on the buyers' side of the transaction. Exclusive Buyer Agents work to get buyers the best price and terms when they buy a home. If you would like an agent who will work exclusively for you, Make sure you hire an E B A...
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