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Eileen Walsh discusses the 5 basic financial facts you need to know when purchasing a home and describes the step-by-step procedures behind a typical LA real estate transaction.

I love working with buyers. Many realtors do not. They won't ever tell you that but it's the truth. They'd rather have a listing than "drive buyers around all day," they say. 

Me? I love buyers. Whether a buyer is selling their existing home to move up to a larger one or to downsize, or it's their first purchase, a buyer is looking forward to their next step in life. It's an exciting time and I really enjoy being a part of it. I guess I'm a teacher (or lawyer!) at heart, so I love guiding buyers through the process to ensure they make the right decision.

Whether you're a first-time buyer or you have been buying and selling homes for years, it's crucial to have as much information as possible. You need to know about current market conditions, where the market is going and how to successfully negotiate in that market. It will also benefit you to know and understand the upcoming process so you know exactly what to expect before and during escrow. Although every transaction is unique, I have winning methods that I employ, especially in multiple offer situations, to increase your likelihood of getting that perfect house and calling it home! 

And perhaps most importantly, my services are free to you! The home seller pays my fees. You will have a very experienced realtor on your side. What's more, I'm a licensed attorney, and while I don't practice law anymore, I DO provide my buyers, during the purchase, with free real estate, tax, and contract advice as it relates to the purchase of your home. What more could you ask for?

What You Need to Know About the Process Itself

5 BASIC FINANCIAL FACTS YOU NEED TO KNOW

1. Get your credit in good shape.

We all know how to find our credit reports. If your credit isn't stellar, call me and I'll put you in touch with mortgage brokers who can help you do just that. Don't try this on your own; you might wind up doing the exact opposite of what is in your best interest. I've seen buyers pay down debt when they should've been putting those funds to better use as a down payment!

2. Get a mortgage broker lined up.

  Aside from checking your credit, this is really step number 1 and should be done before you even start looking for a home. You want to be sure you are searching for homes in the appropriate price range. When you have the proper guidepost from a good mortgage broker, you could realize you actually can have that extra bedroom you've always wanted, or that you really should limit the size of the back yard due to financial constraints you were not aware of.

I always say the mortgage broker is the weak link in the chain. A less than professional mortgage broker can cause your offer on a house to fail. Chose wisely. Only work with brokers who have good references from people you trust. I have brokers I've worked with for years, and who have great programs, and I typically recommend them to my clients. I am confident the house purchase will close when using my preferred brokers.

3. Good Faith Deposit.  

This is the first check you will write! It is standard to place into escrow an amount equal to 3% of the purchase price (the 3% is calculated based on your offer price but will be increased to 3% of the contract price if the price increases during negotiations.) This amount will be applied to your total funds due at the close of escrow. In the event that you legally terminate escrow, that 3% will be refunded to you. Be sure you legally and properly terminate escrow or you might lose that 3%! This alone is a great reason to hire the right Realtor to represent you in a purchase.

4. When do I need my down payment?

When you make an offer, you will need to provide, along with the contract, a copy of your bank statements which show you have the ability to make the down payment. So you will need such evidence up front. It's ok if the funds are not liquid (i.e. stocks and bonds or the like) as long as the source funds can be easily liquidated prior to the close of escrow.

5. Can my parents or friends help with the down payment? 

Yes of course they can and often do! You will just need a "gift letter" signed by the donor with their evidence of the gift funds. Lenders will have their own rules regarding gifts so its best to check with your mortgage broker before putting the gift letter together.

What Happens During Escrow?

You have been searching online and in person for a while now. You found a house, made an offer and it's been accepted! Congratulations! Now the real work begins, escrow! This is the hard part of the transaction, the reason you brought me in to represent you!

Here's how a typical transaction in Los Angeles unfolds right now 

Once your offer is accepted, you have 3 BUSINESS days to put your good faith deposit into escrow. That's usually done via a wire transfer but you can mail or drop off a personal check if you prefer.  The check does not need to be certified. Then you will have a specified amount of time in which to conduct your investigations of the property. This is typically anywhere from 10 to 17 days, depending on what we negotiated on your behalf during the contract negotiation. 

During this time period you will be hiring your "physical inspectors" to kick the tires of the house.  Unless the house circumstances suggest otherwise, I typically recommend a basic general inspection, then proceed to other more specific inspections, i.e., roof or plumbing, if the general inspector's report suggests it. On hillside properties, I always recommend a geological inspection. And in many cases I recommend a sewer inspection as well. I have a book of trusted service providers who you can hire to accomplish all these tasks.

At the end of the contractual 10-17 day period, we will either sign off on, or "waive" the inspections, or request a credit for work to be done by you after the close, or we request that the seller perform certain repairs. This is determined on a case-by-case basis. But you are not done yet!

We still need to sign off on appraisal and your loan, if you are getting a loan. The appraisal is ordered by the bank (on your nickel, of course) and typically the report is completed right around the time you have to waive your loan condition. The bank usually gives you an approval on the appraisal almost simultaneous with your loan approval. What happens if your appraisal comes in low? That's a more complicated question which is beyond the scope of this post, but there are ways we can get around that issue, so rest assured all is not over if that occurs!

Once you have loan approval and a proper appraisal, the inspections are done and you are sure you want the house, blemishes and all, it's time to waive all contingencies. I call this the "I really, really, really want to buy the house" document and I will not  let you sign it without your knowing approval. CAREFUL HERE: this is the point of no return. This step must be done correctly if you don't want to lose that 3% good faith deposit! Rest assured you will be in good hands with this Realtor when we get to that point in the transaction. My #1 goal is to get you over that finish line, or if you decide not to go over that finish line, to back you out legally and properly.

After all this is done, it should be smooth sailing to a smooth close of escrow and you can then put the key in the front door and start your new life!

Get to know Eileen Walsh 

The intelligent choice for Los Angeles real estate. 

Read Eileen's Bio
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