Simi Valley Real Estate Answer Man

Home Buying And Selling Tips and Tutorials

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Simi Valley Real Estate Answer Man - Home Buying And Selling Tips and Tutorials

What Is Escrow and What Does Escrow Do? Escrow Explained.

What is Escrow & What Does Escrow Do? 

In this Episode of the Southern California Real Estate Answer Man, I speak with Keith Parnel of All Valley Escrow. Below you will find a full explanation of the Escrow Process.

AllValleyEscrowLogo

Buying or selling a home (or other piece of real property) usually involves the transfer of large sums of money. It is imperative that the transfer of these funds and related documents from one party to another be handled in a neutral, secure and knowledgeable manner. For the protection of buyer, seller and lender, the escrow process was developed.

As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.

The escrow holder impartially carries out the written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion of the escrow.

The escrow must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing, and requests for payment for various services to be paid out of escrow funds.

If the transaction is dependent on arranging new financing, it is the buyer’s or the buyer’s agent’s responsibility to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. A real estate agent can help identify appropriate lending institutions.

When all the instructions in the escrow have been carried out, the closing can take place. At this time, all outstanding funds are collected and fees–such as title insurance premiums, real estate commissions, termite inspection charges–are paid. Title to the property is then transferred under the terms of the escrow instructions and appropriate title insurance is issued.

Payment of funds at the close of escrow should be in the form acceptable to the escrow, since out-of-town and personal checks can cause days of delay in processing the transaction.

The following items represent a typical list of what an escrow holder does and does not do:

  • serves as the neutral “stakeholder” and the communications link to all parties in the transaction
  • prepares escrow instructions
  • requests a preliminary title search to determine the present condition of title to the property
  • requests a beneficiary’s statement if debt or obligation is to be taken over by the buyer (Seller’s loan must be an assumable loan)
  • complies with lender’s requirements, specified in the escrow agreement
  • receives purchase funds from the buyer
  • prepares or secures the deed or other documents related to escrow
  • prorates taxes, interest, insurance (if applicable) and rents (if applicable) according to instructions
  • secures payoff statements from the lender that holds the Seller’s existing mortgage loan and secures releases of all contingencies or other conditions as imposed on any particular escrow
  • records the grant deed(s) and Deed of Trust (Buyer’s new loan) and any other documents as instructed
  • requests issuance of the title insurance policy
  • closes escrow when all the instructions of buyer and seller have been carried out
  • disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs
  • prepares final statements for the parties accounting for the disposition of all funds deposited in escrow. (These are useful in the preparation of tax returns.)

The Escrow Holder Does Not:

  • offer legal advice
  • negotiate the transaction
  • offer investment advice

How Should I take ownership of the property I am buying?

This important question is one California real property purchasers ask their real estate, escrow and title professionals every day. Unfortunately, though these professionals may identify the many methods of owning property, they may not recommend a specific form of ownership, as doing so would constitute practicing law.

Because real property is among the most valuable of assets, the question of how parties take ownership of their property is of great importance.  The form of ownership taken—the vesting of title—will determine who may sign various documents involving the property and future rights of the parties to the transaction.  These rights involve such matters as: real property taxes, income taxes, inheritance and gift taxes, transferability of title and exposure to creditor’s claims.  Also, how title is vested can have significant probate implications in the event of death.

Buyers should carefully consider the manner in which title will be held.  Buyers may wish to consult legal counsel to determine the most advantageous form of ownership for their particular situation, especially in cases of multiple owners of a single property.

What are the Common Methods of Holding Title?

Sole Ownership

Sole ownership may be described as ownership by an individual or other entity capable of acquiring title.  Examples of common vesting cases of sole ownership are:

1. A Single Man or Woman, an Unmarried Man or Woman or a Widow or Widower:

A man or woman who is not legally married or in a domestic partnership.  For example:  Bruce Buyer, a single man.

2.  A Married Man or Woman as His or Her Sole and Separate Property:

A married man or woman who wishes to acquire title in his or her name alone.

The title company insuring title will require the spouse of the married man or woman acquiring title to specifically disclaim or relinquish his or her right, title and interest to the property.  This establishes that both spouses want title to the property to be granted to one spouse as that spouse’s sole and separate property.  The same rules will apply for same sex married couples.  For example:  Bruce Buyer, a married man, as his sole and separate property.

3.  A Domestic Partner as His or Her Sole and Separate Property:

A domestic partner who wishes to acquire title in his or her name alone.

The title company insuring title will require the domestic partner of the person acquiring title to specifically disclaim or relinquish his or her right, title and interest to the property.  This establishes that both domestic partners want title to the property to be granted to one partner as that person’s sole and separate property.  For example:  Bruce Buyer, a registered domestic partner, as his sole and separate property.

CO-OWNERSHIP

Title to property owned by two or more persons may be vested in the following forms:

1.  Community Property:

A form of vesting title to property owned together by married persons or by domestic partners.  Community property is distinguished from separate property, which is property acquired before marriage or before a domestic partnership by separate gift or bequest, after legal separation, or which is agreed in writing to be owned by one spouse or domestic partner.

In California, real property conveyed to a married person, or to a domestic partner is presumed to be community property, unless otherwise stated (i.e. property acquired as separate property by gift, bequest or agreement).  Since all such property is owned equally, both parties must sign all agreements and documents transferring the property or using it as security for a loan.  Each owner has the right to dispose of his/her one half of the community property by will.  For example:  Bruce Buyer and Barbara Buyer, husband and wife, as community property, or Sally Smith and Jane Smith, registered domestic partners  as community property.  Another example for same sex couples:  Sally Smith and Jane Smith, who are married to each other, as community property. 

2.  Community Property with Right of Survivorship:

A form of vesting title to property owned together by spouses or by domestic partners.  This form of holding title shares many of the characteristics of community property but adds the benefit of the right of survivorship similar to title held in joint tenancy.  There may be tax benefits for holding title in this manner.  On the death of an owner, the decedent’s interest ends and the survivor owns all interests in the property.  For example:  Bruce Buyer and Barbara Buyer, husband and wife, as community property with right of survivorship, or John Buyer and Bill Buyer, husband and husband,  as community property with right of survivorship.  Another example for same sex couples:  Sally Smith and Jane Smith, registered domestic partners, as community property with right of survivorship.

3.  Joint Tenancy:

A form of vesting title to property owned by two or more persons, who may or may not be married or domestic partners, in equal interests, subject to the right of survivorship in the surviving joint tenant(s).  Title must have been acquired at the same time, by the same conveyance, and the document must expressly declare the intention to create a joint tenancy estate.  When a joint tenant dies, title to the property is automatically conveyed by operation of law to the surviving joint tenant(s).  Therefore, joint tenancy property is not subject to disposition by will.  For example:  Bruce Buyer, a married man and George Buyer, a single man, as joint tenants.

Note:  If a married person enters into a joint tenancy that does not include their spouse, the title company insuring title may require the spouse of the married man or woman acquiring title to specifically consent to the joint tenancy.  The same rules will apply for same sex married couples and domestic partners.

4.    Tenancy in Common:

A form of vesting title to property owned by any two or more individuals in undivided fractional interests.  These fractional interests may be unequal in quantity or duration and may arise at different times. Each tenant in common owns a share of the property, is entitled to a comparable portion of the income from the property and must bear an equivalent share of expenses.  Each co-tenant may sell, lease or will to his/her heir that share of the property belonging to him/her.  For example: Bruce Buyer, a single man, as to an undivided 3/4 interest and Penny Purchaser, a single woman, as to an undivided 1/4 interest.

Other ways of vesting title include as:

1.    A Corporation*:

A corporation is a legal entity, created under state law, consisting of one or more shareholders but regarded under law as having an existence and personality separate from such shareholders.

2.     A Partnership*:

A partnership is an association of two or more persons who can carry on business for profit as co-owners, as governed by the Uniform Partnership Act.  A partnership may hold title to real property in the name of the partnership.

3.     Trustees of a Trust*:

A Trust is an arrangement whereby legal title to property is transferred by a grantor to a person called a trustee, to be held and managed by that person for the benefit of the people specified in the trust agreement, called the beneficiaries.  A trust is generally not an entity that can hold title in its own name.  Instead title is often vested in the trustee of the trust.  For example:  Bruce Buyer trustee of the Buyer Family Trust.

4.       Limited Liability Companies (LLC)*:

This form of ownership is a legal entity and is similar to both the corporation and the partnership.  The operating agreement will determine how the LLC functions and is taxed.  Like the corporation its existence is separate from its owners.

*In cases of corporate, partnership, LLC or trust ownership – required documents may include corporate articles and bylaws, partnership agreements, LLC operating agreements and trust agreements and/or certificates.

Remember

How title is vested has important legal consequences and tax consequences.  The tax consequences may be different for same sex legally related couples.  You may wish to consult an attorney or tax advisor to determine the most advantageous form of ownership for your particular situation.

————–

FOOTNOTE (1): Note: Registered domestic partnership status is not limited to same sex couples.

Note: Under current law, California recognizes same sex relationships that are legally performed or entered into in California and in other states and other countries.  This recognition includes same sex marriages and other types of legal unions that are similar to registered domestic partnership status. 

For our purposes in the discussion we will use the title “registered domestic partner” in examples, the term “domestic partnership” will be used to include both California registered domestic partnerships and all non-marital legal unions that are recognized in California (i.e. Civil Unions, etc.). 1

What services will I be paying for when I pay closing costs?

You will usually be paying for such things as real estate commissions, appraisal fees, loan fees, escrow charges, property taxes (depending on the time of year you are closing escrow), homeowner’s insurance premium for 1 year, title insurance premiums (Owners & Lenders), pest inspections, natural hazard report, homeowner’s association transfer fees, document fees & dues (if applicable), and any other City/County or State mandated inspections/reports that may be part of your real estate contract.  These fees are requested approximately 48-72 hours prior to your close of escrow date.

How much should I expect to pay in closing costs?

The amount you pay for closing costs will vary; however, when buying your home and obtaining a new loan, an estimate of your closing costs will be provided to you pursuant to the Real Estate Settlement Procedures Act after you submit your loan application. This disclosure provides you with a good faith estimate of what your closing costs will be in the real estate process. An itemized list of charges will be prepared upon escrow holder’s receipt of the buyer’s loan documents (for both the buyer & the seller) which is typically 1 week prior to the close of escrow and a final statement is issued to all parties when you close your transaction (records) and the buyer takes title to your new property.

Will I be allowed to write a personal check to cover my closing costs?

Your closing funds should be in the form of a wire transfer, to the escrow company or the title company as directed by your escrow officer in the amount requested by your escrow officer. A cashier’s check may be accepted but this should be verified with your escrow officer prior to obtaining the cashier’s check as this may delay the closing or may be unacceptable to the escrow or title company because of CA state requirements.

All of this information was prepared and made available to me by Keith Parnel and All Valley Escrow. Thank you for all of the hard work.

You can contact All Valley Escrow at www.allvalleyescrow.com with offices near you.

Simi Valley Office
3202 E Los Angeles Ave Suite 30, Simi Valley Ca. 93065
Phone: (805) 584-9596   
Fax: (805) 581-1854

Camarillo Office
2301 Daily Drive Suite 301, Camarillo, Ca. 93010
Phone: (805) 388-1901   
Fax: (805) 388-1968

Westlake Village Office
4165 E. Thousand Oaks Blvd. Suite 160, Westlake Village, Ca. 91362
Phone: (805) 494-1027   
Fax: (805) 494-4768

Santa Clarita Valley Office
23822 Valencia Blvd Suite 211, Valencia, Ca. 91355
Phone: (661) 705-1045   
Fax: (661) 705-1049

 

 

 

 

What does it Cost a Homeowner to Sell a Home in California?

 

Real Estate Podcast

Real Estate Podcast

What Are Home Sellers Closing Costs and what do they include?

This article is a tutorial for home sellers. Most homeowners have purchased a home and know what is involved in the buying process, but many are unaware of what is involved in selling their home. In this tutorial, I will break down the costs the home seller pays when selling their home.

Let’s Start with a Net Sheet

When a Real estate Agent comes to list your home, along with a killer listing

Sellers Net Sheet

Sellers Net Sheet

presentation, the agent should have a net sheet with them.  A net sheet is a breakdown of seller costs.  It’s called a net sheet; because it shows approximately how much the seller will be netting or receiving from the sale of the home.

Let’s start by telling you that to sell your home using a Real Estate Agent; in much of LA County and Ventura County, The home seller will pay between 6-7% of the purchase price of the home in total fees and commissions.

So what do these include?  Well they are as follows…. 

1. Commission

2. Real Estate Brokerage Processing Fees

3. Title Fees

4. Escrow Fees

5. Governmental Retrofit

6. HOA Transfer and Document Fees

7. Termite Inspection

8. Flood Certification/Where applicable

9. Home Warrantee

10. Request for Repairs

11. Natural Hazard Disclosure Statement

12. County Transfer Taxes

13. Paying off Mortgages and Liens

In order to demonstrate, we will use a $ 500,000 home as an example.

Commissions

The Listing Broker‘s/Real Estate Agent’s , commission varies as to geographical location but for most transactions in LA and Ventura County,   5-6 % is the most common commission charged. This translates in the case of a 5% commission  to 2 ½ % to the Listing Broker, that is the agent the seller hires to sell the home, and then 2 ½% to the selling broker, or the agent who represents the home buyer. It is a little confusing but the selling agent is the one who brings the buyer.

In some cases, the listing agent will make a deal with the home seller by offering a reduced commission if they can find and represent the buyer and well as representing the Home seller. This situation is called dual agency and as I said, dual agency can sometimes save the home seller as much as ½%-1%. This type of arrangement for a discount is negotiated at the signing of the listing agreement.  Dual Agency has its advantages as well as its disadvantages. We will discuss this in another article.

Now let’s take that $500,000 property. If the commission is agreed upon to be 5%, that will come to $25,000, $12,500.00 to each side of the transaction. I will talk in another episode of the Real Estate Answer Man about what exactly the Realtor does to earn that commission, so look for that episode and download it when you get the chance.

Brokerage Processing Fees

Most Real Estate offices have a processing fee which will set you back from $300-$500. This is the cost of running the transaction through the Real Estate Office.

Title Charges

The home seller’s portion of Title Insurance will cost approximately $ 1,320.00 on that $500,000 home. Title insurance is an insurance policy the seller buys to insure a clear title with no liens from individuals, government entities or claims of ownership by others.  Included in Title Fees, you will also see a wire fee and other Title fees totaling an additional $100.

Escrow Fees

Both sellers and buyers pay their own escrow fees. On that $500,000 home, Escrow fees will cost $1,500. That figure is arrived at by taking a base fee of $ 250.00, and adding a charge of $2.50 per thousand of the sale price of the home.

In addition to that fee, you will be paying a documentation fee of $75.00, and the seller also pays a loan payoff fee of $50.00 per loan payoff. Also be prepared to pay a wire fee of $25.00 and an archive fee of $50.00.  If you need a primer on what escrow is all about, check out my interview with Keith Parnell of All Valley Escrow.

Governmental Retrofit/LA County

The seller will be required to pay for a Retrofit certification to be performed, on homes sold in Los Angeles County. There are companies you can hire to do the certification, and the costs to the seller depend on what needs to be done. The city wants to make sure you have water saving toilets and shower heads; they want make sure the water heater is properly installed and strapped in for those earthquakes we get to enjoy from time to time and speaking of earthquakes, an emergency shut off valve needs to be installed at your gas meter. The seller needs to have a CO detector installed when selling a home in California as well as required well-placed smoke detectors, included in the certification.

Retrofit can get expensive for the seller as you can see.  If you need to install new low flush toilets or if you have to strap a water heater or install a new earthquake Gas shut-off valve, those could cost you a pretty penny.  I have had retrofit costs of as low as $95.00, but as I have just explained, that could go south fast and run into lots more money if major items need to be taken care of. For example, an earthquake gas shut-off valve installed can cost $300-$400

HOA Transfer Fees

HOA transfer fees and HOA Document Transfer Fees only apply when you have HOA’s involved. These documents will vary but some HOA Docs can run as much as $300-$400. The buyers are going to be eager to get these so they can review them to determine what will be expected of them by the Home Owners Association, and in turn, decide if they want to buy the home with the particular HOA regulations.

Termite Inspection

A termite inspection and work needed to be performed for Termite

Sample Wood Pest Addendum

Sample Wood Pest Addendum

clearance is the sellers’ responsibility. We will talk about the Wood Pest Addendum, found as a part of the California Purchase Agreement, but a termite inspection will generally set the seller back about $85.00-$100. If work needs to be done, for instance if the house has dry wood termites, the home will most likely need to be tented and fumigated.  Termite work is usually a cost incurred by the home seller. Other wood pest related conditions like dry rot, subterranean termites and fungus are items that are generally handled by the seller as well. Now I know what you are saying sellers, you are saying,  I thought you can sell the home as is!  Well that’s true and in fact, if the buyer of your home is buying in cash, then a wood pest can be skipped. However, if there is a loan involved, the bank or their lender is going to want to see a clear Termite report before they will fund a loan. The buyer isn’t going to do those repairs before owning the property, hence, the seller usually pays for the most costly part of the termite repair. That repair work includes the cost of tenting or drilling into a slab and pumping in gas for the subterranean variety of termite, replacing damaged wood and so on. I’m going to bring on a real Pest Control expert to talk termites and other varmints in another episode of the Real Estate Answer Man so stay tuned for that.

Flood Certification

In many parts of Simi Valley and recently in many parts of Ventura and Los Angeles County, there are 100 year flood zones, and F.E.M.A. is expanding their reach, causing insurance companies to charge outrageous premiums for this 100 year flood zone.  F.E.M.A.  seems to be attempting to prop themselves up by using California money to take care of others who live in hurricane areas and along the Mississippi  and Missouri rivers where floods actually occur more than every 100 years. Okay just don’t get me started. There is new law on the books where the home seller has to have his home certified so as to show how much it will cost the home buyer to buy flood insurance. This is only necessary if indeed flood insurance is called for on the particular property for sale. This flood certification can end up costing the seller $500 for the certificate. The bad news is that this situation can end up causing headaches for a seller trying to sell their home. Stay tuned for flood insurance updates.

Home Warranty

There is a line in the Residential Purchase agreement that gives the buyer the option to ask for a Home WarrantyYou as the home seller will be asked by the buyer to purchase a home warranty plan. This policy is not required, but generally speaking, paying for a home warranty is a good faith gesture by the seller to home buyer. The seller will be asked to purchase a home warranty plan for one year. These warranties generally cost from $350-$550. This warranty is paid through escrow out of the proceeds from the sale of the home. Some sellers ask me if they have to pay for the warranty, and the answer is no, in fact a buyer can ask for whatever they want, but if you read the Residential Purchase Agreement, it plainly states that the property for sale is as is… but as I said, when the seller purchases a home warranty, they are showing some good faith to the buyer.

Transfer Taxes

Home sellers will be paying State and local Transfer Taxes. In LA County as well as Ventura County, these transfer taxes will generally set the seller of a $500,000 home back approximately $ 550.00.

Natural Hazard Disclosure

In the state of California, a Natural Hazard Report is required to be

Natural Hazard Report Check List

Natural Hazard Report Check List

commissioned for the buyer. NHD reporting companies charge approximately $85-$125 for these reports .These reports are very detailed and are interesting to read.  They include information regarding flood zones, earthquake faults, Toxic Mold information, Megan’s Law, Airport influence and their proximity and so on. We will be talking with a representative from an NHD firm in an upcoming episode of the Real Estate Answer Man, so stay tuned.

Request Foe Repairs

Request For Repairs                      

 

Requests for Repair

The California Residential Purchase Agreement says plainly on page 4 Slide2paragraph 9 that unless otherwise agreed: the Property is sold (a) in its PRESENT physical (“as-is”) condition as of the date of acceptance. That is all well and good, but the buyer has the opportunity to perform inspections and request repairs or credit from the seller to compensate for repairs needed on the property.  The seller has the right to refuse to repair or compensate for repairs, but sellers need to know that in most cases, buyers will be requesting repairs and they need to be prepared to address those early on in the transaction.

Paying Off the Mortgage      

If the seller has not paid for the home in full, the biggest and most important part of the closing costs are going to be paying off the balance of your loan or Mortgage. Escrow will get the totals for the loan payoff from the seller’s bank including fees to satisfy and payoff the loan before the seller sees any of the money from the sale of their home. If you happen to have any liens on the house including tax liens or otherwise, those obligations will need to be settled as well.

So let’s look at the totals, and at the same time, summarize the costs of selling a home with a sale price of $500,000.

Totals

Commissions at 5%     = $25,000

Broker Processing Fee =       350

Escrow Fees =                      1,600

Title Insurance =                 1,420

Transfer Taxes =                     550                                               

Retrofit =                                 100

Termite Inspection =             100

HOA Documents =                    ?

Home Warranty =                  450

NHD Report =                           95

Total                    =           $29,665      Representing a cost of 5.921% to the seller                 

Refunds

Property Tax Refund

The seller needs to pay their property tax up until the date when they leave the property.  If the seller has prepaid their property taxes which often are the case, they will get the prorated money back from the State.

HOA Pro rated dues will be refunded for those of you who pay HOA fees. If you have pre-paid your fees, you will be getting back some of that money.

Escrow Pad

Escrow will often overestimate the costs of doing business in order to have a pad, enough money where they don’t have to go running to the seller asking for more money. That pad is generally around $500. You may get some of that back.

Additional Costs to the Seller

Not everything can be calculated as far as costs to the seller because there are items like I have already described to you like requests for repairs, unforeseeable termite damage and costs to remediate that damage which can be pretty expensive in some cases.  Don’t forget the possible costs of having to do some costly Retrofit work as well.

In some cases, the Real Estate Agent may suggest the seller make some repairs or improvements before the home goes on the market. That will be another expense to the seller as well but that kind of expense will go a long way towards getting a better price on the home.  With that said, the seller does not have to make any improvements that will cost them money and create a monetary hardship. Often those repairs can be worked out at the close of escrow in the form of a credit to the buyer. That way the seller can in essence have the buyer do the repair after close of escrow with no out of pocket cost to the seller until after the sale of the home.

So that is about all I have for you in this episode of the Real Estate Answer Man What does it Cost a Homeowner to Sell a Home.  I hope that all of you home sellers have a better idea as to what it costs, and why. Thanks for listening all the way through. Please visit my blog at www.Barrykessler.com or www.simivalleyrealestateanswerman.com. Check out my YouTube videos, get links to the things I talk about here on my podcast, the Southern California Real Estate Answer Man Show, and please download my other podcasts and tutorials.

Remember I am a Real Estate Agent for real!

If you are selling or buying a home in Southern California, especially in the San Fernando Valley, Burbank, Glendale, Hollywood, Simi Valley, Moorpark and East Ventura County, the Kessler Team will be able to help you with the latest Real Estate selling and buying tools in the industry. We are not challenged by technology and we also bring along our experience in the Real Estate business, to assist you in buying or selling a home.

Thanks for the listen, and I hope to be helping you sell your home for the best price and in a timely manner in the near future.  Give me a call at 818-426-6415. Join me again on another episode of the Southern California Real Estate Answer Man Show.

 

Who Are Mortgage Brokers and Is It a Good Idea To Use One Instead of a Bank When Buying A Home?

Is it a good Idea to see a Mortgage Broker instead of a big bank when buying a home?

Many people would say yes.

Tim Love of CFC Mortgage Bankers, is a terrific Mortgage Broker and one who I have used and many of my clients have used He is a Broker who I highly recommend.CFC_NuVertLogo

Tim will tell you that a Mortgage Broker is a great way to go. No surprise there, but you will be surprised at all of the tools and programs he has for all types of borrowers.

Tim Love, points out the personal service a borrower may get from a Mortgage Broker over the service a bank might offer. The following audio adds some insight into what a Broker may be able to offer home buyers.

Contact Tim at …http://www.cfcmb.com/staff/Timothy%20Love/

 

What Are Home Buyer Closing Costs and How Much Will They Cost?

RE_Answer_Man_albumart2_300x300 In this post, I am going to explain the term closing costs. What are closing costs and how much will they cost you? What are these closing costs comprised of and why are you paying them?

Well, sellers and buyers pay closing costs but in this post, we are just interested in the closing costs paid by the buyer.

Generally speaking, if you are getting financing, a typical buyer is going to pay approximately 3% of the sale price in closing costs. That is above and beyond the down payment mind you.

So let’s take a home that costs $500,000

Escrow Fees will cost generally $200 plus $1.75-2.00 per 1000 so for a home costing approximately $500,000 the escrow fee will cost about $1,200.

You will be paying for Title Insurance. If you are planning on financing the home, the bank will require you pay for Title Insurance. Yes, you are right that the seller should be paying for Title insurance, but as a buyer the bank wants you to pay their part of the policy to protect them and you. So for a home that costs $500,000, that policy will cost about $1,000.

Another item you will be paying are Property Taxes. In Ventura County, property taxes will set you back 1.25 % of the purchase price on an annual basis. During escrow you will be required to pre-pay some of the property tax. It could be as much as 6 months prepaid, so that could be some money, for that $500,000 home that will be $ 3,125. Then for as long as you own that home, you will be paying your property taxes twice a year so you will be paying that $3,125.00 in November, and then again in April. November 1st and April 10th.

Next you will need to pay your property insurance in advance. That’s for fire and liability and you will be required by the lender to pay that in advance. That policy on a $500,000 home will set a buyer back about $900-$1,200 per year. We are talking about California here and that means Earthquake country. Many of us have Earthquake Insurance through the California Earthquake Authority. That Earthquake policy will set you back on the half million dollar home, approximately $1,000-$1,500 per year over the regular insurance coverage.

So what is next? What other Home Buyer Closing Costs are there? Well if you are taking out a loan on this property you are going to have to pay fees to the lender and these things they call points. Now, if you are not taking out a loan but are paying in cash, you won’t be paying all these fees, and you won’t have to pay for that Title insurance we were talking about earlier that you have to pay for the bank. So what are these fees and points and how much will those cost you?
The points are a percentage of the money borrowed so lenders are generally going to charge 1-2 points or 1-2 percent of the loan total. Then you will have to pay an appraisal fee of $450-$500, a loan tie-in fee, a credit report fee, a few other fees thrown in. Those will be added to the 1-2 percent you will be paying in “points”.
So let’s say you are financing $400,000 on this $500,000 purchase, you will average approximately $6,000-$7,500 for all of the lender fees.

You will be paying for inspections. A home between 2-2500 square feet will cost between $350-$500 for a full professional home inspection. I will be talking with a home inspector in one of my up-coming episodes of the Southern California Real Estate Answer Man so look for that. So what other inspections will you be doing that will set you back some money? Well, if the home has a chimney, you may want to spend some money having that individually inspected. You see, a home inspection company may see something wrong with a chimney, but they don’t tell you what an expert would tell you. That expert will charge you around $350 for that inspection. You may want to have the sewer line inspected with a camera to see if it is clogged, damaged or cracked. That inspection will set you back about $350. So we are about at $1,000 for your inspections. The general inspector may suggest that you should have other items looked at more closely like your roof, or your HVAC system, plumbing and the like. Now these things can cost you nothing to have checked over because you are going to have repairmen and craftsmen come in to give you estimates and costs.

So there you have it, As I mentioned at the beginning of this post, the closing costs for a 500,000 home are going to be setting you back approximately 3% of the purchase price or around $15,000.
If you are buying your home with cash, you will pay about half that amount, like $7,000 instead of $15,000. A substantial difference but hey, not all buyers can pay cash.

We can talk about having the seller pay some or all of these closing costs, but that will be another episode of the Southern California Real Estate Answer Man.
And that is it for this lesson from me, the Real Estate Answer Man. Thank you for reading the whole way through. Stay tuned for and download all of my other pod-casts. In the meantime, just visit my website at barrykessler.com, or southerncalifornarealestateanswerman.com and see my blogs, listen to my pod-casts and watch my YouTube videos.
Remember, I am a real live Real Estate Agent, I work with my wife Debra, also a top producer at Troop Real Estate. When you work with us, you get two agents for the price of one. If you are looking to buy or sell a home in Southern California, especially in the San Fernando Valley, Simi Valley Moorpark, Thousand Oaks and Agoura, The Kessler Team is here to represent and serve you with fantastic service, and all of the finest tools in the industry.

I hope I helped you understand what are closing costs and how much will they cost you. 
Remember to check out our website and blog at barrykessler.com.
Thanks for reading along.
See you in your next home!

 

How to Find A Real Estate Agent, a Tutorial

 

RE_Answer_Man_albumart2_300x300Finding a Real Estate Agent

 

This is part two of a multi -part tutorial, The Home Buying Process, where you will get to learn more about choosing the right Real Estate Agent.
Where do these agents come from?
How do you find a Realtor?
Well, you may meet an agent at an open house, and this is good because At an open house you can see the agent in

action. You can take note as to how much preparation the agent has done for the open house. In your opinion, has the agent done a good job for the seller they are representing? That bodes well for an agent, being seen as responsible and working hard for his or her client. Does the agent have the type of personality you can get along with? You may potentially be spending lots of time with this person so make sure you mesh well.

for sale

Open houses are just one way of finding an agent.
Agents come to us in many other ways as well. They may be referred to you through a friend or family member. Maybe this agent is a friend of yours. Maybe you found them through their website or you got their number off of a For Sale sign.

 

Whichever way you find your agent, I have some suggestions that will make your home buying process easier and hopefully more fruitful.

 

1) First of all, the Agent needs to be familiar with the area you are purchasing in. A local agent will know the neighborhoods, the home styles, floor plans and builders in the tracts, as well as tracts that may have problems. They will know the schools the markets the public services and so on in the city/neighborhoods, you are looking in. In many cases, the agent will have already been inside that house you want to look at.

 

2) Make sure you are working with a full time agent. An agent who works full time in the Real Estate Industry will be more knowledgeable than most part timers. Real Estate contracts change at least twice a year here in California and there are always changes that need to be pointed out to buyers. A full time agent will also be more familiar with the current inventory of homes and will also have a good grasp of the current market trends as well as the proper tools needed to transact a Real Estate Purchase agreement.

 

3) Make sure your agent reads through the Residential Purchase Agreement with you, at least for the first offer you write. These agreements are full of all sorts of legal mumbo-jumbo that need to be explained to the home buyer. Your Agent needs to be patient enough to go through it line by line if necessary. After that, as long as you understood the first contract, the agent can even email you the contract for you to sign electronically if they are using Doc-u-sign or a similar e-signing program.

 

4) And lastly, make sure you find an agent that works for you. Let your agent know in advance what you expect of them. If your agent isn’t responsive and isn’t answering your calls or emails, maybe that agent isn’t for you.

 

AGENTS AND DOGfor web

Barry & Debra Kessler Troop Real Estate with Dog Jett

As long as I’m on the subject, if you are looking to buy or sell a home in Simi Valley, Moorpark or Thousand Oaks, in The San Fernando Valley Burbank or Hollywood, I am a real live Real estate Agent and I would be pleased to assist you in your Real Estate endeavors. I work along with My lovely wife Debra Kessler, also a Top Producing real estate agent with Troop Real Estate. We work with the latest tools in the Real Estate Industry; we are tech savvy agents. We produce our own Podcasts and You Tube videos. We use You Tube to market your home. The Kesslers have the right amount of experience you will need to have a smooth and successful real estate transaction. We are backed by the largest and most successful Independent real estate broker in Ventura county. Troop real estate is a full service brokerage with Escrow, Title and Mortgage bankers as well. And Debra and I have a support team that would make others blush. So what I’m saying is, we want to be your Real Estate Agents for Life. Give us a call at 818-426-6415 and visit our website at www.barrykessler.com, watch my YouTube Videos, listen to all of my podcasts and read my blogs about real estate buying and selling as well as places to visit in Southern California. And while you are at it, peruse the properties on my website and have fun. Start Music
I have restaurant reviews as well as neighborhood reviews and information. If you have any questions or if you have a question that you would like me to answer in an upcoming podcast, send me an email and maybe your question will become my next episode of the Real Estate Answer Man Show.
Until then, happy house hunting and I hope to be handing you the keys to your new home.
Thanks for listening, and please join me again for another episode of the Real Estate Answer Man Show.

 

 

 

The Home Buying Process, A Tutorial

RE_Answer_Man_albumart2_300x300The Home Buying Process

Many People make this honest error when they start looking for a home. They go to open houses and start kicking the tires without taking the most important step in the buying process and that is… See a lender!

You have to see a lender first to determine what your house buying budget is. Imagine walking into a home and falling in love with it only to find later on that it is priced 100K more that they can afford.

If you have no money for a down payment on a home, you can’t buy one unless you are a veteran so if you want to buy a home, you need money!

Now if you have been a responsible individual who has managed to put away enough money to buy a home outright, step 2.

Who are the lenders

bank-of-america-logo

chase-bank-logo-5841    wells-fargo-logo

 

1: Big banks like B of A, Chase, Wells Fargo

2: Credit Unions

3: Mortgage Brokers

CFC_NuVertLogo

All of these lenders want specific information from you

1. Income Tax Returns: 2 Most Current
2. W2’s for the most Current Years-All Jobs
3. Most recent paystub (covering 1 month)-All Jobs
4. 2 most recent bank statements- All Pages (All Accounts: Checking, Savings, CD’s Retirement Accounts Etc.)
5. If you already own a property-current mortgage statement, hazard insurance declaration page.

They will want your name, Social Security # and Date of Birth as well as your current address. If you are married, they want your spouse’s information.

Find an Agent

1) Open houses

2. Friend or Family member (be sure the agent does real estate full time rather than part time) and make sure they know the area well.

3. Referral

4. Use Barry and Debra Kessler for homes in Simi Valley, Moorpark, Thousand Oaks, Calabasas, the San Fernando Valley, Burbank and Hollywood.

Home Search

You and your new agent should get together either in person or over the phone, and talk about what you want your new home to be like. How many rooms, baths, a fixer or move in ready. What neighborhood and so forth. From that discussion, your agent will set up a customized internet search with your specific wants and needs plugged in and as the properties come on the market on the MLS, that meet your custom criteria, you will start receiving them in your email inbox.

You should arrange with your agent, a time when you can go on a house tour, looking at a few homes that meet your criteria.

Make an offer

Let’s say to simplify things you find the home of your dreams, what next? It’s time to write an offer. You will sit down with your agent and go over the Residential Purchase Contract. They should go over it page by page and explain what it all means. By this time your agent should have your pre-approval letter from your lender, and also a copy of bank statements showing funds sufficient to cover you down payment. My wife Debra and I do a few other little things that help our buyers get noticed.

So again to make this simple let’s say that your offer is accepted by the seller what next?

Open Escrow

So what is escrow and what do they do? Escrow is a third party that works on behalf of the seller and buyer. The escrow company will issue escrow instructions where they basically break down the purchase contract into simple to follow directions, assigning what is expected from each party by breaking it down into plain English. Each party gets a copy of the instructions and it is wise to read them and understand them. If you see something that doesn’t look right, let your agent know and put it in their lap. They are going to review the contract to see if a mistake was made by the Escrow Company, or if it is a contract issue that can be amended.

Now what else does Escrow do?

1. Look for and deposit your check or wire for the deposit you put on the house, and keep it in safe keeping.

2. Order a preliminary title report.

3. Order a Natural Hazard Report

4. and contact the home warranty company

Inspections are next

You have, according to the California Real Estate Purchase agreement a default period of 17 days to perform your physical inspections on the home. This inspection, along with the appraisal performed by your lender are out of pocket expenses incurred by you. The physical inspection can run from $250-$600, and a typical appraiser will charge $400-$500.

What other inspections should you do?

Now it’s time to do your due diligence. This is your responsibility, not your agents, not the seller, it’s you. So what can you do on your own?

1. Check the schools if you have kids

2. Maybe you want to see the Megans List to see if someone special may be living next door.
3. Go to the city building department and pull a permit history on the home. It is available to the public for a small fee.
4. Have a specialist look at key parts of the inspection where there may be expensive problems like the HVAC system or the roof.

5. Maybe you want to check out the street during different times of the day or night to see what is going on in your neighborhood to be.

6. You are also entitled to a final walkthrough, no later than 5 days before the close of escrow.

The Closing Process

We have almost come to the end of the road here in the home buying process. This is the closing process and it goes a little like this….

1. You have been jumping through all kinds of hoops and finally your loan is approved by the underwriters at the bank and the loan papers or Documents, referred to as Docs, are drawn up.

You will be meeting with an escrow officer , a Notary Public, and signing the documents. Next, the documents are sent back to be reviewed, to see if any mistakes were made like signatures missed and so on, then depending on the lender, you will wait for 1-3 days for review, then, the loan will fund. That’s not the end of the road, you will have to wait one more day for the keys to your home because the Purchase will need to be documented at the County Recorders office. That could happen anytime between 9 and 5, but you will get the keys to your castle. Finally.

And that is it for this first lesson from me, the realestateanswerman. You made it through the first episode. Thank you for listening the whole way through. Stay tuned for and download all of my other podcasts. You can find me at barrykessler.com. Remember, if you are looking to buy or sell a home in Southern California, especially in the San Fernando Valley, Simi Valley Moorpark, Thousand Oaks and Agoura, The Kessler Team is here to serve you with fantastic service, and all of the finest tools in the industry.

Remember to check out our website and blog at barrykessler.com.

Thanks for listening.

See you in your next home!