Advice for Sonoma County Real Estate Buyers

This advice column is a basic description of facts and situations a buyer must be keyed into to feel in control of their purchase. Each transaction differs but it could be reassuring and helpful for you to have some general guidelines as to how this exciting process unfolds. The approach to offering on a short sale unravels somewhat differently, as does offering on a foreclosed property. We will deal with these processes later on.

First and foremost, select your real estate agent carefully. Using multiple agents to view property will eventually backfire on you and you won't get the devotion and service you will get through one agent who knows you are depending on her/him to find the property. If an agent realizes you are using multiple agents' services, you will not get that important phone call when the property you've been looking for hits the market. Agents are paid from the seller's proceeds only when a sale concludes, so they do like to feel that you are using only them for property showings and will eventually be writing the offer with them. This individual will be your counselor and confidant over the course of your search and ultimate purchase. An agent who lives and works in Sonoma County will have more of a handle on neighborhoods, local issues and disclosures and be in a position to inform you much more specifically about that market and its values.

Once you have chosen your agent, ask for a list of mortgage brokers who have had a successful lending history in Sonoma County. A mortgage broker will help you decide which loan program is best suited to you. How much will your initial investment be (downpayment), how much of a loan will you be assuming and at what interest rate and how many "points" will you be paying. You will decide with your mortgage broker what your comfort and financial levels are in terms of purchase price so you don't spend time viewing properties above these levels.

Now that these financial boundaries have been defined, ask your agent to set up an itinerary of homes to view which correspond to the parameters you have both set. We have noticed that a property usually "speaks" to a buyer the minute one meets the other. If you intend to live in this house, the feeling you get when you enter for the first time will only get better with time. Of course, emotions aren't everything. You need to know what challenges this property physically comes with. More on that later.

We believe in making an offer on the property of your choice as quickly as possible for a good reason. Asking too many questions and waiting for the answers before being in contract may leave you on the outside looking in. While you're "processing", another buyer is having her/his offer reviewed and possibly accepted. Don't put yourself in this situation. A real estate purchase contract in California will provide you with an inspection period, allowing you time to collect information from multiple sources and you will have the right to approve or disapprove of these findings during your inspection period. Should you decide that discoveries during your inspection period make you change your mind about wanting to purchase this property, in most cases you are entitled to have your deposit refunded as long as you withdraw your offer within the time limits of your "physical inspection contingency period".

You found the house! What's next?

Your agent will write up a purchase agreement filling in all of the particulars such as:

Who the purchasers are.
What the offering price is.
How much are you putting down.
What is the loan amount and are there any points.
How much earnest money should be offered.
Will there be an increased deposit in the course of the escrow.
How long will the escrow be; that is, when will you own the house.
Do you have to sell another house to purchase this one (known as a "contingency offer".)
Which Title Company will be used.
Is there a loan contingency and if so, how long will you have to pull you loan together.
How long an inspection period is appropriate.
In the event of a dispute with the seller after close, will you use arbitration or not.
What expenses will the seller pay for during escrow or at close and what expenses will you typically have as the buyer.

Your agent will explain your options with regard to all of the above and will tell you what the standard of practice is for the area. For example, in the Russian River Area, buyers generally pay for their inspections and closing costs. Sellers pay for a California mandated report on natural hazards, smoke detector installation and water heating strapping, and their closing costs. These all are however subject to negotiation and thus can vary.

This can be an intimidating time. Here you are ready to invest a very large amount of money in a place you know relatively nothing about except that you like it! Relax, once your offer is accepted you will be inundated with information from many different sources and at the end of your inspection period, there will be no "gray" in your outlook about this property: either you will say "Yes, I'm going to buy this!" or "No, this is not for me".

Congratulations! Your offer is accepted!

Your inspection period begins immediately. We like to call this "Phase I" of the escrow. On an average, it lasts about 2 weeks. Your agent and you will decide which inspections you should undertake so that you are completely informed about the physical condition of the property and house. The list is very long and could include any of the following and well beyond this list, depending on the features and concerns of the house and the land it is on:

Home Inspector, who will inspect a large spectrum of systems in the house from the roof to the foundation and lots of what is inbetween. This inspector may see the need for you to call a specialist, such as an electrician or a plumber to get more information about a particular condition.
Pest Inspector, who will check for water damage/intrusion, wood rot, wood-boring beetles, termites and other damaging organisms to the house.
Septic Inspector, if the house is connected to a septic/cesspool as opposed to a public sewer system.
Well Inspector, if the property is not on public water.
Heating/Air Conditioning Specialist.
Drainage Specialist
Chimney/Fireplace/Woodstove Inspector
Surveyor
Geologist
Appliance Professional

You might want to defer to your agent for names of inspectors to choose from. You might also check in with the utility companies servicing the property to see if there are any new costs associated with their services or any transfer fees new owners are responsible for.

In addition to the inspection reports, you will in most cases receive seller's "Transfer Disclosure Statements". These disclosures ideally provide you with all and any information a seller knows about the property. The Sonoma County Permit and Resource Management Department houses information about the permit histories of properties at their offices as well as on-line. Be sure to inform yourself about the tax situation on your intended purchase with your tax accountant and/or attorney as well as with the tax assessor's office to discuss your future tax bill liability. This is important information for a buyer to review as well. Neighbors and other information venues such as the Chamber of Commerce can provide insights as to what is happening or is being planned for the area.

A buyer does her/his "due diligence" by tapping into these sources and asking questions when disclosures and inspections and other information are provided. Your agent is there to direct you to the sources for answers to your questions if she/he does not have a ready answer for you. Another important task in the buyer role is to call insurance companies to verify the insurability of the property. If you are getting a loan on the purchase, a lender will require homeowner's insurance. If the property is in a flood zone, flood insurance will most likely be required as well. You will receive a "Preliminary Title Report" over the course of your inspection period. This is a very important document issued prior to your receiving title insurance on the property you are about to purchase. Your agent will review this with you and advise you of any title issues which should be investigated. The Title Company will be the best source of clarification of any information included in their report. Your agent will provide you with the best contact at the title company with whom you can discuss the contents of this report.

Once you have processed this large amount of information on your new home and your inspection period, "Phase I" is coming to a close, you will need to remove your "physical inspection contingency" in writing. If there is any negotiating to be done, it usually occurs at this time. Your agent will be a valuable source of advice at this juncture.

Congratulations! You have removed your inspection contingency and are now in "Phase II" of your escrow!

At this stage, you will be working closely with your mortgage broker making sure all documents required to have the loan in place at closing have been submitted.

You should contact the utility companies to provide them with your billing information and the date you will be assuming the responsibility for these.

After the lender has sent the loan documents for your signature to the Title Company, your escrow officer will call you to set up an appointment for you to come into their offices to sign these. After these are all signed, they are returned to the lender for final review and within a couple of days, the loan is "funded". Usually, the following day, the property is recorded at the Sonoma County Recorder's Office in your name as the new owner.

Your dream come true! You now own a piece of Sonoma County, one of the most desirable places one could wish to own a part of!

Let’s address Short Sales. ..

We are experienced able to represent you in a short sale should you find a property that falls into this category. It is best to discuss each property’s scenario but here are a few words on what the challenges with these are.

A property on the market is a short sale when the list price is less than what the seller owes on the property. When you as a buyer present an offer to the seller, the seller either accepts, counters or rejects it. Once the buyer and seller have come to terms, these terms are passed onto the lien holder for validation. Until the bank accepts all the terms of the contract, there is no binding offer between the parties.

These sales are typically long-drawn out escrow periods since the banks are not quickly processing these for a number of reasons. The government is currently introducing a program called HAFA (Home Affordable Modification Program) which is expected to streamline the current short sale process. Before listing the property, the information including acceptable sale price for the bank and a time line for the sale is front-loaded, hopefully giving buyers a clearer view of what kind of time will be needed to close their escrow. We are currently waiting to see how this will actually play out. There are rewarding purchases to be had working within the context of short sales but at the moment, you can’t be in a rush to close your purchase since you cannot control the length of the escrow.

Let’s address Foreclosures...

We are experienced and are able to represent you should you find a property in this category that interests you. So many properties coming onto the market are either short sales or foreclosures and each have their challenges from a buyer’s perspective.

Foreclosure prices have been particularly enticing, and since just recently, one can purchase a property, rehab it and “flip” it without the former 90 day requirement to keep it, there are investors jumping into this market to make money on the properties that have sustained damage and needed work to be habitable. There are cash purchasers out there so the competition for many of these foreclosures is fierce in Sonoma County. You shouldn’t be surprised to hear there are multiple and overasking offers. It might be advisable in this case to search for properties below your qualified level so you can up your offer if need be to compete. If the bank chooses your offer it is very likely that you will receive an “addendum” to the offer which typically rephrases many of the items in the contract and stipulates the bank’s terms. One of the points which buyers have difficulty with accepting is the very short inspection period the bank offers in their proposal. We have seen inspection periods as short as 5 days. We will discuss this in more detail with you should we write offers on foreclosed property for you.

One aspect of these foreclosures as opposed to short sales which is typically gratifying to buyers is that they are short escrows. Most seem to be 30 day escrows.

Short sale and Foreclosure sale procedures are constantly changing so we would advise you to talk with us for the latest updates regarding these types of offers.

Ellen Strady & Bart Strady
Artisan Sotheby's International Realty
3554 Round Barn Blvd., Suite 302
Santa Rosa, Ca 95403
Tel: 707.529.6617

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