1. Get Pre-Approved for a Mortgage

• Why? It shows you are a serious buyer and helps you understand your budget.
• How? Contact a lender or bank, provide financial documents (pay stubs, tax returns, credit info), and receive a pre-approval letter.

2. Find a Real Estate Agent

• Your Agent Compensation: The seller typically pays the buyer’s agent compensation (usually 2.5-3% of the sales price). When you make an offer, your buyer agent compensation will be asked from the seller and could be part of the negotiations to help you win the deal.
• A Buyer Agent Agreement is a contract between a homebuyer and their real estate agent that outlines the agent’s responsibilities and ensures the buyer is exclusively working with them. Its purpose is to formalize the relationship, clarify services provided, and protect both parties, often including terms like loyalty, compensation (typically paid by the seller), and the area buyer are searching for the their home. Effective January 1, 2025, all buyers’ agents in California will be required to sign a buyer-broker representation agreement with their buyer clients as soon as practicable, but no later than the execution of the buyer’s offer to purchase real property.

3. Search for Homes

• Discuss your needs (location, size, style) with your agent.
• Visit homes, attend open houses, or search online.

4. Make an Offer

• Your agent will draft the offer and include the following key elements:
  • Purchase Price: The amount you’re willing to pay.
  • Contingencies: Conditions that must be met for the sale to proceed. Common contingencies include:
    • Loan Contingency: Ensures you can secure financing.
    • Appraisal Contingency: Protects you if the home’s appraised value is lower than the offer price.
    • Inspection Contingency: Allows you to back out if major issues are found during the home inspection.
  • Earnest Money Deposit (EMD): A deposit (typically 1-3% of the purchase price) showing you’re serious. This goes toward your down payment if the deal closes. If you back out without cause, you could lose this deposit.
  • Closing Date: The target date to complete the sale, typically 30-45 days after the offer is accepted.

5. Negotiate and Get Your Offer Accepted

• The seller may accept, reject, or counter your offer.
• Once accepted, you’ll enter escrow, a neutral third-party process that manages the transaction.

Escrow and Due Diligence

6. Submit Earnest Money Deposit

• Deposit the EMD (maximum 3% of purchase price)  into escrow within 1-3 business days after the offer is accepted.

7. Conduct a Home Inspection

• Hire a licensed home inspector to evaluate the property’s condition.
• Common Issues Checked: Foundation, roof, plumbing, electrical, and HVAC.
• If issues arise, you can negotiate repairs, request a credit, or back out if you have an inspection contingency.

8. Obtain an Appraisal

• The lender orders an appraisal to confirm the home’s value matches the loan amount.
• If the appraisal is lower than your offer price, you may renegotiate or cover the difference.

9. Secure Your Financing

• Finalize your loan by submitting all required documents to the lender.
• Once approved, you’ll receive a "clear to close."

Closing the Deal

10. Review the Closing Disclosure

• You’ll receive this document 3 days before closing. It details loan terms, monthly payments, and closing costs.

11. Final Walkthrough

• Conduct a walkthrough to ensure the home is in the agreed-upon condition.

12. Close Escrow

• What Happens?
  • Sign the closing documents, including the deed and loan papers.
  • Pay closing costs (typically 2–5% of the home price).
  • Receive the keys to your new home!

Key Terms Explained

1. Contingencies: Conditions allowing you to back out of the deal without penalty (e.g., inspection, appraisal, loan).
2. Buyer’s Agent Commission: Paid by the seller as part of the total commission, typically split between listing and buyer agents.
3. Closing Date: The day the sale is finalized, and ownership transfers to you.
4. Earnest Money Deposit (EMD): A refundable deposit held in escrow as a good faith gesture.
5. Home Inspection: A detailed evaluation of the property’s condition to uncover potential issues.
6. Closing Costs: Fees associated with finalizing the sale, such as loan fees, title insurance, and escrow fees.

Pro Tips

• Stay within your budget to avoid financial strain.
• Keep all communication with your lender and agent transparent.
• Ask your agent for guidance on contingencies and negotiations.