Welcome to San Diego Blog | March 12, 2013
Homebuyer’s FAQ’s & Answers
During the purchase process, buyers ask a plethora of questions regarding the purchase and escrow process. Here are the top questions we receive – and answers to those questions.
1. What is the Supplemental tax bill? The value of the home will be re-assessed upon change of ownership. The last assessment was made when owner bought the home, and will be re-assessed at close of escrow at new purchase price. California law requires that buyers receive notice that a supplemental tax bill will be issued after close of escrow reflecting any change in property taxes that are owed as a result of the sale. The reason for this is that property taxes are paid in advance. If the value of the property changes, this will affect the amount due for the balance of the tax period. Tax year is from July 1 to June 30.
2. Is the appraisal part of closing costs? Yes, the appraisal was estimated as part of your closing costs, however you pay for it up front.
3. What is a private transfer tax? Developers insert a deed restriction that requires a percentage of the transaction be paid each time the property changes hands. The private transfer tax ensures one party, such as an environmental group, or sometimes, the developer, gets money in the future when the property is bought and sold.
4. Who pays for HOA docs? It is negotiable between buyer and seller, however, typically, seller pays. Many times, in a short sale, buyer pays.
5. What is a Documentary Transfer Tax and who pays? The California Revenue and Taxation Code has set this tax for all counties at $1.10 per $1,000 (or $0.55 per $500.00 to be exact per the Code) of the transfer value (sales price) of the property being transferred. The payment of the transfer tax can be negotiated between the Buyer and the Seller. Normally, in Southern California, the Seller pays. In Northern California, normally the Buyer pays. In Central California, it can be a combination of both.
6. Do I have to write a check for the Earnest Money Deposit at time of making the offer? No, the most recently revised version of the CA residential purchase agreement provides that once the offer is accepted or fully executed by all parties in writing, the buyer has 3 days to deliver deposit funds to escrow. The Deposit can be a check or in the form of a wire.
7. What is a typical earnest money deposit and can I lose it? Usually you will put down about 3%. You have a potential for losing your deposit if you chose not to move forward with closing after the 17th day, which is contingency removal. Up until that point, you can back out if you find something unacceptable and receive your full deposit back. Once the buyer removes all contingencies, then the buyer’s deposit goes hard and could be subject to liquidated damages to seller should buyer decide to cancel the escrow.
8. How does a buyer receive their condo documents for a property in a condo or planned unit development? Escrow orders the condo documents during the first few days of the escrow. Condo docs can generally take 5-10 business days depending on the HOA and include CC&R’s (covenants, conditions & restrictions), Bi-laws, meeting minutes, reserve study or budget and any disclosures regarding any law-suites or litigation.
9. What happens if the seller issues a multiple counter offer to buyers and all buyers accept the seller’s multiple counter offer? The seller can essentially chose the buyer’s offer that they feel is best. All of the multiple counter offers could have been different. If they were the same, the seller could chose the buyer they felt was the strongest buyer (most ability, in love with property, largest deposit, etc)
10. What is a transaction coordinator and why do we need to use one? As a real estate agent, our job is to negotiate a deal for you between the seller and the buyer. You wouldn’t want us bogged down with paperwork, as that is not our expertise. There is a lot of paperwork involved with California purchases and we have found that the most efficient way for the entire transaction to be completed timely, is by using an independent transaction coordinator. Their job is to coordinate with the parties involved and ensure all disclosures are provided and that the seller is doing their part.
11. Why should I consider working with a strong lender that does a lot of purchase business? Today there are many internet companies that make lenders compete for the lowest rates. These companies generally focus on refinance business and can run with very slow turn times – 45-90 days. These companies must run lean on employees to deliver the lowest rates so service is not a priority. If you are refinancing and your loan closes 15 days late, it makes no difference as you are already living in your home. However, if you are purchasing a property and your loan closes 15 days late, you will find frustration with having to reschedule your movers, any remodel work and may be charged a per diem cost by the seller because you are in breach of contract and are costing the seller money and frustration too. Many large banks cannot close loans in 30 days so be mindful when deciding on a lender.
12. What would our total monthly expenses be for a new place? Mortgage payments for well qualified buyers are approximately $400/mo for $100,000 borrowed. Property taxes monthly are the homes sale price without the 000. If it’s a condo, you will need to factor in HOA dues, which typically run somewhere between 400-800 in downtown properties. Other additional costs are electricity and communications, among other personal needs.
13. The building is in litigation–what does that mean? California has always protected consumer rights. In the 90s SB (Senate Bill) 800 was created to protect buyers of new homes. Builders/contractors are responsible for construction defects for up to 10 years after the home was built. The same is true for condos. There have been defects in just about every condo built downtown, particularly inferior pipes and sheetrock. Unfortunately construction litigation has become a cottage industry for lawyers. We will review condo docs and you may request clarification of the status of litigation. Litigation limits who can lend in the building and down payment options. It’s also important to note that values drop during litigation and the repairs and jump in value after litigation is over.
14. What are the views going to be like after the new buildings are built? Views change. The “front row” in “San Diego is owned by municipalities and is used only for commercial development. There are many plans and illustrations of future development. View corridors are created in every plan. In the end, views in San Diego are always going to be beautiful.
15. What are the move in fees and requirements? If moving into a condo, the buyer needs to schedule a move in with the HOA. The HOA manager will provide you with the documents and fees needed for move in.
16. Who pays for the Real Estate Broker fee? The seller pays the Real Estate Broker fee. It comes out of the purchase price as a debit to net proceeds to the seller on the final settlement statement.
17. Do I need to be there for the home inspection? While it is not mandatory, it is highly suggested that you be there. During or after the inspection, the inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you’d like to purchase and it is a good time to ask general maintenance questions.
18. What if they find a major problem during the home inspection? Depending on the issue, a request for repairs would be issued by the buyer. The seller can either fix the problem during escrow or a credit can be issued to the buyer at close of escrow. If the problem is excessive and the buyer wants to withdraw their offer, a cancellation of escrow is issued and all deposits are returned.
For more information on buying or for any other real estate needs, give us a call: 619-356-3099.