Just like much of our daily lives, home buying is completely different than before thanks to the pandemic. Long gone are the days when you could just walk into an Open House and shake a random agent’s hand in exchange for a quick tour.
Now, most sellers wont even allow showings unless they have a Pre-Approval letter and a PEAD form signed for every potential buyer entering the property.
Nonetheless, real estate prices have continued to climb as demand increases while supply runs short. People are still buying homes, and although much of the basics still remain true, there have been significant changes you should know about if you are looking to buy a home this year.
If you are getting ready to start your path towards home ownership in 2021, here’s what you need to know!
The Process of buying a home
Buying a home can be done in six steps:
- Get Pre-approved
- Develop a search criteria
- Viewing Homes
- Submit offers
- Escrow & Closing
The order of the steps is important, as you may not be able to see some homes if you do not have a pre-approval letter. More on that later. To submit an offer on a property, we will need to have the following:
- Current Pre-approval letter from a mortgage lender showing you are approved for a home loan.
- Proof of funds in the form of bank statements or statements for other assets showing you have a down payment and enough to cover closing costs.
- Residential Purchase Agreement (RPA) signed by you and any other buyer on the purchase.
While we work on getting you in a position to submit offers financially, another important factor that should be addressed is the current market and what you can expect when competing with other buyers for a home.
Managing Expectations – Current Market Conditions
Managing your expectations is one of the most important things you can do to improve your chances of successfully finding and closing escrow on your home. The key is getting up-to-speed on what it takes to get an offer accepted. A good way to do this is speaking with an agent about the current real estate market in your area. They will be able to tell you what kind of market you are in so you know what to expect.
Currently in the Los Angeles Market, we are experiencing a very strong Seller’s Market. Low inventory, the pandemic, and record-low mortgage rates have driven demand upward sharply while supply runs short. This creates a very competitive market for buyers, which can be very intimidating / discouraging to new buyers. However, with a the right preparation and mindset, our buyers have been successfully closing escrows throughout the pandemic.
Lets get started!
A pre-approval letter from a lender is required for all offers, and can be required for showings, so that is one of the first things we need to get done. This is an essential step in the home buying process, as talking with a lender will give us an idea of your purchasing power; and thus your budget.
This step is often one of the hardest for buyers, as providing your financials to a lender for the first time can be a bit uncomfortable. However, your pre-approval is one of the most important things you can do early in your home search, and best of all it costs nothing!
Learn more about the pre-approval process.
Once we have established a budget and have our pre-approval letter, we can start on our Search Criteria.
Develop a Search Criteria
Deciding what kind of home you want is one of the most exciting times in your home search. Many buyers tend to feel overwhelmed when trying to narrow down what they really want in a home, and that is perfectly normal, especially when its more than one person making the purchase!
Collaborate, make a list and prioritize it
We encourage our clients to create a list of items or features they want in a home, prioritizing them from most to least important. These lists have a tendency to change during the search due to either budget or new found inspiration from showings along the way; and that is also perfectly normal. However, keeping the list prioritized and in sync with other decision makers and your realtor is of great importance, as you want everyone to be on the same page when you viewing homes.
Viewing Homes During Covid
Viewing homes changed drastically since COVID-19 started. Prior to the pandemic, Open Houses and Showings were just like most everything else; walk in, say hello, shake hands even, take a flyer, mingle with the others looking at the home and maybe leave some information if you’re interested.
Viewing homes prior to the pandemic was very easy. Unfortunately, that is no longer the case.
No Open Houses – Appointment Only
With the pandemic, there ARE NO Open Houses. The only way to show properties is by scheduling showing appointments through a realtor. Showings are also limited to one agent and two buyers MAX. Not only that, but every person entering a home for a showing must sign a new California Association of Realtors (CAR) form called a PEAD form.
PEAD Form – Required
Commonly referred to as a PEAD, the Coronavirus Property Entry Advisory and Declaration form essentially states that you do not have or have come in contact with anyone showing symptoms of COVID-19. This form must be filled out and signed prior to entering the property, as required by CAR rules and guidelines for showing homes during the pandemic.
Pre-Approval – Upon Request
Aside from the PEAD form, sometimes the listing agent will also require a pre-approval letter from the buyer. The reason for this is to ensure everyone viewing the property is an actual buyer with the ability to purchase, as opposed to a nosy neighbor wanting to snoop around, and another reason to get pre-approved before looking at homes!
Look, but Don’t Touch
Once you make it inside, you wont find fliers or brochures for you to take, only shoe covers, gloves, some masks, and a lot of hand sanitizer. Lots of signs will be posted reminding everyone to not touch surfaces and keep masks on throughout the showing.
The one plus side is that you WILL have the place to yourself! There should be no other buyers bumping elbows with your while viewing the home.
Finding the Right Home
Most buyers require a few showings before they find something that really catches their attention.
Finding the right home can be a challenge, especially in competitive markets. However, the feeling of stepping into a potential future home is unmistakable; you will know you have found the right one the moment you step inside! Price, features, location, all of these things should make sense with the property. Once the right home presents itself, its time to start submitting offers!
Making an offer on a property is an exciting milestone! We’ve found a home that fits your needs for the near future and are ready to take the next step towards owning a home! Writing your first Purchase Agreement can be intimidating, since it’s not every day that you sign a contract with hundreds of thousands of dollars at stake. However, that feeling is often overwhelmingly countered by the excitement of finding a home that fits your needs AND your budget.
The details of your offer can vary depending on your financial situation and the property you are targeting. Another factor that can have an impact on your offer is the current market. In competitive markets, we often encourage our buyers to submit clean offers to give themselves the best chance at getting into escrow. Sometimes it takes more than one offer, but eventually you will find yourself opening escrow!
Once your offer gets accepted, its time to open escrow! The escrow process is pretty much the same as before the pandemic. The only exception is PEAD forms must be filled out for everyone entering the house – such as inspectors, and any other person that enters the property.
Once your inspections, negotiations, appraisal, and/or repairs have been done you have removed all contingencies, you can prepare to close escrow!