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House Hunting in California: a Step-By-Step Guide

House hunting is one of the most exciting parts of the home buying process. But for some first-time buyers, it can also be overwhelming and intimidating. That’s where this guide comes in. Today, we will look at some of the key steps in the house-hunting process in California, and how to navigate them like a pro.

California House Hunting Process at a Glance

In California, the house-hunting process can vary from one home buyer to the next, and for a number of reasons. For instance, buyers who use home loans have to complete additional steps that “cash buyers” do not.¬†But since mortgage loans are used for most purchases, we’ll be addressing them here as well.

1. Determine your price range.

It’s wise to establish a price range early on in the process, because it helps you narrow your home search. In other words, you won’t waste time looking at houses you can’t afford.

Before you start house hunting, take a look at your financial situation and establish a basic housing budget. The goal here is to identify the maximum amount you’re comfortable paying each month toward your house payment.

Related: How much house can I afford?

2. Research your target real estate market.

What are home prices currently doing in the area where you want to buy? What’s the inventory situation like? Does the real estate market currently favor sellers or buyers? How long are homes staying on the market, before going under contract?

These are some of the questions you want to answer before you start house hunting. Thankfully, you can gather a lot of this information online.

For starters, just do a Google search for “real estate market trends” followed by the name of the city where you plan to buy. Click over to Google News, specifically, to find the latest information relating to your local housing market.

3. Get pre-approved for a mortgage loan.

Mortgage pre-approval is when a lender reviews your financial situation (including income and debts) to determine how much you can borrow. It makes sense to do this before you actually start house hunting, because it allows you to tailor your search to a specific price range. It’s similar to step #1 above in that regard.

Mortgage pre-approval has other benefits as well. With a pre-approval letter in hand, you can show sellers that you are serious about buying their home. Sellers tend to favor offers that have a pre-approval letter attached, because it shows that the home buyer has been “screened” by a lender.

Related: Getting pre-approved for a loan

4. Find a real estate agent to work with.

Finding an agent is an optional (but recommended) step in the California house-hunting process. There’s no law that requires it, and some buyers choose to fly solo¬†instead. But having an experienced agent on your side could save you a lot of headache and hassle.

Your agent will help you find a home that meets your needs, evaluate the asking price, put an offer on paper, and negotiate with the seller. Those are some of the main services provided by a California real estate agent.

5. Expand your search area as much as possible.

Did you know that housing market conditions can differ from one ZIP Code to the next? It’s true.

For instance, here in the San Francisco Bay Area, the median home price for one county can be several hundred thousand dollars lower than the median price in another county. Supply and demand can also differ from one city or community to the next.

You might have an easier time finding a suitable home that falls within your budget if you expand your search zone to the widest possible area. A broader search will give you more properties to choose from, thereby increasing your chance for success.

6. Validate the seller’s asking price.

You’re well into the California house-hunting process at this point. You’ve got an agent on your side. You been pre-approved by a mortgage lender. And you found a home that meets your needs.

Now, you’ll want to evaluate the seller’s asking price to make sure it reflects current market conditions. After all, it’s called an “asking” price for a reason. That’s how much the homeowner wants to get. But is the price realistic?

One of the best ways to validate the asking price is to look at similar homes that have sold in the same area over the past two or three months. This is what real estate agents refer to as comparable sales, or comps.

There is no exact science for setting the list price of a home. It usually comes down to current market conditions, supply and demand, etc. But you can get a better sense of the market value of a particular house by reviewing recent sales data. You can find this information on property listing websites, and by tapping into your agent’s knowledge.

7. Make an offer based on the above research.

The offer is one of the most important parts of the house-hunting process in California. This is where you submit a legal document to the seller indicating how much you are willing to pay for the house.

The offer can include other information as well, including your desired closing date. The paperwork itself is fairly straightforward. It usually involves a boilerplate document where you simply fill in the blanks. But those blanks are very important and have to be considered carefully. This is another area where an experienced agent can guide you.

The seller can either accept your initial offer, make a counteroffer by changing one or more of the terms, or simply reject it. Sellers are under no obligation to accept offers from buyers. So keep that in mind when determining your offer amount and other contract clauses.

Related: Getting your offer accepted

8. Consider adding contingencies to your offer.

When you make an offer to buy a house in California, you have the option to add contingencies to the contract. A contingency is a specific condition that must be met in order for the transaction to proceed.

For example, home buyers in California often include a home appraisal contingency within their contracts. This contingency gives the buyer a way to back out of the deal if the property appraises for less than their mortgage amount.

There are contingencies for financing and home inspections as well. In all cases, the general idea is the same. Real estate contingencies give home buyers a way to exit the transaction without sacrificing their earnest money deposit, if a certain situation arises.

So there you have it, a basic overview of the house-hunting process in California. We’ve provided a number of hyperlinks throughout this article, so you can “drill down” on specific topics. You can also find related articles by using the search tool at the top of our website, or by visiting our Home Buying 101 introduction page.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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