BUYING A HOME IN CALIFORNIA
The San Francisco area has been documented as one of the most expensive areas in the United States for buying a home. Prices in Palo Alto, for example, begin at $650,000 for a small house in need of repair, on a small lot. Larger homes, and those in the certain areas of the city, cost much more. Even condominiums are expensive, and one might be discouraged about the prospects of purchasing a home. However, Stanford provides excellent housing assistance for faculty and senior administrators.
The procedure for purchasing a home in California is relatively simple, but it does vary considerably from other parts of the United States. Most buyers who utilize the services of a reputable real estate firm do not use lawyers. The brokerage fees are routinely paid by the seller, but in California an agent can declare that they are working exclusively for the buyer, even when the seller is paying the fee. Standardized forms are used and the buyer's real estate agent, in consultation with the buyer, writes up the contract, presents it to the seller, and guides the buyer through the escrow process (described below.)
THE DEPOSIT RECEIPT
The deposit receipt is used to convey your offer to the owner of real estate. It usually will be a standard form and will contain all information pertinent to the transaction. Once completed and signed by all interested parties, the deposit receipt constitutes a valid contract, so care should be taken with this procedure. The deposit receipt is several pages long, and your Realtor will explain each section to you.
The amount of deposit should be large enough to convince the seller that you are a serious buyer. One percent of the asking price would generally be a minimum, but the standard in this region is 3% of the selling price. The deposit check should be made payable to the escrow or title company, usually chosen by the party (seller or buyer) who is paying for the escrow. All monies involved in the transaction are handled by the escrow company.
Your deposit receipt will list certain contingencies. These contingencies should protect you while at the same time not be so restrictive that the owner will not accept them. Some standard contingencies are:
1. Financing (Mortgage)
2. Termite Inspection
3. Building Inspection
4. Approval of all disclosures
5. Approval of all reports
6. Approval of the preliminary Title Report
ESCROW:
Real Estate transactions in California are closed by escrow officers, rather than through an attorney. The Realtor usually opens escrow for the buyer and seller with a reputable title company. The seller then deposits their papers with the escrow holder, and the buyer deposits those funds necessary to complete the transaction. If a new loan is involved, the
lender funds to the escrow as well. The escrow officer is authorized by mutual instructions from the buyer and the seller to disburse funds at the close of escrow. And, the title department will research the title and guarantee good issue Title Insurance upon closing the escrow.
The escrow officer is a completely neutral and impartial third party. The escrow is confidential and only principals to the transaction are entitled to see the escrow instructions, which cover all items involved in the transaction (purchase price, closing date, pro-rations, insurance coverage, etc.) The use of an escrow company enables the parties in a real estate transaction to deal with each other with less risk since the escrow holder acts as:
a) custodian for funds and documents;
b) clearing house for payment of all demands
c) an agency to perform the clerical details for the settlement of the
accounts between the parties.
Upon completion of the escrow (when everything has been deposited to enable the carrying out of instructions) the deed is recorded at the county office, all funds are disbursed according to the signed instructions from both parties, and the seller receives the net proceeds of the sale. In California all the documents are signed prior to the close of escrow, and escrow is considered "closed" (title transferred to the new buyer) upon
recordation of the deed. It is not necessary to be present at the actual close of escrow.
The escrow company's fee is usually paid by the buyer in San Mateo County and by the seller in Santa Clara County, and is on a sliding scale based on the purchase price of the property. Title insurance is issued by the title company.
REAL ESTATE TAXES
Real estate taxes are billed once per year for the period covering July 1 through June 30 of the following year. Most people pay in two installments, one in the fall and one in the spring. The amount of tax is based upon the purchase price. It is generally estimated to be 1.25% of the purchase price of the house, although it may vary somewhat due to additional fees and assessments. The amount that taxes can increase each year is strictly
limited, and cannot exceed 2% per year. One unusual effect of this system is that neighbors with essentially identical houses may be paying dramatically different tax amounts, depending upon when they purchased and how much they paid for their house. In the right circumstances, elderly residents who want to downsize when they have outgrown their homes can transfer their old tax base to their new home.
A SUMMARY OF HOME PRICES
Palo Alto: Homes Condos
Year Median Average Median Average
1994 $408,942 $466,158 $278,229 $269,140
1995 $448,925 $488,803 $261,167 $270,743
1996 $492,458 $555,613 $270,525 $277,482
1997 $564,991 $624,429 $299,250 $337,544
1998 N/A $697,891 N/A $371,300
Los Altos: Homes Condos
Year Median Average Median Average
1994 $594,104 $560,787 $294,646 $285,468
1995 $555,792 $592,195 $385,700 $365,892
1996 $611,417 $646,024 $338,272 $340,241
1997 $691,652 $739,915 $394,950 $376,741
1998 N/A $821,694 N/A $402,466
Mountain View: Homes Condos
Year Median Average Median Average
1994 $322,438 $341,462 $201,708 $206,033
1995 $354,867 $358,734 $185,617 $192,324
1996 $370,721 $378,904 $192,433 $207,363
1997 $404,182 $429,442 $216,591 $223,784
1998 N/A $495,156 N/A $257,050
Sunnyvale: Homes Condos
Year Median Average Median Average
1994 $289,318 $295,102 $204,045 $216,427
1995 $295,395 $301,178 $196,841 $193,811
1996 $328,318 $326,999 $207,314 $210,450
1997 $380,477 $376,558 $232,339 $238,617
1998 N/A $425,355 N/A $273,236
Menlo Park: Homes Condos
Year Median Average Median Average
1994 $406,675 $445,842 $318,563 $333,016
1995 $407,958 $451,070 $327,542 $329,175
1996 $445,208 $483,230 $380,500 $382,977
1997 $548,955 $596,828 $383,636 $418,204
1998 N/A $663,854 N/A $507,522
Portola Valley: Homes Condos
Year Median Average Median Average
1994 $715,000 $746,934 N/A N/A
1995 $863,958 $863,451 N/A N/A
1996 $968,208 $949,329 N/A N/A
1997 $949,017 $1,059,367 N/A N/A
1998 N/A $1,378,655 N/A N/A
Lynne Mercer
lmercer@batnet.com
http://www.lmercer.com
510-796-9965
ColdwellBanker Residential Brokerage
245 Lytton Ave.
Palo Alto, CA 94301
650-752-0756
lmercer@coldwellbanker.com