2018: SFV BUYER'S GUIDE

So, you’re ready to buy a house in the San Fernando Valley. Perhaps you live in metropolitan L.A. and want something more affordable. Or, you might live in the Antelope Valley and want to move closer to the city. And hopefully, you’re ready to stop paying rent and to build equity for yourself and your kids.

Regardless of where you’re coming from, buying a home in the Valley in 2018 isn’t easy. If you have ideas of finding a foreclosure at a great deal, or “offering low” on a listing to get the conversation started, you’re in for a long ride. For every good listing, there’s 10 other buyers who are heavily considering it.

Inventory in the Valley continuously stays at record lows. Buyers are funneling in quicker than homes are being built. People who already own homes aren’t moving because they’re intimidated by the high prices. If you’re in escrow before placing 4 offers, consider yourself lucky.

Our suggestion? If you like a home, offer on it as soon as possible. For more in-depth information on how to get offers accepted, please reference our Advanced Buyer’s Guide.

In this article, we’ll bring you up to speed on the buyer’s situation and what to expect from offering, to escrow, to close. This article isn’t meant to frighten or discourage. You will find your dream house. It just takes a nuanced combination of patience and aggression. By using this website (and its Realtors®), you will be several steps ahead of your competition. This means precious thousands of dollars - and time - saved.

Here's how to buy a house in the San Fernando Valley.

TABLE OF CONTENTS

  1. No, the Market isn't Going to Crash Anytime Soon

  2. How are Home Prices Today?

  3. Prioritize Your Urgency

  4. Get Preapproved for a Mortgage Loan as Early as Possible

  5. Costs of Buying a House

  6. Your Mortgage (And Our Mortgage Calculator)

  7. Find a Realtor®

  8. How to Detect a Listing that Would Take a Lower Offer

  9. Otherwise, You're in a Bidding Situation. Here's What to Expect

  10. Components of a Competitive Offer

  11. How Escrow Works

1. No, the Market isn’t Going to Crash Anytime Soon

405 Freeway Overlooking the San Fernando Valley

Experts agree that prices will continue to rise, though not as quickly as in 2017. Rapid changes in the market as well as interest rates have made buyers feel uneasy.

Your mortgage payment for the same home in January 2018 compared to January 2017 is around $300 more per month. That’s right, with a general price increase of around 6-7% and interest rates going up around a half-point in that period, the house you put off buying for a whole year will now cost you around $300 more a month - for the next 30 years of your loan.

That’s a car payment, groceries, savings, or if you were renting - even more fuel on the fire for lost money. This is not to say to rush to buy the first thing you can get your hands on. This is mental preparation for the arduous process ahead.

Generally speaking, there isn’t a major crash in the near future. There is a possibility for a market correction, but nothing significant enough to outweigh how fast prices are increasing. Economic growth differs from the years leading up to the previous recession because buyers are more protected from shady lending practices. And although prices are increasing, they are doing so healthily.

2. How Are Home Prices Today?

SFV Home Price MEdian

If you haven't checked in a while, the median home price in the Valley at the time of this writing is $650,000. With 20% down, your monthly payment is around $3,200. Or, if you put the least amount down as a first time home buyer (3.5%), your payment is around $4,200.

The bank will only lend at most 50% of your net income to be your monthly mortgage. In other words, if you make $10,000 a month after subtracting monthly bills (but before taxes), you can get a mortgage loan up to $5,000 a month. Keep this in mind when looking at home prices.

If you know all this and you’re still going to buy... then buy! Like, right now. Prices and interest rates are only going up. The next section covers with what urgency to approach the homebuying process.

3. Prioritize your Urgency

Eichler Home in Granada Hills

There are many time-sensitive issues that you must consider, especially in a competitive seller’s market. Some HAVE to move by a certain date. This is most common with families trying to get their kids into a school district.

Some might have a new job. Others want to close escrow on a house before the end of the year to use closing costs as tax deductions.

Don’t forget that buying home in the summer is more competitive than during the winter. This is for a variety of reasons, mainly being that children are off school during the summer. Furthermore, many buyers wait to file their tax returns in order to qualify for a home.

It should be assumed that you will be making multiple offers and may experience disappointment along the way. 2017 had abnormally high amounts of houses going for above asking price, or even being taken off to be re-listed for more money. This is when the disappointment comes.

Almost everyone underestimates how time-consuming buying a home is. The more it heats up, the more akin to a part-time job it is. You also have to consider your schedule to go see homes. Sometimes, you can’t afford to wait until the weekend for a popular listing. On weekdays, going when you get off work at 5:30 might also not sit well with sellers. And if your Realtor® isn’t around to show you homes when you want to, you should consider finding a more flexible one. Being the first offer is oftentimes the difference between winning and losing tiebreakers.

4. Get Pre-Approved for a Mortgage Loan as Early as Possible

But before you even start looking at homes, get your preapproval. No matter how many times we say, it's not enough. You can’t do anything without a preapproval from a bank. Your offer won’t be considered unless there’s an official letter saying that the bank is willing to give you money.

The preapproval process can take an indefinite amount of time - or as little as 24 hours. They run your credit, look at how much money you have in the bank, and verify your tax returns. There are an infinite number of issues that prevent you from getting a loan, including identity theft, having too much debt, or simply not being able to show where your down payment is coming from. Because of this, listing agents know that getting a preapproval can be difficult. Therefore, they absolutely demand that you have one. Put yourself in the seller’s shoes. Would you accept an offer that doesn’t have a mortgage loan ready to go?

As a rule of thumb, $100,000 of income with around 20% down and no debt can get you a mortgage of up to $650,000, which is just about the sweet spot for homes in the Valley. Keep this in mind when filing for tax returns, thinking about your down payment, and negotiating for a raise. Most importantly, remember that any debt you take on directly affects your purchasing power. This includes car payments, credit card debt, student loans, and other payments.

5. Costs of Buying a House

House for sale in Chatsworth

While many think the down payment is the only cost, there are several more fees.

  1. Your earnest money deposit will usually be 2-3% when buying a house. This is the deposit that you put into escrow to show the seller you’re serious. It goes toward the down payment when you close escrow. In other words, if your earnest money deposit is 3% and your total down payment is 20%, you only wire in another 17% once you close escrow. You get your deposit back if you cancel escrow, as long as you haven’t removed certain contingencies.

  2. You pay for your physical inspection as well. This runs around $300. You pick your inspector, though your agent can probably recommend some for you. Ask us for our recommendations.

  3. Your appraisal will also cost from $300-$500. This is your responsibility, but the lender will order this.

  4. Finally, you have the rest of the closing costs. This is generally 2% of the cost of the house. This includes property taxes, escrow fees, and fees associated with the loan. None of this goes toward the down payment, unlike the earnest money deposit. Remember you’ll need another $10,000 to $15,000 for the process of buying a house. These are due upon the close of escrow.

Don't forget the costs associated with living in a house:

  • Furniture

  • Appliances

  • Utilities, which range from $200-$500 a month

  • Cable, Internet, which definitely vary.

6. Your Mortgage (And Our Mortgage Calculator)