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What you should know before you buy a house!

Do you need a real estate agent or an attorney?

A local real estate agent can assist you in finding a home that meets your particular needs. He or she will also
have information about the home and area that an outsider would never find just by looking at the particular
home. Most homes are listed for sale by a real estate broker who is referred to as the seller's agent. The
seller's agent represents the seller. The agent who helps you find the home is called the buyer's agent. Usually
you will not have to pay your agent a fee for the time and energy he or she spends in finding the home and
assisting you in closing the sale. The buyer's agent's fee will be paid by the seller when you complete the
purchase of the home. Your real estate agent will also assist you in negotiating the price, learning about the
community, obtaining a loan, inspecting the home, and in closing the escrow. In some instances, a real estate
agent can represent both the buyer and the seller. This is referred to as a dual agency. This must be disclosed
to you before you make an offer. It is advised that you proceed carefully in this situation, since your agent will
be working for both the seller and you at the same time.

What information must the seller provide you?

In most cases, when you are preparing to buy a home, the seller must provide you with a Real Estate Transfer
Disclosure Statement. This is a pre-printed form that lists many features or conditions about the home, the
land, and the area where the home is located. The seller must list on this form any possible problems he or she
is aware of that might affect your willingness to purchase the home. This includes, for example, easements,
rights of others to control how you use the property, environmental problems, nonfunctioning equipment,
zoning and building violations, and special assessments. The seller's agent must visually inspect the home and
report all facts that he or she feels might affect your decision to buy this property. If you want information that
is not covered in the Real Estate Disclosure Statement or additional information that is disclosed, put your
questions in writing and ask the seller to respond in writing. You should review the Disclosure Statement
immediately and carefully. In most instances, you will have a limited period of time to decide whether you wish
to proceed with the purchase despite the stated disclosures. Depending upon your purchase agreement, some
sellers will require a written acceptance of the conditions contained in the statement. Other sellers will
consider your silence as acceptance of all of the conditions contained in the Disclosure Statement. If you buy a
condominium, the seller must give you copies of the homeowners association's rules and bylaws, and financial
statements, and must inform you if there are any unpaid assessments. You should also ask to see the past
minutes of the association board meetings. You might find that there are pending or future lawsuits or defects
in the construction of the complex being discussed in these meetings. All of which would affect the value of
what you are buying.

Should the house be inspected?

Before buying any property, it is advisable to have it inspected by trained specialists. The kinds of inspections
you need depend on the location and condition of the property. For example, in a hillside area, you might want a
soil stability inspection. If you are buying a home built before 1978, you should seriously consider an inspection
for lead-based paint. At a minimum, you should have the home inspected to determine if it is structurally sound,
a pest control inspection to see if the house has been infected by termites or dry rot, and a natural hazards
inspection to see if the home is located in an area subject to fire, earthquakes or flooding. The real estate
agent can advise you about additional inspections that might be warranted under the circumstances. Keep in
mind that while the seller has to tell you about anything he is aware of that is wrong with the house, he is not
insuring the quality of the house; for this reason, an inspection is a good idea.

How do you make an offer on a house?

Most homes are sold through real estate agents who have expertise in valuing homes. You can also get
information on home sales in your area by visiting a host of Internet sites provided by professionals in the
industry, or by contacting me with your information. Once you have found the home of your choice and have
determined how much you are willing to pay, you need to make a deposit (called earnest money) to show the
seller that you are serious about buying the house. The deposit is considered a down payment on the price of
the home. In some instances you may have to increase your deposit or increase your offer, especially if there
are multiple offers on the home.

The deposit is usually deposited in escrow upon the acceptance of your offer. You submit a written offer on a
form known as the Residential Purchase Agreement and Receipt for Deposit. This form sets out the terms
upon which you are willing to purchase the property. The price you offer on a home will, in most cases, be less
than the amount you will need to purchase the home. There will be expenses incurred in purchasing the home
that will have to be paid by either the buyer or the seller. These include, for example, title reports, document
preparation, recording fees, local taxes, fees for inspections, escrow fees, homeowner's insurance, and
notary fees. Ask your agent to provide you with an estimated closing statement. This will give you an idea of
some of the additional costs you will incur in purchasing your home. You do not want any surprises.

What is a Residential Purchase Agreement and Receipt for Deposit?

This agreement is an offer which, upon acceptance by the seller, results in a binding contract. It should cover
all of the important terms of the sale. For example, it should include a complete description of the property and
of any personal property that will be sold with the house, such as window coverings, kitchen appliances,
washers and dryers. It should state the exact purchase price, including the amount of your initial deposit, any
increases in that deposit, the amount you will pay in cash, check or wire transfer, and the amount you will need
to finance to complete the purchase price. This agreement should also list any conditions that may allow you to
back out of the contract. You will want a condition that allows you to cancel the contract if you cannot obtain a
loan on favorable terms or if the inspections reveal substantial defects or problems with the home. You may
also need a condition that allows you to cancel the sale if you cannot sell your current home. Please
understand, however, the more conditions you have, the less likely the seller is to accept your offer.

This agreement should also set forth what will happen to your deposit if you cancel the sale, what will happen if
you and the seller have a disagreement over the terms of the sale, and how the brokers will be paid. The
agreement should also indicate whether you are purchasing the property in "as is condition" or the seller is
warranting the condition of the property. Take the time to go over each and every term of the agreement with
your agent before you sign the agreement.

Can you change your mind?

You should not make an offer to purchase a house unless you are serious about buying it. You can, however,
revoke your offer before it is accepted by the seller. This revocation should be in writing. If your offer has
already been accepted by the seller, you may be able to terminate or revise your offer if you are unhappy with
what your inspections reveal or if other conditions of the offer are not met.

The Residential Purchase Agreement and Receipt for Deposit contains several provisions that discuss what
will happen in the event the sale does not go through. There is a mediation provision, an arbitration provision
and a liquidated damages provision. The liquidated damages provision can result in you losing most if not all of
your deposit (up to 3 percent of the contract price) in the event you elect not to complete the purchase price,
and your election is without good cause. There is no provision in the standard contract for liquidated damages
in favor of the buyer in the event the seller wrongfully refuses to go through with the sale. You do not have to
agree to this provision. Carefully discuss the pros and cons of initialing this provision with your agent or
attorney.

How can you get a loan?

Most home loans are made by financial institutions such as banks, savings and loan associations, and credit
unions. Other sources of loans are insurance companies, mortgage bankers, finance lenders, mortgage loan
brokers, pension funds and investment trusts. Lenders charge different fees and offer different interest rates
so it pays to shop around.

When you apply for a home loan, the lender will check your credit rating and review your past employment,
income history, and credit and debt obligations. It will also obtain information about the property that will be
security for the loan. This will include an appraisal or estimate of the fair market value of the home, a review of
the preliminary report prepared by the title insurance company to determine what liens, easements and other
conditions will be superior to its loan, and a review of any taxes, assessments and zoning regulations that
affect the property.

Some lenders will charge you a loan application fee, document preparation fee, appraisal fee and other fees to
consider or close the sale. You should discuss these fees with your lender before you submit your application.

What types of home loans are available?

In exchange for cash from the lender, you agree to pay interest and to make payments over a period of time. In
most instances, the property you purchase will be security for repayment of the loan. Sometimes a seller will
offer a seller-financed or carry back deed of trust. This financing method is often used when a seller wants to
receive income over a period of time or when lenders are stringent in their loan requirements. The terms of
these loans should be discussed with your agent or attorney. He or she is best qualified to determine if the loan
documents and agreement meet all legal requirements.

Occasionally, you can "assume"a loan or take over a loan that the seller has been paying off. You should be
careful in assuming any loan. Most loans have an acceleration or due on sale clause. This means that the
lender can demand that the seller's loan be paid in full when the property is sold. If you wish to assume a loan,
you should have your agent or attorney review all of the seller's loan documents and make approval by the
lender a condition to your offer.

Most home loans that are available to Californians offer one of two interest rate structures. A fixed rate loan
offers a set interest rate, so that your monthly payment never changes. Some fixed rate loans are federally
insured or guaranteed, such as a Veteran's loan or an FHA loan. These loans usually have a lower interest rate
and require smaller down payments. For more information on these loans, get in touch with a local office of the
California Department of Veterans Affairs, the U.S. Veterans Administration or the U.S. Department of Housing
and Urban Development (HUD).

Another type of loan that is available is an adjustable rate mortgage loan, sometimes called an ARM. An ARM is
a mortgage loan which provides for adjustment of its interest rate as market rate interest rates change. The
ARM's interest rate is tied to an index that reflects changes in the market rates of interest. Some indexes used
are the Cost-of-Funds Index published by the Office of Thrift Supervision, and the Federal Reserve Discount
Rate. These loans usually have interest rates that are lower than the fixed rate loan interest. ARMs can be
complicated. Make sure that you understand all of the terms of these loans before you agree to accept one.

Occasionally, new mortgage plans become available that are intended to meet specific needs of a community.
These include loans for first-time homebuyers, and loans for teachers. For more information about loan
products click on Loan Programs on the left 2 nd navigation of the web page.

What happens when you "close" on a home?

For the protection of the seller and the buyer, a person or company that has no connection with you or the
seller holds the money and papers involved in the purchase. This procedure is called escrow. The escrow
holder's job is to make sure that all of the terms and conditions of the agreement are met. He or she will also
coordinate all of the activities of the broker, the lender and the title insurance company. The escrow holder will
deliver the deed to the county for recording when it can pay the seller the money. Escrow services can be
provided by title companies, banks, savings and loan associations, independent escrow companies, realtors or
lawyers.

The escrow holder does not act as a mediator, a lawyer or an advisor. The escrow holder is required by law to
remain neutral. Its only job is to carry out the terms of the escrow instructions. In Southern California, escrow
instructions are signed when the escrow is opened. They are modified throughout the course of the escrow as
the agreement between the buyer and seller change. In Southern California, escrow instructions are executed
just prior to the close of escrow. These instructions should be clear and certain as to the intentions of the
parties and the duties of the escrow holder. Make sure your Purchase Agreement does not conflict with your
escrow instructions. If they do conflict, the escrow instructions may be considered your final agreement as to
the terms of the purchase. If you are uncertain as to what the instructions say, discuss them with your agent,
your lawyer, and the escrow holder.

After the close of escrow, the escrow holder will provide you with a Settlement Statement. This document will
show you, as the buyer, all of the costs incurred by you in purchasing the property. You should review this
document carefully and save this statement for later. Many of these costs may be deductible from either your
state or federal taxes. If you have any questions or concerns about the charges you incurred, contact the
escrow holder immediately and ask for an explanation.

How should title to the home be held?

Prior to the close of escrow, the escrow holder will ask you how you wish to hold title to your new home. How
someone holds title will affect what will happen to the property in the event of the death of one of the owners. It
also will affect whether certain taxes will be incurred or whether a probate of the estate will be necessary. You
should discuss your options with a tax specialist and your agent before you make your selection.

You can hold title to the home by yourself, as separate property, with your spouse, as community property, or
with your spouse or a third party, as joint tenants or tenants in common. You can also hold title to the property
in a family trust.

Do I need title insurance?

Title insurance is necessary for your protection when you buy a home. It is, however, not a guarantee that
problems will not arise after the close of escrow. When you make an offer to buy a home, you, as the buyer,
have the right to choose the title company. This decision should be based on the local office's expertise, and
the company's record for fairly handling claims under its policies. You should discuss these issues with your
agent.

Once you have chosen a company, you should make one of the conditions of the close of escrow clear title to
the property. "Clear title" means that when the sale to you is completed, the title to the property will be free
from liens, judgments and other claims that you have not agreed to accept. You should also discuss with your
agent the need for a survey of the property and title insurance coverage for boundary line disputes. In many
instances, especially in rural areas, boundary lines are not where they should be. A survey and survey
coverage can help eliminate future disputes with your new neighbors.

Before a title company issues an insurance policy, it will make an investigation to find out if anyone besides the
seller claims to own the property. It will also search the public records for claims against the property. The title
company will provide you with a report, called a preliminary report. You should carefully review this report to
determine if it describes all of the property you are interested in buying. You should also review this report and
determine what items you are willing to accept when you purchase the property and what items you wish
removed or taken care of as a condition of the close of escrow. If you are uncertain as to what the report says,
you should discuss the matter with your agent.

There are different kinds of title insurance available. Often the difference in cost for the better policies is
nominal. "Basic" or "Standard" coverage is, in most instances, not the best policy available. For an additional
one-time cost or no charge at all, you can obtain protection for losses resulting from illegal construction,
zoning violations, unrecorded liens, prescriptive easement claims, and post policy forgeries. Be aware that
different companies charge different rates. Discuss with your agent and the escrow holder what policies are
available in your area and the differences in prices on each of the policies.

Congratulations!

Whether you are purchasing a home for the first time or for the fourth time, the day of closing should be a
happy moment. And since a portion of your purchase price is paying for the agents and the escrow holder's
expertise, utilize their services throughout the process leading up to the day of closing. Ask questions; ask for
an explanation of any item you do not understand. Request copies of any documents you do not understand;
keep copies of all documents relating to the purchase of your home. And, if necessary, seek advice from a
qualified real estate attorney or tax advisor. Asking questions during the purchase of your home will help
insure that you and your family will enjoy your new home for many years to come.

The purpose of this pamphlet is to provide you with general information. Please understand that the law and
custom and practice in the industry are subject to change, and vary depending upon where you live. Please
consult a qualified real estate lawyer if you have any questions and concerns.

Be an informed consumer; buying a house is one of the most complicated and expensive purchases you will
ever make. As with most other things, you get what you pay for. Look at and compare many houses in different
areas. Once you have seen something you like, assess its location. How far will you have to commute? What is
the traffic like? How does the neighborhood look? What services are available? How good are the local
schools? Will you be able to get your children into them? What is the crime rate in the area, and what types of
crimes have occurred in the past couple of years? Visit the home on multiple occasions and at different times
of the day. Remember: location is vey important. It's one of the biggest factors in setting the price of the home.

Before you make a written offer, know exactly what you are buying and what the costs will be after you own it.
For example, in addition to the monthly principal and interest payments that you will have to finance the
purchase of your home, you will need to budget for utility bills, property taxes, insurance and maintenance
costs. If you buy a home that has a home owner's association, you will also have to pay association fees. Some
homes have special assessments in addition to the regular property taxes. Make sure that you ask the seller
for copies of the past years" bills for these services, and that you inquire as to whether there are any
assessments scheduled to be placed on the property in the future.

Also, check the condition of the house and any appliances, window coverings and other items that you want
included in the sale. Consider purchasing a home warranty. For a minimum fee, the home warranty company
will insure that the house and the appliances are in working condition. Many companies will provide coverage
for washers, dryers, pools and pool equipment, air conditioning, and some roof repairs. Your agent can provide
you with information on these policies.

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