Buying a Home in California
Making an Offer, The Counter-Offer, Opening Escrow...By Rick Campbell
Here is where your agent really begins earning his keep. After you have found the home you want to buy, it's time to make an offer. Offers are always in writing. There's a saying in California that an offer is only as good as the paper it's written on. The paper used in California is called a Deposit Receipt.
All details of the offer are entered on this form, including the description of the property, the price offered, financing terms, duration of the offer, rights of the buyer to inspect the property, which party will pay which fees, etc.
Your agent will assist you in setting an opening offer price by providing a list of homes sold recently similar to the one you are interested in buying. Along with your offer it is customary to provide a "good faith" deposit check of at least 3% of the offered price.
Your agent will then present the offer to the sellers and their agent.
There are two parts to an offer: the price and the terms. Usually you will offer less than the asking price. If it's a seller's market, meaning there are many buyers vying for the same property, you may offer more. In any case, there will more often than not be a counter-offer.
The sellers will counter your offer in writing. The counter-offer will say, in effect, "I agree with your offer except as follows: ...(enumerate the changes the seller requests)." The buyer can respond with a written "counter-counter-offer," and the offers can go back and forth until there is final agreement, or until one of the parties will no longer respond.
Once the offer is agreed to by all parties concerned, the agent will take the written final agreement and the deposit check and deposit them "in escrow." Escrow will then be deemed open.
The purpose of an escrow is to enable a buyer and seller to deal with each other without risk. Before title to the property can be transferred to the new buyer, the buyer must deposit into escrow all monies necessary to pay for the home. This is most commonly done when the buyer obtains a loan. Then, the seller must be paid, the seller's old mortgage paid off, and any other liens on the property must be paid off. All responsibility for handling funds and documents is delegated to the escrow holder, a neutral third party, which is usually a title insurance company or escrow company.
Your title insurance officer can answer many of the frequently asked questions about title insurance, preliminary reports, and alternative ways of holding title to property in California. In a simple transaction, the buyer delivers the agreed upon funds to the escrow holder. The buyer also instructs the escrow holder to deliver to the seller the stated sum only after all conditions have been met, and title is vested in the buyer. Concurrently, the seller deposits his deed and other documents with the escrow holder, authorizing their delivery when the buyer has deposited the agreed purchase price. The contracting parties deposit funds or documents with the escrow holder, for delivery to the respective parties upon performance of all conditions of the agreement.