• After you submit you loan application, the lender has 3 days to provide you with Truth in Lending disclosures and a Good Faith Estimate.
• Once you receive the above disclosures, you have to wait 7 days before you can actually use the loan you applied for to purchase a property.
• If the rate or APR changes an 1/8% or more (increase or decrease) from the initial disclosures, the information must be re-disclosed and you must then wait an additional 3 days to complete your purchase.

In short, pre-approval from a lender has never been more critical than it is currently.

DISCLAIMER: I am not a attorney or lawyer, just a licensed real estate salesperson in the state of California (CA DRE# 01855627). This blog is provided for informational purposes only and to help educate the home buying public of options available to them in the process of buying real estate. If you have concerns about any of the documents that you are signing in regards to a real estate transaction, or any other contract or legal matter I recommend you talk to a competent and properly licensed attorney (preferably one specializing in real estate law).

The Buyer Representation Agreement is like a Listing Agreement for the Buyer. The agreement has both advantages and disadvantages for you (the buyer) and the broker.

What are the advantages of the agreement for you:

1. Shows Real Estate Agent that you are serious about buying a home
2. Allows you to put a deadline on the agreement (creating an incentive for the Real Estate Agent to help you find an acceptable property quickly, by offering an amount of compensation greater than they might otherwise receive through co-operative broker agreements)
   
3. Allows you to help define terms and price up front (saving You and your Real Estate Agent time, by helping define which properties they should be finding for you)
   
4. Defines in writing duties that the Broker (represented by the Real Estate Agent) and the Buyer (You) have in regard to one another

Potential negative effects for you:

1. May potentially owe an additional amount to the Broker for services rendered (since compensation is set in the Buyer Representation Agreement).
2. May still owe compensation, if transaction is prevented due to some fault of your own.
3. May still owe compensation, if transaction is prevented by another party of the transaction and you collect damages from that party. (This amount is limited by the Buyer Representation Agreement.)

The Fee:

Compensation to your Broker can be calculated in one of several ways:

• A percentage of the price you pay to acquire the property
  • Example -- You purchase a property for $300,000, and have agreed to pay 3% to the brokerage representing you; however, the brokerage listing the property is only offering 2.5% to the co-operating broker. The Result: You owe an additional $1,500 ($300,000 * [3% - 2.5%]) to the brokerage that represented you. Total Cost to You: $301,500.
    
• A percentage of the price you pay to acquire the property, plus a flat fee
  • Example -- Same as above, but with the addition of a flat fee (for example $500). The Result: You owe an additional $2,000 ($1,500 + $500) to the brokerage that represented you. Total Cost to You: $302,000.
    
• A flat fee
  • Example -- You and the brokerage agree to a flat fee of $10,000 for their services. The Result: You owe any amount in excess of the amount obtain from the listing brokerage through the amount offered in the listing agreement. So, using the first example again, listing brokerage pays $7,500 (2.5% of $300,000) and you pay the remaining $2,500 ($10,000 - $7,500). Total Cost to You: $302,500.
    
• Any other method of compensation negotiated and agreed upon between you and the Broker, and attached to the agreement as a addendum

Overall, I think that the Buyer Representation Agreement can greatly benefit both the buyer and the broker representing that buyer. It creates incentive for both parties (buyer and buyer's broker), but as with any contract that you enter into you should read the entire agreement and consult competent legal counsel if you do not understand any portion of what you are agreeing to.

If you have any question, on this or any other topic relating to real estate, or are in need of real estate services, please drop me a line by email or give me a call.

There are many risks involved with any kind of investing and the purchase of big ticket items; The purchase of a home falls into both these categories. If you're currently considering the purchase of a home you may be asking: What are some of the current risks in waiting to invest in real estate or buy a home?

Now, I'm not a financial planner, lawyer, or accountant; but here are some things I am aware of as a REALTOR® that you may miss out on if you put off the purchase of a home much longer.

1. Market Risk (Price Appreciation/Increasing Prices)

• As a buyer, you want to obtain the lowest price on the home you are purchasing.
  • If you don't begin the process now, prices may increase to the point that you are no longer able to afford to purchase a home.
  • Market timing is an incredibly hard thing to do -- you may want to start looking and find a price that is acceptable to you, rather than trying to wait for the absolute bottom of the market (which may or may not have already occurred).
    

2. Interest Rates

• Interest rates, like prices, also will probably not go much lower, if at all.
  
  • To finance you purchase you will most likely get a loan, and if interest rate on loans go up 1% percent then the principal amount which you will be able to borrow (making the same amount in monthly payments) will be decreased by about 10%.
    • Example -- If you get a 30 yr loan, at 5% interest, with a principal of $300,000; then your payment will be $1610.46 per month. If you increase the interest rate to 6% and keep the monthly payment the same, you will only be able to get a principal in the amount of $268,611.22.
      • $31,388.78 ($300,000 - $268,611.22) is about 10% (10.46%) of $300,000
    • If you would like to check the numbers yourself or use different numbers, try this website of different calculators (I used the one this link leads to): http://www.mycalculators.com/ca/loancalcm.html
      

3. Tax Credit

(Be sure to check with your tax advisor for details and applicability to your situation.)

• Yes, there currently is a tax credit available, and it is a great opportunity to help get you into a home. Here are the basics:
  • Expires on 30 November 2009
  • Only Available to First-Time Buyers
    • defined as those who have not had an ownership interest in real property in the last 3 years
  • Must occupy (not rent or sell) purchased property for next 3 years
  • Limited to 10% of purchase price or $8,000, which ever is less
  • Starts to phase-out (be reduced in amount) at $75,000 annual income if filed as single, and $150,000 if as married
    
  • IRS page about the credit, with links to required forms: http://www.irs.gov/newsroom/article/0,,id=204671,00.html
    
• You may have heard that a potential increase to this credit (up to $15,000) is currently being lobbied for in the nation's capital, but I would encourage you to not wait too long. The clock is ticking on the $8,000 credit, and as is said A bird in the hand is worth two in the bush. In other words waiting to see may result in your getting no tax credit at all.
  

4. Free Mortgage Protection Program offered by California Association of REALTORS® (CAR)

• This program is offered through the CAR Housing Affordability Fund. Here are the details:
  • Requirements:
    • Only Available to First-Time Buyers
      • Cannot have owned a home in the last 3 years
    • Escrow for transaction -- Open after 2 April 2009, and Close before 31 December 2009.
    • Use a California REALTOR® in the transaction
    • The property must be in California
    • You must be a W-2 Employee
  • What it covers:
    • up to $1,500 per month, for 6 months, to help make mortgage payments if you're single and lose your job due to layoff
    • up to $750 per month, for 6 months, to help make mortgage payments if you or your spouse lose job due to layoff
    • up to $10,000 in death benefit
  • There are other details that you may want to review so here is a link to the page where you can find out more: http://www.car.org/newsstand/newsreleases/mppstory/

As you can see there many advantages that you may miss out on if you wait too long in deciding to purchase a home, especially if you are a first-time buyer and purchase too late to take advantage of the two programs mentioned above.

If you have any questions, or would like to begin your search for a home in Sonoma County please don't hesitate to give me a call or drop me a line by email.

I've heard from a friend or two that I went to college with that they think I live "out in the country". Which leads me to believe that they think there might not be all that much to do here in Sonoma county, but I assure there is plenty to keep you occupied in your leisure time here no matter what your interests.

• Attend a performance at a local coffee shop (music, spoken word, poetry reading, etc.)
• Go Ice Skating (www.snoopyshomeice.com and click "skating)
• If ice skatings not your thing, there is also the Charles M. Schultz (creator of the comic strip Peanuts) Museum right next door (http://www.charlesmschulzmuseum.org/)
• Go to a Farmers' Market (http://www.sonoma.com/thingstodo/farmers_markets/featured.html) or Fruit Stand for fresh produce
• Ride one of the bike trail, or mountain bike in one of the parks
• Walk, Run, or Jog one of the creek paths or other trails (http://www.sonoma-county.org/parks/)
• Go swimming in the Russian River or at one of the many public pools
• Visit Historical Sites (Petaluma Abode, Home of General Vallejo, or the Sonoma Mission; http://www.sonomacountyhistory.org/index.html?links.htm)
• Pick up some books at the library (http://sonomalibrary.org/)
• Go Bowling (in Petaluma, Rohnert Park, or Windsor)
• Play minature golf or go to the batting cages(at Scandia in Rohnert Park; http://www.scandiafunland.com/)
• Join an indoor or outdoor soccer league
• Attend theatrical or musical performances at Santa Rosa Junior College, Sonoma State University (in Rohnert Park), the Sprekels Center (in Rohnert Park), 6th Street Playhouse (in Santa Rosa's Railroad Square), or the Wells Fargo Center (formerly the Luther Burbank Center, in Santa Rosa)
• Go to a performance of the Santa Rosa Symphony (http://www.santarosasymphony.com/)
• Go Dancing (many styles at http://www.ellingtonhall.com/ in santa rosa, and line dancing at http://www.kodiakjacks.com/ in petaluma for those 18 and older)
• Go to one of the many beach (along the Russian River or the coast)
• Hike in one of the county or state parks
• Attend Santa Rosa's Downtown Market (http://www.srdowntownmarket.com) on Wednesday evening

Of course if all else fails, San Francisco, Berkeley, and Oakland are all only about one hour away by car. There you'll be able to find theaters, jazz clubs, professional and college sports teams, and many other forms of entertainment.