Whether you're new to the Silicon Valley or have lived here for years and are now contemplating a purchase, the Valley's dynamic housing market can present significant frustrations and disappointments to the unprepared buyer. Yet, thousands of buyers succeed and profit every year from buying into our incredible market. How do they do it? Read on.

Perhaps you're surprised to find this step listed first. Many prospective buyers assume that the first step is to locate the home and then talk to a lender about securing financing. While that may work in other parts of the country or in unusually slow markets, it seldom works in the Silicon Valley where almost all buyers are pre-approved and many sellers won't even look at an offer from a buyer without an attached Pre-Approval letter. If you want to be competitive in the local marketplace, meet with a lender first and get pre-approved (not just pre-qualified) as step one.

Many people have no idea or are misinformed about their home purchasing power and mistakenly start looking in a price range that is either too low or too high for their individual situation. This is both frustrating when they can't find the right home in the right neighborhood at their assumed price limit, or disappointing after finding the perfect home only to find that their purchasing power is lower than they had assumed. With a Pre-Approval, you submit a written loan application along with proof of income and assets. Your lender will then run a credit check and forward your credit scores and other documentation to the loan underwriter for review and pre-approval . Once completed,a letter will be given to you stating that you've been pre-approved up to the stated purchase price or loan limit subject to certain stated conditions like their review of a satisfactory purchase offer, title report and property appraisal. In many cases we'll have your lender customize this pre-approval letter to the actual offer you're making so as not to let the seller know that you're approved for a higher price than you're actually offering. You can then attach a copy of this letter to your purchase offer. While you can be pre-approved by a chosen lender and then continue to shop around for better rates, it's best to finalize your lender choice before making any offers. This is because once your offer is accepted, time is very limited and there is usually insufficient time to re-start the approval process with another lender.

When you do meet with a lender, also consider credit unions as they sometimes have the better loan terms although the number of loan programs they offer may be very limited. Also be sure to meet with a mortgage broker before settling on a lender as mortgage brokers have access to hundreds of different loan programs and may be more likely to have the program that best meets your needs. If you don’t know a reputable mortgage broker, I can recommend one to you.

With the thousands of home listings now available on the internet and hundreds of web sites for searching them, why would a buyer need an agent? If you're a serious buyer, there are many compelling reasons for having your own "Buyer's Agent". First of all, not all new listings are accessible on the internet and many of those that are, have already been sold. Listings are usually uploaded to the internet quickly but once there, they can sometimes remain there for months depending on what web site you're using for your search. In the Silicon Valley market where the best homes still sell quickly, particularly in high-demand areas, you can appreciate that many of the internet listings may be obsolete.

Before they get serious, many buyers check ads in newspapers or drive neighborhoods looking for open houses. This may be a good strategy for becoming familiar with market locations and prices, but it's unlikely to find you the right home at the right price. The reason is that only a small percentage of all homes listed are ever advertised in the newspaper and the most desirable homes have very few (if any) open houses before they're sold. Having your own agent who works for you will assure that you're notified of all listings that meet your search criteria as soon as they hit the market. More on this in the next step.

But the most important reason for having your own agent occurs after you've located the perfect home and are ready to make a legally-binding purchase offer. Some buyers decide to have the seller's agent (the listing agent) prepare their offer for them. While, legally this is permissable, it could very likely cost you money and impact your negotiating position with the seller. Here's why: The listing agent has, by law, a fiduciary obligation to the seller exclusively to obtain the best price and best terms. If the seller's agent represents you in your purchase offer, you may end up paying a higher price, you may not have important contingency protections written into the contract, important inspections may not be recommended and significant contract variables such as allocation of costs may be written to the benefit of the seller.

If you're serious about buying in the Silicon Valley, find an honest, knowledgeable, professional agent to guide you and represent your interests through all steps of the process. A buyer's agent has the same fiduciary obligation as the seller's agent but only to the buyer. And what does this service cost you? Nothing! Commissions for both the seller's agent and the buyer's agent are paid by the seller.

Your next step is to locate the right home through a methodical, ongoing search of the local Multiple Listing Service (MLS), an electronic database used by all Real estate practicioners in the Silicon Valley to post their property listings. When we first meet to discuss your home purchase requirements I'll develop a search screen customized to your particular wants and needs. This screen which contains such basic parameters as geographical areas in which you're interested, number of bedrooms and baths, square feet and purchase price range, may also contain such detail criteria as school districts, home style, age or any of dozens of other detail parameters.

After developing and saving your search criteria, I then register you with my automated listing search system. This system automatically searches the MLS database daily and e-mails you all the listings meeting your specific search criteria. These "listing reports" which contain color photos, a detailed description of the home and a map showing the home's location, also identify days on market, price changes, re-listings or other revisions. After reviewing the listings you may then select one or more that you'd like to see and we'll schedule a tour at your earliest convenience. If nothing in the first search meets with your approval, we'll continue as long as it takes. In that way, you're assured of immediately seeing every listing which meets your criteria, thus maximizing your chances of finding and purchasing the perfect home before someone else gets there first.

One word of advice with regard to the search. Don't set yourself up for failure by establishing an unrealistic set of criteria. If you want a larger home in one of the more desirable areas of the county, it will cost you more. I can easily tell you the average and median price of homes sold in any area of the county and help you determine the areas that are most likely to have homes which match your buying power. Also, I recommend that buyers identify their most important five or six criteria with particular attention to those parameters not easily changed after move-in. Location, lot size, home size and number of bedrooms and baths are some examples. Kitchens and baths can be remodeled, walls can be painted and yards can be landscaped but a long commute, a busy street or too small a backyard are pretty hard to fix!

Lastly, if you want to be succesful with your search, review all new listings within a day after they come on market. If any look interesting to you, try to tour them immediately. I'll accomodate your schedule and make the appointment with the seller whether it be during your lunch hour, after work or on the weekend. If you have a definite interest in a property but are too busy to see it for a few days, let me know and I can "preview" it for you and e-mail you a video walkthrough of the home to help you to better assess it.  Most importantly, when the right home comes along, try not to let the seller hold an open house. Instead, try to get your offer in before your competition (the buyers who are only doing weekend open houses) have a chance to see it. Even in this slower market, the best listings will always sell quickly and your best success strategy is to avoid the competition.

Once you've located the home you want to purchase, your next step is deciding on the purchase offer. The offer includes both the purchase price and the contract terms. Buyers and sellers tend to focus mostly on the price but equally important are the many contract terms. More on these later.

Your offering price must take into account the current market conditions if you're going to be successful. As an example, in the first half of 2000, the market was in a frenzy and almost all homes sold over list price with multiple offers. The frenzy peaked in April, 2000 with the average selling price at 114% of the listing price for Santa Clara County! This seller's market continued through 2006 when market conditions began to moderate. Even though the market has now cooled significantly, certain areas, certain price-points and certain times of year can still draw multiple offers. The offering price should always reflect the current market conditions and like the stock market, the Silicon Valley market conditions can sometimes be quite volatile. Because I track the market monthly by charting key market condition statistics, I can easily advise you as to the current market environment and your best offer strategy.

After assessing the market conditions, the next step is to pull "comparables" in the subject neighborhood. If the market is moving rapidly (either up or down), these past sale prices may need to be adjusted. They will however give you some indication of how the home you've found is priced relative to comparable properties in the current market. Lastly, you'll want to assess the time on market for the home you're considering and investigate whether there have been any prior price reductions. With this information and an assessment of the competition, you can decide what to offer. While this is a personal decision and is influenced by how much you want the home, here's a useful approach: Select an offering price that satisfies the following test: If the Seller accepts, will you be kicking yourself for offering too much? If so, reduce your offer amount. Conversely, if someone else gets "your" dream home with a higher offer, will you be kicking yourself for offering too little? If so, increase your offer. When the answer to both of these questions is no, you've likely arrived at the optimum offering price.

Everyone wants a deal and we're all accustomed to "negotiating" when buying a car and in some market conditions when buying a home. In past "Seller's Markets" with demand far outstripping supply, the successful buyer had to replace negotiation with an overpriced offer and often the waiver of contingencies. In the current more balanced market you can usually make a more reasoned offer and often negotiate without the pressure of other competing offers.

Now that you've arrived at an offering price, what about terms? Terms include such things as loan, appraisal and inspection contingencies, escrow period, occupancy date, possible seller rent-back provisions, allocation of costs, etc. The "cleaner" your offer is, the more likely you'll be successful, but you need to be careful and protect yourself from "buying a pig in a poke". Contingencies allow you to back-out of the contract within a specified period of time if certain conditions aren't met. In past seller's markets, buyers often waived loan contingencies if they were pre-approved, in order to make their offer more competitive. In today's lending environment, with much stricter and often changing underwriting standards, waiving your loan contingency is very risky and I'd highly discourage it irrespective of the competition. You should also have a reasonable period for an appraisal contingency.  This provision will allow you to cancel the contract (or re-negotiate the price) if the home doesn't appraise for the full purchase price.

Depending on what inspections and reports the Seller has made available for review you might take advantage of them rather than ordering new ones. Conversely, if no inspections have been performed or an inspection makes note of a potentially serious defect then you are well advised to order additional inspections during your contingency period. Buyers always want as long a contingency period as possible and Sellers always want as short a period as possible. Fourteen to 21 days is typical in the current market although the shorter the contingency period, the stronger your offer. One additional tip: an offer to purchase the property “As-Is” can be very appealing to a seller and may tip the scale in your favor in a multiple offer situation. As-Is simply means that the seller has no obligation to make any repairs. You still retain your full contingency rights however, and may order as many types of inspections as you feel are necessary. If you find that the cost of repairs is excessive, you can always cancel the contract, receive your deposit back and walk away.

Once your offer has been accepted by the Seller, the clock begins ticking on your contingency periods. I immediately notify your lender that you have an accepted contract and email them a copy of the contract and Preliminary Title Report so they can order the appraisal and start the final loan processing. I also deliver your personal check for the earnest money deposit (typically three percent of the purchase price) to the escrow company. This deposit is held in escrow and becomes part of your down payment. More importantly though, the deposit may be retained by the seller in the event that you default (fail to complete the purchase) but only if you default after you actively remove your contingencies. More on this later. 

Your next step is to review all the Seller disclosures such as the Preliminary Title Report, Transfer Disclosure Statement, Geological and Environmental Reports, Pest Control Report, Property Inspection Report, HOA Reports and any other documentation made available by the Seller. If additional inspections are needed, I'll coordinate the ordering, providing access and witnessing the inspections so as to have all inspection reports in hand in time for your review and approval within our contingency time period. If there are issues which arise from reviewing the disclosures or inspection reports (e.g.; repairs required), you may ask the Seller to replace or repair some (or all) of the items of which you disapprove. If the Seller agrees, the repairs are made and the contract progresses to close of escrow. If the Seller refuses, you can either accept their refusal and proceed with the contract anyway or renegotiate or cancel and receive your deposit back. The point is that contingencies give you an opportunity to cancel if something adverse is discovered after entering into the contract, but they don't guarantee that the Seller will agree to correct the adverse condition. In practice though, Sellers usually agree to some if not all "reasonable" repairs because they don't want to start the process all over again with another buyer who may never come along or who may have the same repair concerns that you have. 

Once all of your contingencies have been removed, the next step is to schedule the Buyer and Seller signoffs and initiate the Closing process. The signoff is usually held at the Escrow/Title company and involves about 40-60 minutes of your time.

For the Buyer, the closing documents (Promissory Note, Grant Deed and Deed of Trust) will be reviewed and signed off, as will the Escrow Instructions, Title Report, Inspection Reports and various other documents. You will also be asked for your cashier’s check for the balance of the down payment and closing costs at this time. The Seller's signoff is arranged separately and consists of signing all of the Seller documents including the loan payoff documents and grant deed transferring title to the new owner (you). When all of the documents are properly signed and notarized, the Escrow Company sends your loan documents to your lender and requests that the loan be "funded". After reviewing the documents and verifying correct signatures, etc. the lender will then wire the funds to the Escrow Company. This is called "funding the loan". 

Once funds have been received, the actual "closing" begins. This consists of disbursing the funds appropriately, issuing the title insurance policies (to you and your lender) and then recording the new deed of trust and grant deed. Once the deeds are recorded, I'll get a call from the Escrow Company notifying me that the house is "on record" meaning the home is now legally yours. That's the time to "pop the cork", toasting your good fortune at having an equity interest in this amazing Silicon Valley Real Estate market.