BUYER'S PURCHASING GUIDE

The offer form most widely used for residential purchases in California is prepared by the staff of attorneys of the California Association of Realtors. It provides many valuable consumer protections and alerts buyers to their rights and obligations with regard to inspections and investigations regarding the property. When used, the form also delineates sellers' responsibilities under California law, identifying all of the disclosures a seller must give to purchasers.

The basic offer form allows a buyer 17 days from acceptance to conduct inspections of the property. This time period can be modified by agreement. During this "due diligence" period buyers usually begin by hiring a basic home inspector, and then have other desired or recommended inspections. However, when a geologic inspection is anticipated, it is wise to schedule that immediately upon acceptance of the offer to be sure it can be accomplished and the report prepared within the allotted number of days.

WRITING AN OFFER

Once you find the home you want to buy, the next step is to write an offer – which is not as easy as it sounds. Your offer is the first step toward negotiating a sales contract with the seller. Since this is just the beginning of negotiations, you should put yourself in the seller’s shoes and imagine his or her reaction to everything you include. Your goal is to get what you want, and imagining the seller’s reactions will help you attain that goal.

The offer is much more complicated than simply coming up with a price and saying, "This is what I’ll pay." Because of the large dollar amounts involved, especially in today’s litigious society, both you and the seller want to build in protections and contingencies to protect your investment and limit your risk.

In an offer to purchase real estate, you include not only the price you are willing to pay, but other details of the purchase as well. This includes how you intend to finance the home, your down payment, who pays what closing costs, what inspections are performed, timetables, whether personal property is included in the purchase, terms of cancellation, any repairs you want performed, which professional services will be used, when you get physical possession of the property, and how to settle disputes should they occur.

It is certainly more involved than buying a car. And more important.

Buying a home is a major event for both the buyer and seller. It will affect your finances more than any other previous purchase or investment. The seller makes plans based on your offer that affect his finances, too. However, it is more important than just money. In the half-hour it takes to write an offer you are making decisions that affect how you live for the next several years, if not the rest of your life. The seller is going to review your offer carefully, because it also affects how he or she lives the rest of their life.

That sounds dramatic. It sounds like a cliché. Every real estate book or article you read says the same thing.

They all say it because it is true.

Closing Costs and Financing Incentives

There may be times when, as part of your offer, you might request the seller to pay all or a portion of your closing costs, or provide some other financial incentive. One common request is asking the seller to provide funds to temporarily buy down your interest rate for the first year or two. Such incentives can be especially effective if a buyer is tight on money or pushing their qualifying ratios to the limit.

Whenever you ask for incentives such as these, you will probably find the seller less willing to negotiate on price. After all, what you are really asking for is to have the seller to give you some money to help you buy their house. The end result is that, for a little relief in the beginning, you are willing to pay a little more in the long run.

HOME INSPECTIONS

There is no substitute for hiring a qualified home inspector when purchasing real estate, whether residential, commercial or industrial property. The problem is in identifying a qualified inspector as they are not licensed in the State of California. Thus choosing one is difficult. It must be based on other criteria such as their membership in one of the organizations for inspectors (perhaps as one of their instructors), their current licenses in other classifications (e.g. general contractors), and/or recommendations.

Home inspectors cover most systems, structural, mechanical and electrical in a home. Thus they must have a very broad knowledge base coupled with the experience needed to recognize deficiencies.

The home inspector generally conducts the primary overview of the property and recommends other inspections be done when finding conditions that warrant them. Home inspectors do not check for geologic conditions or hazardous materials present. They also may limit their inspections beyond these items, so buyers should be prepared to hire additional experts as needed. Selection of inspectors should be made based upon the inspectors thoroughness and depth of his knowledge.

Some categories of inspections that a buyer could find beneficial are listed below.

GEOLOGIC AND SOILS ENGINEERING INSPECTIONS

Geologists and soils engineers are licensed to perform inspections and do testing to establish the stability of land. Although hillside properties are the ones that generally cause concern about landslides, flat land can be a subject of concern also in terms of soil stability and may warrant being checked out. As an example, a dry lake bed can cause problems due to swelling and shrinking that occurs in rainy seasons, especially when topsoil has been added on top of the sand base.

Poor compaction of the fill that underlies a structure can be a source of problems. In the past, compaction requirements were less stringent and, as a result, settling problems can be found in some older homes.

Soils engineering firms investigate other soil stability issues as well. Water causes many of the problems that are the purview of soils engineers, including mud flows and erosion that can follow rainstorms. For these reasons it is wise to investigate site stability.

STRUCTURAL ENGINEERING

Licensed professionals qualified to conduct inspections and do evaluations concerned with strength and stability of structures, including buildings and retaining walls.

When there are any concerns regarding the strength of a building, or when contemplating a roof replacement with heavier material or addition or change in the structure where original structure is removed, it is best to hire a licensed structural engineer to evaluate the situation.

Sometimes, as an example, an owner will have replaced a portion of exterior walls with glass doors to enhance their enjoyment of a view. Unknowingly the owner removed an element (the wall) that was needed for sheer support in case of an earthquake where twisting forces could compromise the support.

Such situations are avoidable when proper Building Department reviews, permits and inspections are done. Thus when looking at remodeled properties, it is recommended that all building permits be examined.

ROOF INSPECTIONS & ROOF CERTIFICATIONS

Many home inspectors will not walk on a roof to avoid the liability for damage. They lean a ladder along the edge of the roof and try to determine its condition from there. While some indications of the condition of the roof may be evident, other major concerns may not be. One of these is the condition of the mastic used to seal around flashings, skylights and fireplaces. Mastic dries out in time and cracks, causing perhaps the major reason for leakage into homes. It is therefore imperative that this be checked.

Some licensed roofing contractors perform roof inspections and for a fee will offer certifications for a period of years. During that time if any leaks occur, the contractor will make the repairs without charge. One important benefit from this contact is knowing someone to call for periodic maintenance.

PEST CONTROL (TERMITE) INSPECTIONS

This inspection is no longer included in the standard offer form for purchases in California. A buyer can elect to obtain this inspection as a part of his due-diligence during the inspection period, but unless specifically negotiated during the offer, there will be no inspection contingency.

ENVIRONMENTAL HAZARDS INSPECTIONS

Licensed inspectors qualified to perform inspections and tests for specific environmental hazards which are identified in the documents buyers receive as a part of their purchase agreement. Some of the environmental hazards are discussed below. Some may be relevant in other areas of the country where, for instance, in mining areas that are not of concern in Southern California.

Asbestos Inspections

Inspections and testing for asbestos materials. Asbestos is found in our environment having been used widely to control heat within its source. Therefore we find it along highways, from automotive brakes, and in many older structures as a component in ceiling tiles (remember the ones with the holes---they often contain asbestos), acoustic ceiling materials, floor tiles and rolled flooring materials, wrappings that surround heat ducts and plenum chambers, and even heater exhaust vents themselves!

The material was considered an ideal substance to give added protection against heat---and it was inexpensive. This resulted in its being widely used.

It is suggested by some authorities that the material when left undisturbed the presence of asbestos in building materials is not hazardous, but when abraded, shredded, scraped, or otherwise disturbed, asbestos becomes friable and the particles can become airborne. Then it can become a health hazard, especially when blown through damaged ducting into the home or business setting.

Some heater ducting has hard metal tubing with asbestos sheathing on the outside. Other heater ducts are comprised of a thin foil interior and corrugated asbestos material for the structural component. The latter type is easily crushed when unsuspecting or careless workmen climbing over or under it in making repairs or inspections in attics and crawl spaces. Then the asbestos becomes friable---capable of becoming airborne.

Under California law collection of asbestos samples for testing and removal of the hazardous material must be done different companies, properly licensed. California Asbestos Consultants (CAC) are professionals licensed to collect samples. Asbestos Abatement Contractors are licensed to remove and dispose of asbestos. They should be approved by Cal-OSHA.

Protective breathing equipment is worn while asbestos is being removed. It is protected and labeled prior to disposal in a prescribed manner. After asbestos has been removed, the premises are tested to determine that the air quality is safe for reentry.

On the contrary, when asbestos is removed illegally (as in scraping acoustic ceilings), the interior air may become contaminated and become a health hazard. Cleaning the premises can be costly, requiring such techniques as "wet wiping" of every surface in the property!

To avoid this problem, it is important to test a sample of acoustic material before ceilings are scraped. Not all rough, acoustic-like ceiling material contains asbestos, but only by testing a small sample in a laboratory can you be sure.

Mold Inspections

Mold can result from water intrusion that is not quickly removed and the area thoroughly dried out. Some types of mold are classified as significant hazards to the health of occupants. Thus when evidence of moisture is found during an inspection, the buyer is advised to hire a licensed mold inspection company to conduct a thorough sampling of the suspected areas and testing to identify the types of mold, if any.

For a discussion of mold, please read the information provided by the Environmental Protection Agency (EPA).

Controlling moisture is important to prevent mold in the home.

Radon Inspections

Licensed inspectors are available to do testing to satisfy concerns regarding radon gas.

The Environmental Protection Agency provides information at http://www.epa.gov

Lead-Based Paint Inspections

Paint manufactured before 1978 may contain lead which has been found to be a health hazard. It is especially problematic for children living where paint may be peeling or chipping. As a result, the U.S. Environmental Protection Agency (EPA) has prepared a report entitled "Protect Your Family From Lead in Your Home." Sellers and landlords must provide this and a disclosure about any lead-based paint known to exist in the residential structure to a buyer or tenant.

When desired, buyers can hire a professional check the property for lead paint and some testing devices that can be obtained to test privately.

CITY INSPECTIONS

City inspections or reports by building departments are required in many cities to confirm that property in escrow is in compliance with building permits. These reports are fee-based, but not all require an on-site inspection. Some cities require that a buyer acknowledge if he is waiving an on-site inspection.

POINT-OF-SALE UPGRADE REQUIREMENTS

Some cities such as Los Angeles require more modifications than State law requires when property is being sold. These modifications can include water-flow restricting devices, automatic gas earthquake shut off valves, ultra-low-flush toilets, shatter-proof glass or film coatings on certain doors and windows, etc. Smoke detectors and water heater strapping are other point-of-sale mandates.

Sellers are required to submit documents verifying that these changes have been made. Professionals often are hired to provide the certification for the City of Los Angeles and for the escrow holder.

PALOS VERDES HOMES ASSOCIATION INSPECTIONS

Building designs in Palos Verdes Estates and the Miraleste area of Rancho Palos Verdes are controlled by the Palos Verdes Homes Association and Art Jury. They recommend that buyers of property request sellers to obtain a letter of "completion and compliance" as a condition of purchase. This letter can only be requested by the property owner as it involves an on-site inspection and the sellers' authorization.

When such inspections are done, a member of the staff of the Homes Association compared the actual property with the approved plans that are on-file at the Association's office in Malaga Cove. When discrepancies are discovered, a letter is sent to the seller with discrepancies identified.

When there are no discrepancies, a letter of completion and compliance is provided.

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