There’s no question that buying a home in California is a unique process. If you’re looking to purchase a home in the golden state, there are a number of specific considerations you should keep in mind.
There are a few main differences between buying a home in California vs. elsewhere in the country:
Escrow companies handle closings — Once an offer is accepted, the agreement and down payment check will be deposited “in escrow”. This allows both parties to deal with each other without risk.
• Buyer deposits all money necessary for the purchase of the home in escrow, which is not paid by the escrow company until all conditions have been met.
• Seller deposits deed and other documents in escrow, which is not given to buyer until money has been paid.
You’ll sign a deed of trust (also known as a trust deed) instead of a mortgage — Similar, but different from a mortgage, a deed of trust names three parties:
• Trustee — The trustee is an independent third party that has the power to sell the home if the borrower defaults on the loan.
There are extra insurance considerations — California has many natural disaster hazards that may require additional insurance:
• Flood hazard areas
• Dam inundation
• High fires
• Wildland fires
• Earthquake fault zones
• Seismic hazards
Paul, an insurance agent, describes some of the considerations when buying in California: “California is an interesting place. The reason why it’s interesting in insurance is there’s a lot of different dynamics. You might live by the ocean. You might live in the mountains. So it’s always a good idea prior to purchasing the home if possible to look what type of area your home is in”
RAY: In California you deal with the escrow company which is the independent party that represents the buyer and seller and the negotiation in between.
STEPHANIE: Everything filters back through the escrow process, that’s where the funds are deposited, that’s where the funds are held, that’s where the funds are disbursed, that’s where all the documents are reiterated, so it is the hub, the central part of the whole process.
HOLLY: When a homebuyer takes a loan so that they can buy a piece of property in California they will be asked to sign a deed of trust. What they do is they create a lien for the bank against your property that says if you go to sell this property then we have a lien that says you can’t sell it until we get paid off.
PAUL: There’s a lot of different dynamics. You might live by the ocean. You might live in the mountains.
PAUL: It’s always a good idea prior to purchasing the home if possible to look what type of area your home is in. Is it in a brush area? Is it in a flood zone? Has it been earthquake retrofitted?
SCOTT: If you find a home in California that’s retrofitted, you’re ahead of the game, okay? Because that means your house has been reinforced at the studs to handle an earthquake.
PEARL: One of the things that you consider is looking into the Natural Hazards Disclosure Report, which it’ll tell you if the property happens to be on the hazard area or if it happens to be on a fault. Okay, the reason why you want to know that is because you need to have earthquake insurance if you happen to have property that is on the fault, which is an additional cost that most buyers don’t anticipate to have if they don’t do the research.