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What is the EMD (Earnest Money Deposit Check)?

Homebuyers and sellers often ask: “What is the EMD (Earnest Money Deposit Check)?”.

The EMD protects sellers and buyers during the sale/purchase process (transaction). Let’s explore the basics and understand how an EMD works.


Explanation of the EMD (Earnest Money Deposit Check)

Earnest Money Deposit Check

What Is Earnest Money?


The Earnest Money Deposit (EMD) given to the seller demonstrates the buyer’s good faith intention to buy the home. It shows the buyer is serious about the offer to buy the home. Also, known as a good faith deposit. It proves commitment.

Earnest money gives:

  • The buyer time to line up financing (mortgage);
  • Perform a title search;
  • Get a property appraisal; and
  • Conduct inspections of the home before closing (finalizing) the transaction.

In other words, the earnest money is a deposit with an escrow company (or title company) known as “good faith money”.

Often, the sales/purchase contract requires the buyer to deliver the earnest money to an escrow company. The earnest money deposit is due with the escrow company within three days after offer acceptance. The escrow company deposits the EMD into a specified escrow account.


How Does Earnest Money Protect The Buyer?


When a buyer likes a home and wants to buy it, earnest money along with a signed purchase/sale agreement keeps the seller from selling it to someone else. Thus, the seller takes the home off the market. In addition, the earnest money deposit applies to the buyer’s closing costs as a down payment.

As mentioned above, it gives the buyer time to:

  • Check out the seller’s ability to sell the home;
  • Get financing;
  • Hire professional inspectors to look at the condition of the home; and
  • Make sure no termites or pests exist.

If any of these steps fail the buyer may cancel the purchase based on the failure of one or more contingencies. Canceling a purchase because of a contingency failing allows the buyer to get the earnest money back.  We will explain the contingency below.


How Does Earnest Money Protect The Seller?


After signing a sales agreement when the buyer deposits earnest money into an escrow account it protects the seller.

Selling a property without earnest money leaves the seller vulnerable. The seller takes the home off the market while the transaction moves towards the closing. If the sale falls through the seller must put the home back on the market (re-list) and wait for another buyer. This could cause financial hardship.

This is why an earnest money deposit protects a seller from wasting time and losing money if the buyer backs out.

In addition, depositing earnest money decreases the chance of a buyer making multiple offers on homes. This prevents a buyer from tying up sellers with the ability to walk away.

The seller gets to keep the EMD if the buyer fails to complete the purchase due to a change of heart or a reason not included in the contract’s contingencies.  


How Much is the Earnest Money Deposit in California?

In California, a typical earnest money deposit ranges from 1% to 3% of the purchase price.

For example, a $500,000 home earnest money deposit can range from $5,000 to $15,000. It depends, a buyer may offer $5,000 but a seller may require $10,000 or more.

It’s open for negotiation like the sales price. For instance, in a hot market, a seller may ask for a 10% EMD. In such a market, buyers may offer higher EMDs to show sellers how serious they are.

Tip for Buyers: Ask your Realtor about how much you should offer as earnest money.

Normally, the earnest money is paid by a personal check, certified check, or a bank wire transfer into the escrow company’s account. The funds remain there until the closing.

Escrow accounts can earn interest like other bank accounts. If the earned interest amounts to $600 or more the buyer must fill out an IRS Form W-9 before receiving the interest. Form W-9 asks for the buyer’s Taxpayer Identification Number so the escrow company sends the IRS notice of the payment.


If the Transaction Fails How Will a Buyer Get the EMD back?


It depends on different situations. If the seller terminates the sale the earnest money always returns to the buyer. The escrow company will either issue a check or make a direct deposit in the buyer’s bank account.

Likewise, if one or more contingencies in the contract fail the buyer gets a full refund. Let’s explore contingencies.


What Is a Contingency in California?


One of our blog posts explains a contingency. It’s titled, “What are Real Estate Contingencies in California?”.

Basically, a home purchase contract contingency is a clause allowing the buyer to back out if the conditions are not met. Three areas of contingencies include an appraisal, financing, and inspections.

Typical contingencies include:

  • Appraisal: Every mortgage lender requires a professional appraiser to determine if the sales price is fair market value. If the sales price is under, the contingency allows the buyer to walk away;
  • Disclosures: By law, California requires specific disclosures called a “Transfer Disclosure Statement” (TDS) that covers potential problems like structural damage, natural hazards (flood and fire risks), and neighborhood noises;
  • Mortgage: Unless the buyer pays all cash, the buyer applies for a home loan (mortgage). If the buyer fails to qualify, the sale gets canceled;
  • Inspections: Professional inspectors look for material defects in the home and termites. If discovered, the buyer may cancel the purchase; and
  • Clear Title: Sellers guarantee a “clear title” to the property. The seller is the true owner with the right to sell. A “defective title” means the seller’s title is impaired by a court judgment, lien, or another claim to the title. This gives the buyer the right to cancel the purchase.


How To Protect Your Earnest Money Deposit?

Here are some tips to protect your earnest money deposit:

  • Include Inspections and Financing contingencies in the contract. These two specifically protect the buyer;
  • Read, understand, and follow the contract terms. For instance, follow all deadlines including when you get mortgage approval and completion date for all inspections. Missing one deadline gives the seller the right to cancel the purchase; and
  • Handle the deposit correctly. Don’t make a direct payment or write a check to the seller. Make sure your EMD goes to an escrow or title company, or a lawyer. Verify the funds are held in an escrow account and get a receipt.


What is the EMD (Earnest Money Deposit Check) – Conclusion


Now that you learned what is the EMD (Earnest Money Deposit check) follow our suggestions. Like how to protect your earnest money:

  • Treat your earnest money deposit carefully by not giving it to the seller;
  • Deposit your earnest money with an attorney, or an escrow (or title) company;
  • Make sure it goes into an escrow account; and
  • Get a receipt.


Buyers: Make sure your purchase contract includes important contingencies like:

  • An appraisal at fair market value or more;
  • Inspections of the home structure and termites;
  • Mortgage approval;
  • A clear title of the seller with a title search; and
  • Sufficient time to perform all contingencies.


Want to Buy a Home in San Diego County?


Now that you learned how to protect your earnest money deposit let SoCal Lifestyle Realty help you find the ideal home in the greater San Diego area.

Contact us to learn more about earnest money deposits, contingencies, and where your ideal home waits for you in San Diego.


Steven Rich, MBA – Guest Blogger


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iBuyer vs. Agent, Which Is Better For You When Selling Your Home?

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The popularity of iBuyer companies making offers across the country inspired this review. Home sellers want to know: “iBuyer vs. Agent, Which Is Better For You When Selling Your Home?”

Learn how iBuyers profit and demand more repairs than typical buyers.


What is an iBuyer?


An iBuyer is a company relying on its “Automated Valuation Model” to make quick offers to buy homes for all cash. It stands for “instant buyer” offering cash for a fast sale.

In essence, iBuyer estimates the value of a home and makes an offer to buy it. When a seller agrees, iBuyer takes on the burden of ownership, marketing, and reselling the house.

However, there is a catch as you will see below.


How Did iBuyer Start?


The first iBuyer company began in 2014 called Opendoor. Then, Offerpad began as the second iBuyer company. Since then, a few more iBuyer companies entered the market including Knock, Redfin, and Zillow. Source


Is Zillow an iBuyer?


Yes, Zillow is an iBuyer. Back in 2019, our broker, Big Block Realty, wrote a blog post titled, “Zillow Offers 2019 Reviews”.

It included negative reviews from these respected businesses and real estate publications:

It concluded that Zillow offers low purchase prices and lowers the price even more after their home inspection requiring many repairs. Also, sellers made more money selling the traditional way with a Realtor.


What is the iBuyer Business Model?

iBuyer Business Model

Many consumers confuse iBuyer with house flippers. Flippers target depressed homes to buy low, do some renovations, and sell high for a profit.

In contrast, iBuyers focus on houses in good condition. They make an offer to purchase below fair market value. Then, make the sellers do the repairs (or give repair costs credit to iBuyer). They profit when they sell the repaired home at fair market value.

Another way iBuyers profit is by charging a “service fee” close to what a real estate broker charges as a typical commission. Depending on the location, their service fee ranges from 5% to 6%.


How Does iBuyer’s “Automated Valuation Model” (AVM) Differ from a Comparative Market Analysis (CMA)?


Instead of using a traditional real estate Comparative Market Analysis (CMA), iBuyer uses an “Automated Valuation Model” (AVM). This is an iBuyers “proprietary software” program that processes a house’s data and arrives at an offer price.

The CMA traditionally compares similar recently sold homes near the one ready to sell. While no two homes are alike, a CMA looks at common features like:

  • Neighborhood;
  • Home architecture style;
  • Age;
  • Square Feet of the lot and home;
  • Number of bedrooms and bathrooms; and
  • Other similar features.


Then, the CMA comes up with an estimated value based on an analysis of similar features (comps). This usually becomes the listing sales price for the home.

In contrast, iBuyer’s “Automated Valuation Model” (AVM) uses its own data compared to information uploaded by home sellers about their home. They also claim reliance on their “local pricing experts”.

Which is better?

Critics of iBuyer’s AVM system point out that their data is like a “secret sauce” with no way to verify its ingredients.

In contrast, Realtors and real estate agents’ CMA spell out the exact features they compare similar homes in order to estimate your home’s fair market value.


Are AVM Systems Racist?


The Urban Institute, a 50-year-old nonprofit research organization dedicated to “the well-being of people and place in the United States” criticizes the AVM.

On March 5, 2021, they published an article titled,

Why Automated Home Valuation Technology Errors Disproportionately Affect Majority-Black Neighborhoods”.

Their informative article stated:

”In our recent report, we examined data from Atlanta, Memphis, and Washington, DC, to determine how AVMs contribute to racial disparities in home value estimates.”

They concluded,

Lower sales prices heighten the percentage magnitude of AVM error in majority-Black neighborhoods.

They also claimed these findings highlight the racist roots underpinning the systematic undervaluation of homes in majority-Black neighborhoods.

You can read their entire report here.


What Are iBuyer’s Repair Requirements?


iBuyer doesn’t buy your home “As Is”. Here’s how their process works:

  • First, you must answer many questions about the condition of your home;
  • Second, they send an offer to your email, but it’s contingent on a home inspection;
  • Third, one of their “home assessors” visits your home for an inspection which determines if the original offer stands or if you must repair items on the inspection list;
  • Fourth, if you refuse to make the extensive repairs yourself, you must give iBuyer credit towards the repair costs. Thus, your sales price become lower due to the repair costs;
  • Finally, if you agree to make the repairs according to iBuyer specifications (or give credit to iBuyer for the repairs), you can sign a contract for the sale.


Their “repair request list” covers everything from your attic to your basement and yards.

Note: These repairs often end up as deal-killers making you waste a lot of time.


How Do iBuyers Differ from Real Estate Agents?

iBuyers Differ from Real Estate Agents

Realtors and real estate agents represent their sellers when listing homes. State licensing laws require real estate agents to responsibly represent you when you list your home for sale. Likewise, the Realtors Code of Ethics adds clearer duties on behalf of our clients than state licensing laws.

On the other hand, iBuyers represent themselves and not you as a seller or a buyer. That’s why you must carefully ask all important questions to the iBuyer offering to buy your home or selling a home to you. As the old saying goes, “Buyer Beware”. It also applies to sellers.

You must treat iBuyers as strangers looking to buy and resell your home for a fee and profit.

The National Association of Realtors (NAR) conducted a survey in 2018 showing 87% of buyers chose to work with a real estate agent. Those numbers remain high in 2021. Maybe because real estate agents try to help their sellers and buyers more than iBuyers?


What Do Unbiased Real Estate Experts Say About iBuyer?


Better Homes and Gardens magazine (which owns Metrobrokers) after comparing iBuyer with real estate agents came to this conclusion: The singular goal of iBuyers is making money… With the right agent and pricing strategy on your side, you will come out on top every time.  In other words, you will come out on top using an agent instead of iBuyer.


Quicken Loans wrote this about iBuyer: What’s Misleading About iBuyer Programs For Sellers?… Their offers are lower and their negotiations are nonexistent.  In other words, iBuyer makes low offers with no negotiating.


Forbes points out: iBuyers tend to ask for a lot more repairs and a lot more money for repairs than traditional buyers… The one huge advantage of selling the traditional way is the seller typically makes a lot more money.” In other words, iBuyer requires more repairs than other buyers. Sellers make more money using real estate agents than iBuyer.


American Financing points out: With an iBuyer, you may pay heavily for the convenience and quick sale time. Using a Realtor will likely get you a better price on your home but within weeks instead of days. In other words, you pay for the convenience of an iBuyer quick sale. But, if you use a Realtor, you will get a better price waiting for the best buyer.


iBuyer vs. Agent, Which Is Better For You When Selling Your Home – Conclusion

iBuyer vs. Agent

Now that you read our “iBuyer vs. Agent, Which Is Better For You When Selling Your Home”, let’s summarize.

Low Offer: iBuyer makes offers on homes based on their unique “Automated Valuation Model” (AVM). However, they are not “As Is” offers.

Lots of Repairs: After they make an initial email offer, you must allow their “home assessor” to make a thorough home inspection. The assessor looks at everything inside from top to bottom and the outside yards. The assessor gives you a list of necessary repairs.

Deal-Killers: Often, these repairs end up too costly and time-consuming resulting in a “no sale”. In the meantime, you wasted a lot of time.

Racism? The Urban Institute recently criticized the AVM system for undervaluing majority-Black neighborhoods.

Seller Beware: iBuyers do not represent buyers or sellers. As a home seller, you must treat iBuyers as buyers and not Realtors or real estate agents required to watch out for your interests.

In a nutshell:

  • iBuyer makes offers to buy homes based on their controversial AVM home value estimate;
  • Also, their purchase offer depends on sellers making all the repairs they require;
  • Or, give credit from the sales price to cover what they claim as repair costs;
  • iBuyer determines the repair costs, not you or your contractor; and
  • On top of that, you must pay their service fee.

Does this seem like a good deal for you?

If not, work with a qualified Realtor to list your home at a sales price based on a fair CMA home value.


Use a San Diego Realtor to List Your Home at a Fair Market Price


Our SoCal Lifestyle Realty Realtors will give you a fair market value listing price. We will watch out for your interests during the entire listing and sales process.

Contact us to learn more about our services in the greater San Diego area.


Steven Rich, MBA – Guest Blogger






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House Hunting San Diego Questions 2021

Looking to buy a home in San Diego? Here are important house hunting San Diego questions for 2021.

After looking at online photos and descriptions of houses for sale in beautiful San Diego you can do a drive-by for a closer look. If some look nice from the outside you should contact a local Realtor for a preview. Or, you can work with a Realtor from the start.

But, before visiting a home for sale you should know what you are looking for. Questions like “What can I afford?” and “What type of home do I want?” need answers before you start looking.

It’s your job (not your Realtor’s) to decide what you want and if they are realistic. Here are important questions you need answers before making an offer on your next home.


House Hunting San Diego Questions 2021

House Hunting San Diego

Start house-hunting in San Diego the right way. Answer these five questions before searching to help you and your Realtor to focus on your most important wants and needs in your next home.


1. What is the maximum price you can pay?


Don’t stop at the sales price. Know the other expenses when buying a home. One good way is to use a mortgage calculator (unless you have all cash). This calculates all the expenses associated with a mortgage loan like monthly payments, property taxes, private mortgage insurance (PMI), home insurance, etc.

Knowing your maximum price saves you (and your Realtor) time. Walk away when a seller refuses your maximum price offer. New houses for sale pop up almost daily. Don’t lose out on opportunities within your price range by wasting time negotiating with a seller who won’t budge.


2. How large of a home do you need?


You must know how many bedrooms you need. Plus, you should get at least two toilets (one for guests).                                                                     Tip: A house with only one bathroom sells for less when you want to sell.

Consider if you need a home office, extra car garage space, storage room, kids’ playroom, or basement space. Think at least years in the future. Planning on expanding your family? Will your current small children want their own bedrooms?


3. What San Diego neighborhood do you want to live in?


Location, location, location is one thing you can’t change after you move in. San Diego offers many unique and desirable neighborhoods to live in. Our broker, Big Block Realty, publishes descriptions of the major San Diego neighborhoods including the best schools, parks, beaches, shopping, dining, and cultural activities like:


In addition, the WeLease Property Management website provides an excellent description of the Pacific Beach community in San Diego.

Compare the nearby parks, recreation centers, restaurants, shopping, and schools. Which neighborhood fits your needs and wants?

Don’t forget about smaller details like commute time to work and your kids’ schools. If you don’t mind long drives and rush hour snags then it won’t matter. Maybe you prefer to walk or bicycle to work? We recommend taking a test drive from a home you consider buying to your work and your kids’ schools.

Tip: Besides getting your kids to school faster consider that homes in good school districts sell faster and for more money when you want to sell. But, consider that the best school districts often mean higher property taxes.


4. How updated do you want your home?

House Hunting

Looking to move into an updated home? Or, a home requiring some remodeling or work bought at a lower price? If you have the time to remodel a home it will reap benefits in a higher appreciation value and creating your ideal home to live in.

Tip: However, if you get involved with a DIY consider your experience and skills with DIY projects. Ignore the DIY home improvement TV shows. It’s never as easy as they claim.

You may prefer doing cosmetic work like fresh paint, new appliances, and furniture, or landscaping.

This is why using a professional home inspection service before closing on your purchase may save you lots of money if hidden defects reveal expensive electrical, plumbing, or structural work.


5. What features do you need?


Your lifestyle and preferences dictate the home features you need. Do you need a large gourmet kitchen? If you like to entertain you may prefer a large patio with a fire pit. Do you have hobbies requiring a workspace?

Want a swimming pool? It’s much cheaper to buy a home with the right size pool than building one yourself.

Considering future renovations? Will the current home design and floor plans suit your tastes?

What are deal breakers? Will you put up with living on a busy street? Or, dealing with a high-maintenance backyard?

Tip: You need to write down all the features you need and want in your next home. Likewise, you need to write a list of deal-breaking features to avoid.


How to use this information in your RealScout search?


We at SoCal Lifestyle Realty are proud of our new hi-tech RealScout programs that help buyers find ideal homes faster.

Remember the lists we suggested above? Let our Realtor input your likes and dislikes lists into the RealScout search program to weed out current listings not meeting your desires and needs. That’s right, RealScout modernized local MLS listings search to find what individual buyers want. No other real property search platform does this, including the local MLS.

Learn about the benefits of our RealScout programs from our Big Block Realty brokerage blog posts:

RealScout Comes to San Diego to Help Home Buyers 2021. You will learn how our unique RealScout platform uses hi-tech Artificial Intelligence (IA) to focus on buyers’ needs and wants instead of basic MLS home features. Go through hundreds of current MLS listings in seconds searching the type of home you desire and avoiding the ones you don’t want. It even sends our Realtors an instant message when a new listing meeting our buyers’ desires get listed on the MLS.


How RealScout Helps San Diego Home Sellers in 2021”. RealScout also helps sellers find ideal buyers faster. This blog post describes the Rapid Listing Alerts program informing our Realtors instantly when a new MLS listing contains a buyer’s listed preferred features. It also explains how the RealScout Property Comparison allows buyers to compare photos of two or three ideal listed homes side-by-side on the same screen. It even makes buyers’ preview appointments fast and easy.


Tip: The best part is that our Realtors allow buyers to access the RealScout platform searches on their own. You can input your likes and dislikes and watch RealScout hunt all of the San Diego MLS listings to find matches. Instantly, all matches appear for you to view photos, descriptions, compare two or three homes photos, and set up previewing appointments.


House Hunting San Diego Questions 2021 Conclusion

House Hunting San Diego Questions

Let’s summarize our house hunting San Diego questions for 2021.

  1. What is the maximum price you can pay?;
  2. How large of a home do you need?;
  3. What San Diego neighborhood do you want to live in?;
  4. How updated do you want your home?; and
  5. What features do you need?


Using this information in your RealScout searches


Your lists help our RealScout platform with finding your dream home. This includes:

  • RealScout lets our San Diego buyers find their dream homes faster;
  • Buyers list their features and preferences they like or dislike in their home searches;
  • New real-time San Diego MLS listings are updated instantly on our RealScout searches;
  • New MLS listings matching our buyers’ preferences notices get sent to our buyers and Realtor instantly;
  • Buyers can compare photos of two or three listed homes simultaneously on the same screen side-by-side including same rooms (kitchen, bedroom, bathroom, etc.);
  • The RealScout platform allows buyers to access a calendar to make previewing appointments fast and easy; and
  • RealScout lets listing agents contact our Realtors when a match occurs with our buyers.

Want Our RealScout Programs to Help You House Hunt in San Diego?


Our SoCal Lifestyle Realty Realtors will help you find your ideal San Diego home faster. That’s because our unique RealScout platform conducts local MLS searches quicker than other search platforms. Better yet, RealScout lets you put your lists of likes and dislikes into its search system. Find the home you seek better and faster.

Contact us to learn more about how our RealScout programs will make your San Diego house hunting easier.


Steven Rich, MBA – Guest Blogger


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What are Real Estate Contingencies in California?

Buyers often ask, “What are real estate contingencies in California?”. This blog post provides the answer.

Let’s begin with a definition of real estate contingency.


What are Real Estate Contingencies in California?

According to the Oxford English Dictionary, the formal definition of a contingency is “A future event or circumstance which is possible but cannot be predicted with certainty.”

In other words, “an offer contingent on an event not happening due to unforeseen event or circumstance”.

A real estate contingency in California lets a buyer get out of (cancel) a purchase agreement when a certain event happens. The California Association of REALTORS® (CAR) explains that their standard real estate purchase agreements all contain the following contingencies:

  • Appraisal – Protects the buyer if the home appraisal comes out less than the purchase price allowing the buyer to cancel the purchase;
  • Disclosures – California law requires the home seller to make certain disclosures included in a “Transfer Disclosure Statement” (TDS) covering structural information, damages, neighborhood noise problems, and natural hazards like fire and floods risks;
  • Inspection – Mortgage lenders require a home inspection. If the inspection reveals termites or material defects in the house the buyer can cancel the purchase;
  • Loan – The buyer must get a loan (mortgage) approval to buy the house. If the buyer fails to qualify for the mortgage, the seller can cancel the sale; and
  • Title – The seller guarantees “clear title” as the owner with the right to sell the house. If “title defects” appear during the search of title records, the buyer can cancel the purchase.


Contingency to Sell a Buyer’s California Home

It’s always better to sell your home before making an offer to buy another home. That’s because your finances are in order with enough funds for your earnest money deposit and down payment.

Yet, circumstances arise when you find your dream home and don’t want to lose it. That’s why a contingency to sell your home before buying a house exists. If your house doesn’t sell in time for the closing date on your new home the seller can cancel the purchase.

Why would a seller agree to wait for the buyer’s home sale to close? A fix-up requiring large renovation expenses may not attract buyers. A buyer’s house in escrow with loan approval near closing may not take too long making the buy before selling contingency acceptable.

CAR has Form COP for this contingency.

However, if the buyer’s home is not in escrow or even listed, sellers beware as the risks outweigh the benefits. It amounts to letting a buyer tie up the house while the seller loses opportunities to sell.

One way around this is for the seller to add a new contingency called a Removal of Buyer’s Sale Contingency. If the seller gets an acceptable offer from another buyer can give written notice to remove the contingency within 72 hours. This forces the buyer to buy the house without waiting for the sale of his or her home. The buyer may seek a bridge loan or sell assets to come up with the funds to complete the purchase.


Do Contingencies Expire after 17 or 21 Days in California?


The answer is “yes and no” because after 17 days (for appraisal and inspections) or 21 days (loans) some contingencies are not automatically waived.

For instance, a loan contingency lets the seller deliver a Notice to Buyer to Perform (NBP) after 21 days if the buyer did not secure a mortgage. The NBP gives the buyer two more days to remove the contingency. The buyer accomplishes this by obtaining a mortgage or pays for the home with cash. After two days, if the buyer fails to fulfill the contingency the seller can cancel the purchase.

View a sample of the NBP.


Can Buyers Cancel Open Contingencies in California?


No, because each contingency has its cancellation rights. For example, an appraisal contingency allows the buyer to cancel if the property’s appraisal is less than the purchase price. Another example, a loan contingency gives the buyer the right to cancel if unable to qualify for the designated loan.

Similarly, according to CAR, “An investigation contingency allows the buyer the right to cancel the purchase if in ‘good faith’ the buyer is not satisfied with the property’s condition or anything else affecting the property’s condition”.


Will California Buyers Lose the Deposit after Canceling the Purchase based on an Open Contingency?


No, because an open contingency allows buyers to cancel the purchase at any time. The seller can’t sue the buyer for breach of contract since the buyer maintained the right to cancel. A breach requires the buyer to disregard conditions without good cause.

CAR advises their member Realtors never to give buyers assurances they will get their deposit back. That’s because if a seller simply refuses to give the deposit back it will force the buyer to file a lawsuit or demand arbitration. The buyer can sue the agent and the broker for making false assurances.


Can the California Seller Keep the Deposit after Canceling the Sale after an NBP?


No, because CAR’s contracts require a seller to cancel a contract after the NBP and to release the deposit to the buyer.

The only time a seller retains the deposit is when the buyer breaches the contract by failing to close (escrow) after the buyer removed all contingencies. This requires the seller to deliver a Demand to Close Escrow (Form DCE), not an NBP.


Can a California Buyer Waive Contingencies?

Yes, but consider the consequences.

With the popularity of pre-approved mortgages, most home purchases close without buyers backing out because of a contingency.

Buyer’s contingencies protect them from losing their earnest money deposit.

But, in a “hot” competitive real estate market many buyers voluntarily waive contingencies to make their offer more attractive to sellers. Yet, waiving contingencies meant to protect buyers’ earnest money deposits could lead to unforeseen events and losing the deposit.

Always consult with your lender and an experienced Realtor before waiving any contingencies.




Our answer to the question, “What are real estate contingencies in California?” raised issues about different types of contingencies.

  • Appraisal – An appraisal contingency protects buyers when the house appraises less than the sales price. The buyer cancels the contract and gets the earnest money back. If the property appraises at a higher value the seller can’t cancel the sale. Thus, the contingency protects the buyer both ways;
  • Disclosures – The law requires sellers to truthfully disclose many features of the home and its surroundings. Failure to disclose or writing lies allows the buyer to cancel;
  • Inspection – After receiving the home inspection report the buyer can cancel the purchase due to pests and material defects;
  • Loan – If the buyer can’t qualify for the loan the purchase can’t close and the buyer gets the earnest money back;
  • Title – If the title search discovers title defects that prevent the seller from selling the buyer can cancel the purchase;
  • Sell a Buyer’s Home – If a sale depends on the buyer first selling his or her home before the closing date failure to complete the sale on time allows the seller to cancel the sale. Sellers could request adding a Removal of Buyer’s Sale Contingency allowing the seller to sell to another buyer;
  • Expired Contingencies – Typical contingencies expire in 17 or 21 days when the seller can serve a Notice to Buyer to Perform giving the buyer two days to perform or the seller can cancel the sale;
  • Canceling Open Contingencies – Each contingency has its cancellation process; and
  • Waiving Contingencies – Buyers can waive contingencies protecting their rights, but not the ones protecting sellers.


Want to Learn More About California Real Estate Contingencies?


SoCal Lifestyle Realty helps sellers and buyers in the greater San Diego area. Our Realtors also can help you to understand California real estate contingencies.

Contact us for all your real estate sale or purchase needs in San Diego County.


Steven Rich, MBA – Guest Blogger



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What and Where Are Opportunity Zones in San Diego?

Real estate investors often ask, “What and where are Opportunity Zones in San Diego?”.

Let’s break these two questions up to give you the best answers.


What are Opportunity Zones in San Diego?

Opportunity Zones in San Diego

The 2017 Tax Cuts and Jobs Act (TCJA) created Opportunity Zones across the nation to stimulate development in economically distressed communities. Capital Gain tax incentives encourage private investors to purchase and develop these properties.

The IRS explains Qualified Opportunity Zones (QOZ) as an economically-distressed community where qualified new investments get preferred tax treatment. Each state designates which localities qualify as a QOZ. The Secretary of the U.S. Treasury certifies each one and delegates authority to the IRS to apply the preferred tax treatment.

But, the law expires on December 3, 2026. So, investors need to make all their purchases by that date unless this law gets an extension for further years.

In the 50 states and the District of Columbia over “8,761 designated Qualified Opportunity Zones” exist. This lists all 50 states and D.C. in a pdf. file:

  • Alphabetically by State;
  • County;
  • Census Tract Number;
  • Tract Type; and
  • ACS Data Source.


What Tax Benefits for Investing in a San Diego Opportunity Zone Property?

Tax Benefits

Legally avoid paying the capital gains tax with the Opportunity Zone laws. Similar to an IRS 1031 Like-Kind Exchange, the Opportunity Zone laws defer your capital gains if you reinvest your gains within 180 days of your sale.

Capital Gain Tax Reductions: Purchase and develop a San Diego Opportunity Zone property and hold on to it for five years. Then, 10% of your capital gain becomes tax-free permanently. Hold on to the property for at least seven years and the tax reduction increases to 15%.

Tax-Free: Hold your investment for at least 10 years and your entire capital gain becomes permanently tax-free when you sell your San Diego Opportunity Zone property.


To sum up, the Qualified Opportunity Zone program offers real estate investors three tax advantages:

  1. Deferring capital gains taxes when selling the QOZ property;
  2. Ability to eliminate part of the capital gain tax; and
  3. Ability to get a permanent tax-free gain after 10 years of appreciation.


What Qualifies Opportunity Zone Properties?


Above all, you must do more than purchase a property in the Opportunity Zone. The purpose of this program is to improve distressed communities. So, these conditions are also required:

A Qualified Opportunity Fund must own the property. This means you can’t buy a qualified property in your name or an LLC. You must invest your funds into a Qualified Opportunity Fund that makes the purchase.

Furthermore, the Qualified Opportunity Fund must make substantial improvements within the first 30 months of ownership. Experts claim that at least the same amount of funds to buy all property structures must make the required “substantial” improvements. Deduct the cost of the land from the purchase price as the rest equals what the fund paid for the structures.


How to Form a Qualified Opportunity Fund?


In short: A Qualified Opportunity Fund (QOF) is an investment entity filing either a partnership or corporate federal income tax return. Also, it identifies itself as organized for the sole purpose to invest in Opportunity Zone properties.

Most importantly, investors must do what is similar to a 1031 Like-Kind Exchange. The capital gains get invested into a Qualified Opportunity Fund which buys property in a Qualified Opportunity Zone.

Therefore, a QOF must meet these four requirements:

  1. The funds come from an entity that files a tax return (partnership, corporation, multi-member LLC, etc.). Sole owners or single-member LLCs do not qualify;
  2. Legal documents forming the QOF must state the purpose to invest in Qualified Opportunity Zone property;
  3. The QOF must use at least 90% of its assets to purchase Qualified Opportunity Zone property. To meet this requirement, experts suggest forming a new entity to act as a QOF; and
  4. The QOF must file an IRS Form 8996 self-certification as a QOF every year with its annual tax return. A late-filed tax return may disqualify the QOF status. The self-certification form must state the first month during the initial tax year that the QOF began.


Moreover: these Opportunity Zone tax benefits are not limited to the sale of rental properties. You can use this program to defer capital gains tax from sales of other assets besides real estate. For instance, the sale of stocks and business interests qualify as capital gains funds to reinvest in the QOZ program.

Tax Election – After meeting all the requirements for the QOZ tax benefits, as a taxpayer, you must make an election for the tax deferral in your individual tax return for the year of the capital gain.


How an Opportunity Zone Differs from a 1031 Like-Kind Exchange?


You only need to reinvest the capital gains and not the entire sales proceeds like you do in a 1031 Like-Kind Exchange.

This means you can keep the rest of your sales proceeds and not pay taxes on them.

In addition, other benefits of the Opportunity Zone program over a Like-Kind Exchange include:

  • The right to choose non-like kind property (real estate) to reinvest into when selling stocks and business interests;
  • Not using an exchange intermediary; and
  • Avoiding the Like-Kind Exchange 45-days to identify replacement properties rule.

However, the 180 days to close on the reinvestment purchase rule is similar to a Like-Kind Exchange.


How to Find Qualified Opportunity Zones in California and San Diego County?

How to Find Qualified Opportunity Zones in California

The State of California prepared an Excel spreadsheet listing all the counties with Designated Qualified Opportunity Zone Tracts of land. They are identified by:

  • GEOID;
  • County;
  • Census Tract;
  • Poverty Rate; and
  • Median Family Income.

San Diego has 46 of them. You can download the Excel sheet by clicking:

California Opportunity Zones

In addition, the Community Development Financial Institutions Fund’s Opportunity Zones Resources page answers many questions about the Opportunity Zones in California.

Before purchasing a property learn about the Escrow Closing Costs in San Diego. Similarly, Why You Need to Use an Experienced California Real Estate Agent.




We answered the question, “What and where are Opportunity Zones in San Diego?”.

Let’s sum it up – The purpose of Opportunity Zones is to stimulate private investments into economically distressed communities. The federal government provides several tax incentives to encourage private investors to purchase and develop these properties.

The State of California publishes an Excel spreadsheet listing the Qualified Opportunity Zones by county.

These properties require purchasing from a Qualified Opportunity Fund (QOF) to invest at least 90% of its assets into QOZ properties.

Thus the Qualified Opportunity Zone program offers three tax benefits:

  1. Capital Gains Tax Reduction – Investors holding their investment in a Qualified Opportunity Fund for at least five years reduces their capital gains tax by 10%. After seven years, the tax reduction increases to 15%.
  2. Capital Gains Tax Deferral – Investors re-investing their capital gains into a Qualified Opportunity Fund for at least 10 years permanently defers federal tax payments on the realized gains.
  3. Eliminating Taxes on Future Gains – Investors holding onto their Qualified Opportunity Fund investments for at last 10 years avoid federal capital gains tax on their realized gain.


Interested in San Diego Opportunity Zones?


SoCal Lifestyle Realty can help you. Let our experienced Realtors assist you with locating Qualified Opportunity Zone properties in San Diego County.

Contact us for all your real estate sale and purchase needs in the greater San Diego area.


Steven Rich, MBA – Guest Blogger




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Tips for Staging Your San Diego Home When Selling

The best tips for staging your San Diego home when selling begin with an old slogan: “Love at first sight”. In real estate sales, appealing homes possess “curb appeal”, a positive emotional attraction from buyers on the street.

Big Block Realty published a guide about creating buyers’ positive impressions. Also, another post described how initially “buyers decide on emotion rather than practicality”.

This post goes beyond those explanations.


Best Tips for Staging Your San Diego Home when Selling

Staging Your San Diego Home

Financial advisors claim that prospective home buyers first consider two things:

  1. What they want in a house; and
  2. What they need in a house.

In other words, house hunters declare “wants” and “needs” in that order. It’s the “wants” that initially attract them to a house from the street. For instance, “That house looks really nice” means “This one looks like my dream home”. That’s curb appeal in its rawest form.

We will show you tips for staging your San Diego home when selling.

Let’s begin with defining “What is home staging”?

Home staging makes homes look stunning. Real estate marketing practices improve a home’s visuals making it look appealing in photos, videos, and during previews. Take a dark drab room and make it energetic with brightness for a “homey” feeling.

Professional home stagers inspect homes inside and outside to advise home sellers about making them appeal to buyers.

Tip: A good listing agent knows how to save sellers money by offering their experience with home staging for free. We recently published a post titled, “Use an Experienced California Real Estate Agent” showing other benefits too. The home staging suggestions may include:

  • Moving around existing furniture to create an illusion of extra space;
  • Adding candles, fresh flowers, colorful throw pillows, better lighting, etc. for special touches to make a room “homey”;
  • Cleaning every room, curtains, and carpets along with the front and back yards;
  • Removing all clutter inside and outside including closets, cabinets, and drawers;
  • Organizing the garage and storage spaces to look ready to use;
  • Hiding personal items so buyers vision their items in each room;
  • Using electric deodorants or reed diffusers to make every room smell nice;
  • Repairing everything in need, buyers don’t want a house demanding repairs;
  • Remove all signs of pets because some buyers don’t like them or are allergic to them; and
  • Painting over out-of-fashion colors and using neutral ones to appease most buyers.

Do you see what home staging does for your home?

It cleans, organizes, brightens, and makes the home smell good.


Staging Vacant Homes


If your home for sale is vacant, home staging becomes essential.

Take a look at the two examples below showing how vacant rooms transform into appealing ones for buyers.

Staging Vacant Homes
Home Staging Example 1 by Daniela Margiotta

Image Source / Image License

Staging Vacant Homes
Home Staging Example 2 by CICADAMOONWORKSHOP

Image Source / Image License

Quality photos: This is a good time to point out the benefits of using high-quality photos.  Don’t use your smartphone camera. Poor quality photos do not impress buyers.


Why Staging Your San Diego Home is Worth It?


Do you want to sell your San Diego home faster at top dollar? 

According to the National Association of Realtors (NAR), home staging increases buyers’ offers from 1% to 5% (Source).

According to The San Diego Union-Tribune on March 30, 2021, the average San Diego home price last January was $710,000 (source: CoreLogic data). The Tribune claimed, “San Diego home prices rose the third fastest in the nation to start the year at 14.2 percent.”

Using the NAR staging price increases with San Diego’s average home price means increases of $7,100 (at 1%) to $35,500 (at 5%).

Would you like those price increases?


How Does Home Staging Help Buyers?


NAR reported on April 6, 2021, their survey of buyers’ agents showed that:

  • 82% reported home staging allowed buyers to better visualize the house as a future home;
  • 76% stated that buyers knew what they wanted in a home before they began looking for a new home;
  • Over 70% claimed that photos, virtual tours, and videos became more important after the COVID-19 pandemic started;
  • 63% reported TV shows explaining the home buying process positively affected their business; and
  • 31% claimed home staging greatly reduced the time a home typically remained on the market before selling.

So, home staging gives sellers higher sales prices and faster sales. 


How Important is a ‘Homey” Feeling?


According to the same NAR survey, 77% of potential buyers found home staging made them imagine living in the home. Buyers who feel emotionally attracted to a house usually purchase it.

Home staging creates an initial emotional appeal through photos, videos, and virtual tours. Later, when the buyer visits the home the attraction turns into love.

“Love at first sight” leads to previews resulting in sales.


How to Stage Your Home Inside and Outside


Since first impressions count, every room and the outside need staging. Let’s look at the most important rooms and the outside to see what they need.


Home Staging Your Outside


Look at your home’s exterior in the eyes of a buyer. Their first impression must impress them. Here’s what to do:

  • Mow your lawns – And keep them mowed because you never know when a buyer drives or walks by;
  • Spruce up the front and back gardens – Trim the bushes and trees, and add new plants. See that the outdoor furniture looks nice. Fix cracked walkways;
  • Make outdoor improvements – Fix your staggering gutters, repaint your front door and fix your fences, make the driveway and patio look new with jet washing;
  • Make your pool brilliant – Step up your back pool cleaning and maintenance, make the water look crystal clear, and throw out old or worn pool furniture;
  • Create an attractive backyard – Within your budget, landscape the back (and the front too);
  • Paint old or worn siding, fences, and outdoor structures to look new; and
  • Don’t forget the roof and chimneys – Old and worn roofs scare buyers who fear leaks. Make sure the chimneys work and look sturdy.


Home Staging Your Interior


Entrance hallway – The first thing a buyer sees when entering your home makes a big impression. Repaint the hallway as most are small and cost little to do. Replace the doormat, clean the rug and improve the lighting. Make your hallway sparkle.

Refresh the walls – Repair all cracks or bulges. If your interior needs painting the cost is worth it. But, use neutral colors so buyers have more options for decorating rooms.

Make your living room cozy – It’s one of the most important rooms where people go to relax in comfortable chairs and sofas with practical tables and good lighting. Use features and focal points like a cozy corner to curl up into and relax.

Rooms with a view – Show off your best views from your windows. Wash all your windows regularly so they look brilliant.

Natural lighting – Make sure the windows allow natural lighting.

Re-arrange your furniture – Store your large furniture and replace them with compact ones like a “settee” (an elegant and slimmer profile than sofas) complimenting the coffee table. Rent classy small furniture to make rooms appear larger and comfortable.

Curtains may clash – If your curtains clash with wall colorings or look outdated or tattered, replace them. Clean your curtains and open them to let the room look brighter.

Use your storage spaces – Move the clutter into your storage spaces, Buyers seeing cupboards and wardrobes stuffed with things instantly feel your home lacks adequate storage space.


The Most Important Rooms for Staging Your San Diego Home when Selling

Kitchen – The heart of a home is the kitchen where the family eats and friends linger over coffee or tea. Store away small appliances leaving more counter space for buyers to visualize how their small ones fit. Kitchens must remain clean and sparkling with no dirty dishes or clutter. Clean all appliances with no smelly fridge or dirty stove.

Bedrooms – Make the master bedroom look like a lifestyle improvement to the buyers. Keep other bedrooms minimal with a bed, dressing table, and bedside tables with lights. Remove clutter including the closets and hide the toys in the kids’ bedrooms.

Bathrooms – Cleanliness sells bathrooms. Make sure all tiles, fittings, glass surfaces, and fixtures shine with no signs of rust or mold. Re-grout the tiles if damaged or dull-looking. Repair leaks and replace poor shower sealants. Remove personal toiletries so the bathrooms appear clean, shining, and neutral. Place a couple of candles in the corner of the bathtub and a potpourri bowl on the counter to smell good.

Garage – Must look clean and organized with shelves and storage space that buyers like.




The best tips for staging your San Diego home when selling won’t cost you much.

Budgeting: Knowing what your closing of sale fees in advance helps you to budget for your home staging. We recently published a post titled, How To Understand California Escrow Costs 2021 explaining your estimated closing costs.

Necessary repairs and re-painting become unavoidable expenses. But, the rest of these home staging tips won’t break your budget like:

  • Staging homes arouse buyers’ emotions. Curb appeal arouses instant love at first sight. Home staging increases buyers’ offers from 1% to 5% earning you thousands of extra dollars;
  • Homey rooms appeal to buyers. Clean and organized homes with minimal furniture allow buyers to visualize living there; and
  • Nice aromas attract. Kitchens and bathrooms free of bad smells become inviting. Make every room smell sweet.

Therefore, home staging cleans, organizes, brightens, and makes your home smell good.

When 77% of potential buyers find your home, staging allows them to imagine living there. They feel emotionally attracted to your home and end up wanting to buy it.

“Love at first sight” with your home increases the odds you will sell it to that buyer.


Need Help with Staging Your San Diego Home before Listing?


When listing with us, SoCal Lifestyle Realty agents offer their home staging experience for free.

Contact us to learn how we can help you with staging your San Diego home for a faster sale at a higher price.


Steven Rich, MBA – Guest Blogger









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Is It Hard To Get Pre-Approved For A Mortgage In San Diego?

Buyers often ask, “Is it hard to get pre-approved for a mortgage in San Diego?”. A simple answer is “No”. But you need to know a few important facts which we explain below.

Finding a home, you love and losing it to another buyer is heartbreaking. San Diego’s housing market often sees multiple offers on desirable homes. What could you do to increase your chances of getting ahead of other buyers for the same home?

First, understand why you need to use an experienced California real estate agent to help you find the home of your dreams. Read our recent blog post titled, Use an Experienced California Real Estate Agent.

Then, get a mortgage pre-approval letter from a San Diego lender. It’s an evaluation by a lender to determine if you qualify for a mortgage and how much. Yet. it doesn’t guarantee a mortgage. Instead, you show your seller a pre-approved mortgage letter along with your offer showing you qualify for that amount. It gives sellers confidence you are a serious buyer.

Pre-Approval Steps for a San Diego Mortgage

San Diego lenders offer pre-approved mortgage letters to buyers. But not every buyer receives one. Let’s explore the steps to get a pre-approved mortgage letter from a lender.

You only need five steps to get a pre-approved mortgage in San Diego. A mortgage pre-approval requires these steps:

  1. Filling out a loan application;
  2. Providing supporting documents like tax returns, W2s, recent bank statements, etc.;
  3. Stating how much of a cash down payment you can provide;
  4. Allowing your lender to run a credit check; and
  5. Based on your credit history & score, down payment, and documents, you will learn your mortgage options.


What Factors do Lenders Consider in a Pre-Approval Mortgage Letter?

After receiving the information and documents you provide, your lender looks at these key factors:


Questions Affecting Your San Diego Mortgage Pre-Approval Process

The following 10 questions help your lender to determine what you can afford:


1. What is the Maximum Home Purchase Price You Qualify for?

Let’s face it, you can’t buy a million-dollar home if you can’t afford it. The purpose of getting a pre-approved mortgage letter is to find out what you really can afford to buy.



2. What are Your Monthly Mortgage Payments Based on the Purchase Price?

Your lender can help you to estimate your monthly housing expenses. It’s based on your monthly income and expenses along with funds to cover emergencies (like medical or emergency home repairs).

The maximum purchase price you can afford depends on how much you can pay every month towards the mortgage and your living costs.


3. How Much Will You Pay for Closing Costs?

Knowing how much you need to pay for the escrow closing costs ahead of time helps you to budget.

Too often a buyer finds out just before the closing how many thousands of dollars he or she needs to close the transaction. Extra costs include homeowner’s insurance, escrow fee, and title deed recording fee.

Read our recent blog post explaining the types of buyer’s escrow closing costs. It provides examples for three different San Diego home purchase prices closing settlement statements written by a local escrow company and a lender. It’s titled, How To Understand California Escrow Costs 2021.


4. Is Your Down Payment Coming from You or will a Family Member Contribute?

Coming up with the full down payment on your next home yourself helps with your mortgage pre-approval. But if you come up short ask family members to contribute. Known as “down payment gifts”.

If family members help you to come up with the down payment you need to ask them before applying for the pre-approval. Part of the documents you give your lender to support your application includes a Standard Gift Letter. You and the gift donor state that the funds are a gift and not a loan requiring repayment.

Tip: Too often a son or daughter asks the parents for an extra $10,000 as the closing gets closer. It’s better to ask before committing to a purchase and applying for a mortgage pre-approval without a standard gift letter.


5. What Occurs When You Pay with a Larger or Lower Down Payment?

According to the legal publication Nolo, the advantages of a large down payment include:

  1. Lenders offer lower interest rates – Lenders hate to foreclose on defaulting loans. They reward buyers with higher down payments by offering them lower interest rates. That’s because the risks of default are lower with large down payment buyers.
  2. Less interest to pay – Larger down payments result in less interest. Depending on the purchase price, lowering your interest rate by one percent saves you thousands of dollars over the life of the mortgage;
  3. Lower monthly mortgage payments – Borrowing less money means having less to pay back. A lower interest rate means lower monthly payments;
  4. No Private Mortgage Premiums (PMI) – Paying 20% or more of the purchase price at closing saves you from paying the PMI. This saves you thousands of dollars per year;
  5. Better odds of beating out multiple offers – When many buyers make offers on the same house a bidding war begins. Sellers do not want buyers incapable of closing on the sale. Buyers with larger down payments look better.


6. What Special Mortgage Programs Exist that You Might Qualify for?

The California Housing Finance Agency (CalHFA) provides a list of special mortgage programs. For first mortgages these include:


The San Diego Housing Commission (SDHC) provides homeownership grants, deferred loans, and mortgage credits to help lower-income families purchase their first homes. It’s called “The SDHC First-Time Homebuyer Program”.


7. Which is Better for You a 30-Year or 15-Year Fixed Rate or an ARM?

An Adjustable-Rate Mortgage (ARM) gives rates that regularly go up or down. A fixed-rate mortgage interest rate never changes during its time.

According to NerdWallet, “ARMs often appeal to first-time homebuyers”. That’s because they offer a lower introductory rate making it easier for first-time buyers. Good in the beginning, but the rates may rise later on due to the economy.

According to The Balance, a real estate data service, a 30-year fixed rate makes it easier for retiring. While a 15-year fixed-rate pays down your mortgage balance quicker.


8. Can You Lock In the Interest Rate Now or Will it Vary at Closing?

Some lenders allow locking in the interest rate for a fee. Locking in your interest rate gives you security knowing how much you will pay.


9. Is there a Pre-Payment Penalty if You Pay Off the Mortgage Early?

A prepayment penalty charges a fee for paying off the mortgage early.

Nolo claims that “federal laws prohibit some mortgages from having prepayment penalties”. Since 2014, the federal government placed many restrictions on prepayment penalties.


10. How Long is a Pre-Approval Letter Valid for?

Typically, a pre-approved mortgage letter expires between 60 to 90 days.


What’s Included in a Pre-Approval Mortgage Letter in San Diego?


Pre-approval mortgage letters usually include:

  • Maximum purchase price;
  • Mortgage amount;
  • Loan program;
  • Interest rate;
  • Down payment; and
  • Expiration date.




Now that we answered the question “Is it hard to get pre-approved for a mortgage in San Diego?” let’s sum it up.

Pre-approval mortgage letters determine these important factors about your mortgage qualifications:

  • The maximum home purchase price;
  • Your maximum monthly payments;
  • The down payment;
  • Mortgage programs you qualify for;
  • The interest rate; and
  • Expiration date.


Need Help with Finding a San Diego Mortgage Lender?


SoCal Lifestyle Realty maintains close contact with experienced San Diego area mortgage lenders we recommend to our buyers.

Contact us for all of your home purchase needs including finding the right home for you and your family in the greater San Diego area.


Steven Rich, MBA – Guest Blogger




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How To Understand California Escrow Costs 2021

California escrow costs (also known as “closing” costs) confuse most buyers and sellers. Learn how to understand California escrow costs in 2021:

  • Firstly, we’ll explain the terms used by escrow officers (or title companies);
  • Secondly, we’ll explain the types of costs related to the closing of escrow;
  • Thirdly, an explanation of estimated fees for each item that the seller and buyer pay at the closing; and
  • Finally, we provide examples of California escrow costs.

Typical California Escrow Costs Terms


California escrow officers prepare a written statement for the buyer and the seller known as the Master Settlement Statement. This lists every credit and debit paid by the buyer and seller.

Most importantly, here is an explanation of the typical escrow statements terms.

Appraisal: A California appraisal company prepares a report providing the home’s “fair market value”.

Attorney’s Fee: If a California lawyer gets involved for the buyer or seller usually reviewing the closing documents.

Bank Wire Fee: Escrow officers send the funds held in escrow by bank wire.

Closing or Escrow Fee: Either a California attorney, a title company, or an escrow company conducts the closing. The escrow company handles all funds for the transaction. In 43 out of the 58 California counties, the buyer and seller each pay 50% of the escrow fee.

Courier/Messenger Fee: Pays the messenger providing transportation of all-important loan documents.

Credit Report: The buyer’s mortgage lender buys a “credit report” from a credit reporting company. It gives a “credit score” (a number rating the risk or “creditworthiness”) of the purchaser based on the buyer’s “credit history”. A higher credit score results in a lower mortgage interest rate.

FHA Mortgage Insurance Premium (UFMIP): If the buyer obtains a Federal Housing Administration (FHA) loan, the buyer pays a UFMIP. It amounts to 1.75% of the mortgage loan. An option exists for the buyer to include the UFMIP in future loan payments rather than upfront.

Flood Zone: An expert determines if the home sits in a “flood zone”. If so, the purchaser must buy “flood insurance” before the closing.

Home Inspection: A California certified home inspector views the home to see if it needs repairs before escrow closes.

Homeowners Association (HOA) Transfer Fee: Purchasing a condominium or a home inside a closed community of homes requires the seller to pay for the HOA membership transfer fee to the purchaser. This assures all dues get paid at the closing.

Homeowners Insurance: The first year of an insurance policy covering damages to the home paid by the buyer.

Homeowner’s Title Insurance Policy: An option to protect the buyer from any challenges to the right of ownership. Sometimes, the seller’s ex-spouse or another person claims part or full ownership to contest the sale.

Lender’s Administration Fee: Also known as an “origination” fee pay for the lender’s administrative costs. Usually, around 1% of the total loan amount. But some mortgages don’t require an origination fee. Read our Note about this before the Conclusion.

Lender’s Title Insurance: The mortgage lender receives an insurance policy protecting the home’s title. Prior liens not paid off at the closing or boundary disputes affect the property’s “clear title”. A lender’s title policy for the mortgage depends upon the mortgage loan amount. Thus, the California escrow costs samples provided below won’t include this item. But you can access the Ticor Title Insurance Company website and use their free Rate Calculator.

Mortgage Application Fee: A fee the buyer pays when applying for a mortgage loan. Also called a mortgage “processing” fee. This includes a “credit check” to see if the buyer qualifies for a loan.

Mortgage Insurance & Property Tax Deposits: Purchasers are often required to pay two months of property taxes and mortgage insurance as a deposit with the escrow agent.

Mortgage Prepaid Interest: Lenders often require prepaying any accrued interest from the closing date to the first mortgage payment date.

Notary: A California certified Notary Public witnesses and certifies the authenticity of signatures on the title deed and other important transaction documents.

Termite Inspection: Covering the cost for a California certified professional inspector looking for “dry rot” and termites. Saves the buyer from expensive repairs of rotten wood or exterminating termites.

Private Mortgage Insurance (PMI): Buyers with less than a 20% down payment of the home’s purchase price must get a PMI policy and pay the first month at the closing.

Property Tax: Lenders require payment at the closing of any property tax due during the first 60 days of ownership. Buyers may calculate their California property tax using this Property Tax Calculator.  This calculator includes every county in the country.

Real Estate Commissions: Usually 5% to 6% of the purchase price paid to the listing and selling brokers who divide it.

Reconveyance (Release) Fee: The fee to close the existing loan and release the lender’s lien on the property.

Survey Costs: When a professional survey of the property’s boundaries verifies that the property’s lines and fences do not cross over into adjoining properties.

Title Recording Fee: Filing fee for the title deed filing at the county recorder’s office paid at the closing. Click on this link to find every California County Recorder’s Office.

Title Search: A title company researches the property’s public records to verify no claims challenge the seller’s title and right to sell.

Transfer Tax: A tax paid when the title transfers to the buyer. The county transfer tax is the same throughout the state but some cities also charge a city transfer tax and generally a lot more. The city of LA for example charges city transfer taxes.  Transfer tax is generally quoted as $1.10 per thousand while technically correct, but the correct formula is 55 cents per $500. This makes a difference in the calculation when the price isn’t an even thousand number.

Underwriter’s Fee: A mortgage lender’s fee for investigation of the buyer’s qualifications for loan approval.

VA Funds Fee: The Veterans Administration (VA) loan (if applicable) fee is paid at the closing. The buyer may choose to pay this fee upfront or over the life of the loan. Exemptions from this fee exist. Here are links to a list of all fees for VA loans and a list of the costs for a VA funding fee.


California Escrow Costs in Detail

Now that you learned all the terms and explanations of the California escrow closing costs. Let’s look at the specific closing costs. These estimate the average fees based on the California Closing Statements examples below.

  • Appraisal: $495
  • Bank Wiring: $30
  • California Transfer Tax: 55 cents per $500
  • County Recording of Title Transfer: $200
  • Courier/Messenger Service: $165
  • Credit Check: $77
  • Escrow Services: $1,700 to $2,500 depending upon purchase price.
  • Flood Zone Certification: $15 to $99 depending upon company used.
  • Homeowner’s Insurance: $470 to $1,500 depending upon purchase price.
  • Homeowner’s title insurance policy: $1,400 to $2,423 depending upon purchase price.
  • Loan Origination Fee: $350
  • Loan Processing: $800
  • Notary: $200
  • Property Taxes: 1.25% of purchase price
  • Real Estate Commission: 5% divided between listing and selling brokers.
  • Termite Inspection: $75
  • Title Insurance: $400 to $1,800 depending upon purchase price.
  • Underwriting Fee: $950

NOTE: Most importantly, the costs for a real estate transaction depend upon the property, final sales price, purchase agreement terms, and conditions between the seller and the buyer. In addition, the mortgage loan amount for the buyer adjusts the costs.


Examples of California Escrow Costs


Albert Tapia an escrow officer works for the New Venture Escrow Company in Chula Vista, California for the past 6 years. He spent the last 21 years working in the escrow field. He kindly prepared example Settlement (Closing) Statements for three different San Diego home sales ($450,000 and $650,000 and $950,000).

His first example is a San Diego home sale for $450,000:

California escrow costs for a $450,000 home sale


The second example is a San Diego home sale for $650,000:

California escrow costs for a $650,000 home sale

His third example is a San Diego home sale for $950,000:

California escrow costs for a $950,000 home sale

Sarah McCalmon, Senior Loan Advisor for First California Funding in San Diego, a direct home mortgage lending company since 1985. She also kindly provided us with a “Closing Costs From a Lender’s Perspective”.

She includes the three different San Diego home sales prices in her Estimated Buyer’s Closing Costs example:

San Diego Buyers Closing Costs

NOTE: In addition, Sarah points out an important tip for home buyers:

Make sure to watch out for things like:

Lender Origination Charges on the Fee Sheet is what the lender is charging for the loan and interest rate. Beware of large Origination Charges or Discount Points as a cost for the interest rate chosen.

It’s important to look at the cost details and not be fooled by the illusion of the lowest interest rate offered. The lowest interest rate with the wrong strategy can cost you more than a slightly higher rate with the right strategy. Make sure you review your specific needs with your mortgage advisor.




In conclusion, our “How To Understand California Escrow Costs 2021” taught you about the meaning of unique terms in closing statements. For instance, knowing the average fees paid to professionals involved in a California real estate transaction. Moreover, looking at typical California escrow closing statements to see what buyers and sellers pay.

We provided you with California escrow costs guidelines, explanations, and examples to help you with selling or buying a home.

Above all, a valuable tip from a San Diego mortgage advisor about the pitfalls of Lender Origination Charges. Which saves California home buyers money.

SoCal Lifestyle Realty helps home buyers and sellers to save money with useful blog posts. And, our friendly Realtors make your sale or home purchase a worthwhile lifestyle experience.

Contact us for all your home sales or purchasing needs in the greater San Diego area.


Steven Rich, MBA – Guest Blogger


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Use an Experienced California Real Estate Agent

Why You Need an Experienced California Real Estate Agent


When you sell your home or want to buy a home, that’s the time to use an experienced California real estate agent. Let’s face it. An inexperienced real estate agent can cost you time and money.

Inexperienced agents often miss the ideal fit you seek in your new home. Plus, they don’t know how to negotiate effectively on your behalf when you sell or buy.

real estate agent san diego california

How to Gauge Real Estate Experience


Don’t bother with asking an agent how much experience he or she has. Salespersons tend to brag about their experience from the first day working.

Instead, ask the agent how many times he or she renewed their real estate license. California agents’ licenses get renewed every four years. [See the California Department of Real Estate (CDRE) Renewing Your License.]

Also, check out the CDRE website to verify a California agent’s license. And, see if the agent ever had ethical violations or any disciplinary actions by the State of California.

After knowing how many license renewals the agent experienced and verifying it with the CDRE, you will know the agent’s experience. Also, researching any ethical violations gives you an idea of the agent’s honesty.


Benefits of Using an Experienced California Real Estate Agent

Experienced Real Estate Agent

Anyone can search for online homes for sale listings. Also, anyone can schedule a viewing of a home for sale.

Just visit the Massachusetts Institute of Technology Library’s Geographic Information Systems (GIS): Housing & Real Estate.

There you will find links to the Trulia Real Estate Search and the Zillow Real Estate Data Portal for current national real estate listings. Also, links to the U.S. Census Housing Data and the National Association of Realtors Housing Statistics for detailed data about locations across the country.


So, if you can search for home sale listings nationally and get useful data about their locations, do you still need a California real estate agent?


Yes, because agents perform other functions than locating homes for sale. Here are several ways an experienced agent offers you valuable advice.

Pulse on the local real estate market: An experienced agent identifies and predicts local market trends. Like an experienced stockbroker telling you what to buy and when to sell. Which neighborhoods are trending up or down? When should you sell and when to wait? Experienced agents know the local market prices and trends.

Networking with other agents: Experienced agents know buyer’s agents which helps you to sell faster. It’s all about finding the right fit. For instance, if you want to buy a certain type of home or in a specific neighborhood, your agent lets other agents know. One of them can recognize a perfect fit and contacts your agent. Experienced agents maintain a tight-knit group who share information.

Experience with negotiations: Negotiating the best price for sellers and buyers is an art. The more an agent negotiates, the art form gets better honed. Experienced agents get insights into sellers’ and buyers’ motivations. This experience separates the sellers motivated to sell quickly from those willing to wait for a better deal.

Community connections: Experienced agents maintain contacts at federal, state, and local government agencies. A friend at City Hall opens more doors. If a large national company intends to build a new local factory an experienced agent knows about it before the local media. Plus, how it affects the local market and specific neighborhoods. Experienced agents always know about changes or new developments in the community.

Good referrals: Selling or buying a home requires working with:

  • Title companies;
  • Escrow companies;
  • Mortgage lenders;
  • Appraisers;
  • Home inspectors;
  • Pest inspectors; and
  • General contractors.

Experienced agents know who to avoid and who to trust.  


Use Experienced Close Friends and Relatives as Your California Real Estate Agent

nice realtor

It’s tempting to help out a relative or a close friend just newly licensed as your real estate agent.

But, use experienced relatives and close friends instead. That’s because selling or buying a home sometimes becomes the biggest economic decision in your life.

You will feel comfortable knowing friends and relatives act in your best interests while aware of your personal goals. There is no better person than an experienced agent who is a family member because they will help you navigate the process better.


Plenty of Inexperienced Real Estate Agents

bad real estate agent

The U.S. Bureau of Labor Statistics report, “Real Estate Brokers and Sales Agents: Job Outlook” expects jobs for real estate agents to grow 7% by 2028. More than 2% higher growth compared to other jobs.

A true test of a real estate agent occurs when the market is down, like during the past year’s COVID-19 pandemic. The experienced agents know how to weather the storm. While the inexperienced agents falter.



The biggest reason real estate agents quit the business is not making enough money. According to the U.S. Bureau of Labor Statistics, “Real Estate Brokers and Sales Agents: Pay,” the median income for U.S. real agents is around $48,000 per year. The lowest-paid earned less than $25,000. Not enough to pay the mortgage and raise a family.

So, inexperienced real estate agents won’t look out for your interests when it comes to earning larger commissions.

Besides asking about experience, look into these traits to help you know more about the agent:

Time management and organization: Experienced agents maintain many clients. The best ones manage their time and succeed as organized professionals. They keep appointments and reply to messages quickly.

Patience: Conflicts often occur during real estate transactions. Agents who calmly listen and think logically possess patience.

Communication: Experienced agents should project an outgoing personality. Good communication skills make an agent’s job easier. If you feel an agent is likable and communicates well, other sellers and buyers probably feel the same way. That’s what you want.

Marketing expertise: Ask yourself, would you buy anything from this person? If your answer is not a resounding “Yes”, don’t work with that agent.




You just learned why you need to use an experienced California real estate agent. Asking a real estate agent about experience usually results in self-promotion. Research an agent yourself with the California Department of Real Estate website.

The benefits of using an experienced California real estate agent include:

  • Knowing the local market prices and trends;
  • Maintain a tight-knit group who share information;
  • Experienced with negotiations to your advantage;
  • Always know about changes or new developments in the community; and
  • Maintain good referrals with real estate professionals to benefit you.

If available, use experienced close friends and relatives as your California real estate agent. You know and trust them to always act in your best interests.

Many inexperienced real estate agents won’t look out for your interests when it comes to commissions.

An experienced California real estate agent possess these traits:

  • Organization and time management skills;
  • Patience to remain calm, listen to you, and think logically;
  • Communication skills; and
  • Marketing expertise to quickly sell listings and gets the trust of clients.


Want to Use an Experienced California Realtor?

real estate san diego


All our experienced agents at SoCal Lifestyle Realty are Realtors too. Read about the benefits that Realtors offer over real estate agents, Is a Realtor Better Than a Real Estate Agent?

As a Realtor®, every one of our agents agrees to follow a Code of Ethics that the National Association of Realtors strictly enforces. Realtors promise honesty and fairness to all parties we deal with. Also, we pledge to put the interests of our clients above our own.

Contact us for all your real estate sales and purchasing needs in the greater San Diego area.



Steven Rich, MBA – Guest Blogger