The Los Angeles Home Buying Guide
The Los Angeles home-buying guide
Here’s a guide designed to give you everything you need to know before starting the search for your home.
Buying a home can be a truly daunting task. In today's America, it requires that many prospective homeowners sink their entire life savings into a single purchase that also happens to be the place they plan to live. In Los Angeles, where prices are sky-high and still rising, that can be a particularly overwhelming idea.
For many buyers, particularly those who have never owned property before, pricing isn't the only stumbling block standing in the way of a purchase.
There are also questions of where to start looking, what price range to consider, and how to obtain a loan and how to navigate the whole home buying process.
So my intention is to answer those questions and more in this guide. It won't address every topic you might be curious about as a potential buyer, but it will give enough information to get you started on your search (or convince you to keep renting instead, seriously, no pressure).
Let's get started.
How much do homes cost in LA?
Los Angeles County’s median home price was $585,000 in March 2018—an all-time record, according to real estate tracker CoreLogic. That figure includes both singe-family residences and condos, which tend to be significantly less expensive.
Single-family homes sold for a median price of $620,000, while condos fetched $500,000. Both numbers were at least 8 percent higher than the corresponding medians in March of last year. Bear in mind this is the whole of L.A county in many parts of Los Angeles even a million dollars dosen’t necessarily buy you a mansion.
Price: The median price of a single-family home is $620,000. For condos? $500,000.
Even these figures, which include starter homes and smaller residences meant for one or two occupants, may understate the priceiness of the LA market. Home shopping site Zillow calculates the median asking price per-square foot to be just under $416. That means that a typical single-family home of around 2,000 square feet could be expected to retail for about $832,000.
Obviously, though, prices are very neighborhood dependent. In some parts of LA, that amount of money could go much further; in others, you’d be lucky to get a tiny bungalow.
Why is it so expensive?
The cost of buying has been steadily rising, and homes are now pricier than they were even in the years leading up to the Recession. Does that mean another financial calamity is approaching? Not necessarily.
Real estate experts blame a variety of factors for LA’s high home prices, including the area’s persistent desirability among well-heeled buyers and a dearth of new construction to satisfy buyer demand.
Compounding the problem is a reluctance among owners to sell, even with prices as high as they are. CoreLogic finds that the total number of homes for sale across LA County is well below average and has even gone down in recent months.
That dosen’t mean homes are reasonably priced; the data firm also found that Los Angeles residences have been “overvalued” since July 2017. That means that homes are selling for more than 10 percent above the level where historical trends and the salaries of buyers suggest they should be.
What kinds of homes can I buy in LA?
We’ve already mentioned single-family homes and condos, but there are other property types to be familiar with in LA.
Single-family homes: Your classic American-style house that sits by itself on its own plot of land (white picket fence and swimming pool optional).
Condos: Condos are basically apartments that you can buy instead of lease. Unlike single-family homes, a condo building and the land beneath it are co-owned by everyone in the complex who has purchased a unit (sometimes the land is rented but unusual in most of L.A). Amenities and upkeep in a condo complex are paid for by a homeowner’s association, which is funded through monthly fees paid by residents. Single-family homeowners don’t have to pay these fees—but they are also shoulder any home maintenance costs themselves, rather than dividing them up with neighbors.
Townhomes: Generally attached to neighboring units, these offer the space and feel of single-family homes, but they function more like condos. Residents share ownership of the land around the homes and pay monthly homeowner dues.
Small lot homes: Somewhat unique to Los Angeles, small lot homes might look like town-homes from a distance, but they are, in fact, more similar to single-family residences. The units in small lot complexes do not touch and sit on tiny pieces of land barely larger than the house itself. Buyers don’t have to pay dues to a homeowners association and instead pay much smaller maintenance fees for upkeep of communal space.
Co-ops: It’s possible to find some co-ops in Los Angeles, though they are not nearly as common as in other cities, like New York. These are similar to condos, except that buyers don’t technically own their units. Instead, they own shares in an association run by a very powerful board that often vets potential residents. Co-ops are also (usually) a bit cheaper than condos.
“Development opportunities”: It’s possible to buy vacant land and then build something of your own in Los Angeles, but the rules around this are complex, and the process can be costly. Don’t do this if your only preparation is reading this guide. If you have some experience then I have access to many on and off market development opportunities and am happy to refer you to contractors, architects, expediters etc should this be your wish.
How much of a down payment will I need? If you’re paying in cash, congratulations on your success and/or luck in life. You can skip this question. Otherwise, you’ll need to save up for a mortgage agreement, and that may take some time.
Trying to produce a traditional 20 percent down payment can be a significant obstacle in Los Angeles, given the area’s high housing costs. Working with the $580,000 median price calculated by CoreLogic, that’s a $116,000 sum up front.
Fortunately, most loan providers don’t require 20 percent down from buyers. Many home shoppers now pay 10 percent or less up front when purchasing a home.
Numerous programs are in place for buyers without much cash on hand. They include Federal Housing Authority loans for first-time buyers, VA loans for veterans and active service members, and Home Possible Mortgages for buyers with low or mid-level incomes.
The disadvantage of making a low down payment is that, in most cases, you’ll be hit with private mortgage insurance payments that drive up your monthly costs. With less equity in your home, you may also be more susceptible to downswings in the housing market, making it easier to end up underwater on a home loan.
I have a huge network of industry professionals including some brilliant lenders who also have access to some more creative lending programs and am happy to refer you to an expert.
Should I bother getting pre-qualified? Yes. Getting a loan can be a long and difficult process, and, in a competitive real estate market like Los Angeles, it’s best to start as soon as possible. Getting pre-qualified—or better yet, pre-approved—by a loan provider will give you the ability to make a quick offer, should you come across the home of your dreams giving you a much better chance of beating out the competition and having your offer accepted (I include the pre-approval and proof on deposit with all my offers).
Working with a lender in the early stages of buying will also give you a better sense of what kind of budget you have to work with, and if there are any special loan programs you might be eligible for. It’s also a good opportunity to work out any potential kinks in the lending process (whoops, you added an extra zero to last year’s tax return) before going into escrow, when you’ll have less time to correct these issues.
Do I need a real estate agent? Absolutely, trying to navigate the ins and outs of purchasing a home (over 40 documents) —particularly if you haven’t bought before—can be a real challenge without the help of a professional. Not only can an agent help you with things like finding homes in your price range and arranging showings, they will be able to guide you through the process of negotiating a price with the seller and agreeing upon the terms of the sale. Remember the listing agent is only concerned with the interests of his client the seller, not the buyer (higher sales price bigger commission for him). The buyers agents fee comes from the sale anyway so you have your own expert representing your best interests for free (you would be mad not to).
Am I going to get into a bidding war? It’s quite possible. A recent report from Zillow found that over one-third of Los Angeles area homes sold above their asking price in 2017. That suggests it’s common for sellers to receive multiple offers when listing a home. Presenting your offer correctly is a skill in itself and as important as the price you decide to offer.
Bidding wars break out most often over lower priced homes in popular neighborhoods. As a result, buyers must be “extremely flexible” with their wish lists or potentially be prepared to overpay. But if you choose wisely, with the help of a seasoned agent skilled in negotiation this should never be the case.
How long is this going to take? The home buying process can be as short as a single day and as long as three years. Where your search falls in that time frame will depend on how prepared you are, how picky you plan to be, and whether you get a bit of luck along the way.
Typically in this market a buyer that stays focused on their home search should be able to identify a property and close escrow within a six month period, sometimes considerably less.
Should I just rent instead? Buying vs. renting can be a tough decision, and the answer depends on how long you’re planning to stay, and whether you’re ready to make such a large financial commitment. If you are willing to stay put for five or more years, buying can be a smart investment. Renting may be simpler with a lower amount of risk but do you really want to be paying off someone else mortgage when you could be paying your own.
What about gentrification? Los Angeles has one of the lowest rates of homeownership in the nation, and buying a house isn’t attainable for many residents. If you are able to buy, even if it’s not a mansion in the Hollywood Hills, you’re probably doing better financially than most Angelenos.
That’s important to recognize—particularly if you’re moving into a new neighborhood. Take some time to get to know your neighbors, and be sensitive to the fact that there may be history and cultural aspects of the area you aren’t aware of yet.
When is the best time to buy? Despite its reputation to the contrary, Los Angeles definitely has seasons, and the same goes for the local real estate market. According to Zillow, late spring is when you’ll have the freshest offerings, with the number of residences hitting the market rising sharply between April and June.
Timing : Not all of those homes will sell right away, though, and June, July, and August are the months when the most overall homes are on the market—having collected during the spring months. Late summer is also a good time for bargain hunting, as owners chop prices and buyers looking to move before the start of the school year exit the market. Per Zillow’s calculations, more than 13 percent of homes listed in LA got price cuts each month between July and September of 2016. November through to January can also be an excellent time to buy as sellers start to panic going into and around the holidays.
For any and all of your L.A real estate related questions I’m always here to help whether buying or selling or simply looking for expert advice please feel free to contact me directly any time. Tel 310 279 8117 Email firstname.lastname@example.org Web www.johncampbellestates.com