The Home Buying Process Explained

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John Collins is twenty year resident of the San Diego coastal community, and a successful residential real estate agent and Realtor® since 2013. He specializes in the sale and purchase of San Diego real estate including luxury homes, condos, townhomes, investment properties, and first time buyers. John Collins is licensed with the State of California, CalRE# 01948818 and holds professional designations in real estate negotiation, real estate luxury home marketing, and handling distressed properties.

John Collins runs Collins Coastal, and is affiliated with Coldwell Banker realty. He is a highly rated San Diego Real Estate Agent. See His Google Business Profile And Reviews Here.

Video Transcript:

If you're getting ready to buy real estate for the first time, or for the first time in a long time, and you're trying to remember or figure out what the process is, I’m here to walk you through a broad overview of the steps. This way, there aren’t any surprises and you’re always prepared for what comes next.

Now, before you do anything else—before you get in the car and start going to open houses or fall in love with online listings—you need to get pre-approved. Once you’re pre-approved and know your budget, that’s when the fun part starts: you get to go shopping.

You and your real estate agent will identify neighborhoods where properties that meet your criteria also fit your budget. I highly recommend looking at several neighborhoods to start. Pick a handful of homes in each one, and maybe for a day or two over the weekend, go out and see them. This will help you understand the different areas and how they appeal to you.

If you don’t find something right away, that’s okay! You’re starting to narrow down where you want to be and what type of property you want. This also helps you benchmark the market—understanding what’s available today—so when new listings pop up, you can be selective and focus on those that align closely with your preferences.

Once you've identified the property you want to make an offer on, you and your agent will put together a strong, competitive offer. There’s more to an offer than just price. The length of escrow, the timing of contingencies, and other non-monetary terms come into play. It’s also important that your real estate agent communicates well with the listing agent. By understanding what the seller needs beyond just the highest price, you can make an offer that’s more likely to be accepted, especially in a competitive situation.

Alright, the next step in buying a home is getting into escrow. You’ve made a great offer, and it’s been accepted by the seller. It might feel like you’ve arrived, but really, you’ve just begun.

An escrow company is a neutral third party that holds funds and helps facilitate the transaction. This reduces risk and ensures that, at the end of the process, the seller gets their funds, and you get the title to your new home.

One of the first things that will happen once escrow is open is they’ll provide instructions for the buyer to submit the earnest money deposit. The earnest money is your “skin in the game” and typically ranges from 1% to 3% of the purchase price. A 3% deposit is considered particularly strong. The deposit goes towards the cash you need to close the deal. The earnest money shows the seller that you’re serious and not just making offers for fun.

The earnest money is often wired, so it’s extremely important in this day and age to confirm the wiring instructions with your escrow company before sending any money. If it goes to the wrong place, it can be very difficult to get back. Use common sense and you’ll be fine.

Once you’ve opened escrow and sent in your earnest money, we typically move into the contingency period. Contingencies are conditions that allow you, the buyer, a way out of the deal if needed. When escrow opens, the power shifts from the seller, who had all the power before accepting an offer, to the buyer, who now has several ways to exit the deal.

There are three main types of contingencies:

1. Inspection contingency – to assess the physical condition of the property.
2. Loan contingency – to ensure your lender can finalize your loan.
3. Appraisal contingency – tied to the loan, this ensures the bank will only fund a loan based on the appraiser’s determination of the property’s value, not necessarily what you offered.

The length of time you have to complete these contingencies is determined by the contract. By shortening contingency periods or waiving them altogether, you can make your offer more attractive to the seller. For example, you may be confident enough to waive the loan contingency if you’re certain your financing is solid.

As the due dates for contingencies approach, the seller will expect you to release them, which means you’re no longer able to back out of the deal for those reasons. For example, you’ll release the inspection contingency once you’ve inspected the property and negotiated any repairs or credits. You’ll release the loan contingency when your loan is conditionally approved, and the appraisal contingency after the appraiser confirms the property’s value.

Once you’ve released the final contingency, you’re making a firm commitment to go through with the transaction. At this point, your earnest money deposit “goes hard,” meaning it’s at risk if you back out of the deal. However, a good real estate agent won’t put you in a position to release contingencies before you’re confident in moving forward. Even if you do need to back out after this point, there are still ways to recover your deposit, depending on the circumstances.

At this stage, I tell my buyers that it’s okay to start falling in love with the home. Before that, we’re keeping things business-minded, but once all contingencies are released, it’s time to get excited about your new home.

Between releasing contingencies and the final days of escrow, you’ll start preparing for the move. Get movers lined up and start making plans.

As closing day approaches, there will be another burst of activity. The escrow company and your lender will generate your loan paperwork (if applicable), which you’ll sign in the presence of a notary. The lender will then send the loan funds to escrow.

You’ll also receive instructions from escrow on wiring the remaining cash needed to close. This will include the balance of your down payment and closing costs, minus your earnest money deposit.

Once escrow has all the funds needed to close, they’ll release the title to be recorded in your name. After that, the property is officially yours! Escrow will disburse the funds, mostly to the seller, and your real estate agent will hand over the keys to your new home.

And that’s it—that’s the process of buying a home, at least here on the West Coast and specifically in San Diego. Of course, each transaction is different, and each property comes with its own unique nuances. Throughout the process, we’ll have detailed conversations about each step to ensure there are no surprises.

I hope this overview has given you a clear understanding of what to expect. If you have any questions, feel free to reach out to me. I’m always here to help!