Congratulations! You’ve decided to buy a home in Los Angeles. Our city is world-renowned for sparkling weather, endless entertainment options, and active outdoor lifestyles. In L.A., you’re never very far from the beach, mountains, desert, or urban nightlife. These amazing amenities come at a cost, though, as Los Angeles is among the most expensive real estate markets in the world — and one of the trickiest to navigate.
It’s not impossible to get a good deal on a house in (or near) Los Angeles, even for those whose finances are tight. Let’s take a look at three ways you can break into the real estate market without breaking the bank.
Still unsure if renting or buying is for you? Check out our latest post: Saving Money in LA: Should I Keep Renting, or Should I Buy?
Homebuyers: Have you looked outside LA County?
The Greater Los Angeles Area is a complex, sprawling metropolis that often drives motorists bonkers. (Hello, bottlenecked freeway!) But the region’s imposing size is good news for homebuyers because there are intriguing neighborhoods in every nook and cranny waiting to be discovered. These neighborhoods, which may be a little off the beaten path (read: not in Los Angeles County), may also be more affordable for those aiming to spend less than $500,000. That’s a tall order in Bel Air and Brentwood or even Encino and Sherman Oaks, where the average home price is upwards of $900,000.
What’s the solution? Cross the county line into the OC!
Stanton is a city in western Orange County where the average home price is a reasonable $435,000. Less than 30 miles from Los Angeles, Stanton has an average crime rate that is 24% lower than the rest of California. Houses in other Orange County cities, like Anaheim, hover just above $500,000, making them high in terms of nationwide home prices (which average closer to $400,000 for new homes) but relatively low for the Golden State.
Hop over to San Bernardino County and the average home price will be slashed as well. Rancho Cucamonga, for example, boasts an average home price of $469,000 while nearby Loma Linda has an even lower average of $424,000. Along with Riverside County, San Bernardino County comprises the Inland Empire, which the Los Angeles Times projects to be among the fastest-growing economies in California.
According to a recent article, which cites a regional study conducted by UCLA:
In Southern California, the fastest job gains through 2020 are expected in the Inland Empire, followed by Orange County, Ventura County and Los Angeles County.
Oh, and those unsightly orange construction cones? Those are a good thing. Construction cones are part of the growing pains, which could mean rising property values in the near future. Keep an open mind about location and you may find a house that suits your wish list and your budget.
Get Pre-approved for a Mortgage
A certificate of mortgage preapproval is your passport to entering the house of your dreams. Being pre-approved can both simplify and accelerate the home purchase process, which is essential in a competitive real estate market famous for bidding wars. Strong credit (a FICO score above 620) and verifiable income are both necessary for mortgage pre-approval.
It’s important to distinguish between pre-qualified and pre-approved. Getting pre-qualified is like dipping your feet in the shallow end of the pool while getting pre-approved is diving into the deep end. Pre-qualification, a quick process, comes before pre-approval, which may take much longer.
If you’re sure you’re ready to purchase a home, then pre-approval is the way to go after you’re pre-qualified. You’ll complete a very detailed application (including a possible fee) and lay bare your entire financial history to the potential lender.
If you’re pre-approved, the lender will indicate a specific amount so that you know exactly which properties are out of reach — and which are within your grasp. Note: Incurring major debt or losing significant income could invalidate a pre-approval, which is based on the exact documentation and finances you present at the time of application.
Getting pre-approved for a mortgage can be an arduous, time-consuming process, but it’s worth it when you lay eyes on that perfect house and can confidently stake your claim.
Work with a Buyer’s Agent
Once you have your pre-approved mortgage certificate in hand, it’s time to shop for the best real estate agent. It’s important from the outset to know if an agent is a dual agent, meaning that he or she represents both the buyer and seller in a transaction. By law, real estate agents need to reveal to potential clients whether they’re dual agents, but it doesn’t hurt to do your own research.
The seller’s agent, who may not operate or negotiate in your best interests, isn’t the right representative for you either. You need a buyer’s agent who will be your personal advocate and walk you through every step in the process. As your advocate, a buyer’s agent should reveal any secrets about your potential purchase, like a plumbing defect, that the seller’s agent may be hiding. Buyer’s agents also specialize in the purchasing intricacies of the real estate transaction, making them an invaluable resource to first-time home-hunters.
Buying Your First Home in Los Angeles
If you’re realistic and compromise just a smidgen on certain things, like square footage, you can reimagine your dream home. A 2-bedroom, 1-bathroom house can be considered small or cozy depending on your perspective. A cozy house with a large backyard in Southern California has incredible possibilities when you consider the sunshine factor. (Barbecue in January, anyone?)
If you do find a house that makes your heart sing, don’t hesitate to make an offer. Buyers who act swiftly and definitively will get the best deal and not have to resort to bidding wars, which play into the palm of the seller’s hand. Houses that are newly listed on the market are especially competitive and you can ask your real estate agent to show you these first. On the other hand, houses that have been on the market for more than 90 days may also be a good option, as an eager seller may lower the price to close the deal.
Whether you build your nest in downtown Los Angeles or the San Gabriel Mountains, there is a perfect place for you. Here’s to your new home!
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- Chapter 13 Bankruptcy Prevents Foreclosure of California Woman’s Home
- Cash for Keys: California Program for Homeowners in Foreclosure
Barry Edward Borowitz is the founding partner of Borowitz & Clark, LLP, a leading bankruptcy law firm that represents clients petitioning for bankruptcy protection under Chapter 7 and Chapter 13 of the bankruptcy code. Mr. Borowitz has been practicing bankruptcy law exclusively for more than 15 years. View his full profile here.