Tag Archives: Lessons

Lessons Learned: What to do while in escrow

Even though we had a grip-load of help and worked with such great people throughout the whole process, I really wish I had known just exactly what I was in for.  We made some mistakes and were mislead by a few things and I thought it would be nice to jot it all down for anyone looking for a bit of guidance for building a house and for my own future reference if we do this all over again someday.

Lets start with escrow! Sweet sweet escrow where you have about 30 days to make about 40 thousand phone calls.  When you buy a house, unless you pay 100% cash, it is a requirement (at least in California) that all of the basic necessities are there.  It has to have water, power, a method of disposing of sewage, it has to have somewhat of a clean title in order qualify for a loan, usually a pest inspection is required, etc…you know somewhat of what you are getting yourself into.  However, when you buy a lot, your on your own.  No one is looking over your shoulder or making sure everything checks out because there isn’t a bank involved.

Some of this advice/information may not apply to every lot and I might be missing some things that we didn’t encounter.  Although to me it seems unlikely that there was an issue we didn’t encounter…

So you fall in love with a lot, you put an offer in on it and it is accepted!  Holy cow, your in escrow! This was the weirdest feeling.  Sean and I put in a pretty low offer on our lot and really expected them to come back at us with something much closer to the asking price.  We put the offer in late afternoon one day and early the next morning our realtor called and said it was accepted!   Immediate thought: Should we have offered lower? My advice there is NO.  You shoudln’t.  You should offer what you are willing to pay and what you would be comfortable with and hope that the other party is equally reasonable.  Anyhow, provided you have an accepted offer and you get put into escrow, here is what you should do (BEFORE you get your heart set and plan your whole life in your imaginary future house):

1) Do your research! Hardcore googling is involved here.  Go on the city website and search for documents relating to your lot.  Look for any related recorded documents involving your lot, redevelopment plans, or the original development.  Look for any agenda items that relate to your tract or to your lot in particular.  In our case, our lot was at one point part of a redevelopment plan which includes a market and several future single family residences.

2) Determine the use (ie Single Family, multi family, Mixed Use, etc) and make sure it ties in with what your intentions were for the lot.  Our lot was actually a mixed use lot and originally they told us we would have to have a commercial aspect to our house.  We got the city to agree to us using the lot for only residential purposes and then also had them put that in writing.  The purpose of getting them to put it in writing, is that someday, if the house were to burn down, the city could require the house to be re-built to the original zoning restrictions and a strictly residential dwelling would be non-conforming.  Since an insurance company will only pay for you to re-build like for like, you’d end up in a pickle.  I cannot stress enough how important it is for you to get anything that someone agrees (that isn’t documented) elsewhere to in writing.

3) Utilities: Make sure you completely understand what utilities are available to you and get it in writing.  In escrow, we went down to fact find at the city and the city reviewed their records and determined we did have a sewer lateral for our house.  In actuality though, after a camera test was done to look at the lines, the lateral was running underneath our neighbor’s house and couldn’t be used.  If we had asked the city for confirmation of the lateral in escrow, they probably would have done the camera test then, and we would have at least known what we were getting ourselves into…which turns out to be ripping up a whole street to install new sewer lines at our expense.

4) Make sure you very carefully review your preliminary title report (provided to you in escrow) and don’t take anything for granted.  Our lot, for a lot that was tracted off over 100 years ago, had a SUPER clean title.  However, we did discover on the preliminary report that the previous owner had put an easement on it for access to utilities in the future (he still owns surrounding land).  We were not comfortable with leaving the easement as is and asked him to remove it, which he did.  The take away here is to ask for what you want.  People may say no, but then at least you tried.  The purpose of receiving a preliminary report is to work out any kinks your not comfortable with.

5) Permit Fees…the take home here is to make sure you know what the current permit fee rates are in the city where you are building.  These can change dramatically from year to year.  We made the mistake of assuming based on past rates and got burned.  They almost doubled! Us: “Why did the permit fees go up so much?” The City: “Because no one is building and we need to re-coup for the lack of permits being pulled.” OY!

6) Make sure you fully understand the setbacks & height requirements and that you take into consider the average natural grade when calculating your height if the city where you are building calculates the height of your house that way.  Basically you take the grade at the front of the house and the grade at the back of the house and average them and add that to the height of your actual structure.

7) Have your realtor pull comps for what your completed house on your lot will be worth once its built so that you can have the satisfaction and peace of mind that you are making a sound investment.

8) Find a designer or architect and have them put together the initial drawings while you are still in escrow.  I know this sounds crazy, but the soils engineer will need them, the loan will require them, and so will basically everyone else.  If you are serious about moving forward quickly and you don’t see any reason why you wouldn’t close, go ahead and get started on the plans.

9) If you are really serious about the lot and all of the previous items have checked out and you are still comfortable moving forward, do not bother having a “preliminary” soils report done…just go for the full soils report.   You will save yourself $1000+ by doing so.  You are going to have to have the full soils report done anyways and its really only about 2x the cost of a preliminary soils report.  When you do seek out soils engineering services, ask them to provide you with a quote for what you will need to take the project all the way through to completion.

Next Up: Close of Escrow though Plan Check

Disclaimer: I am by no means a professional and I highly recommend consulting with a professional and asking a lot of questions of each potential vendor or person you come into contact with and if something doesn’t make sense, ask for more clarification.  And trust your gut.