Buying – Page 2 – Sandy Gadow

How to Negotiate Closing Costs on a Newly Constructed House

By Sandy Gadow
Special to The Washington Post

Ever notice how enticing advertising for newly built houses can be?

More than one million new housing projects were started in 2014, and the prospect of being able to choose between several models — combined with the benefits of owning a new house — make buying from a developer an attractive option.

Today, many builders offer incentives to the buyer in the form of either upgrades to the house or credits given at settlement that help reduce the closing costs. Often, in order to qualify for these offers, the builder may require that you use its in-house or affiliated closing agent. It may also offer assistance with financing, help arrange pre-qualification for a mortgage and even secure reduced interest rates and loan-related costs. There is no problem with using the builder’s recommended or affiliated agents, but there are certain things you can do to insure that you will get the best deal possible — and pay the lowest fees.

These days, closing costs on a new house typically range from 2 to 4 percent of the sales price. A house that sells for $250,000, for example, could incur settlement fees from $5,000 to $10,000. Naturally included in those fees will be the costs associated with obtaining a mortgage and expenses payable to the closing agent (or title company) such as:

Title searches and lien clearance
Issuance of title insurance
Payment of applicable county and state transfer taxes
Recording fees

Although many builders might insist that it is customary for the buyer to pay all title insurance fees — depending on who issues the policy — this fee can be negotiated. When you use the builder’s in-house or affiliated agent, the builder is generally allowed greater leeway to offer you a discount or credit toward the settlement costs.

Whether you use the builder’s agent or a closing company of your choosing, be sure to ask for a “reissue” rate for the title policy. A reissue rate is available to a home buyer when the seller has owned the property for a stipulated amount of time — generally two to 10 years. Each state sets its own requirement as to the length of time the seller must have owned the house and also determines the reissue rate.

In Florida, for example, the seller must have owned the house for less than three years to qualify for the discount, whereas in Maryland the seller can own the property for 10 years or less for the buyer to be entitled to the reduced rate. According to Federal Title and Escrow Company in the District, 65 percent of all transactions qualify for the reissue rate, and in some in some cases, the discount can be as high as 40 percent.

In new construction, the builder will have already purchased title insurance on the land, probably within the last year. So the buyer would qualify for a discounted rate that would be applied to the amount paid for the policy on the land, and then pay the standard rate for the balance. For example, if the builder purchased a title policy for $200,000 and the sales price of the new house is $400,000, the buyer would receive a discounted rate on the first $200,000 of coverage, and only pay the full cost on the remaining $200,000 balance.

On all home sales there is a state-levied transfer or “documentary transfer tax,” and in some areas individual counties add their own transfer tax. The tax rate is determined by the state (and counties), and who will pay the tax is determined by local custom. You can find a chart of the tax for your state at: www.ncsl.org/research/fiscal-policy/real-estate-transfer-taxes.aspx.

In some states, such as California, the seller always pays the tax. But in other states, such as Maryland, the fee is shared between the buyer and seller and an exemption is given to first-time home buyers. Although the tax is not negotiable, who pays the tax can be. This is especially the case if you are using the builder’s agent, as the builder will be able to negotiate with you regarding who will pay this closing cost. An independent title company may not have that option. Similarly, if you use the builder’s finance company or preferred lender, you may be able to receive further discounts (ones that might not otherwise be available to you), on loan fees.

To be sure you are getting the best value on closing costs, check with a local title company, and ask if it will run a comparison for you between your builder’s closing cost estimate and the title company’s breakdown of fees. Many companies will do this for you at no charge, and it generally takes only minutes. You may find that the builder’s estimates for title and escrow fees are much lower, and choose to take that option.

To avoid any misunderstandings, complete your closing cost negotiations with the builder before you sign the sales agreement.

How Closings Are Handled State by State

Real estate closings may be handled by escrow companies, title companies, lawyers, or a combination of one or more of those. Some lenders may have their own closing department. A revised explanation of how a real estate closing will be handled in your state can be found in the new up-dated 2nd edition of The Complete Guide to Your Real Estate Closing, now available at www.amazon.com or www.sandygadow.com/order.html. You will find a complete listing of how an escrow closing is handled in every state, which will include where to make a complaint, an estimate of the fees you will have to pay, and who will do what in the closing.

Here is a Sample:

Alabama
Attorneys handle closings. Conveyance is by warranty deed. Mortgages are the customary security instruments. Foreclosures are non-judicial. Foreclosure notices are published once a week for three weeks, county by county. The foreclosure process takes a minimum of 21 days from the date of first publication. After the sale, there is a one-year redemption period. Alabamans use ALTA policies to insure titles. Buyers and sellers negotiate who’s going to pay the closing costs and usually split them equally. Property taxes are due and payable annually on October 1.

Consumer Complaints:

Banking Department

401 Adams Avenue, Suite 680 Montgomery, AL 36130-1201 334-242-3452
Fax: 334-242-3500
Web: www.bank.state.al.us
David Parsons, Acting Commissioner Alabama Department of Insurance 201 Monroe Street, Suite 1700
P.O. Box 303351 Montgomery, AL 36104 334-269-3550
Fax: 334-241-4192
E-mail: insdept@insurance.state.al.us Web: www.aldoi.org

Alabama Real Estate Commission 1201 Carmichael Way Montgomery, AL 36106-4350 334-242-5544, TTY: 334-396-0064 Fax: 334-270-9118
E-mail: arec@arec.state.al.us Web: www.arec.state.al.us

Rate filing statute: File and use Customary title fee splits: Owner’s policy: Negotiable Lender’s policy: Buyer
Title search: Negotiable Transfer taxes: Buyer
Transfer Tax based on appraised value not on sale price.
Closing fees: Negotiable Recording fees: Buyer
Real estate transfer disclosure required? No Agency relationship disclosure required: Required by time of purchase offer.

Mortgage Closing Pain Points: What You Can Do?

A recent study by the Consumer Financial Protection Bureau reported the results of a year-long study to identify the most troublesome aspects of a loan closing. The CFPB, in an effort to improve the mortgage closing process for borrowers, asked consumers, lenders and other stakeholders how the process could be made more efficient, streamlined, and less stressful for the borrower. The Bureau identified three major “pain points” in the mortgage closing process.

Not enough time to review: Study found that consumers were frustrated by the short amount of time they had to look over their closing documents, often not seeing the paperwork until they arrived at the closing. Borrowers reported feeling pressured to rush through their paperwork and sign, without anyone asking them if they understood the terms.
Overwhelming stack of paperwork: The number of documents can be daunting in a closing. There are forms intended to help borrowers better understand the costs and risks of their mortgage, forms which are a result of the lender\s legal risk assessment and forms which fulfill federal, state and local government requirements. The volume of paperwork can vary from lender to lender, often reaching 30 to 40 documents.
Complexity of documents and errors: Many of the closing documents are written in legal terms or full of technical acronyms not known to the average borrower. In the CFPB study, they found many consumers complained that they had very little help from the closing agent, attorney, or mortgage broker attending the closing. Many complained they found errors in the closing documents, which led to delays when the closing agent had to redo the entire closing package.

What You Can Do?

Always ask to see your loan documents at least one day in advance of closing. There may be slight adjustments made on the day of closing, but generally all other figures will be the same. If you have any questions at all, ask the closing agent or your mortgage broker for an explanation. If an attorney is assisting in the closing. ask for explanations of each and every document or section you are unclear about.

Take your time. It is easy to rush through the process. It may have taken you months to obtain the loan, get the approval, the credit reports, and the documentation you had to provide to the lender. You are ready to close the deal and be done with all the hassle. You may have a closing deadline to worry about It is normal to want to sign as fast as possible and end the painful process. But, the hidden problem lies in the fact that the loan may contain clauses which may apply years later, and which would be unacceptable. Or, you may find an error which needs correcting. Now is the time ask the questions and fix any problems.
Remember, you are in the driver’s seat. Everyone wants the loan to close – the lender, the closing agent, the realtor, and the lawyer. They may handle closings every day and the documents may be second nature to them, but they know this may be your first closing, or it may be your hundredth, either way, it is your right to understand each and every document you sign. You are paying for their services and you have the right to expect answers.

Can Mediation Save Our Deal?

Jack and Eliza searched Fayette county in Virginia for the right house. Not only must it be in good condition, have a nice yard, be in a good school district, but it had to also be a show place for entertaining. Both Jack and Eliza loved to have week-end dinner parties. They thrived on inviting the most educated and interesting guests. A four bedroom colonial home situated on an acre and a half of land became available and Jack made an offer which was accepted. A 30-day closing was agreed upon and the inspection period began. Everything seemed to check out. There were no major repairs needed and nothing looked out of the ordinary. One day prior to closing, Jack was reading through the settlement documents and came across an affidavit which he was asked to sign. It was a document from the seller, drawn on what looked liked legal letterhead, and it stated that the sale could only take place on condition that a chestnut horse, owned by the current owner, could continue to live in the small barn located in the back of the property. The new owner was moving to an apartment in the city and it would be impossible for him to take the horse with him.

Jack protested and the owner stayed firm. No horse, no deal. Nothing had been mentioned about the horse up to this point, and the realtor, the closing agent, and the buyers all scratched their head. No one could explain why the owner had remained silent about this non-negotiable issue until the day before closing. It seemed like the deal had reached an impasse. The owner offered to return the buyer’s deposit, he crossed his arms, and squared his jaw. He wouldn’t budge.

By now, Jack and Eliza had already moved into the house in their minds. They had arranged their furniture, picked out a new color of paint for the rooms, selected new appliances for the kitchen, and hired an artist to paint a scenic mural in the dining room. They had ordered the outdoor lighting for the patio and had the invitations prepared for their first party. Jack turned to his realtor and asked what he could do. Could he force the seller to sell? Did he have any legal rights?

Within the Purchase Agreement was a clause, which is common place in most real estate purchase agreements which stated

16. DISPUTE RESOLUTION: Unresolved controversies, claims and other matters in question between Buyer and Seller arising out of, or relating to, this Contract or its breach, enforcement or interpretation (“Dispute”) will be settled as follows:

Buyer and Seller will have 10 days after the date conflicting demands for the Deposit are made to attempt to resolve such Dispute, failing which, Buyer and Seller shall submit such Dispute to mediation under Paragraph 16(b). Buyer and Seller shall attempt to settle Disputes in an amicable manner through mediation pursuant to (state) Rules for Certified and Court-Appointed Mediators and Chapter 44, F.S., as amended (the “Mediation Rules”). The mediator must be certified or must have experience in the real estate industry. Injunctive relief may be sought without first complying with this Paragraph 16(b). Disputes not settled pursuant to this Paragraph 16 may be resolved by instituting action in the appropriate court having jurisdiction of the matter. This Paragraph 16 shall survive Closing or termination of this Contract.

17. ATTORNEY’S FEES – COSTS: The parties will split equally any mediation fee incurred in any mediation permitted by this Contract, and each party will pay their own costs, expenses and fees, including attorney’s fees, incurred in conducting the mediation. In any litigation permitted by this Contract, the prevailing party shall be entitled to recover from the non-prevailing party costs and fees, including reasonable attorney’s fees, incurred in conducting the litigation.

Successful Mediation — a Guide

How to Choose a Title Insurance Company

Choosing the right escrow officer or title attorney to handle your sale can mean the difference between a smooth and rapid closing or a complicated, delayed closing, fraught with anguish. Most often either the buyer or seller may choose the closing agent, depending on your local custom, but whoever it is, there are several important criteria which should be considered.

Selecting an escrow closing agent, whether it be an escrow officer in an independent escrow office or a real estate attorney in a law firm or title company, is a choice which should be made carefully. This choice will be one of the most important steps in your escrow and closing process as you will be working closely with this person, often daily, throughout the entire 30 or 60 day period of your real estate sale or purchase. Whoever you choose, that person will become your personal secretary, complying with the terms and conditions of your instructions, and they will keep your funds safely deposited in an escrow account. They will strive to be as confidential as possible, answer your questions, and clear up any title problems which may arise.

Let’s look at four important criteria to consider when choosing an escrow officer or title attorney. The first criteria is the reputation of the company in the community. The first place to begin your search is to ask your friends and acquaintances who have had recent experience with real estate transactions to recommend a company or an individual they have been pleased with, one who met all their expectations. Inquire among friends as to the reputation of the individual officer or title company in your local community. Ask your friends if the escrow agent they recommend returns phone calls promptly, explains details in everyday, understandable language, inspires confidence, and is knowledgeable and acts in a professional, courteous manner.

The second criteria to look at is the managerial experience of the escrow agent you are choosing. Look at the professionalism in the escrow agent or title company you are considering. Your escrow agent should be knowledgeable, efficient, friendly, and confidential. Above all else, ask lots of questions when interviewing your potential escrow closing agent. Ask about their previous experience. Have they handled many FSBO transactions? Do they have a good working relationship with lenders and are they experienced in handling loan documents? Do they have experience in handling possible title problems that may be found in the title report?

The next criteria which we will consider is the location of the office of the closing or escrow agent. Since you will have to visit the escrow agent’s office in person at least once and perhaps several times to prove your identity, sign numerous papers, and deliver or pick up a check, try to select an agent with an office conveniently located near your home or work so you can reach it during normal business hours in just a few minutes.

The final criteria to consider is the fees that your escrow or closing agent is going to charge. Fees charged by escrow agents and closing attorneys do vary, and the decision on who pays which fees will also vary from state to state. The seller may be paying for the title insurance, as in Florida, for example, or the buyer may be paying the escrow fees, as in California. Whoever is responsible for paying for each individual fee should be determined well ahead of the closing, and before you choose your escrow or title agent. You will want to try to select the most reputable and professional escrow or closing agent you can find, combined with the one who also charges the most reasonable fees. Several fees, such as recording fees, transfer tax fees, are non-negotiable and will be the same statewide. Title insurance fees and escrow fees can vary from company to company.

You can expect your escrow officer or closing agent to do several specific things for you. Included in the cost of the escrow and title fee will be the following: ordering of the preliminary title report, securing payoff demands/and or beneficiary statements from existing lenders and requesting full reconveyances of any deed of trust or mortgages to be paid off in escrow, obtaining instructions and loan documents from the new lender, obtaining documents to clear any outstanding liens against the property, issuing receipts for deposits of documents and holding funds in a separate account, prorating taxes, interest, rents, etc., preparing buyers and seller’s escrow instructions and seeing that all documents are properly executed, determining when everything is going to be completed so the transaction can close, obtaining title insurance for the buyer and or the lender, arranging timely transfer of the fire insurance policy or seeing that the buyer secures a new policy, recording the necessary documents, such as grant deeds, deeds of trust, powers of attorney, substitutions of liability, and reconveyances, when all the conditions of the transaction have been met, and finally, disbursing all funds to the proper parties, delivering documents and preparing the final closing statements.

After looking at the reputation of the escrow or title company in the community, the managerial experience of the office, the location of the office and the fees charged, choose the closing or escrow agent that you would feel most comfortable working with, asking questions, going over documents and discussing all aspects of your closing process with in detail. Your choice of escrow or closing agent may be one of the most important decisions you make to arrive at your final goal of a timely real estate sale or purchase.

Is Title Insurance A Worthy Investment?

Evelyn Hunter wanted to deed a small condominium apartment in Pasadena, Ca., to her grandchildren. Because this property transfer was among relatives, Ms. Hunter didn’t see the need to obtain title insurance, a one-time premium paid to a title company that guarantees that you own a particular piece of property and that no one else has a claim to that property. After all, Ms. Hunter had owned the apartment for 15 years and hadn’t had any problems during that time. Although she wasn’t legally required to purchase a title insurance policy for her grandchildren, Ms. Hunter should have considered doing so. Several years later her granddaughter decided to sell the property and a title search revealed there was a flaw in the chain of title going back before Ms. Hunter had purchased the property. It took over a year and a half with a cost of several thousand dollars in legal fees to resolve the problem. If Ms. Hunter had purchased title insurance for her granddaughter, she would have been covered for any expenses to correct the problem.

Unlike fire or property hazard insurance, which insures against events which could occur in the future, title insurance covers events which have taken place in the past, such as forged documents, incorrect easement descriptions or a lack of legal authority to sign documents. In Mr. Hunter’s situation, there were problems with the former owners that she was not aware of. People often think nothing can go wrong with the title to their property after they have the deed in hand. After all, everything may seem official – the deed has been recorded at the county recorder’s office; an examination of the property shows no visible signs of encroachment or lien problems and walking the property to verify the survey shows no obvious boundary disputes. Perhaps you’ve even searched county records to check for problems and found none. (Note that the risk of doing this search yourself is that you would have to be able to interpret correctly the recorded ownership information that you find). But, if just one judgment or lien against the property has been over-looked, which can happen even when expert title examiners do these searches, it could be very costly and create problems later for an owner.

After seeing an advertisement for a commercial property located in Sebastopol, Ca. Matt and Kristen Stevens decided to make an offer on the property. The modest building, with two retail stores and a small customer parking lot, seemed like an ideal investment. Inexperienced in commercial property and city parking requirements, the Stevens assumed that the parking lot provided adequate spaces for the building. They purchased the property and obtained a polity of title insurance to protect their interests.

What was not readily apparent was that half of the parking spaces were located on an adjoining neighbor’s property, and an easement had been created and described in the Stevens’ deed which gave the Stevens the right to jointly share in the use of this easement. A city ordinance required them to provide a certain number of parking spaces for their tenants. The Stevens were sure they had enough spaces with the half of the parking lot they owned and the half which they shared with their neighbor.

After several months of ownership, the neighbor told them that he really owned part of the parking easement, and this property was included in his deed. The Stevens’ tenants could not use his land for parking for their customers. The Stevens were now in jeopardy of losing the occupancy permit on their building because they could not provide the required number of parking spaces. An error had been made in the boundary description of the easement. The Stevens weren’t sure where to turn for help, so they contacted a lawyer, who suggested they make a claim to the title company which issued their policy of title insurance.

The title company was responsible for investigating the matter and ended up negotiating with the Stevens’ neighbor to resolve the problem. The title company offered to buy the additional parking spaces from the neighbor, adding the land to the Stevens’ deed. The couple now owned the additional spaces and the occupancy permit was valid and the tenants could continue in business. The purchase price for the parking spaces alone well exceeded the cost of the title insurance policy.

What Types of Title Insurance Are Available?

There are two basic types of insurance: an owner’s policy and a lender’s policy. The owner’s policy is normally written for the amount of the purchase price of the property and contains basic coverage, which can be expanded by adding endorsements. An endorsement is additional coverage, which can be added to the title insurance policy to cover specific events. The lender’s policy is written to cover the amount of the loan and contains several items which an owner’s policy does not include. Your lender will require you to obtain both types of title insurance if you are using a mortgage to finance your property purchase.

What Types of Risks Does An Owner’s Policy Cover?

A standard owner’s policy covers such risks as:

Forgery and impersonation;
Lack of competency, capacity or legal authority of a party;
Undisclosed or missing heirs;
Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner);
Undisclosed (but recorded) easement or use restriction;
Missing interpretation of wills;
Erroneous or inadequate legal descriptions;
Lack of right of access; and/or
Deed not properly recorded

What Additional Coverage Does A Lender’s Policy Include?

An expanded lender’s policy will cover:

Off-recorded matters, such as unrecorded easements;
Deed to land with building encroaching on land of another;
Incorrect survey
Claims to water and mineral rights
Silent off-record terms (such as mechanics’ or estate-tax liens); and/or
Pre-existing violations of subdivision laws, zoning ordinances or covenants, conditions, and restrictions.

Lenders often require endorsements to cover such items as violations of the covenants, conditions, and restrictions which limit the use of land and regulation of the type and location of improvements. Lenders may order an endorsement to cover encroachments made by property improvements which may extend onto a neighbor’s property. There are many other endorsements available, each suited to a particular situation or occurrence. After an inspection of your property, the lender will determine which added protections are needed to protect their interest.

What Is The Cost of Title Insurance?

The cost of a title insurance policy varies from state to state, in part because states differ in how much they regulate title insurance fees. Some states, such as Florida, set a minimum title insurance rate, called a “promulgated rate,” in order to establish a base rate that title companies and attorney must charge. Insurance providers in other states, such as California, must file their fees with the state’s insurance commissioner, and once filed, must adhere to those fees.

How Long Does Title Insurance Remain In Effect?

Once written, title insurance remains in effect for as long as you own the property, so it is important to choose wisely when reviewing the coverage afforded by your policy. The cost of title insurance in minimal when you consider the protection it provides. You probably will never have to file a claim, but in the event you do, you will be glad you have this valuable insurance.

Can I Transfer The Title Insurance To A New Owner?

No, title insurance is not transferable or assumable by a new owner to the property. It terminates once legal title changes.

Steps to a Cakewalk Closing

New York Times April 27, 2012

There’s no lack of information on the Internet about real estate closings. But according to Sandy Gadow, the author of “The Complete Guide to Your Real Estate Closing” and a Sotheby’s broker who has taken part in thousands of closings, both buyers and sellers should know certain basic things to make a closing go well.

Most important, do your homework. There’s no such thing as being too well prepared. Even if there’s a fleet of lawyers present, buyers and sellers should educate themselves as fully as possible about what will take place. For example, you do know what an Aztec recognition agreement is, don’t you? (It’s a document that describes what will happen in the event of a lien against the buyer.)

Hire the right people. You wouldn’t ask a heart surgeon to perform a lung transplant, right? Make sure you choose a lawyer who is familiar with the laws in your geographical area and who has had experience with similar proceedings. If you’re buying a big-ticket co-op in the heart of Manhattan, don’t choose a lawyer whose biggest deal was a lean-to in the boonies.

Before the closing, write down all the questions you intend to ask, so you won’t forget them. Making a checklist sounds like grade school, but do it anyway.

Bring a valid form of identification. (A library card won’t cut it.) You have no idea how many people forget something so simple. And your signature can’t be acknowledged by a notary public unless you show official proof of your identity.

Show up on time. Closings can take long enough as it is. Don’t make matters worse by straggling in three hours late.

And since closings can take hours, don’t schedule yours late in the day, especially if you plan to move in right away. You don’t want a moving van loaded with all your worldly possessions double-parked outside the office till the wee hours.

Published: April 27, 2012 NY Times

What Your Closing Agent Does for You

Although you may not feel you need to speak with your closing agent until you are well into the purchase process or possibly not until the day of closing, it is a good idea to contact the closing agent early on, introduce yourself, and be sure the agent has all your contact details, phone numbers, e-mail and mailing address. The closing agent usually works for a title or escrow company, or, in many Eastern states, it may be an attorney.

While you are taking care of property inspections and securing financing, the agent will be working behind the scenes to search the title, determine pro-rata expenses such as property taxes, work with the seller’s lender, with your new lender, and following up on any special instructions which may be spelled out in the purchase agreement. The agent will hold your deposits in a separate escrow account, prepare closing statements, and obtain title insurance. The closing agent works for you, so don’t hesitate to ask questions along the way. The closing agent is an impartial party to the transaction and is there to provide information and facilitate the transfer of the property from the seller to buyer. You may also have your own attorney working for you advising you on your personal circumstances or issues… Your attorney will liaise with the designated closing agent and have your best interests in mind.

Below is a check list of what your agent will be doing for you and what you in turn should do to be sure everything runs smoothly and you close on time.

Who Does What?

What Agent will do	What You will do
Obtain a title report and arrange for Issuance of policy of title insurance.	Read and understand the title report. Question any easements, liens, rights of way, or other issues in the report. Check the plat map for correct boundary lines. Sign off on agent’s report.
Prorate costs such as property taxes, Insurance, loan interest, and rents, if applicable.	Check the proportioned expenses. Do the math. Mistakes do occur.
Collect and coordinate paperwork, Including financing and required disclosures.	Arrange for cash, in the form of Cashier’s check or bank transfer for your portion of the closings costs which you agreed to pay.* Pay attention to any increase in your deposit which may be required after initial purchase agreement was signed and date funds are due.
Transfer and record deed.	Check the spelling of your name, the manner in which you will hold title, and the description of the property.
Transfer your payment to the seller.	Speak directly with other parties, such as the inspector, real estate agent, mortgage broker or your attorney to be sure everything is in order before you hand over your final payment. Check and cross check before the day of closing.

Who Are The Other Parties to the Closing and What Will They Do?

In addition to the closing agent, title company, attorney, and real estate agent, there will probably be a lender involved in your closing. The lender will provide the financing for the property and work with your closing agent to be certain that all the conditions required to fund your loan will take place prior to closing. There will be an appraiser involved, who will examine the property and issue an appraisal report. There may be a surveyor, who will issue a survey, which may be required by your lender.

There may be a pest inspection company and a building inspection company involved in your closing. These inspectors will be responsible for performing a detailed inspection of our house and issuing a report as to their findings. There will be an insurance agent involved, as a new insurance policy will need to be issued on the property.

How You Will Pay the Closing Agent

A single escrow closing fee, determined by the amount of money involved in the transaction, will cover all of the usual escrow closing services except for the title insurance fees.

Local custom unique to a particular geographical area generally dictates who will pay which fees. In some areas, the buyer pays the title and escrow fees, whereas in other areas, the seller pays half of the fees and the buyer pays half.

TIP
Although dictated by local custom, many closing costs may be negotiated. Be sure to discuss this before signing the purchase and sale agreement. Clearly spell out the costs the seller will pay, and those which will be the buyer’s responsibility.

Get The Best Closing Agent

One of the many extra services a closing agent offers is information. Your closing agent will be available to answer your questions about the closing process in general, and your individual transaction in particular. Your closing agent will know the status of your closing at any given time. Don’t be afraid to ask, even if you may feel your question has been asked before. It is better to be clear before signing any document, especially since they may well be legally binding for many years to come.

To make sure you are choosing the best closing agent, get referrals from not only your agent, attorney or mortgage broker, but from trusted family members, friends, neighbors, or colleagues. Make sure your referral source had a good experience with the closing agent and found the agent to be efficient, accurate, and able to handle the closing according to schedule.

TIP
Choose a closing agent who is conveniently located. You will probably have to drive there at least once, for the closing, and perhaps several other times. For example, you may need, you to sign a power of attorney, deliver an old divorce decree or provide a copy of a trust agreement.

How your Title Insurance Dollar is Divided Up

Often misunderstood, title insurance is viewed by many home buyers as an unusually high expense in comparison to other closing costs in their real estate transaction. Lender costs are generally accepted, as borrowers realize they are getting something valuable for their money, a mortgage to purchase the property. City or county transfer taxes are accepted, as they are a non-negotiable requirement of most real property transfers. Buyers understand and pay for fire or hazard insurance policies on their property, anticipating the policy will reimburse them in case of a loss. Why then are title insurance premiums, a one-time charge for a title policy lasting an indefinite period of time, often considered not worthy of the cost?

Melanie and Bill Murphy, grudgingly paid out $950.00 to purchase title insurance on a $250,000.00 home they were buying in Richmond, Virginia. As required by their lender, the Murphys also purchased a lender’s policy to protect the mortgage holder’s interest in the property. Realizing that title insurance was a necessity, Melanie and Bill wanted to have this protection, but the cost seemed high to them in comparison to other closing costs. The Murphys understood the $875.00 fee for fire insurance, and were comfortable paying that charge. But Bill hadn’t heard of any of his friends having to make a title insurance claim, and he wondered how valuable that policy really was. Bill had doubts that he was getting value for his dollar in purchasing the title insurance policy.

Homebuyers may be confused as to where their title insurance dollar goes. Looking at the statistics, title insurers paid out $487 million in claims thru the 3rd quarter of 2004, $662 million in 2003 and $583 million in 2002. While the amount paid out in claims is rising every year, historically title insurance claims represent between 4-6% of the total revenue collected. It would seem logical that the higher percentage of claims that an insurance company pays out, the better value the insured is getting for his money. With title insurance the opposite is true.

Title insurance is based on the theory of “loss prevention” which means that the greatest amount of time, and money, is spent preventing title problems from ever occurring in the first place. According to an American Land Title Association (ALTA) survey, one out of every four real estate transactions shows evidence of title problems. You may not even be aware that a problem exists, as title companies make every effort to ensure the property is free of all possible title problems before issuing the policy of title insurance.

Preventing potential loss and subsequent claims is a highly labor-intensive, and expensive, component of a title company’s operating budget. One reason is that in order to maintain current records, which are critical to the accuracy of a title search, new documents must be up-dated and indexed daily. Skilled and trained researchers and underwriters must interpret the effects of these documents on the title. Forged documents, one of the most common title problems found, in addition to falsified documents, invalid deeds, and incorrect property descriptions, are just some of the title issues which must be examined. Other title risks include recording mistakes, deed indexing errors, unpaid mechanics’ liens, judgment liens, income tax or property tax liens, undisclosed easements, claims by missing heirs, and claims by ex-spouses.

The cost of a title insurance policy relative to the cost of a property transaction is about one-half to one percent of the purchase price. The premium price is based on five factors, starting with the largest percentage and descending to the smallest.

The cost of maintaining current title information on property local to that operation, the “title plant”
The cost of searching and examining the title to subject properties
The cost to resolve or clear defects to the title
The claims costs covering title defects, including legal fees
The allowance for a reasonable profit

The average expense ratio for a title company is greater than 90%, while the expense ratio for personal property or casualty insurance is less than 30%. Adding to the expense title companies incur is the need to perform the majority of underwriting work in the state and county where the property is located. Performing title searches on a national level, which could be more cost effective, is generally not possible as laws and customs vary from state to state.

Brian Harrison, a title researcher for a local title company, was conducting a title search on a property in Plainview, New York. His search revealed a federal tax lien against John and Roberta Simmons, the Sellers, (and against the property), in the amount of $84,504.00. The Simmons’ assured Mr. Harrison that the lien had been paid off, and they produced a faded copy of an IRS form titled “Release of Levy,” which described the property and was signed by an IRS agent. Mr. Harrison went ahead and authorized the closing of Mr. and Mrs. Simmons’ property sale, without listing the tax lien as an exception of the new owner’s policy of title insurance. Shortly thereafter, the IRS threatened to execute against the property. The “Release of Levy” document which John and Roberta Simmons produced was in reality only a promise from the IRS to forego collection efforts as long as the Simmons made installment payments on the outstanding lien balance of $41, 572.00. Once the sale was finalized, the Simmons’ stopped making payments to the IRS on the tax lien. The title company was obligated to pay the full amount owing to the IRS to obtain the correct document, called a “Certificate of Release of Federal Tax Lien.” which cleared the lien from the property.

A unique benefit of title insurance is that its coverage can extend long after an owner has sold the property. This coverage was tested in the case of Mr. and Mrs. Stark of Toledo, Ohio. A judgment lien in the amount of $253,513.00 was placed on the Stark’s property and was still in place when Mr. Stark deeded the house to his wife. Mrs. Stark sold the home a short time later to Richard and Nancy Prouder. After living in the home several years, the Prouders sold the house to Henry and Edwina Miller. Nearly eight years passed before the bank who had filed the original lien started enforcement of it’s claim against Mr. Stark. The bank filed a lawsuit against the Millers, as the current owners of the home, and sought to force a sale of the house. Henry and Edwina Miller contacted their title company and learned that the bank had the right, as a judgment creditor, to file their lawsuit against the Millers, as the lien against Mr. Stark was filed during the time Mr. Stark owned the home. The title company representing Henry and Edwina Miller determined that the judgment lien had gone undetected because it was originally indexed in the local computerized title plant under the name “Stank,” instead of “Stark.” The title company insuring Henry and Edwina Miller negotiated a settlement with the bank, paying out $147,500 for an assignment of the judgment lien. Knowing that the prior owners, Richard and Nancy Prouder also had held title insurance, the Miller’s title company made a claim against the Prouders on the warranties given when they sold the home. The Prouders title company reimbursed the Miller’s title company in the amount of $145,000.00.

Although you may not be aware of the financial benefits of your title insurance policy, when a title claim is made, it is usually very significant. In may be large in terms of dollar loss, or critical in terms of property loss. Whether a claim is valid or not, your title insurance policy will cover all the legal expenses necessary to defend your title.

This article may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Shopping On-Line for Title Insurance

While you may want to use your local or referred title or closing company, it still may be worth your time to shop on-line to compare title insurance rates and fees. If nothing else, if you find a cheaper rate or fee, you can present this quote to your title company (or attorney) and ask them to match those discounted fees. Several on-line companies have cropped up, such as www.titleinsurance.com, www.EasyTitleQuote.com, and www.myclosingspace.com.

Each of these companies works a bit differently from the other, but basically they shop your specific transaction for competitively priced title insurance and closing costs among many title companies. One company, www.myclosingspace.com may actually handle the closing themselves. They currently have offices in Florida, New York, New Jersey and are licensed in Delaware, Massachusetts and Pennsylvania. In addition, they will attend a closing at any location of your choosing.

As with any company, you would be wise to verify the service provider you choose to be sure that is an approved title insurer by checking with your state’s Department of Insurance or with the Department of Financial Services. In addition, checking with the Better Business Bureau may reveal complaints which may steer you away from using one company over the other. Although price is a major factor in choosing a title company, good service and the ability to pay claims should also be considered.

One forward thinking state, Colorado, publishes a listing of companies in their state offering title insurance and includes a list of the title insurance premium charged by each company, county by county. Colorado law requires title entities to make insurance premiums and fees available to the public upon request, and by visiting the Colorado Division of Insurance website, www.dora.state.co.us/insurance, you can view these fees for yourself. (“All such rates or fees shall be readily available to the public in each office of the title insurance company or title insurance agent in the county to which said rates or fees apply.” http://www.ltac.org/mainpages/regs-crs.htm).

With a little bit of work, you may save yourself several hundred, perhaps even thousands, of dollars from paying the full-priced title insurance premium. You may find savings on other closings costs as well, such as escrow fees, title and search fees, document preparation fees, courier and notary fees.

This article may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

What is a Co-Op?

A co-op is similar to a condominium except rather than owning a piece of physical property you own a share in a corporation. The corporation in turn owns the building you live in, and you get a proprietary lease to live in a specific unit within the building and your share gives you a proportionate interest in the entire property. The lease allows you to live there as long as you own shares and spells out any restrictions on your use of the unit.

As with any corporation, your shares also give you voting rights. Shareholders elect the Board of Directors, who make most of the decisions and manage daily operations or hire staff to do so. The shareholders pay a monthly “maintenance fee” to cover these and other costs. In some cases, the most desirable the unit a shareholder has, the higher the maintenance fee.

Do I buy title insurance on a Co-op purchase?

Because co-op shareholders to not have deeds to their individual units, they do not buy title insurance nor do they generally go through escrow, although they could certainly go through escrow if they wanted to.

Can a co-op owners deduct a portion of property taxes and mortgage interest on their tax returns?

The IRS treats co-op owners just like the owners of a condominium or single-family home. Co-op owners may deduct their portion of the property taxes and mortgage interest paid by the corporation as a whole.

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Many cooperative buildings do not allow mortgages on the share (or unit) you purchase. In addition, often the interview and approval process can be grueling. Be prepared to show all you financial, income and expense, details and personal references.

The interview is your chance to interview the Board as well. Use this opportunity to find out as much as you can about the co-op, ask if there are any special assessments in the works, the condition and of the building, and any special restrictions in the building.

What Is the Best Way to Improve My Credit Score?

While there is no “best” way to improve your credit score, as each of the three main credit reporting bureaus may give a higher value to one type of action over another, there are several steps you can take, which done together, can potentially raise your score 75 points or more. These steps are not difficult, but they do take planning and perseverance. You don’t necessary have to pay off all your debt, but rather you may need to reposition some debt, while paying down higher balances on other obligations. The reward is great, and can potentially save you thousands of dollars in lower-interest rate loans and time saving qualifying requirements. Most lenders base the interest rate they offer on the FICO score derived from the results found in the borrower’s credit report. The higher the FICO score, in most all cases, the better the interest rate offered. Although determining your FICO score may seem arbitrary and complicated, there are still things you can do to improve your over-all score.

Obtain a free copy of your credit report from www.annualcreditreport.com. You can also call them at 877-322-8228 or write at Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. If you have recently been denied credit, you have the right to request a free credit report from the bureau who reported your bad credit.
Check and repair incorrect information. Look over the report carefully for errors or information which is outdated or not correct. Are there collections or past-due debts which have been paid off? If so, contact the creditor and ask that they send a correction to the credit reporting agencies. Are there items listed in which you perhaps were a co-signor on a credit card, for example with a parent or former spouse? Can these be removed? Are there items listed as open, yet you have closed out those accounts? Are any previous mortgages which have been paid noted as paid in full? Are there any late or delinquent payments which you can dispute? Are there any creditor items which you can write a letter of explanation to be attached to your credit report? If you failed to pay off an account and it went into collection, pay it off as soon as you can. These accounts hurt your score and remain on your report for seven years.
Keep your balances low in relation to your credit limit. Do you have any credit cards in which the balance owing is close to the credit limit on the card? If so, try to pay down this balance. Try to limit the balance owing to no more than 40% – 50% of the credit limit.
Make payments when due. Even if you carry roll over balances on a credit card, be sure to make that payment on or before the due date. Set up an automatic payment for at least the minimum payment. Your credit card company will send you a form to sign up for this feature. This will prevent you from ever being late on a payment. Delinquent payments, even if only a few days late can have a major negative impact on your FICO score.
When possible, pay more than the minimum amount due. Even a payment of $20 or $20 over the minimum due will be helpful.
Pay down any large credit balances. Paying down a balance is one of the fastest ways to improve your credit score. Can you tap into your savings to pay down or pay off a high interest or high balance card? This step can improve your credit score by up to 100 points by paying off some credit items completely and paying down the balance on others.
When you pay off a credit card, don’t necessarily close it down but rather keep a small balance so that your positive payment history will continue to show up on your credit report. Note that closing an account doesn’t make it go away. A closed account will still show up on your credit report, and may be considered by the score.
Prevent numerous credit report searches. A credit search can be performed on your report without your knowledge. Chose to “op-out” by contacting (www.optoutprescreen.com) and request that unauthorized persons not be allowed to access your credit report. Oftentimes repeated credit searches will lower your over-all FICO score. Your score is not affected when you check your own credit. Credit checks by prospective employers also do not count. These types of inquiries may appear on your credit report, but they are not included in your FICO score.
Payoff or renegotiate bad credit debt. These could include such as medical collections, delinquent credit cards or past-due school fees. Work with the creditor and request a new pay-off figure which they will accept if you pay off the debt in full. If that is not possible, request a lower interest rate and realistic due date. Get any promise to remove bad credit in writing from the creditor.
Only apply for credit cards which you absolutely need. Resist the temptation to take advantage of any offers for credit unless you are sure you need that extra credit. Opening new cards can lower your score and will result in additional credit searches showing up on your report.

If your FICO score is:	Your interest rate may be:	Monthly payment:
760-850	3.602%	$1,364
700-759	3.824%	$1,402
680-699	4.001%	$1,432
660-679	4.215%	$1,470
640-659	4.645%	$1,546
620-639	5.191%	$1,646

Rules for Investing in America as a Foreigner: A Primer

Raj and his wife Nila want to buy a house in America to be used as a vacation home. They are citizens of India and unsure as to the rules which dictate how they can make a property purchase. Raj and Nila have contacted several real estate agents via the internet, but have received conflicting information. What should they do?

The Rules

A foreign national (someone who is not a U.S. citizen) is allowed to buy property in America provided that purchase does not threaten national security or come from someone from a hostile country.

A visa may be required for entry into the United States so that should be determined before you make plans to visit the country. Your local immigration authorities may be able to advise you or the U.S. Embassy or Consulate can also provide information. There are over 40 different kinds of non-immigrations visas, the most common being a non-immigrant visa for a temporary stay. See the U.S. Immigration visa information website for a detail of the forms of visas available.

First Steps

The first step is to determine the area of the country you are interested in. You can then interview different real estate agencies and make inquiries as to your needs and desires. Are you looking for a house, a condominium, or a commercial property? What state and town would you like to look in? Ask if the agent has handled purchases by foreign nationals before and if so how many. If they have not, ask to speak to someone who has.

The second step is to find an experienced and specialized real estate attorney, preferably one who has handled purchases by foreign nationals in the past.

How to Find a Good Attorney

Ask for recommendations from your real estate agent. Typically an agent will have an established relationship with an attorney who assists in the property purchase. Ask for several names to chose from and be sure to ask if the attorney has handled property transactions between foreign nationals. Not all real estate lawyers may have experience in that field. You can visit the website www.lawyers.com and http://www.americanbar.org/aba.html for further lists of lawyers in each state and town. Try not to relay on cost alone, as the lawyer you chose will be important not only for this purchase but for further questions which may arise when you decide to sell the property. Find someone you trust. Ask to get a fee agreement in writing and be clear on what services you need, and how you would like to be contacted.

The three most important questions to ask the attorney are:

When and how do we establish a bank account in America?
Do we have to prove we are self sufficient?
How should we hold title? This is important for taxation purposes and in the event one of the parties were to die. Among the options you will have are: hold title in your individual name; in the name of a trust or a corporation; in a limited partnership, limited liability company or a joint venture. A real estate investment trust (REIT) or a foreign pension plan may be other possibilities. The decision on how you take title will depend on your individual financial goals and long-term plans for the property. See: What are the most common ways to hold title?

Depending on the state in which you decide to buy, your attorney may handle the closing process from start to finish, preparing deeds and obtaining title insurance, seeing that the transfer of monies takes place on time, and recording the appropriate documents at the county courthouse. (See: State by State Closing Guide.)

Your attorney can prepare or review an existing purchase contract, looking to be sure it has the necessary safeguards and complies with the law. The contract or Purchase and Sale Agreement will be legally binding, so before you sign, you want to be sure it spells out in detail everything you need in terms of financing, time of closing, condition of the property, and that it contains safeguards which allow you to back out within a specified period of time. (See: What are contingencies and why are they so important?)

Putting it simply, a real estate lawyer will be your watchdog. He would guide you through the whole process of purchasing a real estate in the United States in order to make sure that you will be legally protected. You will have a capable and trustworthy liaison to help you out with the contract. He will also face legal disputes if any arise

Requirements

Verify Cash: You will not be required to have a legal status in the U.S., however, you will be required to verify any monies over $10,000.00 which will be transferred into the country. Federal law requires anyone involved in the purchase transaction, the real estate broker, title agent, attorney or bank, to report all cash transactions over $10,000 limit to the federal government. You must be able to prove the source of that money if asked.

Federal Taxation: Non-immigrants or non-residents must pay taxes on the income made from an investment in the United States.

Individual Taxpayer Identification Number (TIN)

The Foreign Investment in Real Property Tax Act (FIRPTA) requires that foreign nationals or others who have federal tax reporting or filing requirements ( and who do not qualify for a Social Security Number) must obtain a TIN or taxpayer identification number.

The TIN number can be obtained from the Internal Revenue Service (IRS) or by a Certified Professional Accountant (CPA) approved by the IRS. This may be done when you are ready to file your tax return, or it can be issued when you purchase your property. (Check with your attorney for the requirement in your case).

You will have to fill out a Form W-7 in order to request your TIN. On the form you will be required to give a valid reason for your application. (ITIN Guidance for Foreign Property Buyers and Sellers)

You attorney can advise you if you meet one of the exceptions to the tax filing requirement, submit documents that prove your identity and foreign status and the required supplemental documents with the form W-7.

Substantial Presence Test

You will not be taxed on income made outside the United States unless you overstay your visit. When a foreign national overstays their visit they can become classified as a “Tax Resident” which can result in their income from all sources worldwide being subject to U.S. tax.

You are considered to be a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year of your visit. Therefore it is essential that you keep track of the number of days spent in the United States each year.

Exceptions: there are exemptions to the specific time limits on stays for medical conditions and when you have specific connections to another country. Your attorney and accountant can help you with U.S. taxation law. Information can also be obtained at a U.S. Embassy or Consulate.

The Third and Final Step will be the Closing when the deed to the property is signed over, the funds to purchase are transferred to the Seller, and the property legally changes hands.

What Happens at Closing?

When: the date of the closing will take place according to the date specified in the purchase agreement or when all the conditions of the contract have been met.

Where: The closing will take place at your attorney’s office or at the title insurance or escrow office (depending on the local custom in the area).

Who will attend: The buyer, the seller, your real estate agent, your attorney, your mortgage broker (if you will be obtaining financing through a lender). * The seller can pre-sign their necessary documents and does not have to be present on the say day as the buyer. *

Why you need your lawyer: The escrow or closing officer is not allowed to give legal advice. They are allowed to act as an impartial third party only. Your real estate agent may explain documents and their intended use, but is not licensed to attest to their legal implications.

You may have questions as to the legality of a document or to its implications on you and only your attorney is licensed to give you that advice. It is worthwhile to note again that the closing documents will be legally binding so you want to be sure you understand your responsibilities on each paper you sign.

What documents will I have to sign?

You will be asked to sign a Closing Statement. If you are obtaining financing with a traditional lender or bank, you will sign loan documents, which can be voluminous. It is recommended to read those ahead of time (at least 24 hours before closing) and be sure you understand everything in them. At that time, you can review the closing figures and be sure they are correct. Those set of loan documents will include a promissory note, a mortgage or deed of trust, a truth in lending disclosure statement and a HUD-1 or Settlement Statement. There may be additional government regulatory forms to sign, depending on your circumstances. The seller will be responsible for signing the deed and title over to you, a bill of sale if there are personal property items included in the sale, and an affidavit of title and a statement attesting to the fact that they have done nothing to cloud the title on the property and that they know of no unrecorded contracts, easements, or leases regarding the property.

When will I be given copies?

You will be given copies of all the documents you signed at the time of closing. You can also ask if your closing if they can put those documents onto a CD for you to keep. The original deed will be mailed back to you or your attorney once it has been properly recorded in the county recorder’s office.

When can you move in?

The day you take possession will normally be spelled out in your purchase agreement. Most often it is stated as possession will take place on the day of closing. However, there are instances where the seller has requested extra time to move out, but that would only be something which you have approved of, in writing, prior to closing.

Final Words

Prior to closing, go through the following Closing Check List.

Have you made a final walk-thru inspection of the property?

Is the condition of the house or property as it should be? Are there any personal property items left behind by the Seller. Is everything in working order? Did you order a Home Warranty policy for future repairs? If so, did you review that policy?
Are you satisfied that the Seller provided you with all required disclosure documents or any known defects on the property?
Have you carefully reviewed your mortgage closing documents? Are the lender’s closing costs as they represented they would be? Are there any “junk fees” added on that you do not agree to? Are the names correct on the mortgage or Deed of Trust documents?
Is the loan amount, interest rate, term of the loan, and prepayment penalty correctly stated? When will your first mortgage payment be due? Where will the payment be made?
Do you agree with the title fees being paid to the title company, attorney, or escrow agency? Are they the same as previously quoted to you?
Do you understand the prorations, those items or costs of which you will pay a portion of or be given a credit for? Are the prorated dates and amounts correct?
It is clear on which day you will take possession of the property? Will the Seller hand over the keys on the day of closing or at a later date?
Is the purchase price correct on the closing documents?
Have you been credited for all deposits put into escrow either by you or on your behalf?
Is your name correct on the grant deed? Is it spelled correctly, and does it include your correct middle initial? Is the manner in which you will take title stated correctly?
Is the legal description of the property correct? Does this description conform with the one given in the title report? Are all the easements and rights-of-way properly listed?
Were any questionable items on the title report removed or explained to your satisfaction?
If there is any personal property included, are you being given a Bill of Sale, and do you agree with the items included?
Are you paying for fire insurance yourself outside of escrow or through the closing agent? Is the premium correct and is the policy for a full year?
Are the property taxes being paid in full? Ask when the next property tax bill will become due.
Check that the return address on the Deed is where you will want the recorded Deed to be sent. (You will want to keep this official document in a safe place).

If you are out of the country at the time of closing, you can instruct your attorney to do the walk thru inspection for you and review the documents, answering any of your questions.

When you Sell

Selling a property as a foreign individual, you will be subject to a withholding requirement. This holds true regardless if you made any profit or not. Under the Foreign Investment in Real Property Tax Act, (FIRPTA), you will be subject to a 10% withholding from the sale proceeds until your tax obligation is determined.

According to the US National Association of Realtors, Canadians contributed 23% of total international home sales of $82 billion in the US during the year ended March 2011. (Indians contributed 7% and the Chinese 9%).

Copyright 2011 © Sandy Gadow—All rights reserved. No part of this article may be reproduced of distributed in any form or by any means without the prior permission of the publisher. All information is deemed reliable but is not guaranteed and should be independently verified.

How Do I Prepare For A Smooth Closing?

There are several things you can do to be certain that your real estate transaction will close on time, and that everything will go smoothly. A day or two before closing, you should review your final closing statement or HUD-1 Statement, whichever is used in your area of the country. You should go over all the calculations and be certain that you are given credit for all your deposits and any other credits due to you from the seller or for other items agreed upon between buyer and seller. Go over all the lender and title and escrow fees, to be sure they are what you had been told and that you agree to them. Check the math calculations on the closing statement. Errors do occur.

Carefully review the preliminary report or the guarantee of title insurance, to verify the exact legal description of the property and any liens, encumbrances or other items which may have been discovered on the property. Be sure that all items are removed that you did not agree to. Verify that the title or escrow agent has your correct vesting, or the way you want to take title to the property. This is important because to correct a vesting on a deed later on is time consuming and can be avoided if care is taken when escrow is closed.

Besides the paperwork which you must review and verify, you should reinspect the property once again just prior to closing. Is everything the way you expect it to be? Have all the necessary repairs or other corrective work been done that were promised to you? This is important so that you don’t arrive at your new house and find unexpected surprises.

The most important thing to remember is that before closing you want to be certain that all the conditions of the purchase contract have been met. You want to be sure that all directions given to the closing agent have been performed. Before signing your name to any closing documents, check and double check that everything is correct, interest rate, fees charged and condition of the property.

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Make up a “Home Closing Checklist” of items to review prior to committing your signature to your closing documents. Write down all your questions. Be sure you are satisfied with all property inspections and charges and fees which you must pay. Be certain you have been credited for any credits promised to you.

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Remember to arrive on time at the closing and to bring a valid form of identification with you. Your signature cannot be acknowledged by a Notary Public unless you show official proof of your identity.

What is the First Time Homebuyer Credit?

The First Time Homebuyer Credit is a credit available to taxpayers who purchase a primary residence during the period April 8, 2008 and December l, 2009. It is a result of the Housing and Economic Recovery Act of 2008 and the American Recovery Reinvestment Act of 2009. One important qualification is that you (and your spouse, if applicable,) cannot have owned a home for the three years prior to your purchase.

In addition to the requirement that the home be your primary residence, there are income limitations as well. No credit will be given if your adjusted gross income, for a married couple filing a joint return is $150,000 to $170,000. For other taxpayers, the qualifying range in order to qualify for the credit is between $75,000 to $95,000. The home cannot be used as a rental or vacation property.

For homes purchased in 2008, you will be required to repay the credit over a fifteen year period, in 15 equal, annual installments beginning with your 2010 income tax year. This requirement does not apply to home purchases made in 2009, in which no repayment is necessary.

The amount you will receive if you qualify for the credit is ten percent of the purchase price of the home, with a maximum allowable limit of $8,000.00 ($7,500.00 for homes purchased in 2008). You apply for the credit by filling out an IRS Form 5405 and submitting it with either your 2008 or 2009 tax return, whichever may apply in your case. The credit will be applied to your federal tax bill, reducing the amount owed, or if you do not owe any tax, the credit will be refunded directly to you.

Many Buyers have asked if the credit applies to seller financed transactions. The answer is you may claim the credit whether you obtain a traditional mortgage or if you utilize seller financing.

For up-to-the minute details of this credit plan, you can refer to the Internal Revenue Service website at www.irs.gov.

First Time Home Buyer Credit Summary

Applies to a home purchase that closed after April 8, 2008 and before Dec. 1, 2009
Applies only to homes used as a taxpayer’s principal residence
Reduces a taxpayer’s tax bill or increases a refund, dollar for dollar
Is fully refundable, even if you owe no tax
The credit is claimed on IRS Form 5405
For homes purchased in 2009 the credit does not have to be paid back, unless the home is not the taxpayer’s main residence within a three- year period following the purchase
No vacation homes or rental properties qualify for the credit
There are income limits which apply to qualify for the credit.
The credit can only be claimed once the purchase has been completed. (close of escrow).

What is an unrecorded easement?

Easements (those rights someone else has to use part of your property) are typically recorded in the public records of the County in which the property is located, and are thus easily discernable to anyone searching in the public records. An unrecorded easement, on the other hand, are those easements which for whatever reason go unrecorded. A prescriptive easement for example, whereby a neighbor had been using the property in some way for a long time and thus created an easement may never have been recorded. An unrecorded easement is not covered by the title insurer unless an extended coverage endorsement is purchased and added to the title insurance policy.

Recorded easements generally show up in a title search performed by the title company, but unrecorded easements may show up only on a survey. If you do not have a survey done on your property, you can ask to look at the existing owners’ survey which may have been done when they purchased the property, to ascertain if any unrecorded easements are in place.

If you discover an easement, check the wording carefully. When a document grants an easement to a particular person, the restriction may terminate when he dies or sells the property. If it is granted to someone for a term of years or to someone and his “heirs and assigns,” then it probably is in effect no matter who owns the property.

This article may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.

Why do I need a survey?

While the plat map attached to your preliminary title report will show the boundaries of the property, it will not show where the house is located on the property or whether there are any encroachments on the property (such as a neighbor’s tree, driveway, or fence).
A plat map is a subdivision map prepared by developers when the tract of land and parcels were first created and will not show which easements on the property could affect legal title.

To make these determinations, you will need a survey. A survey will show you exactly where the property lines are located and whether there are any building restrictions affecting your rights. Having this information may be important if you have plans for adding a pool or a fence to the property, for example. Apart from wanting a survey to determine the location of buildings and easements on the property, you may have plans to divide up the property at a later date. Let’s say you are buying a house located on several acres of land. You have determined that local zoning law allows you to split the property into individual parcels or lots. If you think you may consider splitting the property at some later date, having a survey in hand will help you make those decisions when that time may come.

While surveys tend to be expensive, you can cut the cost down by asking the previous owner if there is an existing survey which you could look at, or asking for the previous surveyor’s name, so you can request that the old survey be up dated. You can also visit the official surveyor in the government land records office in your county, and ask one of the staff to help you with any boundary or easement questions you might have.

Most surveys do not include staking the corners of the property. If you want this done, be sure to ask for this to be done at the time the survey is performed.

Choose Right Settlement Agent for a Quick Closing

In spite of the recent shift in the real estate market, seeing sales slowing down in many areas, savvy Buyers are looking for well-priced properties which may now be available to them. Not wanting to loose out to a competitive Buyer, many borrowers want to know how to make settlement go as smoothly, and quickly, as possible. The right choice of a settlement agent is one way in which you can speed up your closing.

The settlement agent is the person who coordinates all the paper-pushing that goes into a closing. Generally, the agent has some sort of connection to a title insurance company.

Closing agents, however, are not all alike. You may have heard that title insurance rates and closing fees can vary from company to company, but you may not be aware of the differences in service you will receive from one company to the next.

Many borrowers also are not aware that they have the right to choose title insurance agents. Under the federal Real Estate Settlement Procedures Act, the seller cannot require you to buy title insurance from a particular title company. The lender may request that you use a title company it finds acceptable, and it likely will recommend some companies, but in most cases you have the choice. The lender usually always agrees with your pick.

This power of choice is a tool you can use to be sure your closing goes as smoothly and quickly as possible. Depending on where you live, you may choose among a title company, an escrow company, a lawyer or a real estate agent. Whichever entity is used, you will want to ask some basic questions before making your choice.

Your choice of closing agent will largely be determined by the state in which you live. In a number of eastern states, a lawyer will probably close your transaction. In South Carolina, North Carolina, Delware, Connteticut, Main and Vermont, lawyers are technically required to handle the settlement. In other states (approximately 16) an attorney is required to prepare the deed, although the lawyer can generally be employed by the title agency or insured branch office. In the western part of the country, escrow or title companies typically handle closings. In many states, including Virginia and Maryland, as well as the District of Columbia, there are attorney-assisted closings, title company closings and closings assisted by real estate agents.

Closing is about preparation and service. Expect good service, and ask for it. Making the right choice ahead of time will be the magic key that opens the door to a speedy settlement.

Ask how quickly a title search can be performed. Ask the turnaround time for issuing a title commitment or title report. Ask who will communicate with the lender, appraiser, real estate agent, inspector and lawyer, if one is involved. Some title officers or closing agents don’t have assistants to help them get the reports out quickly. They can become bogged down with files, and yours may be on the bottom of the stack.

Ask if the title company or agent uses a “transaction-management system” or other means of internal or Internet software system to transmit information, or even documents, electronically. Many lenders have what is called “digital document delivery systems,” which means they can transmit your loan documents to your closing agent by way of the computer. The title company can receive your loan documents almost instantaneously. Funds to close escrow can be received electronically.

What this means is that if there is a change to the documents, a last-minute correction or addition, it can be handled within minutes.

When selecting a title company or closing agent, ask if they use this means of rapid document delivery. Ask if they use a system of instant communication for reports and documents. Ask ahead of time what kind of service you can expect.

The five major national title insurance companies are Fidelity National Financial Inc., First American Corp., LandAmerica Financial Group, Old Republic Title Co. and Stewart Title Co. Among them, they issue about 90 percent of the title insurance policies, said James Maher, executive vice president of the Washington-based American Land Title Association. Regional and one-state companies handle the remaining policies, he said.

All the national companies have transaction-management systems in place. This is important because information can be exchanged, approvals obtained and errors corrected almost instantaneously. In some cases, title reports can be read on a hand-held communication device or on cell phones so that most of the parties to the settlement have access to the information. In some cases, home buyers and sellers as well as professional service providers can log in.

Many regional insurers and larger closing agents have their own systems.

If you use a lawyer to handle your closing, you will want to ask how frequently the law office handles title searches, how large the staff is that will process your file and how quickly the closing date can be arranged.

Many law offices do not rely on real estate closings as a primary source of income, but rather as a way to accommodate clients or to generate further business. Be sure your lawyer has the staff available to quickly process your file. Ask if the lawyer will provide the closing documents to you one day before closing.

Many borrowers arrive at a closing only to find the lawyer or closing agent reading through the documents for the first time. Make it clear that you would like your closing documents to have been read and reviewed before you come in for signing. If there are discrepancies, these can be resolved before closing.

Do not be afraid to exercise your power of choice. Even if your lender recommends you use the title company that normally handles its closings, get several quotes on your own.

If you find a closing agent or title company that offers you a savings on title insurance, closing costs, title exam, search or courier fees, let your lender know. They may agree to match those cheaper fees. Get your quotes in writing, and present them to your lender. Your savings could be substantial.

You may be entitled to a discounted rate on your title insurance policy. If the previous title policy was written in the past two to five years, ask if you qualify for a “reissue rate.” Title companies may not offer the discounted rate unless you ask for it. The savings could be 20 percent or more of the original title policy, so be sure to ask. In Florida, for example, there is a “Butler rebate” law which passed several years ago, allowing title insurers to deeply discount their fees on title insurance. They probably will not offer this information to you, you will have to ask for it.

Compare reissue title rates. Lawyers are not regulated by the state’s insurance agency and may charge a different rate from that of a title company. (offer to discount their “profit” portion of the title insurance policy.) Similarly, reissue rates may vary from title company to title company.

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What Is The Cost of Title Insurance?

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Can I Transfer The Title Insurance To A New Owner?

Who Does What?

Who Are The Other Parties to the Closing and What Will They Do?

How You Will Pay the Closing Agent

Get The Best Closing Agent

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The Rules

First Steps

How to Find a Good Attorney

Requirements

Individual Taxpayer Identification Number (TIN)

Substantial Presence Test

What Happens at Closing?

What documents will I have to sign?

When will I be given copies?

When can you move in?

Final Words

When you Sell

First Time Home Buyer Credit Summary