Title Insurance? Here’s Why You Need It

The purchase of a home is most likely one of the most expensive and important purchases a person will make. The buyer and the mortgage lender must be certain that the home is indeed completely the buyer’s and that no other person or government entity has any right, lien, or claim to the property at all whatsoever. Like most types of insurance, having title insurance is better to have and not use than needing it and not having it available.

Title Insurance companies are in business to make sure the rights and interests of the property are clear, that the transfer of title takes place efficiently and correctly, and that the interests of a homebuyer are protected to the maximum degree.

Hidden issues can pop up after the closing of a home. Having title insurance will protect the buyer from some pretty sticky situations. Some of these unforeseeable title claims can be:

  • Forgery | False Documents – for example, the seller misrepresents the identity of the person selling the property.
  • Fraud | deception to achieve unfair gain -for example, someone steals identity and either sells the house without the owner’s knowledge or consent or takes out a second mortgage on the property and walks away with the money.
  • Clerical error | inconsistent paperwork and historical records – for example, an unforeseeable discrepancy in the property or fence line confuses ownership rights.

Title insurance is a safeguard against loss arising from hazards and defects already existing in the title. While claims on title insurance are rare compared to other types of insurance, they still happen and can be complicated legal issues to fix.

  • Outstanding mortgages and judgments, or liens against the property because the seller didn’t pay required taxes.
  • Pending legal action against the property that could affect your ownership.
  • An unknown heir of a previous owner is claiming ownership of the property.

After the title company conducts an exhaustive search relevant to the property with assurance that no one else has an interest in it, a policy will be issued. Because of this examination of all the records, any problems with the title will be cleared up before the purchase of the home. Once the title policy is issued, if a problem arises leading to a file against the property, the title company pays the legal fee that would be incurred in the defense of the owner’s rights as well as any loss arising from a valid claim. This protects the owner and any heirs as long as it is their property.

The Bottom Line: The title company hired will conduct a meticulous title search, however, the possibility of something being overlooked cannot be eliminated. That’s why it’s crucial to have title insurance. The policy will protect against any unforeseen issues that may arise with the property’s title. Without title insurance, an owner could end up dealing with expensive legal costs and other charges. An investment like a home should be safeguarded and a title policy should be in place before the day of closing.

Share This Post

Bridge Loan in Real Estate

What is a “bridge loan”?  It is a temporary loan used while permanent financing is being secured. Bridge loans often have higher interest rates. They allow a homebuyer to take out a loan against their current home to make the down payment on their new home. This may be a good option for you if you want to buy a new home before your current home has sold.

A bridge loan is dependent on the equity of your current home. Your equity is the difference between the value of your home and what you owe on your current mortgage. Many lenders provide the borrower with the difference between their current loan balance and up to 80% of the current home’s value.

With this new loan, borrowers can cover the down payment and closing fees on their new home.

Pros of a Bridge Loan:

  • You don’t need to have selling contingencies of your current home to make an offer on a new home.
  • Application and closing are often quicker than other loans.
  • Depending on the lender, the bridge may not have any payments until the deal is closed. Some lenders may require interest-only payments until the deal closes.

Cons of a Bridge Loan:

  • You must have excellent credit and a low debt-to-income ratio.
  • There are often origination and legal fees.
  • Paying two closing costs – one on the bridge loan as well as the new home.
  • Lenders charge higher interest because these loans have such a short lifespan. The work involved for the lender is equivalent to a comparable longer-term loan.
  • Terms are generally 6 months to 2 years.
  • While some bridge loans have fixed interest rates, others can have a variable rate that may rise before the loan is paid off.
  • If your primary home doesn’t sell, you could end up with three mortgages: one on the primary home, one on the new home, and the third being the bridge loan.
  • Bridge loan lenders can be difficult to find.

The Bottom Line: Bridge loans are short-term loans that help a buyer purchase a second property when they have not yet sold their primary property. There are tough qualifications and some challenges for someone to be able to obtain two mortgages at once, thus the bridge loan offers a solution. Bridge loan borrowers will have more freedom and flexibility, but will also face some negatives like high interest rates and closing costs. It’s important to compare all the benefits and the negatives before making a bridge loan commitment.

Share This Post

Step by Step: Building a House

So you have decided to have your dream home custom-built on a plot of land that you love. What could be better than watching it all happen from the ground up just the way you want it? While you might be better off doing this, it’s not as easy as it seems. There are a lot of details that need to be worked out and you will need to be prepared.

The first thing you should do is hire the most experienced realtor with new home construction knowledge, who will best represent you and your interests during your home search and the home-building process. A realtor that regularly deals with builders, but isn’t affiliated with a builder. Do this before even visiting a builder’s home construction site. Many model homes are represented by a real estate agent who has a relationship with the builder, and many builders won’t allow you to hire your agent once you already visited their sales office without representation. Seeking the help of a knowledgeable professional who regularly deals with builders and knows the local community will save you time and money. Besides, it will cost you nothing as a buyer to be represented by an agent since it is typically the seller who pays for the commission. Many builders are also happy to work with agents.

Do your research on the builders. Search for online reviews, testimonials, and any news and updates you can find. Then check for the validity and trends in those reviews, since many builders will surely have a history of both happy and unhappy clients. If possible, also talk to local homeowners or current residents. Connect with them in online groups or communities through social media to better educate yourself before making a decision. Also, research the location and the community where the new construction is being built and you can learn about your potential neighbors as well. Ask your realtor if they’ve worked with the builder before and gain insights about their reputation.

It’s normal to be fascinated by that picture-perfect model home, but don’t let it blind you. Model homes are, of course, decorated to look desirable and striking. They have been furnished and staged so that rooms will appear bigger. Model homes were often constructed using a mix of standard materials and fixtures and include many upgrades that don’t necessarily represent what you can get, so it’s crucial to note what exactly you will be getting. Enlist the help of your agent to get a list of the standard features and common upgrades, together with their associated costs.

Most builders are reluctant to lower their prices because it may set a precedent for future buyers in the development who may expect similar discounts. The best way to negotiate with a builder is through upgrades. Consider asking for the builder to negotiate “on the back end,” such as paying for closing costs and performing upgrades at no additional charge. This is the less obvious way for builders to sweeten the deal while still maintaining the value of their neighborhood. With the help of your agent, research the builder’s negotiating style so that you can plan for an effective way to make a creative offer.

Consider other sources where you can find a lender who will offer you the best deal. Don’t automatically use the builder’s lender without shopping around for better options. Builders often have their preferred lender so that they can be fully informed of your progress as a borrower. However, they may not work with your best interests in mind. Your agent can also help you by referring to a trusted list of private lenders.

For some instances where the builder’s preferred lender is the only option, find out if there are incentives, special offers, or competitive rates available to you if you agree to use the builder’s lender. In some situations, it can be a cost-efficient option since they are often willing to offer competitive rates and terms, especially if the builder owns the lending company.

Get an inspection! New homes can have problems or defects since construction workers can make mistakes as well. There may be problems with the HVAC or plumbing installation that only a licensed home inspector can detect. Getting an independent inspection is always a good idea since any problems can be identified before a builder’s warranty expires. It will also help you learn more about the home. A home inspection will guarantee that everything is safe and up to code.

Even if you are working with a respectable builder, make sure that everything you have negotiated and agreed upon will be included in writing. They may honor your requests, but verbal conversations are not binding so they may forget about the promises they made to you. Make sure that everything important will be put in binding documents that must be signed by all parties. It’s especially crucial if you are buying a home that is not yet complete. Your experienced real estate agent can help you ensure everything is in writing and that all documents are properly signed.

Lastly: ask about warranties. Find out what is and isn’t covered and for how long, since not all warranties are created equal. Most builders use third-party warranties that cover materials and workmanship. Builders often use construction materials from different manufacturers or suppliers, like for windows or tiles, so those products may have separate warranties. There’s a great chance the builder might refer all issues to the manufacturers instead of handling the issues directly. Get the builder to specify each product’s warranty information so you can prepare your offer documents to address any concerns before closing. Warranties will also help you understand the process you need to follow once something needs to be fixed.

Share This Post

I Can Get the Same House for Less. Why Would I Want to Buy Your House For More?

Pricing your home too high can be damaging. Overpriced homes sit on the market, day after day and month after month while the price gets lowered. The listing becomes stagnant, and buyers assume there is something very wrong with the house thus avoiding it. Eventually, there will be a buyer out there who knows they can get a deal on the house and make a lowball offer.

The first 30 days on the market are the most important. This is when the most showings will occur. Having a home that is priced too high, will push buyers away and they will choose to ignore it or bookmark it to check on the status of the price later. The longer the home sits unsold, though, the more negatively it is viewed. Buyers believe it is overpriced or there is something wrong with it. Waiting too long to drop the price will mean most likely losing the people who have bookmarked the home as they have probably already moved on and bought something else.

Additionally, if the home is on the market too long, potential buyers will think they are in a better negotiating position and end up tossing out a real lowball offer. Even when the negotiating begins, it will be less than the original asking price. To attract the most potential buyers possible, the home must be priced correctly from the onset of its going on the market.

If by chance a seller is lucky enough to get an offer on their overpriced home, there is still a hurdle to get over. The home may indeed be in a desirable neighborhood and have all the bells and whistles, but for the buyers to get a mortgage, they need to have the home appraised. The dollar amount the bank will lend the buyer is based on the appraised value of the house rather than the agreed-upon purchase price between the buyer and seller. The appraiser will use the prices of recently sold nearby comparables to help determine the value of your house.

If the home does not appraise at the price the buyer offered, the seller will either need to reduce the price to meet the appraisal value or the buyer will need to come up with additional funds to make up the difference. Not many buyers are jumping to ante up more money on even their dream home if the appraised value is not matching. Sadly the home will end up back on the market with additional expenses and adding to the days on the market.

Another issue is that any good realtor who is showing homes to buyers is obligated to do what is best for their clients and showing a well-known overpriced home is something they will steer clear of. Properties shown to buyers will meet the current fair market value. They will wait until the price is eventually reduced. If then, the lowered, overpriced home is shown, the buyers will look for all the things that are wrong with it – because they know there has to be if it’s on the market for a long time. The real problem all along was always the price.

Picking the right realtor is the key to a successful sale of a home. Interview several agents before choosing one and have them write out how much they think they can sell the home for. If one gives a significantly higher number than the others, be wary. It’s unfortunate but some realtors will throw a high number into the ring just to get hired. The realtors should come armed with the comps (competitive market analysis) and be able to back the number they came up with.

Some sellers mistakenly believe that Zillow’s pricing estimates, called Zestimates, and other online valuation tools can be used as a good barometer for estimating the price of their home. Beware of these tools and websites as they will never replace a good real estate agent who knows the local market and their estimates are usually far off the the actual selling price of a home.

The Bottom Line: When a house starts overpriced, it almost always ends up selling for less than market value. By pricing it high to drop the price later, you are completely bypassing the best candidates for buyers. They will look for homes for sale that are more accurately priced. Experienced real estate agents know that pricing a home appropriately from the start is critical to getting it sold quickly and at the best price.

Share This Post

We Buy Home For Cash Scam

Homeowners who are facing foreclosure, can’t afford home repairs or need to sell their home quickly and “as is” can get easily tempted by the “We Buy Home for Cash” offers. While some accredited companies will come in and buy a home quickly for cash, there are more scammers out there taking advantage of homeowners in destitute situations. It’s important to keep an eye out for common scams so as not to fall victim to extortion.

Some Red Flags

Unsolicited Offers: Legitimate cash homebuyer companies will advertise their business and enable you to contact them directly rather than send a postcard, an email, or a call making an unsolicited offer on your home. You should expect to talk to a real person, meet them, and walk through the home together. When the conversations are only over the phone or digitally, it’s easier for the scammer’s identity to be hidden and take advantage of you.

Strange Company: The common thread of these scam homebuyer companies is that they don’t want to be tracked down. Their website is commonly cheap looking and often has typos, and grammatical errors and comes with a phone number that traces back to nothing / no physical address. Real companies are transparent about their process and in their communication. They will likely have a social media profile and other presence online. There will be a digital footprint.

Proof of Funds: These cash-buying companies should be able to provide proof that they have the funds before any signatures on the dotted lines. If they can’t verify the funds by providing you with said verification, it’s probably a scam. Successful cash buyers will show you all you need to know to ensure there is no risk of the deal falling through.

Money Wiring: A big sign that you are doing business with a scammer is if they want you to wire money to them. Be very skeptical if the company is unwilling to use a standard and secure payment method.

Personal Information: If the cash-buying company asks for personal information such as your social security number, bank account, or other financial information, it’s likely a scam.

Behavior: Reputable cash-buying companies are professional at all times. They won’t seem overeager or not respond to reasonable requests you might have. If the person you are speaking with seems to be rushing you, please know that they can’t possibly have had enough time to collect the proper amount of information to even make a legitimate cash offer. Especially if they have not even inspected the property to see the condition. If they are slow to give you any documentation such as proof of funds it’s a good bet they are trying to scam you.

The Bottom Line: There are established, reliable, trusted companies with a good history. Unfortunately, some criminals will take advantage of home sellers by using the cash offer scheme. The best way to prevent becoming a victim is to know the signs of a scammer, know the correct way the process should work, and do your due diligence. If it seems too good to be true, it probably is.

Share This Post