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New Build Title Insurance

Most people know how important it is to have title insurance when buying a new home. The buyer needs to have protection against defects or problems because of liens, encumbrances, or defects in the title when there is a transfer of property ownership.  But, what if the home being sold is new construction since there isn’t an actual previous home that has a title? Many prospective homeowners wrongly assume that newly built homes are free of title defects.

When a home is sold, the original seller transfers the title deed to the buyer. The hope is that the seller has had full possession of the title without any liens on the property and has the right to sell it. A title company will research public records looking for problems that might be associated with the property – filing errors, forgeries, undisclosed heirs – and once searched will provide a policy to protect the buyer from any issues that may be uncovered later.

All of the above makes sense if a home that is being bought has been owned by someone else. What happens when a buyer is purchasing the land to build a new house on? Why would title insurance be needed? Because the land was owned and may have been broken up from an even larger parcel that has undiscovered claims. The title to that land may come into a dispute in years to come. Most land is not completely claim-free, thus there is history. Furthermore, the builder may have bills unpaid to subcontractors and suppliers resulting in a lien on the new home. 

A title policy is a best and safest way in protecting the buyer of the land where the new home is being built.  There will be no question of ownership in the future, especially if the home in the new subdivision was not properly subdivided. 

The Bottom Line: The lender will want to be sure that there is a clear title on the property.  Someone owned the land on which the new home is being built before the buyer and the title to that land may at some point come into dispute. And, while there is no question the owners could experience disruption during a dispute, title insurance will ease the pain by covering the bills during the process. 

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Holiday Home Selling

Winter season is not the most optimal but if you hire a Realtor that knows your market well, you still can sell your home at a competitive price. If you are living in the Northeast, Midwest, or other cold areas, the following are some ways that can help to sell your home faster and at a fair price during the busy month of December and then through the darker months of January and February.

There are fewer homes being sold now, and winter in general, which makes people nervous about putting their homes on the market. More home buyers are house-hunting in the Spring months when the weather is warmer, and the days are longer. But, you might be surprised to find out that Winter could actually be a great time to put your home on the market. The new year is a time when most people are back at work after the holidays and will often search the web for their next big move. If you are serious about selling your home, it should be online and marketed early to ensure they don’t miss this audience.

Because it isn’t a high-selling time, you will need a very experienced Realtor to help price your home as it can be complex. You don’t want to scare off buyers by pricing too high or even too low, causing buyers to wonder what’s wrong with your house. When your home is put on the market in the winter, buyers often assume you are desperate to sell your home and may lowball you thinking you’ll sell for any price. Buyers that are house hunting during this traditional off-season time, usually mean they are eager to buy and more willing to negotiate the price.

One of the beauties of the holiday months is that many people adorn their homes with festive lights and decorations. People purchasing a home during that time may see the neighborhood in a different light—more festive and cheerful—and may be more willing to consider an area that they may have been on the fence about.

Stirring up some interest during cold January is to price your home slightly under comparable homes in order to draw in multiple offers. More offers tend to drive up the value of your home prompting more competitive bids from buyers who often will end up paying more than the initial asking price.

The real challenge might be to help dress up your home after the holidays in dreary January and February weather. To help make your home feel more welcoming, shovel the walks, add outdoor illumination along paths, light candles indoors, add cozy throw blankets, and have holiday-type smells such as cinnamon or cookies.

Furthermore, during the cold, any problems you may have in your home can become more prominent including drafts and leaks. To help lessen these potential problems, crank up the heat so buyers feel toasty warm and will be less likely to notice any issues.

While it may be difficult to sell your home during the holidays and January and February, it’s not impossible especially if you hire an experienced Realtor who knows your neighborhood well and can guide you to list your home at the best possible price. Sometimes, waiting to list your home during the beautiful Spring months when the sun is out and the trees are blooming and flowering can mean that you could miss out on potential buyers. Many Realtors will tell you, some of their best sales happened in the new year.

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3 Types of Real Estate Fraud

Buying, selling, and owning real estate is often the most expensive transaction many individuals will undertake in their lives. Hundreds of thousands of dollars are involved and dishonest tricksters and scammers are out there hoping to take advantage of those involved.

Con artists may use several methods to swindle you in one of their schemes. Foreclosure bailouts, home equity fraud, home renovation scams, rental fraud, and deceptive timeshare scams, are just a few types of real estate fraud that may be performed. Here are three of the most common:

Foreclosure Bailout

A foreclosure rescue scheme is a type of fraud that takes advantage of homeowners who have fallen behind on their mortgage payments.  The fraud perpetrator approaches the homeowner with promises of paying off the delinquent mortgage and helping the homeowner stay in the property. 

There are many variations of a foreclosure rescue scheme.  Some schemes require the homeowner to unknowingly transfer the property title to a third party.  Other schemes will promise homeowners that if they transfer the title, they can continue to rent the home and repurchase it at a future date.  The purchaser of the property, sometimes the foreclosure rescue artist, is now free to refinance the property or to sell the property to another party.  Sometimes the foreclosure “rescuer” charges the borrower high ‘service fees’ up front and then disappears with the money without providing the promised service. 

Home Equity and Home Renovation Fraud

According to the Council of Better Business Bureaus, home-remodeling contractors ranked slightly behind car salespersons and auto mechanics in generating the most consumer complaints. Be very careful when using your home or your home equity as security for a home improvement loan. Fast-talking salespeople will offer to refinance your home at a lower interest rate to provide cash to the homeowner, the cash can be used to pay for home improvements or to pay off bills. Victims are frequently asked to sign blank contracts or contracts that they were not allowed to read before signing. Later, the homeowner discovers that they signed a contract that contains terms in contrast to the originally promised terms. This results in the loss of equity in the victim’s home, and also they have signed a mortgage in which they have incurred considerably higher interest rates. The homeowner is now faced with a higher mortgage payment, one that they may not be able to afford.

Rental Fraud

Rental scams occur when the victim has a rental property advertised and is contacted by an interested party. Once the rental price is agreed upon, the scammer forwards a check for the deposit on the rental property to the victim. The check is to cover housing expenses and is, either written in excess of the amount required, with the scammer asking for the remainder to be remitted back, or the check is written for the correct amount, but the scammer backs out of the rental agreement and asks for a refund. Since the banks do not usually place a hold on the funds, the victim has immediate access to them and believes the check has cleared. In the end, the check is found to be counterfeit and the victim is held responsible by the bank for all losses.

Another type of scam involves real estate that is advertised online. The scammer duplicates postings from legitimate real estate websites and reposts these ads, after altering them. Often, the scammers use the broker’s real name to create a fake e-mail, which gives the fraud more legitimacy. When the victim sends an e-mail through the classified advertisement website inquiring about the home, they receive a response from someone claiming to be the owner. The “owner” claims they’re unable to show the property without payment because they are either out of town or out of the country. If the victim is interested in renting the home, they are asked to send money and shortly thereafter the property is no longer available.

The Bottom Line: Be suspicious of unsolicited email or telephone offers. Scammers often find victims through these spam emails. They may send tens of thousands of those emails, hoping to find a handful of individuals who will respond. With advanced technology and interacting digitally with victims, it can be challenging to avoid real estate scams. However, it’s important to stay vigilant about protecting your personal information and bank accounts. Only work with qualified professionals you trust and familiarize yourself with some of the common warning signs. If you believe you’ve been involved in a real estate scam, make sure to contact the authorities immediately.

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What is Home Equity

Home equity is the difference between what you owe on your mortgage and the current value of your home. You can build equity as you pay down your loan balance and as the market value of your home increases. If you still owe money on your mortgage, you only own the percentage of your home that you’ve paid off. Your mortgage lender owns the rest until you pay off your loan.

With each mortgage payment you make, the balance of your loan decreases, and you build more and more equity (assuming your home value doesn’t decline). When your mortgage is finally 100% paid off, you have 100% equity in your home.

Equity is an important financial tool and one of the greatest financial benefits of owning a home. If you sell your home, your equity will be a factor in how much buying power you have when purchasing a new home. If you plan to stay in your current home longer while you build more equity, you can borrow against that equity to secure a home equity loan. When you take a home equity loan, you are putting up your equity as collateral in case you default on the loan.

There is usually a lot of flexibility in how you use a home equity loan. However, If you are thinking of selling your home in the near future, the home equity loan would be paid in full at the time of the sale.

Typical ways to use a home equity loan:

  • Funding a student loan for yourself or your child 
  • Paying off or consolidating credit card debt 
  • Funding a vacation 
  • Paying for weddings or important celebrations 
  • Starting a business 
  • Making home improvements and upgrades 
  • Paying medical bills 
  • Making key purchases, such as a car or a truck 
  • Funding investments 
  • Set aside for an emergency fund

Advantages of a home equity loan:

  • The interest rates for home equity loans are fixed, instead of variable, and your monthly payment is consistent, so you never have any surprises.
  • You can pay for big purchases little by little.
  • The interest rate you pay on a home equity loan is often lower than those for credit cards or other types of loans.
  • You can usually get access to funds quickly, sometimes within days of completing the loan documents.
  • You also might be able to deduct the interest you pay on a home equity loan.

The Bottom Line: Home equity loans are a great tool to help you borrow against your home’s equity. However, they’re not the only way you can access the money you’ve built up in your home. Before you can decide if a home equity loan is a right choice for your needs, you need to understand your options. Borrowing against your home’s equity is always risky, as the lender can foreclose on your home if you fail to make payments. Be sure to get excellent financial advice before making any decisions.

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Beware Overpricing Your Home!

We all want to get the most money possible when we put our homes on the market so it’s natural to want to ask for top dollar. After you and an experienced realtor review the comps from your neighborhood, you believe you should price it high so that you have room to come down and still make some good money. But the most important part of selling a home is knowing the current market value so you don’t price it too high. There are problems associated with listing your home too high that can actually hurt the sale.

Problem #1: Listings get the most showings in the first 30 days of being on the market. If a home is priced too high, buyers may choose to ignore it or put it in a “wait and see category.” The longer the home sits unsold, though, the more negatively it is viewed. Buyers will think it must be overpriced or there is something wrong with the home. If you wait too long to drop the price, most of those “wait and see” buyers will have already moved on and there will be a smaller pool of buyers interested in your listing as the days on the market increase.

If the home is on the market too long, potential buyers will think they are in a better negotiating position and you may end up receiving a lowball offer, which can be frustrating. Even if you can negotiate up, it will be for far less than your original asking price. If you want to attract as many potential buyers as possible, it’s important that the home is priced correctly from the onset of its going on the market. 

Problem #2: An overpriced home helps your competitors. When a buyer looks at your home and then visits another that is priced the same but comes with more features, your competitor’s home will look like a much better deal.

Problem #3: If your home sits on the market for too long, neighbors and potential buyers will assume that there is a problem with it. The home will be stigmatized, and buyers will either be too turned off or too afraid to check it out.

No one wants to buy a house that nobody else seems to want. A house that sticks on the market for months often generates suspicions that some undisclosed feature or element is making it unsalable.

Problem #4: A buyer is interested in your house and willing to pay the price you are asking. But they need to get money from the bank to pay for it. All banks demand an appraisal of any property they loan out money for, and yours will not be the exception. The market runs the appraiser and they will appraise your property in accordance with it. When the appraiser comes back with a noticeably lower market value than the price the buyer is offering the bank will likely refuse to give the buyer a mortgage. This can lead you from a safe sale to an unsuccessful mortgage application leaving you with no option but to seek more buyers.

The Bottom Line: Find an experienced Real Estate Agent and listen to their advice for pricing your home, stay realistic in your pricing and accomplish your ultimate goal of selling your home. Know that 75% of real estate marketing is the price you set in the beginning. All of the marketing and advertising in the world will not sell an overpriced home.

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What Home Inspectors Look For

As a homebuyer, you get to choose your home inspector, so it’s important to find a good one who’s experienced and educated. Ask your realtor for a couple of recommendations and then do a simple search on google to find any reviews there may be.

An inspection is the buyer’s greatest opportunity to determine the home’s condition. You will get a full picture of the home from the inspector spending time documenting the big and the little issues. This is not a test that the house passes or fails, but rather it’s a way to identify problems that will need to be dealt with.

Foundation: A home inspector takes a close look at the structural integrity of the home you want to buy. Part of that means he will be looking for cracks, moisture, water damage, and sticking windows and doors, which could reveal that the foundation of the home is shifting or sinking. The inspector won’t have the final say as they can’t officially diagnose or offer repair solutions for the foundation issues. They identify and find all the hidden problems and gather the overall sense of the issue and if it is believed to be serious, a structural engineer would need to come out. Most of the foundation repair companies won’t charge a fee to come to inspect in the hopes that you will hire them to fix the problem.

Roof: The inspector will check if the peak is straight and level. if the roof is sagging between rafters, if shingles show any signs of deterioration, if roof vents are visible, and if there is any loose flashing near the chimney. He will want to make sure the roof is well-constructed and will protect you from the elements. As part of the report, you can expect to be provided with an estimate of how many good years the roof has left before the consideration of replacing it.

Plumbing: He will look inside and outside the house and he will check to see if the water is running from the taps including the spigots, see that they drain empty, and make sure that the toilets flush. The inspector will look for any leaks around the plumbing, pipes, and fixtures. There will be an assessment of the toilet flappers, dripping faucets, and leaky showerheads.

Electrical: One of the leading causes of house fires is the electrical system, so expect this to be a very thorough examination. In addition to checking the electrical panel to make sure wiring and grounding are up to code, the inspector looks for corroded wires and correct amperage ratings. Common electrical issues include exposed wiring, painted outlets, reversed polarity, aluminum wiring, and lack of GFCI protection.

HVAC: Inspectors will check the thermostat, air conditioner, furnace, heat pumps, and ducts to assure that all are in working order. He will look at service records and determine the system’s age, evaluate the cleanliness of each component, and the safety mechanisms.

The Bottom Line: There is much more to a home inspection than those above but these are the most costly to repair or replace if issues are found. With this report, you are more able to identify what you can or can not take on if you buy a home. Furthermore, a home inspection can uncover potentially life-threatening problems like mold or faulty wiring that could cause a significant fire.

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DIY Quick and Easy Reboot to Sell Your Home

If you are preparing to put your home on the market, it might not make sense to complete any big home improvement projects. Once you have met with your realtor and are convinced there aren’t any major repairs to make, consider doing some easy refurbishing yourself to make your home more appealing to buyers. These updates shouldn’t take long to accomplish, and they won’t break the bank.

The First Impression:  Start with the first thing potential buyers will see online, driving by, or coming to a showing – your home’s curb appeal. Check all your landscaping and keep your grass cut. Clear your yard of dead plants, weeds, sticks, and leaves. Trim the trees and the bushes and consider adding a few bags of dark mulch around them. If your home has a front porch, adding a couple of pots of seasonal flowers on the front porch can make a huge difference. Update and possibly remove any accessories such as a doormat, wreath, or rug.

The Front Door: A little sanding, a fresh coat or two of paint, clean or paint the trim, and put on a new doorknob. A knocker will add some charm. Fix or replace any exterior lighting that needs some help.

Bathrooms and Kitchen: Outdated lighting and plumbing fixtures can drag down the entire vibe of a home. But by replacing the old fixtures with either timeless or trendy ones, you breathe fresh life into the space. If your cabinets have old and tired hardware, replace them for a quick, easy, and cheap facelift. Regrout and replace chipped tiles. This may take some extra elbow grease but will make your tile look new and give it a fresh look that buyers love.

Fresh Paint: Brighten up your home with a new coat of paint in a color palette that will appeal to today’s buyers. Doing this will help in covering up stains, marks, scratches, and any odors.  Choose a warm neutral color to appeal to the widest range of buyers. Talk to your realtor for advice on what is currently popular. Painting can be done on a weekend and absolutely won’t break the bank.

Flooring:  A huge selling point for potential homebuyers. Remember that odors linger especially in rugs and carpets and worn, dirty, or badly colored carpeting can turn a buyer off in seconds. If you have good hardwood floors, consider ripping out the carpet and exposing the wood. If that isn’t an option, your realtor should have recommendations on who or what to use to bring life into your carpeting – replacing or deep cleaning it.

Window Treatment: Get rid of any town window shades, dreary curtains, bent mini-blinds, and dusty old drapery. Remove and replace with simple white mini-blinds or wood blinds. Easy fix and refresh that can be done in a day.

The Bottom Line:  Adding any or all of these updates can easily and cheaply get your home ready to sell with confidence.  If you want to sell your home as quickly as possible you’ve got to put your best foot forward for potential buyers, especially those who come in to take a physical walk-through of the property.

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Community Matters When Buying a House

When a home-buying budget is tight, there’s always the temptation to buy a fantastic, big house in a less costly area. However, buying a home in an undesirable neighborhood might be a huge mistake, especially when it’s time to resell in the future. Choosing the right neighborhood is one of the most decisions you will make. Of course, there will always be issues you wouldn’t be able to discover until after you’ve moved in. But there are ways to scout out red flags ahead of time.

When you see homes that are rundown throughout the community, it could be a sign that the residents have given up and the neighborhood is in rapid decline. A street that is full of homes with broken/cracked windows, overgrown, unkempt yards, home vacancies, gutters filled with leaves and vines, sagging rooflines, pooling water in yards, homes with obvious chipping paint & broken fences should sound off an alarm. It’s a clue that the neighbors don’t take pride in their homes and with no upkeep, they can end up decreasing the property values for the entire street.

Are there too many houses that are for sale in the neighborhood? When driving through notice if there is an abundance of “for sale” or “for rent” signs. If everyone is trying to sell, it’s probably not a coincidence. There are plenty of reasons this could be going on, but it’s important to have your Realtor dig in and find out the details. Also, check with the local police department and find out about the crime – a real reason people would be making a mass exodus from the neighborhood.

How is the local school system? Are there fewer students enrolling? A sure sign of a healthy community is a blossoming school. Another reason to have a good, knowledgeable Realtor with you – he/she should know all these details or at least where you can find the information about the schools.

Most streets have some cracks and bumps but are you noticing big potholes in the neighborhood? This could mean that this is an area of neglect in the city. Is the local park a mess? If you can see that there is no organization to take care of the streets, the parks, and any public spaces in the neighborhood it is a sure sign that the property values are headed down.

Drive through the neighborhood on a beautiful day. Do you see people out and about? Are kids playing ball in yards? Bike riding? Is anyone sitting on the front porches? A big red flag if you don’t see people. This could signal that residents stay inside and don’t allow their children to play outdoors because they don’t feel safe outside. Again, check with the local police department.

The Bottom Line: Attention to the surroundings of any neighborhood is important. Often, the focus is on the home and how perfect it is for you, but a huge part of the way you live is where you live. Drive around, contact the local law enforcement agency, speak with local real estate agents, and do online research. 

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A Home & Its Title Chain

Does the seller have the legal right to sell this home? Is the home’s title free of judgments, liens, or bankruptcies that would prevent the seller from transferring a clear title to the buyer? How can you be certain?

Every property has a history of owners.  That history is called an ownership chain, or more often, a title chain.  When a link in the chain has a problem, it’s called a title defect, or a cloud on the title. No matter how small the problem is, any title issue must be resolved in order to offer a clear title to the buyer.

When purchasing a home, you may view title insurance as an unnecessary cost.  However, title insurance provides protection for both the seller and the buyer against title defects. Title insurance, as the name implies, insures against property title defects or ownership defects.  Some title problems may not become apparent for years. Others can hinder the sale of your home, and may even limit who you can sell your home to.

The title company will examine public records of the home being sold, sometimes going back 50 years or more, to look for past deeds, wills, trusts, divorce decrees, bankruptcy filings, court judgments, and tax records that may be defective or outstanding. The results of the search will be compiled into a preliminary title report that will be given to the buyer, seller, real estate agent, lender, and attorney involved in the sale.

Common Issues

PUBLIC RECORDS: Mistakes and errors happen but you do not want it affecting your home. The errors can be disastrous and cause you an undue financial burden to resolve. Simple clerical or filing errors could affect the deed or survey of your property.

UNKNOWN LIENS: Prior owners of your property may have left unpaid bills. And, even though the former debt is not your own, banks or other financing companies can place liens on your property for unpaid debts even after you have closed on the sale. This is an especially worrisome issue with distressed properties.

ILLEGAL DEEDS: While the chain of title on your property may appear perfectly sound, it’s possible that a prior deed was made by an undocumented immigrant, a minor, a person of unsound mind, or one who is reported single but in actuality married. These instances may affect the enforceability of prior deeds, affecting prior (and possibly present) ownership.

MISSING HEIRS: When a person dies, the ownership of their home may fall to their heirs or those named within their will. However, those heirs are sometimes missing or unknown at the time of death. Other times, family members may contest the will for their own property rights. These scenarios – which can happen long after you have purchased the property – may affect your rights to the property.

FORGERIES: Unfortunately, we don’t live in a completely honest world. Sometimes forged or fabricated documents that affect property ownership are filed within public records, obscuring the rightful ownership of the property. Once these forgeries come to light, your rights to your home may be in jeopardy.

UNDISCOVERED ENCUMBRANCES:  At the time that you purchase your home, you may not know that a third party holds a claim to all or part of your property – due to a former mortgage or lien, or non-financial claims, like restrictions or covenants limiting the use of your property.

UNKNOWN EASEMENTS: You may own your new home and its surrounding land, but an unknown easement may prohibit you from using it as you’d like or could allow government agencies, businesses, or other parties access to all or portions of your property. While usually non-financial issues, easements can still affect your right to enjoy your property.

BOUNDARY/SURVEY DISPUTES: You may have seen several surveys of your property prior to purchasing, however, other surveys may exist that show differing boundaries. Therefore, a neighbor or other party may be able to claim ownership of a portion of your property.

UNDISCOVERED WILL: When a property owner dies with no apparent will or heir, the state may sell his or her assets, including the home. When you purchase such a home, you assume your rights as the owner. However, even years later, the deceased owner’s will may come to light and your rights to the property may be seriously jeopardized.

The Bottom Line: The experts at Title First oversee and perform thousands of closings each year. When using Title First, you can sign confidently on the dotted line knowing that all details of your title transfer and closing are in proper order. We are here to answer any questions you may have about buying or selling a home, and our team will guide you through the entire process.

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Don’t Be Caught Surprised & Unprepared: Closing Costs

Closing costs add up to anywhere from 3% to 6% of the purchase price. This means if your home is $400,000 and your closing costs are 4%, you’ll owe $16,000 at closing.

Some examples of costs common during a closing:

  • Application fee — The application fee covers the cost of administering the transaction and handling the documentation. 
  • Appraisal fee — A licensed appraiser inspects the home to determine its worth. This appraisal fee typically costs a few hundred dollars. 
  • Credit report — As part of the due diligence to determine your credit worthiness and determine the interest rate for your loan, the lender will pull your credit report. This fee is rolled into your closing costs. 
  • Homeowner’s insurance — Homeowner’s insurance is typically required to protect the home from loss or damage. Up to one year’s worth of insurance is due at the closing. 
  • Private mortgage insurance (PMI) — PMI is designed to protect the lender in case you default on your loan. Until you own a certain percentage of the home, private mortgage insurance may be required by your lender. 
  • Property taxes — Depending on your location, you may be required to pre-pay 60, 90, or 180 days worth of property taxes when you close on your house.
  • Transfer tax — Typically a percentage of the sales price or fair market value of the house, this tax fee is collected and paid when the title passes from the seller to the buyer.
  • Underwriting fee — Also known as a loan origination fee, this fee is charged by the lender for preparing the mortgage loan. 
  • Title search services: A title search verifies the seller’s legal right to transfer the property to the buyer and flags and liens that may have to be cleared before the sale can be completed.
  • Real estate attorney’s fees: It’s customary and advisable (and mandatory, in some jurisdictions) for both buyer and seller to hire attorneys to review sales contracts before a home sale is completed. In more complicated sales—if a home is occupied by tenants at the time of the sale, for instance, or if the sale is contingent on the seller completing certain repairs or improvements—attorneys may play a more active role, crafting contract provisions to protect their client’s interests.
  • Agents’ sales commission: Real estate agents representing the buyer and seller typically split a commission of 5% to 6% of the sales price.

The Bottom Line: There are steps you can take to bring down your closing costs:

  • Schedule your closing at the end of the month. Part of your closing costs is prepaid interest charges on your mortgage for the remaining days of the calendar month. If you schedule your closing toward the end of the month, you’ll only pay these charges for a few days.
  • Ask the seller to cover some of the costs. In a buyer’s market, and/or if your seller is particularly eager to complete the sale, you can ask them to cover some of the closing costs.
  • Compare your loan estimate and your final closing disclosure form. Check for inconsistencies and new charges. If something doesn’t look right, bring it to the attention of your lender.
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