Agents/Agency

Searching For A Home

Introduction
If the first thing an agent wants to do is to drive you around, go find another agent. Experienced agents don't drive people around before interviewing them first. Also, a good agent will have you begin the loan process immediately. We're not talking about getting pre-qualified, we're talking about getting approved for a loan. This will put you in the strongest possible negotiating position. Buying a home can be an emotionally draining experience. Finding the right home can be a time consuming endeavor. You must be willing to make a commitment of your time and effort to work with your agent. The best properties sell quickly, prices are up, and it can be tough to find a home with just right mix of size, location, amenities, and emotional appeal.

Before starting your search make out two lists of what you are looking for in a house: those things that you must have, and those things that you would like to have. When talking to your realtor, go over not only what you want, but why you want those things - a good realtor may be able to suggest homes that don't meet your stated requirements, but do meet your needs. Shop with a pad of paper - make notes. Share your feelings with your realtor - not just yes or no, but what things you liked and did not like about each house. This will help your agent help you to find the right house.

Top of Page
Top of Section

The Right Frame of Mind
With the right mindset, buying a home will be easier and less stressful. Below are some tips to help you.

1. Help Yourself
Learn as much as you can about the entire process through books, friends and the Internet. Investigate neighborhoods by driving around and learn price ranges, check commute times to your place of work. Most importantly be sure you feel comfortable about the neighborhood. You'll need to drive around to open houses and see property. If you wait around for your agent to drive you around on Saturday or Sunday for a couple of hours you aren't helping your agent or yourself. The more you know about the area and the price of homes in the area the easier it will be for you to determine the value of homes you view and eventually put in an offer on.

2. Be emotionally detached
If you can keep a check on your emotions you'll think more rationally and be able to make better decisions. When you find a house that seems to fit acknowledge that the house may fit your needs and price range and leave it at that. Remember, there are many behind-the-scenes things that may be taking place--other buyers competing for the home, unforeseen issues with the physical condition of the property or other issues that may make it a poor choice. Bottom-line, acknowledge the house may be a fit, but don't get carried away with emotion. Remember there are many hurdles you need to overcome. Let your agent deal with the seller's agent to find out about all of the behind-the-scenes issues and then move quickly to submit a good clean offer. Once you are safely under contract and past the physical inspection, you can relax a bit and start thinking about the future.

3. Patience and understanding
Sellers may make unreasonable demands or get upset over certain issues. This is part of the process. The sellers may not want to sell their home but they may be in a situation where they must. They may be selling due to a job transfer, a divorce, money problems, old age, or illness. Selling under these conditions might get anyone upset. Have patience, be calm and try to see the sellers point of view. Your agent should be able to work any problem with the seller's agent. If the purchase contract was written properly you should be protected from the majority of issues that may come up.

4. Problems prior to closing
It's not uncommon for there to be problems before the closing. The problem could come up from the lender, title agent, or someone else involved with the transaction. Don't panic, almost all problems can be resolved. If your agent is experienced he or she has probably handled similar problems in the past. Remember, stay calm, call your agent and let them take care of the problem or steer you in the right direction.

Top of Page
Top of Section

Making a Time Commitment to Your Home Search
Be ready to make a big time commitment. You are making one of the biggest decisions of your life, both emotionally and financially. You will spend endless hours driving around neighborhoods, looking at homes, view open houses and weighing the pros and cons of each neighborhood and each home. Add in the time getting approved for a loan and you get the idea. Finding the right home probably won't happen by just setting aside a few hours on a Saturday afternoon. This is serious business, the decisions you make will have long lasting implications, so be prepared to devote the proper time.

Top of Page
Top of Section

Viewing Homes For Sale
First I will print out the home listings from the MLS that meet your price range and requirements. I will drop off, fax or e-mail these listings for you to review. Look over the listings and call me back with the houses that appeal to you. I will contact the listing agents and eliminate any homes that are sold or under contract (pending). The market can move quickly and the best homes that are priced right will sell quickly. Also, many agents do not update their listings on the MLS in a timely manner. I will call you back with the homes that are still available and you may take a drive around to look at the homes and neighborhoods from the outside. Call me with the homes you liked from the outside and I will make appointments to view these homes.

Top of Page
Top of Section

Considerations When Viewing a Home
If you walk into a home and immediately don't like it, let's not waste time. Let me know that it's not quite right for you and lets move on to the next house. If the listing agent talks to much, just say to them, Do you mind if I take a look around on my own and then I'll ask you if I have any questions. If you like a home try not to show it. We don't want the listing agent or seller to know. Don't feel you must explore every inch of a home. It can be very difficult to set up appointments the same day, unless the home is vacant. It is best to schedule 24 hours in advance. It may be difficult to arrange a showing early in the morning or late at night, on holidays, or on Saturday or Sunday mornings. Some people are slobs and the house will be a war zone. Look beyond the clutter and imagine the place cleaned and painted. Many good deals have been passed over by buyers who didn't use their imagination. Your agent can usually point out the repairs or modifications that could be done to make the house fit your needs.

Top of Page
Top of Section

Timing: Selling Your Present Home
If you have a home to sell, you'll want to put it on the market, as soon as possible if not sooner. The ideal situation is to have the closings as close together as possible or in some case a week or two apart, giving you enough time to move and clean-up your old home and paint and/or clean up the new one. This may be possible if your home goes on the market priced correctly. Once the closing date for your existing house is set, you can then go about selecting your new home without worrying about timing. You don't have to sell your home first, but there are many downsides. Prospective sellers may not consider any offer you make if the contract is contingent upon your selling your home first. Some sellers my accept your offer but keep their home on the market seeking a better offer and giving you the first right of refusal. Now you have to hope and pray your home sells before another buyer comes along to buy your dream home. Just the stress of worrying if someone else will buy your dream home is enough but imagine that someone else does buy it. You are better off first selling your house. If the buyers of your house want to move in quickly and the sellers of your new home can't move fast enough then the solution is a short-term rental of an apartment. Getting the home of your dreams may be worth a short-term inconvenience.

Top of Page
Top of Section

Other Sources of Property for Sale
In addition to the homes I send you from the MLS, I always recommend that my clients scan other sources of homes for sale. The reason is that many times my clients will see something that catches their eye that is in a completely different area than they were considering. This scenario also helps illustrate an important lesson I learned about finding your home. It can sometimes be very difficult to articulate what you are looking for. However, when you find it, you'll know. What I believe is that most buyers are looking for a particular feeling they get from a house. Some want a feeling of security they get from a home with tall fences and gates. Some want a feeling of nature from a home with lush green landscaping. Some want that family warmth and coziness from a home with a large kitchen that overlooks the family room so they can cook while still talking to friends and family. Remember: All real estate agents have access to the MLS and can show you any home you see advertised by another real estate agent. Calling the listing agent may not be the best of ideas because they represent the seller not you.

Top of Page
Top of Section

- The Internet
The Internet is an excellent way to view listings and get a feel for the market. You can search for available listings anywhere in the country 24 hours a day through my website. However, be aware some of the listings may be out of date or inaccurate. Consult your agent to get up to date information and more detailed information about a property or neighborhood.

- Harmon Homes, Homes & Land and The Home Review Magazine
These are free weekly periodicals that can be picked up at newsstands and convenience stores. These convenient magazines have many photo ads of properties listed by agents. This is another great tool to use in your property search.

- The Local Newspaper Real Estate and Open House Section
I always recommend that my buyers grab the local newspapers to check the open house section. This way you can see what will be open on the weekend and go see the homes that interest you.

- Open Houses
Open houses are a great way to learn the market and see what's for sale. Your agent will also be able to tell you what's open that weekend. If you are interested in a particular area, drive that area on Sunday and you'll be sure to find some open houses.

- Tuesday Broker's Caravan
Usually every Tuesday between 11am and 2pm agents/brokers will hold an open house to get a property exposed to other agents. This enables other agents to preview the new listing inventory for their buyers. However, anyone is welcome to stop by. I frequently send or accompany my clients to Tuesday caravan so they can get a jump on the competition. Usually, food and/or refreshments are offered to entice agents to stop by.

- For Sale By Owners (FSBO)
The FSBO can be another great source of properties for sale. Sometimes sellers want to try to save real estate commissions by selling their home themselves so they run newspaper ads in the real estate classifieds and put up lawn signs. If the seller is truly motivated this can be an excellent way to find a property. If you do find a FSBO that looks interesting, have your agent call the seller and make an appointment to view the home. Most sellers will cooperate with an agent if that agent has a bona fide buyer. In fact, many times they're grateful there is an agent involved because they quickly realize that it's not easy to coordinate all of the paperwork and forms needed in a real estate transaction. The seller usually ends up paying a 2.5 or 3% commission so everyone's happy. It is a good idea to have someone represent your interests and help negotiate the best possible deal.

Top of Page
Top of Section

What to Do if You Discover a Home You Like on Your Own
If you see a sign when driving around, walk in to an open house, read a newspaper ad, or see a property on the Web that interests you, call me right away. I will pull all the info about the property & fax or e-mail it to you immediately! I will immediately call the listing agent and find out the details about any property and get you the inside scoop! Agents don't have exclusives. All agents have access to all MLS listings.

Top of Page
Top of Section

Open House Etiquette
The main goal of an agent at an open house is to meet potential clients and induce them to work together. They can be a little pushy at times and start asking you all types of personal questions. If you walk in to an open house, please let the agent know immediately that you are already represented and hand them your agent's card. This will cause most agents to back off and go back to whatever they were doing.

Top of Page
Top of Section

Can't Find the Perfect Home
If you know exactly what you want and it isn't on the market we can help. Whether it be a specific home or group of homes or a particular neighborhood we will find you a home. We will contact the owners and let them know we have a client that is interested in purchasing their home. After viewing the home or homes, if you are interested, we can start negotiations and put in an offer on your behalf. Be advised there is not much room for negotiation when you approach someone to buy their home.

Top of Page
Top of Section

Introduction - Before Putting in an Offer
Once you find the right home that fits your budget and requirements the next step is to make an offer on the property. Before you make an offer you need to get as much information as possible so that you can make an intelligent offer. A good agent will provide you with all the information at his disposal so that you can make an informed decision.

Top of Page
Top of Section

Check the Sale Comps
The first and most important thing your agent should do is to provide you with a report showing what comparable properties in the neighborhood have sold for in recent past. In general, the more recent the sale the more relevant it is. Lacking any recent sales in the particular neighborhood then your agent should provide you with sales comps on similar homes in similar neighborhoods within the area in question. Your agent should be able to interpret the reports and give you an opinion on the true value of the home within a range.

Top of Page
Top of Section

Check out the Neighborhood
If you haven't checked out the neighborhood yet then do it now before putting in an offer. Drive around the neighborhood at different times to get a feel for the neighborhood. If possible, walk around and talk to other property owners to get their opinions of the neighborhood. Ask your agent for their opinion and what they know about the neighborhood.

Top of Page
Top of Section

Check out the Seller
Why are they selling, divorce, debt, job relocation or retirement? Your agent should be able to find out this information from the listing agent and possibly a clue as to how motivated the sellers are to sell. Information is the key to putting in a good offer.

Top of Page
Top of Section

Check the Commute
If you commute, drive from your job to the house. Or better yet take the morning drive from the house to your job. You want to be sure the commute time is acceptable.

Top of Page
Top of Section

Introduction - Making An Offer
Before you even get to the point of making an offer ask for and read a purchase contract to get familiar with the various clauses and paragraphs. Below are the points to be aware and the steps in the offer process.

Top of Page
Top of Section

Home Inspection & Termite Report

Introduction
Any home, new or used, will have minor problems. For instance, an electrical outlet may not work, there may be a leaking faucet or maybe roof, one of the appliances may not work. The purpose of a home inspection is to insure you are aware of all problems and potential problems with a home before you buy. A seller is required in most cases to make the necessary repairs to insure everything is in working order. You or your realtor should schedule a home inspection immediately after acceptance of an offer to purchase. The Florida Association of Realtors contract provides that this must be done within ten business days of the effective date. Basically the inspector will check the home from the roof to the foundation and everything in between. He will run the dishwasher, check the heating and cooling systems, check the plumbing, electrical, check for leaks, etc. He will give you and/or your agent a written report on the spot or fax or mail the report within 2 or 3 days. At you or your agent's request the seller or seller's agent will be given a copy of the report as well. You may want or need to also have a separate roof inspection. If you are purchasing a home on the water, you will want to have a seawall inspection done as well. (Damage to seawalls, docks and swimming pools are not covered by flood insurance.) If you want to have inspections for radon, lead-based paint, environmental hazards, etc. You will need to have these completed within the same period. Pest control inspections are generally not done until 30 days before closing, due to lender requirements. In many cases the home inspection company may be a licensed pest control company as well. It would not be prudent for a homebuyer to forego a home inspection before purchasing a home. Under Florida law the seller must disclose (seller's disclosure) to the buyer all known facts that materially and adversely affect the value of the property being sold and that are not readily observable. The key word is known. Your agent should ask for this disclosure before you put in an offer. There are often things wrong with the home that the seller may not know about. The home inspector checks the interior and exterior of the home, goes up into the attic space, and goes in the crawl space, if there is one. The price of a home inspection will vary with the size of home and with the amenities of the home (crawlspace, pool, etc.). Expect to pay anywhere from $250 to $500.

Top of Page
Top of Section

Seller Responsibility
The inspection is done to determine whether any warranted items are in need of repair. Generally the seller warrants that the structure (including roofs and pool) are structurally sound and are watertight, and that the appliances, heating, cooling, mechanical, electrical, security, sprinkler, plumbing systems, seawall, dock and pool equipment, if any, are in working condition and will be maintained in working condition until closing. The seller does not warrant and is not required to repair cosmetic conditions (unless the cosmetic condition resulted from a defect in a warranted item). Cosmetic conditions means aesthetic imperfections that do not affect the working condition of the item, such as tears, worn spots and discoloration of items such as floor coverings, wallpapers, window treatments; nail holes, scratches, dents, scrapes, chips and caulking in bathroom ceilings, walls, flooring, tile, fixtures, mirrors; tears or holes in screens; and minor cracks in windows, driveways, sidewalks, pool decks, garage and patio floors. The seller is not obligated to bring any items into compliance with existing building code regulations (unless necessary to repair a warranted item). Codes are constantly changing, and vary from one municipality to another. If the item was installed properly under the code existing at the time of installation no more can be required. The inspector will point out items that he recommends bringing to current code, such as GFI (ground fault interrupt) outlets, but this is a buyer option, not a seller requirement. Note that most contracts provide that a licensed contractor or repair person must do any repairs.

Items commonly noted in an inspection:

• Electrical panel: a fuse that is double lugged.

• Pool equipment and/or screen enclosure that needs to be grounded.

• Faucet that will not turn completely off.

• Outlet that does not have power.

Choosing an inspector
Be sure the inspector you hire is licensed and certified. Does he belong to a professional association such as ASHI? What are the qualifications and background of the person actually doing the inspection? How long has he been doing inspections? What type of report does he prepare? Does he distinguish between comments that are general and those that are specific to your property? Does he welcome you to be there during the inspection? Is he willing to answer questions as he goes along, and to explain how things work? Will he differentiate observations from problems? To what extent does he stand behind his work? Ask your agent for a list of home inspectors as well as checking the yellow pages. Also ask friends, family and co-workers for a referral. Do not just rely on your agent to arrange for the inspection especially if you have any doubts. Recently, in the news there were stories about home inspectors working with real agents to the detriment of their clients. The agents instructed the inspectors to not disclose all of the problems in a home because they wanted to make sure the deal closed so they would get paid. In return the agents would send more business to the inspector. Make sure you are comfortable with the inspector. Feel free to ask for a list of recent clients and call them to see if they were happy with the inspector. One last thing, make sure that your home inspector has E&O insurance. You want to be able to recover damages from his insurance company if there is negligence or fraud. Protect yourself.

Top of Page
Top of Section

Who pays for the inspection and how much does it cost?
The buyer pays for the home inspection. You pick him and you pay him. You want an independent opinion as to the true condition of the property. Most inspectors charge about $200 to $300 for a condo and about $250-$500 for a house. Of course larger properties with 2 or more stories, larger square footage, or older homes that are in very poor condition can be higher. Always describe the property accurately to the inspector in order to get an accurate price quote.

Top of Page
Top of Section

Inspection Day
When the day of the inspection comes, make sure to be present as your inspector inspects the property. This way you can ask him any pertinent questions about the home. It's not necessary to shadow him as he does his inspection, but when he is finished have him show you all the defects he finds with the property. Most inspections take about 1.5 - 2 hours for an average house.

Top of Page
Top of Section

The Home Inspection Report
Go through the report carefully when you receive it. Make sure your agent has a copy as well. Then decide which defects you can live with and which you can not. Work with your agent to determine which repairs you would like the seller to correct. When you have decided, have your agent send a letter to the seller's agent asking for repairs. Here's what I typically tell my clients: you are buying a used home with all of its accumulated defects and problems. It's not perfect. Don't ask a seller to fix or paint minor problems. However, if the air conditioner has problems or one of the appliances doesn't work, I would want those items to be fixed. Keep in mind the market conditions, and the seller's situation. If you are in a hot market with rising property values and there were multiple offers on the property then the seller will probably not want to spend time or money on repairs. You've got to decide at that point how much you want the house, especially if there is someone else waiting in the wings if your deal falls apart. In a slower market, a buyer has more leverage to ask for repairs. A seller who is highly motivated will fall over himself to get the property repaired and keep the deal on track. The bottom line is to work closely with your agent and rely on his professional opinion.

Top of Page
Top of Section

Problems with the property: Where you stand
If there are significant problems such as a damaged foundation, a severely damaged roof, or plumbing that is shot, I always recommend that the buyer get a specialist out to examine the damage and get an estimate to repair the problem. Your home inspector is only an inspector. He generally should not be doing repairs or giving cost estimates. That is a conflict of interest. In Florida the sales contract usually specifies the $ amount of any required repairs the seller will undertake. If required repairs exceed the amount specified, the seller may agree to pay for these repairs, the buyer may accept the home without the repairs that exceed the amount specified or the buyer may back out of the contract. Refer above to Seller Responsibility, to understand what would fall under required repairs. Many buyers think cosmetic problems, such as cracked floor tiles or roof tiles must be repaired, which is not the case. Talk to your agent to fully understand what are warranted items. You cannot back out of a contract because you think an item should be repaired but the seller does not agree. If you are unsure about the condition or quality of a home talk to your agent. There are ways to further address or protect your interests by adding the right language or addendum to the sales contract.

Top of Page
Top of Section

Required Repairs: Points to consider
If possible I would recommend taking a cash credit for repairs instead of having the seller do the repairs. Sellers will always try to do the repairs as cheaply as possible and chances are that you won't be happy with the quality of the work. Simply take the estimate you got from the contractor who gave the estimate and have your agent send a letter to the seller's agent requesting a cash credit at closing. Usually there is a bit of negotiating at this point. Sellers like to split the cost of repairs with the buyers. If you ask for a thousand, they'll offer five hundred. Ask for your agent's opinion and do what makes sense to you. Common sense goes a long way.

Top of Page
Top of Section

Is a Termite Inspection required?
A termite inspection is not always required. However, most of the time it is performed. One of the main reasons is that most lenders making the loan require a pest inspection and repairs if there is damage. As a buyer, I would certainly require an inspection and repairs to be done.

Top of Page
Top of Section

Who picks the Termite Inspector?
Generally the buyer (or the buyer's agent) picks the termite inspector since they will be paying for it. In many cases the company doing the inspection of the home may also be licensed to do the termite inspection.

Top of Page
Top of Section

Termite Inspection on condominiums or townhouses
The type of structure determines if an inspection is required. Typically the HOA (Homeowners Association) is responsible for termite issues in the common areas and exterior of your condo. It is fairly uncommon for a termite company to recommend tenting a condo building when a sale occurs. Usually the HOA will contract with a termite company for periodic inspections and maintenance. In most cases a termite inspection is not required for a condo. However, some lenders still may require a complete termite report and clearance for condos. Check with the condo homeowner's association to see what their termite policy is.

Top of Page
Top of Section

The Home Appraisal

Introduction
Banks require an estimate of value prior to making a loan because they don't want to make a loan on a property worth less than the contract price. An appraiser is sent out to the property to determine the value of the property and make sure the value is in line with the sales price. Appraisers inspect and measure the property and check the sales comps in the immediate area. Appraisers are not home inspectors they are just inspecting the general condition of the home.

Top of Page
Top of Section

What's the cost and who pays?
The buyer usually pays for the appraisal unless the buyer has cut a special deal with the lender. Depending on the lender the appraisal may be paid in advance or incorporated into an application fee, some are COD, which means the buyer must write a check at the time of the appraisal and finally some lenders will bill the buyer at closing. An average appraisal is roughly $275-$600 depending on the size of the home.

Top of Page
Top of Section

Do you get a copy?
The buyer doesn't usually receive a copy unless specifically requested by the buyer. However, you paid for it so you certainly are entitled to it if you wish. Some lenders have "policies" that don't release the appraisal. Check with your lender.

Top of Page
Top of Section

What if the appraisal comes in below the contract price?
If the appraisal comes in too low, it can be a problem. The appraiser is saying the property is not worth what you agreed to pay for it. When this happens, usually both of the real estate agents will mobilize and scour the MLS for recent sales comps that the appraiser may have overlooked. Sometimes these comps can help change the appraiser's opinion of value and he will raise the appraisal price of the home. The agents will also look for properties in the MLS that are currently in a pending status to see if they can determine the contract sales price. If they can get this information it can usually be used to help the appraiser raise his estimate of value. Usually, most appraisals can be readjusted higher with a little bit of legwork. If the final appraisal is below the contract sales price you have the option of canceling the contract or paying the difference out of pocket. If the appraisal comes in higher than the contract price, then great, you got a great deal on the home. This doesn't happen very often.

Top of Page
Top of Section

Property Taxes & Homeowners Insurance

Understanding Property Taxes
Property taxes are used for municipal improvements and upkeep. Schools, streets, paying bonds, etc. Property taxes are due once a year in November unless you have an impound/escrow account. Property taxes in Broward and Palm Beach County in general are approximately 1.75% to 2.00% of the assessed value of the property. The tax assessor may reassess your property after you close and issue you a tax bill based on the new assessment when the new tax bills are sent out. Depending on how long the previous owner has lived in the property your tax bill could increase substantially from the previous owners tax bill.

In 1992 Amendment 10 to the Florida constitution put a cap on the increase in a homeowner's property tax assessment at 3% or the annual increase in the CPI (Consumer Price Index). This amendment also provides that the homestead property's assessed value return to its' true fair market value upon transfer of deed. Your current years tax bill would be based on the previous owners bill, however in the next full year of your ownership the assessed value of your property and your property taxes could increase substantially. In order to avoid this shock please consult with your agent but the best way is to call the property appraisers office and ask. I have the locations and phone numbers of the appraisers office for Broward and Palm Beach County at the bottom half of my Homestead Exemption page.

A lender generally considers your property taxes as part of your monthly obligation even though you may pay your taxes once annually. Let's say you buy a $300,000 home and the tax assessor assesses your house at $200,000. Your taxes are approximately $200,000 x 2.00% = $4,000 per year. Divide that by 12 months and you get a monthly tax payment of $333.33. For pre-qualification purposes, the lender considers that $333.33 part of your monthly payment. The good news is that property taxes are a tax deduction. Please check with your tax advisor for further information. In Florida there is a property tax exemption called the Homestead Exemption on your main residence which will decrease your tax bill.

Top of Page
Top of Section

Homeowner's Insurance
Homeowner's insurance (sometimes called hazard or fire insurance) pays for financial losses caused by a broad range of disasters that could damage your home or your property if they occur during the period of the contract and subject to the terms and conditions of your policy. The insurance company also promises to pay damages resulting from injuries or damage to other people, such as slip and fall or a dog bite, for which you are held legally responsible.

Top of Page
Top of Section

Windstorm Insurance
A basic homeowner's policy does not cover Windstorm (hurricane) damage. Generally insurance companies write their policies through the JUA (Joint Underwriting Association), which is a state agency set up to help provide windstorm insurance to homeowners through various insurance carriers.

Coverage is fairly expensive. Ask your insurance agent for specific pricing. When purchasing a condominium or townhouse, be sure to inquire if the HOA currently has insurance.

Top of Page
Top of Section

Flood Insurance
Lenders check flood maps prior to making a loan. If the subject property is in a flood zone then you will be required to purchase flood insurance. However, an individual can opt to purchase flood insurance if so desired.

Top of Page
Top of Section

Condo Insurance
The exterior and common areas of condominiums and townhouses are generally covered by the HOA's master insurance policy. However, you still should purchase a condominium package policy to cover the interior contents of your condo. Condo insurance usually includes liability insurance, which covers you against liability claims such as slip-and-fall or dog bite claims.

Top of Page
Top of Section

Do I need Insurance?
Homeowners insurance coverage is required by all mortgage lenders to protect their investment. Depending on the location of your property you may be required to purchase flood insurance as well. If you were buying your property in a cash deal (no mortgage financing) you would not be required to purchase insurance, however this would not be advisable. Homeowners insurance covers not only the structure but the items in your home. Flood insurance may not be required by a lender however it is still a good idea to purchase this extra protection. Any damage caused by flood waters is not covered under a homeowners insurance policy.

Top of Page
Top of Section

When should I purchase Insurance?
Immediately after acceptance of an offer to purchase, you should start shopping for homeowners and flood (if required) insurance. Remember that the JUA (the Joint Underwriting Association of the State of Florida) will not issue new policies when a named storm is within a certain distance of Florida, i.e., West of 72 degrees west longitude, east of 95 degrees west longitude, north of 15 degrees north latitude and south of 35 degrees north latitude, nor within 48 hours of when the storm leaves this area. Note that this includes Puerto Rico, Texas, Mexico, and parts of South America and up into North Carolina. If a hurricane is within this area, JUA will not issue policies unless they have already been paid for in full. Ask your agent if you will need a flood elevation certificate. If so, this should be ordered at the same time as your survey, as it is less expensive when done at the same time. The lender - conservative in your interest - may not order the survey until after your loan is approved. You will need to provide and original binder of insurance from your insurance agent to your title agent at or before closing.

Top of Page
Top of Section

Title Insurance Q & A's

Introduction
With few exceptions, a home represents the largest single investment most people will make in their lifetime. Thus, it is only natural that an owner will want to make that investment secure by protecting the basic proof of ownership. Title insurance is the most effective and least expensive way of doing just that. Title insurance is issued by a title company or title attorney. Title agents not only issue the policy they also conduct the closing process. Lender's require title insurance.

Most people don't really know what is involved in the closing process. The closing process is where all funds are disbursed, closing paperwork is prepared, title deeds are prepared and notarized. The closing is usually handled by a title company or a title attorney. Among their many responsibilities are:

• Cashing the buyer's deposit check and holding the money in the escrow trust account.
• Coordinating paperwork between the parties, agents, lender, title, insurance.
• Preparing and notarizing deeds and documents.
• Coordinating the funding of the loan.
• Paying off the seller's loan.
• Preparing the HUD-1 closing cost settlement statement for all the parties.
• Disbursing the sellers check and the agent's commissions.
• Prorating the annual property taxes and any other obligations

This is just a brief overview of the many responsibilities that the closing agent performs.

 

What is a Title?
A title is the evidence or right that a person has to the ownership and possession of land. A defect in that title can be any legal right held by someone other than the owner to claim property or to make demands on the owner of that property.

Top of Page
Top of Section

What is an Abstract?
An abstract is a history of the title to a particular tract of land. It is not a title! It consists of a summary of the material parts of recorded instruments affecting the title of the real estate. The abstract may be correct but the title imperfect. The abstract is not a guarantee. It is only a record of what has been recorded. It does not judge the correctness of any item it lists. It merely reports them for an examiner to interpret. Abstracts are not used in real estate transactions in many parts of the country.

Top of Page
Top of Section

What can make a Title defective?
There are many possible causes of title defects that no examination can disclose. That is because they have never been recorded and thus do not appear in the abstract. A title insurance policy protects the owner against all of the hidden risks listed below, and many more:

• Fraud- False claims of ownership, forged deeds, wills, signatures, conveyances, instruments, false representations, false records of all sorts, illegal acts of trustees, guardians, administrators, and attorneys.
• Human error- Errors in copying, indexing, recording; errors by administrators, executors, trustees, guardians and attorneys; destruction of records.
• Improper deeds and wills- Deeds by persons of unsound mind, minors; deeds delivered after death or without the grantor's consent; invalid, suppressed, erroneous wills, missing heirs, unsettled estates.
• Liens and other rights- Liens for unpaid estate, inheritance, income, property and gift taxes; homestead rights, community property rights; irregular court proceedings, court opinion reversals, lack of court jurisdiction; defective foreclosures.

What is Title Insurance?
Title insurance is a contract to protect an owner against losses arising through defects in the title to real estate owned. If the title is insurable, the company guarantees the owner against loss due to any defect in title or expenses in legal defense of the title pursuant to the terms of the policy.

Top of Page
Top of Section

Owner's Policies and Lender's Policies.
A lender will often require a title policy for their protection alone. Such a policy does not protect the owner. To protect themselves against possible title defects, an owner should purchase an owner's title insurance policy on the property.

Top of Page
Top of Section

Why buy Title Insurance?
When a person buys a car or consumer goods, they seldom need to know whether the former owner is married, single, or divorced; whether they have paid their taxes or are involved in a lawsuit. But when a person buys a home, it is necessary to have all of that information and much more. For while he or she may own the property, others may also have rights in that same real estate.

A competent investigation can uncover such items as unpaid taxes, easements, restrictions and more. However, all items affecting the title are not contained in a single book, in a single office, or even in the same city. Then, add to this the possibility of human error at a multiplicity of points. Yet what is not in the public records often causes title problems. For all these reasons and many more, a property owner needs the protection afforded by title insurance.

Top of Page
Top of Section

What does Title Insurance Cost?
The cost is directly related to the value of the property. The higher its value, the more coverage is needed. The premium is small compared to the total purchase price. The premium is paid only once and remains in force for as long as the property is owned by the insured and continues to protect the insured on warranties after it is sold. Generally, in Florida the cost of an owners title insurance policy is $575 on the first $100,000 and $500 per $100,000 thereafter. This is the minimum cost according to Florida law. For example on a property valued at $150,000 the title insurance would cost $575 + $250 for a total of $825. Please be advised these are estimates and that the actual cost may be somewhat higher depending on the title agent. The cost for an lender's title insurance policy which is to insure the lender is usually a nominal fee.

Top of Page
Top of Section

Preliminary Title Report (Prelim)
Once the earnest money contract is signed by both buyer and seller, a commitment for an owner's title insurance policy should be ordered. This commitment will be based upon a search of the public records. A preliminary title report issued by the Title Insurance Company that tells a buyer several things about the property. It tells you what liens are on the property such as the seller's current loan(s), state or IRS tax liens, or back property taxes. The prelim also notifies a buyer about any easements on the property. An easement is basically a right for someone else to use a portion of your land. For example, utility easements give the right to the Telephone Company to have telephone poles in your yard or cable companies to run cable under your property. The prelim will disclose those liens, defects or encumbrances that will be exceptions to coverage on the policy unless removed. Such a search will allow the purchaser to understand the manner in which the title company is willing to insure the condition of title and to insist upon the seller providing clear title to the property before exchanging the sales' proceeds for the transfer deed. Once this exchange is made and the transfer documents are recorded, the owner's policy will be issued, insuring the buyer against loss due to any undisclosed claim covered by his or her policy. If you have any questions, always make sure to ask the title officer assigned to the file to interpret the findings and make recommendations.

Top of Page
Top of Section

Who Pays for Title Insurance?
There are two title policies that must be purchased in a real estate transaction (except cash transactions). One is the owner's (buyer's) policy and one is the lenders policy. Generally, in Palm Beach County the seller pays for the policy that insures the buyer whereas in Broward County the buyer pays. The buyer pays for the policy that insures the lender in both counties.

Top of Page
Top of Section

Who Picks the Title Insurance Company?
In Palm Beach County, the seller usually through their agent will pick the title insurance company whereas in Broward County the buyer, usually through their agent will decide. Most title companies provide adequate service, however charges can vary significantly. Consult your agent or call a title rep for more information.

Top of Page
Top of Section

Deciding How to Hold Title
Your title agent and/or loan officer will ask you how you want to hold legal title to your new property.

Here are 5 common ways to hold title to your new home.

1. Sole ownership. Most single or divorced buyers hold title in sole ownership. For example, John Doe, a single man as his sole and separate property. A married person can also takes title to real property in sole ownership. However, their spouse usually must sign a quitclaim deed giving up any ownership interest in the property. There are no tax or other advantages of holding title in sole ownership. When the sole owner dies, any real property held this way is subject to probate court upon the owner's death

2. Tenants-in-Common. When two or more owners take title to real estate, especially if they are not married, they often become tenants-in-common. For example, investors might select this method. Each tenant in common owns a specified interest in the property. For example, one owner might own a 60 percent interest and another could own a 40 percent interest. The percentage ownership is specified on the deed. A major advantage is that each tenant in common can sell or pass their interest by their will to whomever they wish. For this reason, tenancy in common is especially popular in second marriages, so each spouse can will their share to their children from their first marriage. However, tenancy in common property is subject to probate court costs and delays.

3. Joint tenancy with right of survivorship. When title is held in joint tenancy with right of survivorship, all co-owners must take title at the same time, own equal shares, and the surviving co-owner winds up owning the entire property. After a joint tenant dies, the surviving joint tenant(s) receive the deceased s share. The deceased s will has no effect on joint tenancy property. A major advantage is that probate costs and delays are avoided when a joint tenant dies. The surviving joint tenant(s) usually need only record an affidavit of survivorship and a certified copy of the death certificate to clear the title.

4. Tenants by the Entireties- A tenancy created by husband and wife jointly owning real property with instant and complete right of survivorship.

5. Living trust. A good way to hold title to real property is in a revocable living trust. There are many advantages, such as avoidance of probate costs and delays. Until the death or disability of the trust creator, the home and other real estate in the living trust are treated normally. Since the living trust is revocable, real estate can be bought, sold and financed normally. If the trustor becomes incompetent, the named alternate trustor (such as a spouse or adult child) takes over management of the trust assets. When the trustor dies, the assets are distributed according to the trust terms. Privacy is a major advantage. Unlike a will, which becomes part of the public probate file, the living trust terms remain private. Another advantage is that court challenges of living trusts are virtually impossible, whereas challenging a will by disappointed relatives occur frequently. Many people feel that the best method for most homeowners is the living trust, because of all its advantages and virtually no disadvantages. However, there is a fee for your attorney to set up a trust. Consult him or her for prices.

6. Corporate Name- Usually this is for properties purchased by corporations, however many foreign nationals choose to hold title in a corporate name for reasons ranging from tax ramifications to secrecy.

Top of Page
Top of Section

The Final Walk-Thru Inspection

Introduction
The buyer's walk through prior to the closing is to verify the repairs (if any) have been done in a professional manner. Be sure the tenants, if any are out of the property. Check that the seller has not removed any fixtures that are included in the sale like draperies or light fixtures. The walk-through is also a good time to check out any repairs that were performed. Finally, you want to be sure the sellers have moved or are in the process of moving.

Top of Page
Top of Section

When is the walk through done?
The final walk through is done prior closing, usually the day of the closing. If there is concern about the condition of the home or quality of repairs, if any, then a walk through can be scheduled much earlier. The reason for this is that I feel my buyer has leverage at this point to make sure the repairs and everything else have been done to the buyer's satisfaction.

Top of Page
Top of Section

Something is missing
Many times a seller will remove something like a light fixture or fan. Not only do they remove it, they either leave a hole where the fixture was or replace it with something of less value. If something is missing, the first thing to do is to have your agent send a letter to the seller's agent asking that the sellers return the missing item(s) or give you, the buyer a cash credit to replace the missing item(s). If the sellers are stubborn, use your common sense and weigh the value of the missing items against your desire for the house. Although the principle may be important, losing your dream home over an argument about a $100 fixture may not be wise. To avoid this situation, any items or fixtures that are unique or of special interest should be noted prior to making an offer. These items should be detailed in the sales contract.

Top of Page
Top of Section

The repairs are not completed or done correctly
Arguments over the quality of repairs can be a difficult point to negotiate. The repairs may appear to be done by a novice to you but the seller will argue that the repair has been completed as agreed even if you don't like the final product. The quality of repairs may be open to interpretation. I usually recommend that a buyer ask for a cash credit instead of having the seller make repairs. The only thing you can do is ask your agent to send a letter to the seller's agent asking the sellers to redo the job to your satisfaction or give you a cash credit to properly finish the repairs yourself. Once again use your common sense. If you got a great deal on the house and everything else is ok, it might be better to let it slide. As always, confer with your agent and follow his or her advice.

Top of Page
Top of Section

The Tenants are still in the property
One thing you don't want to do is inherit someone else's tenants. When you do your walk through check to see if the tenants have started packing, inquire if they have found a place, and find out when they anticipate moving. Make sure your agent follows up with the listing agent. I advise you not close if the tenants and their belongings are not out of the house. Every situation is different, please consult your agent for his or her advice on the best way to deal with the problem. If the seller is motivated to close, the agents should put some pressure on the seller to get the tenants out. Sometimes a small cash inducement from the seller to the tenants to leave promptly works wonders.

Top of Page
Top of Section

What if the seller's are not cooperative in resolving problems
If any of the problems above can't be resolved amicably and you don't want to just forget it, read on to see what you can do. At this point you are ready to close or you are at the closing table. All you need to do is sign the loan docs and bring in the balance of your down payment. At this point you have leverage. The agents want the deal to close so they can get paid. Your lender wants the deal to close so he or she can get paid. All the vendors, termite, title, etc. want the deal to close so they can get paid. And of course, the seller wants the deal to close so they can get their check. It's all up to you. Important note: The buyer does not have a cancellation right. The walk through is solely to confirm that the repairs if any have been completed as agreed and that the seller has complied with seller's other obligations. Nevertheless, you do have leverage. I would advise my buyer to do nothing. Do not sign any of the closing documents or the loan documents. I would inform the seller's agent that you're not budging until the issues are resolved. What usually happens is the agents will start to feel the heat. They just want to close. They are so close to a paycheck that they will put heat on the seller to perform. Or in many cases the agents will chip in to make good on the repairs or missing items. However, always verify with your mortgage lender that you are not jeopardizing your loan or interest rate lock. Also ask when your loan documents expire. NEVER DO ANYTHING THAT WILL JEOPARDIZE YOUR LOAN. You'll need to work closely with your lender and agent to make sure of the time constraints. Remember interest rate locks expire as do loan documents. If the interest rate expires you will have to re-lock your interest rate and you might get a higher rate. If your loan docs expire, you will be charged about $300 to redraw the loan docs. Use your common sense. You will have to make a decision on how far to go.

Top of Page
Top of Section

The Closing

Homeowners and Flood Insurance
You will need to give your insurance information to the title company as soon as possible before the closing. They can't close without it and lenders will not draw closing loan documents without it. Give your loan officer your insurance agent's name and phone number and they will be able to help coordinate things. You must obtain a signed original insurance binder from your agent, which you must bring to the closing. Remember to inquire if your home is in a flood zone and to obtain flood insurance as well. For more detailed information about insurance click here.

Top of Page
Top of Section

The Estimated Closing Cost Settlement Statement (HUD-1)
Prior to closing you should get (or ask for) the estimated closing cost settlement statement from the title company. Look at the buyer charges and make sure they look correct. If you have any questions, ask your agent, the title agent or your loan officer to explain them. Many times the HUD-1 is not ready until shortly before the closing for various reasons. There is no need to worry. You can't close without this statement and all parties will review the statement at the closing. If there are any mistakes they can be easily corrected on the spot.

Top of Page
Top of Section

Final Loan Approval
Your loan is approved. However, sometimes there are conditions that need to be cleared up before the lender funds the loan. They may want another explanation letter for something or they may want a correction on a document. Whatever the case, the title agent, the mortgage broker, or your agent will work to solve these conditions. They are usually just minor items that need attention, but talk to your agent or mortgage broker if you have any questions or concerns.

Top of Page
Top of Section

Signing Your Loan Documents
Your lender will send the closing documents to the title company for you to sign. Loan docs spell out all of the terms and conditions of the loan such as the interest rate, term of the loan, loan points, and your actual payment. Once the docs are signed they are sent back to the lender.

Top of Page
Top of Section

Funds to Close
Before the closing you will usually have received a copy of your HUD-1 closing statement that will show the balance you owe to close. The title agent will instruct you to bring in the balance of your down payment and closing costs. You will be asked to bring in a cashier's check or to wire the money directly to their account.

Top of Page
Top of Section

Funding the Loan
At this point the lender has already wired the funds into the title company's bank account. Once everything has been signed and sealed the title company will disburse checks to all the interested parties to the transaction (seller, loan officer and your real estate agent).

Top of Page
Top of Section

Recording the Deeds
The title company will take the deeds to the county recorder to record all of the documents. You will receive copies of all the documents you signed at the closing. However, the recorded Warranty Deed along with your title insurance policy will be mailed to you several weeks after the closing. If you do not receive these documents be sure to call and ask what happened.

Top of Page
Top of Section

Change the Utilities to Your Name
Don't forget to change the utilities in to your name. Usually the seller needs to cancel the utilities before the utility companies will allow you to put them in your name. Have your agent remind the seller's agent to remind the seller. I usually recommend making the changes 2 or 3 days before the actual close. Your agent should have all of the utility company phone numbers. Click here for utility company phone numbers and other useful phone numbers. Also check out Useful Links for more information.

Top of Page
Top of Section

After the Closing
HUD-1 Settlement Statement
As discussed elsewhere, at the end of the closing, the title agent will issue a settlement statement referred to as the HUD-1. If somehow you have not reviewed this statement up to this point then do so now to be sure all charges and credits are correct. This itemized statement shows all of the charges and closing costs that you paid as well as any credits you received. Your agent will also receive a copy of the HUD-1. If you have any questions ask your agent or the title agent to go over the statement with you.

Top of Page
Top of Section