7 Common Questions in Residential Real Estate Deals

7 Common Questions in Residential Real Estate Deals

NOT INTENDED TO BE LEGAL ADVICE.

1.  Should I have an attorney review my listing agreement?

Absolutely.  An attorney can help point out items in the listing contract that will net you more from the sale of the home than you may have gotten.  At attorney can also talk you about things like real estate agents’ dual representation clauses and how they may affect you.

2.  Do I really need an attorney?

An attorney is highly recommended regardless of whether you are the Buyer or the Seller.  There are many different types of sales contracts being used in the marketplace, including various revisions thereof.  A real estate attorney can help negotiate terms to the Sales Contract that will protect you in case the sale of the home falls through.  Attorneys also become the focal point for document requests and preparing closing documents, thereby freeing you up to prepare for the big move without having to worry about all the legal details necessary.  Your attorney will also prepare any required legal paperwork, including the deed.  An attorney will also sit with you through the closing and explain what you are signing and why it is required.  Without an attorney, you will have to manage the entire process and prepare legal documents yourself.  An improperly executed or insufficient document can kill the sale at the closing table.

3.  What is Title Insurance and Do I Need it?

Title insurance is protection against loss arising from problems connected to the title to your property.  It is meant to protect an owner’s or a lender’s financial interest in real property against loss due to title defects, liens or other matters.  It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.  Is it required?  If you are going to take out a loan to buy the property, then you will be required to purchase title insurance, although our office always recommends that you purchase it anyway,

4.  What Type of Loan Do I Need?

While not necessarily a legal question, there are many different types of loans and programs available to Buyers.  Fixed rate mortgages and variable rate “ARM” mortgages are amongst the most popular.  There are also home buyer programs, such as FHA backed loans, that can help you receive a lower rate or allow you to put a lower down payment down.  A mortgage broker or lender can help you select the best type of loan based on what you want to do with the home and length of time you plan on living there.

5.  Do I Need Homeowner’s Insurance?

Homeowner’s insurance is mandatory if you are taking out a mortgage.  Every lender you encounter will require that you purchase it, and if you do not, they will take out a policy for you and pass the premium down to you.  Beware the double-dip.  The lender may not know you independently purchased insurance and they may charge you for it anyway.  Other times, a lender may make a mistake and charge you for it regardless of whether you told them about purchasing your own policy.  Always make sure to read your lender’s monthly statement to make sure you aren’t being charged extra!

6.  What is an escrow account?

An escrow account is a bank account that your lender opens for you.  As part of your monthly payment, your lender will likely take out an additional amount for real estate taxes, insurance, and PMI.  The lender will then make direct payments to the county (for taxes) and to the insurer (for PMI and homeowner’s insurance).  Be careful to monitor that your bank is actually paying your taxes!  Sometimes, the bank will make a mistake and not pay your taxes, which will cause you to assess late fees, and possibly even send you into foreclosure for uncollected taxes.  When property tax time rolls around, ALWAYS make sure the tax has been paid.

7.  What is PMI?

PMI is “Private Mortgage Insurance.”  PMI is extra insurance that lenders require from most home buyers who obtain loans that are more than 80 percent of their new home’s value.  PMI plays an important role in the mortgage industry by protecting a lender against loss if a borrower defaults on a loan and by enabling borrowers with less cash to have greater access to home ownership. With this type of insurance, it is possible for you to buy a home with as little as a 3 percent to 5 percent down payment. This means that you can buy a home sooner without waiting years to accumulate a large down payment.