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Buyers Information 1.Criteria for Selecting A Listing Agent 2.Mistakes Home Buyers Make 3.What is a Title Policy? 4.What you Need to Know about Property Insurance 5.Steps to Purchasing a Home   Criteria for Selecting A Listing Agent Real estate consumers would be wise to select an agent: Who is professional in appearance, attitude, demeanor and capability. Whose company has a strong local reputation for service, ethical performance and available resources. Who is willing to prepare, present and commit to a written comprehensive marketing plan. Who is willing to commit to a schedule of communication, follow up activities and attending to details. Who has experience and knowledge of the local marketplace. Who is skilled and accomplished in formulating and implementing effective negotiating strategies. Who has a reputation for caring, committed and trustworthy service.   Mistakes Home Buyers Make They don't act quickly enough when they find the right property. They don't think 'resale' when they purchase a home. They don't ask lenders enough questions or the right questions when selecting a loan. They don't package themselves or their offer to be attractive to a seller or their listing agent. They select the wrong agent and agency to work with in purchasing a home. They do not contact an agent soon enough in the process and expend wasted energy in looking for a home. They do not talk to a lender first to have them examine their mortgage approval amount and price range. They can overlook great homes by not overlooking replaceable carpets, paint or easily fixable items. Top   What is a Title Policy? It is a fact that the largest one-time investment that most people will ever make is the purchase of a home. Even so, many people are not aware of the potential pitfalls associated with this monumental decision. What Is Title Insurance? A title insurance policy protects the insured against loss or damage sustained by a defect in what’s known as the chain of title (described in Q4 below). Some of the most common hidden risks that can create a loss include: False impersonation of the true owner of the property Forged deeds, releases or wills Undisclosed or missing heirs Instruments executed under invalid or expired power(s) of attorney Mistakes in recording legal documents Misinterpretations of wills Deeds by persons of unsound mind Deeds by minors Deeds by persons supposedly single, but in fact married Liens for unpaid estate, inheritance, income or gift taxes Fraud Obtaining an Owner’s Policy of Title Insurance will provide protection to the buyer from these and other risks as outlined in the policy. The one-time premium that is paid for this coverage will provide peace of mind for many years to follow. Why Do I Need Title Insurance? Without an Owner’s Policy of Title Insurance, you may be leaving home ownership vulnerable to terrible risk. For example, what would you do if someone knocked on your door one day and said, “I am the real owner of this property, and the person you bought it from was a fraud.”? Without title insurance, you would be left to hire your own attorney in hopes that he or she could prove that your title was clear. You would stand to not only be left paying a hefty legal bill, but you may also lose your home. Doesn’t My Mortgage Bank Take Care of This? A Lender’s Policy of Title Insurance is required by the bank to protect their interest in your property. However, that Lender’s Policy does not protect you, the owner. Without an Owner’s Policy, you may find the title company paying a claim to your lender, but your interest may be left uncovered. Make certain that you protect your interest in your property by obtaining an Owner’s Policy of Title Insurance. What Does A Title Insurance Company Do? When a contract to purchase property has been executed, the title insurance company will research the chain of title to the land to discover: Who the owner is, How title is vested in the owner, What outstanding liens are attached to the property, What other encumbrances (easements, etc.) exist on the property. This research will help to identify any problems before you complete the purchase of the property. It is the goal of the title insurance company to identify and bring to resolution any problems that may exist before the purchase is final. Once the policy has been issued, the insured is protected from any covered risks that may arise prior to the date of the policy. What If A Claim Is Made? If anyone makes a claim of interest to your property that falls within the effective date and coverage of your title policy, you simply contact your title insurance company and they will take it from there. The title company will assess the risk, hire an attorney to defend your interest if necessary, and seek effective remedy of the claim. You can rely on your title company to work with you to resolve your claim quickly and in the most suitable manner. Top   What you Need to Know about Property Insurance How can insurance availability/affordability affect the real estate transaction? The affordability and availability of insurance affects both buyers and sellers. Buyers will typically be obtaining mortgage financing to pay the purchase price of the property. The lender will require that there be property insurance to cover their interest in the property. If proof of insurance is not available at closing the lender will likely refuse to release the funds and therefore delay or even derail the transaction, either of which can impose both inconvenience and cost to both the buyer and seller. Even in a “cash” transaction the buyer may be hesitant to complete a transaction where insurance is not available to cover the buyer’s equity in the property. When should a buyer apply to obtain an insurance policy to cover the property being purchased? The interest of both buyers and the sellers now suggests that the buyers should begin their search for insurance no later than the time of the contract to purchase is signed. This helps to assure a firm commitment for the issuance of a policy well in advance of the settlement of the transaction. Waiting until the last days or even weeks before the closing can limit the opportunities of the buyers and sellers to address the affordability and availability issue and, if needed, to find alternatives for difficult to insure properties. There have been many examples of transactions which have been adversely affected in some manner because of problems associated with insurance availability/affordability. What kinds of events can affect the ability to obtain insurance on a property being purchased? A number of factors can affect the availability and cost of homeowner insurance on a property being purchased. For example, they include: past claims filed on the property (up to previous five years) poor insurance credit score of the prospective purchaser past claims filed by the property purchaser on other properties physical characteristics of property (e.g., leaky roof) characteristics of the property’s location (e.g., proximity to fire station, regional weather conditions) How does the insurance company know what claims have been filed in connection with the property? Approximately 90% of all insurance companies contribute information regarding claims to an insurance industry database. When underwriting a new policy the insurance company may obtain a report from this system from one of a couple different sources to determine the property’s claims history. This report is most often identified as a comprehensive loss underwriting experience report or a “C.L.U.E. Report.” The report contains information regarding property claims filed in connection with a particular property and claims filed by a particular insured person. For a fee the current owner of the property may obtain a copy of this report. A copy of the report is available to the property owner through companies such as ChoicePoint, Inc, either by writing to ChoicePoint, Inc. located in Alpharetta, Georgia, or by going to their website, choicetrust.com, and A-Plus, either by writing to A-Plus located in Jersey City, New Jersey or calling 800/709-8842. Should I get a copy of the C.L.U.E. Report? While this decision is up to the property owner, it is important to understand the limitations of the report. The report contains only raw information and how that information will affect the insurability of a property isn’t explained as a part of the report. Moreover, not all insurance companies use the report and those that do use it don’t all use the information in the same way. As a result having the report may not enable you to predict whether a particular company will insure the property. If you want information on how a C.L.U.E. Report or other similar report may affect your ability to obtain insurance contact your insurance agent. Are there factors unique to a buyer that can affect their ability to obtain insurance? Yes, although not used by all insurance companies in determining eligibility for insurance, some companies do review the claims filed by the buyer on properties owned by the buyer during the preceding five years. This is another aspect of the C.L.U.E. Report database that focuses upon the insured individual rather than the insured property. Another more controversial factor is the use of Insurance Scores. Insurance Scores, which are formulas developed by insurance companies in an effort to predict the likelihood of an individual filing claims, are sometimes used to determine to whom or at what price an insurance policy will be issued. Insurance scores are not standardized within the insurance industry and both how they are calculated and how they are used is generally not known outside of individual insurance companies. If you want additional information on how insurance scoring may affect your ability to obtain insurance contact your insurance agent. Can a seller include a requirement that the buyers demonstrate their insurability as a condition of the sales contract? Yes, although not common, such a require ment could be included in an agreement. However, the specific language of such a condition should be carefully considered. Check with your real estate agent to find out if any standardized language has been developed in your community and/or consult with your attorney. As discussed herein the factors used to determine a particular buyer’s insurability will vary from one insurance company to another and can leave questions regarding whether and when such a condition had been satisfied. Can a buyer include a requirement that property be insurable and/or the insurance be affordable as a condition of the sales contract? Yes, but the specifics of such a condition should be carefully considered. Check with your real estate agent to find out if any standardized language has been developed in your community and/or consult with your attorney. There are multiple factors which might be used to determine a property’s insurability or the “affordability” of the insurance in such a clause. The factors used in a contract clause could include, but are certainly not limited to: acceptable C.L.U.E. report purchaser is satisfied of the insurability of property secure binder of property insurance on property cost of insurance doesn’t exceed specified threshold Both buyers and sellers should be aware that there are advantages and disadvantages to such a clause that should be considered. The advantage of such a contingency is that it may allow the buyer to cancel the transaction if the property proves uninsurable or insurance is unaffordable. This avoids reliance on a financing contingency and any question regarding its application where the property and borrower would otherwise qualify for a loan. On the other hand, the inclusion of such a clause may affect the acceptability of an offer, particularly if the offer is being made in a competitive environment. Top   Steps to Purchasing a Home Often the idea of buying a home raises a lot of questions, and buyers are often unsure of what it takes to do so. This brochure is intended to answer common questions and help potential buyers understand the steps taken to owning their own home. Step 1—Financing First things first. Prior to any home shopping, all buyers should be in contact with a mortgage lender to get pre-qualified and/or pre-approved, which basically means……what can I afford? Upon an initial approval from the lender…….you are now ready to start looking for a home. Step 2—Search for Properties The fun begins. With the help of a realtor, you will look for homes in the locations you desire, and include any special requirements such as bedrooms, baths, lot size, etc. You will probably look at many prospective homes in your price range, not only to get educated, but to find that “right” one that suits you or your family. Step 3—Write an Offer There’s a house that fits most your needs and are ready to buy it. It’s now time to write a formal offer on a Purchase Agreement with your realtor, which spells out all the terms you are willing to agree to; such as…...price, how you will finance it, closing date, inspections, taxes, survey and possession date. An earnest deposit check is also usually required at this time. Once these terms are agreed upon by both you and the seller, we can move to step 4. Step 4—Inspections Often buyers will want specific inspections to be performed on the property to insure it’s in good working order. Over the next 10 days, all these tests & reports will be completed, and any repairs needed to correct defects will be negotiated between buyer & seller with the help of your realtor. Final agreement on all these items is required. Note: Most inspectors like to be paid COD. Step 5—Mortgage Lender After all negotiations are completed between you and the seller, your lender then will order up the appraisal, any survey if needed, title work on the property, and their own inspections if you are financing with a FHA program. If any further repairs are needed by the lender to comply with the FHA program, they are negotiated once again. After all these items are in their office, they will send your completed file to their underwriting department. The underwriting department will take approximately 48 hours to finalize all financing requirements needed to complete your loan. Usually, after the 48 hours, we will receive a final clear to close. It is also at this time that you must arrange & pay for a new insurance home policy for the first year. Step 6—Closing The closing will usually take place at a title office, which is arranged by your realtor. The title office is responsible for handling all the loan documents, property transfer affidavits, homestead exemption forms and for figuring all final costs. It is vital that your realtor verifies and looks over all final costs on your closing statement, as often times they are not always accurate. You will meet at the title office at the scheduled time, and bring with you the following: Your driver’s license, your first year’s home insurance policy binder, and a certified cashier’s check in the amount you are required to bring as your down payment & closing costs made out to the title office. Once you’ve signed all documents….final arrangements are made for keys & move-in date. Top