Home Buyer Tips Archives - Page 10 of 12 - Real Estate News and Commentary

April 6, 2007November 23, 2021

Do You Know What a Home Inspection Should Cover?

by Dan Krell
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Now that the market has turned away from the record seller’s market we recently experienced, homebuyers are asking home sellers for such things as closing cost assistance and home warranties. It is also common to ask for contract contingencies such as financing approval and a home inspection.

During the height of the sellers market it was common for home buyers to forgo the home inspection so as to have their purchase offer look better than others. These home buyers took the chance that the home did not have any latent defects and was in acceptable condition.

If you are a home buyer, it is highly recommended to have a home inspection. The goal of a home inspection is to ascertain the general condition of the home including the structural condition, revealing items that need immediate attention, and determining the remaining lifespan of the home’s systems by visually inspecting the home and its components. Because the inspection is visual, it has limitations. Hiring the right home inspector can make the difference.

Before you hire a home inspector, consider that not all home inspectors are equal. It is recommended that you interview your home inspector and ask basic questions such as what are their qualifications and experience, what certifications/licenses they have, do they carry errors and omissions insurance (ask for a copy), can you contact a past client for a recommendation, what will the inspection cover, how long will the inspection be, and is the inspection guaranteed.

The Maryland legislature passed a home inspector licensure law that has been deferred due to funding constraints. So although your home inspector may not licensed, they could be certified by and/or have memberships in the National Association of Certified Home Inspectors and the American Society of Home Inspectors. Both associations require the home inspector to follow an education requirement as well as an ethical code and standards of practice.

What should your inspector be looking for? The American Society of Home Inspectors standard for a home inspection is to examine the condition of the home’s heating system and/ or central air conditioning system (temperature permitting), interior plumbing system, electrical system, roof, attic and visible insulation, walls, ceilings, floors, windows, doors, foundation, basement and structural components. The findings will be recorded in a report that will be given to you at the end of your inspection.

Like everything else in life, a home is not a perfect structure. Finding problems in the home is not a definite indicator to not purchase the home, however it is more of a guide to determine if you can afford to take on repairs immediately or in the future. Depending on market conditions, it is common to ask the seller to make the necessary repairs.

Home inspections are not just for older homes. It is becoming more common to have a home inspection of a new built home as well. Although home builders have their own quality assurance measures, no one is perfect and mistakes are overlooked.

For more information about home inspection scope and limitations as well as finding a qualified home inspector, you can search the websites of the National Association of Certified Home Inspectors (NACHI.org) and the American Society of Home Inspectors (ASHI.org).

This column is not intended to provide nor should it be relied upon for legal and financial advice. This column was originally publoshed in the Montgomery County Sentinel the week of 1/22/2007. Dan Krell © 2007.

April 6, 2007November 28, 2020

Know Your Rights as a Home Buyer and Make a Budget

Buying your first home is one of the most exciting things you can do; it also happens to be one of the most stressful things in your life as well. To help cope with this wonderful rite of passage, we try to prepare ourselves by doing research and getting advice from family and friends.

In theory, all residential real estate transactions are similar. However, the reality is that every transaction is subtly different with its own problems and issues. To help prepare you for your first purchase, here are some common tips to assist you in your purchase.

Make a budget. Making a housing budget and sticking to it is one of the most important steps in the process. Your housing budget is determined by your income, your debts, and your life style. Consulting with a lender can be helpful determine your housing budget. In creating your housing budget, don’t forget to include other housing related costs such as taxes, home owner’s insurance, utilities, and regular maintenance.

Know your rights. Knowing your home buyer rights can help you make the right choices during the process. If you follow this column, you have read how some real estate professionals are ignorant or unconcerned with real estate laws and ethics. Protect yourself by becoming aware of your rights protected by the Real Estate Settlement Procedures Act (RESPA), Fair Housing laws, and predatory lending laws. You can find more about these laws at HUD.gov.

Among your home buyer rights, you have the right to choose the Realtor, lender, insurance company, and title company you want to work with. Choosing a Realtor is subjective; after all, you are putting your trust in them to assist you in one of the largest purchases of your life. Don’t feel compelled to use a particular lender or title company because your Realtor recommends them or makes promises of discounts. Shop around, get quotes and compare services.

Do your homework. Thinking through such questions as where to live, what type of home to buy, how much to spend, what type of neighborhood amenities are important, will help you in your decisions. You should conduct some research on the communities and homes you are considering to purchase.

If you are uncertain about what is important to you in a home, viewing as many homes as possible can help you determine and narrow your preferences. As you shape your preferences, you will find that it is easier to shop for a home.

Know your expectations. Are your expectations realistic with regard to the home buying process, and how much home you can buy? When interviewing Realtors, discuss your expectations of them as well as what is expected from you in return. You should also discuss your expectations of what you can buy. It is common for first time home buyers to amend their expectations during the process. If you are relocating from outside the metro area, it is common to have sticker shock and change your expectation of the size of home you can buy.

As a home buyer, using a Realtor and lender can help you through the process. In the end, however, it is your choice and your home. Do your home work and be prepared.

This column is not intended to provide nor should it be relied upon for legal and financial advice. © Dan Krell 2007.

March 16, 2007November 28, 2020

Know Thy Lender

To protect the public interest, most professionals involved in real estate transactions in the state of Maryland are licensed. Realtors, title attorneys, real estate appraisers, and insurance agents are all regulated by the State. As of January first loan officers working for mortgage brokers, or as they are now titled mortgage loan originators, are now regulated as well. Loan officers working for federally chartered banks are exempt. The law is the fruition of efforts to help curb the fraud, predatory lending, and other problems that exist in the industry.

Make no mistake, the mortgage industry is already heavily regulated by the Federal Government as well as the State. Mortgage loans that are originated are required to comply with federal regulations such as the Truth in Lending act, regulation Z, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act. The state of Maryland has additional requirements that need to be met as well.

By licensing mortgage loan originators, the state of Maryland has placed accountability directly on the loan officer. Many are hoping that the new licensing laws will force loan officers to do their due diligence and act responsibly such as when issuing approval letters, loan commitments, or rate locks. Additionally, the new regulations will help curb predatory lending and hopefully reduce settlement table surprises.

Before January first, consumers’ source of recourse was to make complaints against the mortgage company to the Maryland office of Financial Regulation and/or the Maryland Attorney General’s office. Now, an offending loan officer will be held accountable for his/her actions and misdeeds and may face penalties for violations.

Another positive aspect of the new regulations is the limiting of opportunists that come and go when the market is favorable and hopefully weed out those with bad intentions. In addition to a criminal background check and finger printing, requirements for licensure include either three years of experience in the lending industry or the completion of a forty hour “pre-licensing” class.

Although the law went into effect on January 1, 2007, a recent Baltimore Sun article (Md. Warns Loan Officers: Get License, 12/22/2006) stated that many loan originators had not filed for their license and boasted about their intentions of not filing. Maryland regulators are taking this seriously as they are planning to “round up” those violators. The bottom line is, as stated in the article by the deputy commissioner of financial regulation, if someone is talking to the public they need to be licensed.

As a precaution, the Maryland Association of Mortgage Brokers offers these suggestions to consumers: never sign a blank document; read all documents carefully and ask questions and don’t be hurried into signing anything you do not clearly understand; stop the entire transaction if you feel you are not getting clear answers; be wary of telephone or mail solicitations, especially if the promises seem “too good to be true”; do not be pressured into applying for more money than you need; even a small increase in the total loan can result in big interest payments over time; get copies of all loan documents, especially anything you have signed.

If you are unsure of your loan officer’s license status you can check with the Department of Labor, Licensing, and Regulation (www.dllr.state.md.us).

December 30, 2006June 27, 2019

Corporate Relocation Made Easy

One of the top reasons for people to move to a new city is because of job relocation. Moving is not always easy, but relocating your entire family to a new city is especially a huge endeavor that requires lots of planning and assistance.

Whether you decide to relocate thirty miles away or 2,000 miles away, it is always overwhelming. One of the first things you may want to do is find out about the town you plan to live. There are many relocation resources online that can help with your planning. Websites such as Relocation Essentials (relocationessentials.com), or Home Fair (homefair.com) offer community information, school information, planners, demographic statistics, and city virtual tours.

Additionally, you may want to talk to a local Realtor in the new town , as well as friends, family, and even your Professional association to learn about the town from first hand experience. Networking can help with assisting with family needs that are not offered in your relocation package.

Another item you should be familiar with is your corporate relocation benefits. Although many companies offer a relocation package, benefits vary from one company to another. Most companies contract with a relocation company to handle relocation requests. The terms of your relocation package may vary depending on the level and tenure of your employment as well as the distance of your relocation.

Although, most relocation companies allow you to choose the real estate professionals you want to work with including Realtors, some do not. So, before you sign the listing agreement with your favorite Realtor, ask the relocation company if there are any restrictions.

Common elements of a typical relocation package include a moving allowance, closing cost help, and a buyout. Whether you are moving across the country or across town, it is not cheap and depending on the terms of your package, a moving allowance can pay for the entire cost or just provide you with a stipend. Additionally, you may be required to use a specific moving company. If not, compare reputable moving companies to see which one will be best for you.

Another common element of a relocation package is closing cost assistance. Corporate America knows that relocation is not cheap and one of the large expenses is purchasing a new home. To lure top prospects, some relocation packages offer special financing including paying all closing costs. Most relocation packages offer a stipend that may cover most of the closing costs. As lender requirements vary, make sure your lender will allow any relocation stipend.

Many companies offer a corporate buyout as an additional benefit to your relocation package. The buyout is actually performed by the relocation company that your company contracts with, and is a guaranteed sale at price that is determined by the relocation company. Depending on the terms of your relocation package, you are usually allowed to attempt to sell your home before it is bought by the relocation company.

If you are relocating for a new position within your company, you are restricted to the terms of your current relocation benefits package. However, if you are relocating because of a position with a new company, you can attempt to negotiate a custom relocation package that will offer the services and financial assistance necessary to make the move easier.

by Dan Krell

December 30, 2006October 11, 2019

Why Title Insurance is Important

Title insurance should not be an enigmatic item listed on the settlement sheet, and there should be no question as to its validity. Here is a very basic explanation of why title insurance is important.

Title insurance, like other forms of insurance, is governed by the Maryland Insurance Administration (MIA). Title companies and title attorneys are licensed by the State to sell title insurance.

Title insurance is important because it’s an assurance that the home buyer receives a clean title from the home seller. Clearing a title of all liens and mortgages is not always an easy task. The first step is for the title attorney to order a title abstract.

A title abstract is simply a synopsis of the chain of title, or a history of ownership, that has been recorded in the office of land records in the county court house. The title abstract indicates all owners, mortgages, liens, encumbrances, and easements attached to the property. The title abstract also indicates previous sales and mortgage and lien satisfactions.

Because all the information in the title abstract is obtained from recorded information, it is inevitable that mistakes occur. For example, it is common for mortgage release letters to be lost, misfiled, or never filed at all. Sometimes there are years of information that is lost or destroyed resulting in a break in the chain of title.

Once received, the title attorney will review the abstract and look for any blemishes including unreleased mortgages or liens and breaks in the chain of title. If there are any blemishes found, they need to be cured before issuing a clean title. The home seller can remedy most blemishes by supplying all required documents or paying to release attached liens and mortgages. Sometimes it may be necessary for the home seller to show their title insurance policy so as to indicate they were given a clean title.

Sometimes there are items not filed in the office of land records that may affect the ownership of your home. Some of these items may be heirs of previous owners or undocumented lien holders who may make claim to your home. Title insurance can protect you from these claims. It is rare, but making a claim with the title insurance company can resolve these issues.

Lenders believe title insurance is important. If you are obtaining a mortgage to purchase the home, your lender will require “lender’s coverage” title insurance. The lender’s coverage protects the lender in case there are any unrecorded liens, easements, or other unrecorded defects.

Just as in other insurance policies there are different levels of coverage of title insurance. A basic owner’s title insurance policy typically assures clear title to the property and covers against incorrect signatures, on documents, forgery, fraud, and defective recordation of covenants, encumbrances or judgments.

Extended coverage may include coverage for building permit violations from previous owners, covenant violations from previous owners, living trusts, and a variety of encroachments and forgeries. Title insurance does not cover against liens placed after the effective date of the policy.

Policies and limitations vary, consult your title attorney for more information. Some policies cost more than others because of the difference in title insurance companies and levels of coverage. When comparing title companies, you should also ask about title insurance coverage and rates. You can access more information about title insurance at the MIA website, www.mdinsurance.state.md.us.

by Dan Krell