Real EstateREAL ESTATE INFORMATION CENTER Overview Real estate refers to property that is permanently affixed to land. Real estate law encompasses regulations and legal codes pertaining to matters under a specific jurisdiction. It includes commercial and residential real property transactions. There are Federal and State issues associated with real estate law that vary according to jurisdiction. These laws pertain to all matters of real estate including ownership of land and buildings, financing, leasing, taxes, construction, and environmental laws. Brokers A broker is licensed by the state that he or she works in. Brokers are solicited by potential buyers to sell their property. The seller and the broker create a contract whereas the broker tries to sell the property and the seller pays the broker a commission if a sale occurs. Likewise, the buyer may solicit a broker to find his or her property. The real estate broker has an obligation to the person who hired him or her. If a seller and buyer sign an agreement to purchase property, it is between the seller and buyer – the broker is not involved in that particular agreement. Contracts / Transfers The written agreement made between the buyer and seller of a property is governed by contract law. Once the title to real estate is taken over by the new buyer, the buyer hires an attorney or title insurance company to perform a title search to ensure it is free and clear of liens, litigation risks or title defects. Public records are investigated to determine recorded deeds for the property mortgages, unpaid real estate or federal taxes, liens, government claims, judgments, or foreclosures that are outstanding. The title company will insure the buyer against any losses sustained because of the title’s invalidity. Once the investigation is complete, the seller delivers a titled deed with the proper description of the land to the new buyer. Most states require the deed to be officially recorded. Mortgages A loan secured by a mortgage is the number one way consumers finance real estate transactions. The mortgage is a transfer of interest in the property as security for the obligation. The borrower repays the mortgage monthly for usually 15 or 30 years. This monthly payment includes interest and principal amounts. Foreclosure can result if payments are not made. The lender sells the property to satisfy the remaining mortgage debt. State law determines how the foreclosure process takes place, taking into account other liens on the property, if any. If your lender is threatening to foreclose on your property, you should contact an experienced real estate attorney to protect your interests.
Real Estate Terms Real estate law includes many words and terminology that a first-time buyer may not know. RESPA – The Real Estate Settlement Procedures Act requires mortgage lenders to disclose costs associated with the transaction, copies of the lender’s servicing and escrow account practices, etc. The lender is also required to give the borrower an estimate of any service charges involved. Broker – A broker is a licensed individual or agent who negotiates real estate agreements between two parties. A real estate agent (realtor) is a licensed representative who works for a broker. Condominium – A condominium owner owns their unit. They are allowed to use the common areas that are owned by the condominium association. The association manages the property and improvements; however, the owner is required to pay a monthly association fee. Appraisal – An appraisal is an estimate by a third party of the value of real property after comparing to other similar properties in the same neighborhood. An appraisal is needed before a mortgage lender will make a loan. Mortgage Loan – A mortgage loan is a loan secured by the property the loan is allowing the buyer to purchase. A mortgage can be obtained with a fixed or adjustable rate of interest. It can include balloon payments at the end. Assessment – An assessment is a fee for government improvements that are beneficial to adjoining property. The homeowner pays a proportional share of the cost. These include sidewalks and roads. Contract for Deed - A contract for deed allows the seller to keep legal ownership of the property. The buyer lives in the property and makes monthly payments until the purchase price is paid. The actual deed transfers the ownership from one person to the next. With a warranty deed, the seller promises the title to the land is good and complete. A quitclaim deed is used when a person (grantor) disclaims any interest in a piece of real property and passes the claim to another person (grantee). Title – Title insurance protects against title defects. An attorney gives a written statement or title opinion of the current condition of the title to the buyer. Survey – A lender usually requires a mapping of land boundaries, improvements and easements on property. This is especially true with commercial property. Closing – A closing is the last step in purchasing property. The buyer finalizes his or her mortgage and pays any closing costs. The seller hands over the deed and keys to the property.
Foreclosure – Foreclosure takes place when the homeowner does not make payments on his or her mortgage. The lender has the option to foreclosure on the property, take it back and sell it to recoup its investment. A court appearance usually takes place to make sure the foreclosure is warranted. Deed Information A deed transfers ownership of property from one person to another. The deed must include a legal description of the property, the buyer’s name and the seller’s name. The seller signs the deed, making him or her responsible for any claims against the condition of the property. An experienced real estate attorney will make sure it is executed properly. A deed must follow State laws and always be in writing. The rules of the jurisdiction where the property is located must be followed correctly. The deed should be recorded where the property is located to make the change of ownership pubic record. A quitclaim deed lets transferor give his or her rights to the property to the other person. However, it does not guarantee the extent of the interest transferred. A quitclaim deed is often used during a divorce. A warranty deed transfers ownership and promises that the seller has good title to the property and defends against any defects. It guarantees the best protection for buyers. A special warranty deed guarantees against claims that may arise while the seller was the legal owner. Home Inspection Hiring an independent and experienced home inspector to check the condition of the property before you purchase it can relieve some of the stress involved in buying a home. It is necessary for piece of mind. The cost runs anywhere from $200 to $500 but is well worth it. The inspector will give you a detailed report on any defects in the home, giving you an opportunity to negotiate the price. The inspector checks for possible safety problems in the structure, construction and mechanical systems of the home and give you a report on any repairs needed. Areas of inspection include plumbing, electrical system, water heater, waste disposal systems, heating and air conditioning, ventilation, insulation, doors, windows, floors, termite problems, and the roof. It is wise to check for gas, asbestos or lead problems. The inspector will answer any questions you may have. If you are using a VA or FHA loan, another inspection will occur at the time of the appraisal. Do not sign an offer to purchase the home without getting a thorough inspection. It is also wise to insert an inspection clause in your contract stating if there are serious problems, the seller must fix them or you can back out of the offer.
Closing The transfer of ownership of the property takes place at the closing. Usually the seller, buyer, attorneys, lender representative, and real estate broker attend this meeting. At the closing, all issues resolved, money matters discussed, and the documents signed. An experienced real estate broker can explain closing costs to you. They range anywhere from 2% to 5% of the purchase price. The costs cover fees for escrow, attorney, loan origination, recording, appraisal, document preparation, and survey. They also include property taxes for period to closing date, interest from closing to one month before first payment, mortgage insurance, title insurance, and loan discount points. The buyer receives a statement explaining all services provided and fees charged, a truth-in-lending statement, mortgage note, and sales contract. Finally, the keys and signed deed are given to the new owners. The closing agent records the deed and mortgage. Conclusion The laws for real estate transactions are different and complex in every state. An experienced real estate attorney is knowledgeable of all State laws. He or she will make sure your rights and interests are protected. Links to additional home information The Making Home Affordable program has recently expanded. It allows homeowners who are current but underwater on their mortgage guaranteed by Fannie Mae or Freddie Mac to refinance these loans. For more information, visit www.makinghomeaffordable.gov The Department of Housing and Urban Development gives information on all aspects of buying or selling a home in communities all over the United States. It details the implementation of the Recovery Act of 2009. Visit HUD’s website at www.hud.gov Learn about an $8,000 first-time homebuyer tax credit at www.realtor.org Search for a home in any city in the United States at http://realestate.yahoo.com. This site includes information on buying, selling, financing and improving your property. Real Estate Legal Center sponsored by
Earl Carter & Associates
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