FAQs

A: Closing costs, or the fees associated with buying and selling real estate property, can be divided into three basic categories; lender fees, prepaid and settlement costs. Lender fees may include points, appraisal, credit reporting, underwriting, settlement and tax service fees. Prepaid fees may include interim interest, real estate taxes and escrow, and insurance premiums and escrow. Settlement fees may include title insurance, settlement or attorney fees, taxes, recordation and messenger fees. As with many elements of a real estate transaction, closing costs are negotiable. They can be paid by the buyer, the seller or any combination of these two parties. Some of the more common types of closing costs are described below, although many other types of costs can come into play. Closing costs are individual to a piece of property, and hence will differ according to region, property type, and numerous other factors. As always, it is important to discuss closing costs with your agent and lender in order to be fully informed regarding your particular situation. Commission fees may be paid to real estate agents representing the buyer and seller of a piece of property. Property taxes must also be paid by the seller (usually), until the last day of ownership. A new homeowner's insurance policy must also be purchased, usually by the buyer. Any assessments or liens on the property in question should be taken care of prior to the close of escrow, and are usually paid for by the seller. Escrow services and title insurance must also be settled. Other fees may include, but are not limited to, property inspection fees, termite inspection, termite removal, document preparation fees, deed recording fees, loan assumption charges, home warranty and utility adjustments. Closing costs for sellers usually comes down to commissions plus approximately 2% of the sales price of the property. For buyers, closing costs usually amount to 3% of the sales price.

A: Property Ownership - How Secure Are You? Real estate is traditionally a family's most valuable asset, and many laws have been passed to protect it. While most of these laws are set up to protect the owner, their family and heirs, others may have claim on the property. In certain situations, governmental bodies, contractors, lenders, judgment creditors and the Internal Revenue Service may also lay claim to property, sometimes without the owner even being aware of it. An owner's title insurance policy provides homeowners with coverage against most of these occurrences. Title insurance is sometimes the difference between actually owning a property and just thinking you do.

A: It exists to provide confidentiality and impartiality during a real estate transaction. Escrow exists because buyers, sellers and lenders have a personal stake in the outcome of any real estate transaction. It is important to have a neutral party ensuring that all requirements for a successful transaction are met. Escrow is this neutral third party, designed to assist buyers, sellers and lenders in meeting all of the mutually agreed upon terms and conditions. The escrow holder is used as a depository. Buyers and sellers provide funds, deeds, inspection reports, insurance information and any other related documentation to escrow. They then give the escrow officer written instructions that must be met prior to completion of the transaction (recordation). Escrow begins once a buyer and seller successfully negotiate an offer. Once the seller accepts an offer, the buyer deposits earnest money into escrow.

A: Most lenders require homebuyers to carry homeowner's insurance. This is a hazard insurance policy designed to cover your property against peril. Most homebuyers elect to take out a comprehensive homeowner's insurance policy. This type of coverage covers the cost of rebuilding your home, your possessions, liability, vandalism, theft, water damage (not flood related) and loss of use. There are three basic areas this type of insurance is designed to cover. Casualty: If your home should be damaged or destroyed (most frequently due to fire), your insurance will cover the cost of rebuilding your home. This is usually based on the square footage of your dwelling space (which can be found on the appraisal report). It is important to note that your coverage amount is not based on the amount you paid for the home, or the amount of your mortgage. Personal Property: Your insurance policy also will likely cover up to a specific amount towards the replacement of your personal belongings in your home, similar to renter's insurance. It is important to ask your insurance agent which items may not be covered under this portion of your insurance. In most cases, a separate policy can be purchased to cover any items not falling under the purview of this portion of your coverage. One example may be an expensive item of jewelry. Liability: As a property owner, you are liable for any accidents which may occur on your property. If a guest or passerby slips on a patch of ice on your front porch or falls off your staircase, you are liable for their injuries. This is also covered under your homeowner's insurance. Remember to compare insurance rates. Ask your insurance agent any questions you may have regarding coverage and loss, limitations, deductibles and the like. Your real estate agent will be able to point you towards a reputable insurance agent.