Q:
What are the tax benefits of owning a vacation home?
A:
Today, a vacation home can be
purchased for investment purposes as well as enjoyment. And yes, there are
tax benefits. Visit
www.irs.ustreas.gov
or talk with your tax planner for information on the tax benefits of owning
a second home.
Q: How much should you offer for a house?
A: When making
an offer, you should consider the following factors:
·
The advertised price of the
house.
·
What you can afford.
·
Prices for comparable houses.
·
Whether the local real estate
market is hot or cold.
·
The seller's needs, like
whether the seller needs to close quickly.
·
Whether the house is uniquely
valuable to you.
·
How much you feel good about
paying for a particular house.
Q:
What is the definition of a short sale?”
:A:
The
“short” in short sale actually refers to the fact that the payoff amount
agreed to in the transaction is “shorter” than the mortgage balance on
the property. Simply put, there is more owed on the home than it will
sell for.
Q: What kind of inspections do I really need to have to find out about
the condition of the property?
A:
A number of inspections
are highly recommended. They should be provided for in the purchase
contract, even if they are not required by the lender. Remember, the
standard Offer to Purchase and Contract states that "closing shall
constitute acceptance of the property in its then existing condition
unless provision is otherwise made in writing." In other words, once
closing is completed, you may be found to have accepted the property in
its existing condition.
The most
important inspections are:
-
Home Inspection
A home inspector typically examines the condition of the property,
including the plumbing, heating, cooling, and electrical systems,
and the structural components. In North Carolina, professional home
inspectors must be licensed. Read the home inspection report
carefully, and be sure to ask the seller to complete all repairs
permitted in the purchase contract. Not having a home inspection may
save you money "up front", but it could be very costly if you find
after closing there is a major defect in the property. You may also
need additional inspections performed by a specialist, such as an
electrician, heating and air conditioning contractor, or a
structural engineer.
-
Wood-Destroying
Insect Inspection
Have a licensed pest control operator perform a pest inspection
prior to closing. It should reveal evidence of wood-destroying
insects, if any, that could adversely affect the structure.
-
Survey
A survey provides accurate measurements of the property; its precise
total area; the location of buildings and other improvements to the
property; and any encroachments, easements and possible setback
violations. You are typically responsible for paying for the survey.
Examine the survey prior to closing to make sure the acreage and
other conditions of the property match what you were told by the
seller or real estate agents and what is shown in the purchase
contract. You should also be aware that the title insurance company
may exclude from coverage problems shown on the survey which are not
resolved before closing.
-
Appraisal
Virtually all lenders will require you to pay for an appraisal of
the property to determine if its market value meets or exceeds the
purchase price. Review the appraisal report prior to closing to make
sure the value of the property, its square footage and features
match what you were told by the seller or real estate agents and
what is shown in the purchase contract.
-
Wells and Sewage
Disposal Systems
If you are buying a property served by either a well or a septic
system (not city water or sewer), you should have them inspected
prior to closing. A well inspection and separate water test should
be done to determine whether there is an adequate amount of water
and water pressure for the property and if there are any harmful
contaminants in the water. An examination of the septic system
should determine if it is adequate to support the property and is
properly performing. Repairs to these systems can be very expensive.
-
Radon
Radon is a radioactive gas that can be found in homes all over the
United States. Any home can have a radon problem, regardless of its
age or condition. Therefore, you should have the property tested for
radon to make sure that any detectable radon is at or below EPA's
guidelines for an "acceptable" level.
Q: What is title insurance?
A:
The lender will probably
require you (the borrower) to purchase title insurance to protect its
interests from potential title problems. Before issuing a title insurance
policy, the title company will require the closing attorney to perform a
title search to discover any problems with the title to the property.
Problems found during the title search (such as unpaid judgments, taxes,
mortgages, etc. on the property) must be corrected before closing.
For a few
dollars more you can also purchase your own title insurance policy to cover
you from title problems with the property which may not have been discovered
prior to closing. If a problem covered by your policy is discovered after
closing, the title insurance company will help clear up the problem or
compensate you for any losses you have sustained. Like any insurance policy,
there may be exceptions in your coverage, so it is critical that you
carefully read your policy and refer any questions to the closing attorney.
Q:
I am buying a newly built home, do I need Title Insurance?
A:
Construction of a new home raises special
Title problems for the Lender and the Owner. You may think you are the
first owner when constructing a home on a purchased lot. However, there
were most likely prior owners of the unimproved land. A Title Search
will uncover any existing liens and a survey will determine the
boundaries of the property being purchased. In addition, Builders
routinely fail to pay subcontractors and suppliers. This could result in
the subcontractor or supplier placing a lien on your property. Again,
Lenders want to be sure the property has clear Title, and they are
insuring the correct property. Purchasing Owner’s Title Insurance will
protect you against these potential problems and pay for any legal fees
involved in defending a claim
Q: What is a "homeowner's
association"?
A:
If
you buy in a residential subdivision or planned community, it is likely you
will be joining a homeowner's association. A homeowner's association is a
group of property owners that acts like a private local government,
providing services or benefits to its members such as a clubhouse, pool or
trails. Members pay for these benefits in accordance with the association's
bylaws. Homeowner's associations may also regulate the use of common areas,
paint colors, fences, outbuildings, etc. By exercising their voting rights,
members have input into decision-making.
If you
are purchasing property in a subdivision or planned community, prior to
closing you should obtain documentation as to any dues, assessments,
covenants, rules, restrictions, and services provided. If the real estate
agent(s) or closing attorneys do not give you relevant documentation prior
to closing, ask them for the most current copy and review it before you
close.
Q: What happens if the
property is damaged or destroyed after I sign the purchase contract but
before closing?
A:
Typically, the
purchase contract requires that the property be in substantially the same or
better condition at closing as on the date you contracted to buy it (normal
wear and tear excepted). If the property is damaged or destroyed by fire or
other casualty prior to closing, the risk of loss is on the seller. The
buyer has the option to wait for the seller to repair or reconstruct the
property or to terminate the contract and recover any earnest money deposit.
Q: Who closes the
transaction?
A:
A real estate
closing is completed when the seller conveys the title to you by deed, you
give the purchase money to the seller, and the appropriate documents are
recorded with the Register of Deeds office in the county where the property
is located. The closing will probably be handled by an attorney chosen by
you. In many transactions, the attorney may also represent the lender and
the seller. The seller may hire his or her own attorney or pay your attorney
to prepare the deed to give to you. Make sure you know "up front" who the
attorney is representing. Others involved in the transaction may recommend
or offer you financial incentives to hire a particular closing attorney, but
you have the final word. Prior to closing, the seller should give the
closing attorney a copy of the deed to the property. Also, if there is an
outstanding mortgage on the property, the seller should give the attorney
any personal information needed to obtain a loan payoff figure so any
existing loan(s) can be paid off in full at closing. As the buyer, you will
need to give the closing attorney a copy of your contract and contact
information about your lender, any inspectors, or other persons who provided
services in connection with the transaction.
Since
closing involves several complex phases (examination of the title,
completion and explanation of legal documents, and resolution of any
possible title problems), you should carefully consider having an attorney
assist you throughout the process and during the closing. Also, read each
closing document so you fully understand each step of your real estate
transaction.
If a
non-attorney is handling your closing, that person may render only
administrative services related to the transaction ? not give you legal
advice.
Q: What is a closing
statement or "HUD-1"?
A:
A closing
statement is a document that summarizes all funds received by you and the
seller at closing, and all funds paid by you and the seller for various
expenses of the transaction (real estate agent commissions, loan payoffs,
fees for inspections, property taxes, etc.). For all closings involving
federally insured loans, the Real Estate Settlement Procedures Act (RESPA)
requires that this information be reported on a form from the federal
Department of Housing and Urban Development (HUD) ? a HUD-1 form.
Typically, you must pay a portion of the property taxes, the cost of all
inspections, and all costs associated with the loan, title search and
closing. These costs include the appraisal fee, survey, pest inspection,
lender fees, fees to establish an escrow balance for homeowner's insurance,
taxes and any required private mortgage insurance, attorney fees, title
insurance, and recording fees. The seller normally pays the balance due on
any existing loans, his portion of the taxes, commissions to real estate
agents, fees for deed preparation, cancellation of existing liens, and
revenue stamps payable to the state. In most transactions, payment of these
fees is negotiable between the parties. However, if you are getting a VA or
FHA loan, the lender may require the seller to pay particular closing costs,
such as the pest inspection
