Once a home is secured for purchase, the lender requires title insurance, which must be secured before the transaction closes. When selecting a title insurance company, you will be given the option of which coverages to choose.

A closing protection letter is one of these, which a title insurance company will provide to the lender, buyer, and seller.

What is it? And is it necessary?

A closing protection letter (CPL) is issued by the title underwriter. This document ensures that the underwriter will protect its client from any mistakes made by the title agent who handles the escrow accounts associated with the transaction.

The title agent is responsible for handling large sums of the lender’s and buyer’s money, and mistakes can be made. For example, a mistake could be if the agent misplaces or mispurposes the funds in your escrow account. There is also the risk of an agent being dishonest or fraudulent.

In any case, where a mistake is made on behalf of the agent, the closing protection letter is drawn up so that the title underwriter will protect a specific party to suffer no actual loss.

Put simply, a closing protection letter is a form of insurance intended to provide coverage to specific parties of the transaction. Each party will decide whether or not it is necessary. However, a lender will rarely hire a title agent without the issuance of a CPL, and the burden of the fee is typically placed on the buyer.

It is natural to feel a little uneasy about an insurance company handing you a document intended to protect you from them, but charge you for that document. But keep in mind that this is something they are legally required to do.

Also, not all accounts where these documents are put into effect are fraud or dishonesty. Human error does occur, and without this document, an honest mistake can cost you thousands of dollars.

What should the closing protection letter include?

All CPLs are transaction-specific and what they offer coverage for depends on the insurance being issues. However, there shouldn’t be much deviation from one contract to the next. Please, reference the image below for an indication of what a CPL should look like. [Read more…]

The most common question we hear from home buyers outside of “Where are you located?” is regarding title insurance costs.

You may have heard title insurance costs roughly around $1,000 per policy. This is true, but you likely want a more accurate number before you begin to approach the closing table so you are not caught off guard and can make sure you’re getting a fair deal.

Luckily, getting a rough idea of how much title insurance will cost you is relatively straightforward. It’s based on the price of your property and where you are located.

But remember that there are two different types of title insurance – owners and lenders. A few factors also help to determine costs.

• Owner’s Title Insurance: Primarily based on the overall sales price of the home and its location. In most cases, it’s the more expensive policy, and this is because down payment amounts, loan amounts, and even your credit history are also figured into the policy.
• Lender’s Insurance: Solely based on the total loan amount and the state where the property is located. Less is factored into the policy, so it will almost always have a lower price than the owner’s insurance.

You can often expect title search fees to be included in the cost of your title insurance quote. This does depend on the insurance provider, but most providers will make it clear if they do. Also, if you can bundle your policies together, it’s wise to do so. Doing so can result in a reduction of the fees.

How to Calculate Title Insurance Quotes

How can you calculate it on your own? Let’s take a look at some of the details you need to be aware of.

Again, location is one of the most significant contributing factors to how much title insurance policies will cost. The good news is that each state regulates policy rates, and what you will pay with one company should closely match what you would pay with another.

However, prices will be different, and you have the right to shop around for the best rates. You should also note that you have the option to select between basic and enhanced policies. [Read more…]

As you’re closing on a home, helping a client, or brokering a deal; you’ll come across a document called the closing disclosure (or CD). A closing disclosure can become very frustrating and cause anxiety when you first read it. Why? Because you’re told to act immediately upon receiving it, and let’s face it, if you’re not a lawyer this can be intimidating.

The anxiety and confusion is mostly caused because the closing disclosure will only be in your possession just a few days before your closing appointment, and you’ve already had to deal with a million papers and meetings and inspections. This just adds too your pile of work.

But never fear! We’re here to help you through the ins and outs of the closing disclosure and purchasing a property so you can comply with the three day timeline.

For starters, you already know it’s your job to review the closing disclosure immediately upon receiving it. The three day timeline exists to ensure that you have enough time to remedy any discrepancies or issues within this document.

The first and most important thing to do with your closing disclosure is to compare the loan estimate on the document with the loan papers you received after applying for your loan. You are making sure the closing disclosure matches the loan estimate as closely as possible to avoid hold ups at closing.

It’s important to note that the loan estimate is an estimation of payments and fees. Some variances are to be expected, while others shouldn’t be present at all. If they do exist, you want to address them before closing.

The timeline helps promote a smooth closing process. Nobody wants you to feel confused or frustrated at the closing table. Instead, they want you to feel prepared and collected. The agent handling your closing services will also be happy to explain anything else that has your worried at the appointment and likely before.

The Three Day Rule

But how long before closing should you be supplied with the CD? This is where the Three Day Rule comes into play. This rule is simply put into place to ensure you have received the closing disclosure three days before closing.

Receiving the closing disclosure three days in advance ensures you will have had enough time to deal with any potential issues and know what you will owe upon consummation. You know what will be expected of you well before you become legally obligated to fulfill your end of the contract.

How Does the Three Day Rule Work?

The three-day rule applies to business days, including Saturdays. But Sundays and Nationally recognized holidays do not count. This means you may technically have more than three days before closing to review the document. [Read more…]

Your offer got accepted, and then they drop the news on you. There’s an easement on the property. At first, it may seem like an intrusion, but ultimately, it’s not all that bad. You may hardly notice anything at all.

A property easement is a nonpossessory right to use or enter a piece of property for a specific purpose. It does not give anyone the right to use your property for any other purpose than is explicitly stated.

Easements are typically issued for two reasons.

1. The most common cause is to allow utility companies to access and maintain power lines.
2. Otherwise, an easement is commonly granted to enable another landowner to travel across your property to access the main road.

In any case, it does not grant any individual access to your property in its entirety. There are some instances where it may allow construction on your property, and you will need to pay careful attention to this.

There are many other possible reasons for an easement to be granted on a piece of property. Different types of easements are issued because of this. For example, an easement granted to a utility company is not the same that will appear when another property owner simply needs access to roadways.

Understanding how one will use your property becomes very apparent once you know the different types of easements.

Types of Easements

[Read more…]

Ready to get your home inspected for sale?  Or maybe you’re about to purchase a condo and want to know what to expect.  This guide to frequently asked questions will help you with all things home inspection!

• How much does a home inspection cost?
• How long does a home inspection take?
• Does a condo cost the same as inspecting a house?
• What does the inspector look for?
• If the inspector finds more issues, does the cost increase?

How Much Does a Home Inspection Cost?

Home inspections can cost from $200-$500. The price depends on the home’s size, age, location, and if additional steps are required, such as testing for mold and/or radon.

Below is a list of what you can generally expect to pay for a home. With so many factors that play into the final cost of a house, the charge can vary from the suggested price that is listed. [Read more…]

Closing costs are the fees associated with buying and selling a home. They may be incurred by either the buyer or seller. Here’s what you should know about the various fees and whether the buyer or seller pays. 

Closing Costs For Homebuyers

Aside from the down payment and earnest money the buyer is responsible for most of the closing costs. Some of the fees can be negotiated and the amounts can vary based on the state, lender, and mortgage type.

Buyers typically pay for property-related fees including the appraisal fee, home inspection fees and loan-related fees. These include the application fee, attorney’s fees, and mortgage broker fee.

Other closing costs for buyers are:

• Credit report fee. 
• Origination fee, also known as the underwriting fee or processing fee. This pays for administrative services when making the loan, including document preparation and notary fees.
• Discount points. Each point is 1% of the loan amount. Points can be paid at closing to lower the interest rate on the loan.  
• Flood determination. If the property is located within a flood zone, flood insurance will need to be purchased.
• Document preparation fee.
• Mortgage insurance fees. If the buyer is paying a deposit of less than 20% they are often required to get mortgage insurance.
• Property taxes. Usually between 2 and 6 months of county taxes.
• Annual HOA fee and HOA transfer fee.
• Pest inspection.
• Escrow deposit. Depending on the lender you may be required to pay 2 months of property tax and mortgage insurance. 
• Homeowner’s insurance. Lenders often require the premium for 1 year to be paid.
• Transfer tax.
• Title fees, including search fees, lender’s title insurance, and owner’s title insurance. 
• FHA, VA and USDA fee. If the loan is through the Federal Housing Administration the buyer is required to pay FHA insurance premiums and an upfront payment of 1.75%. If the loan is through the Department of Veterans Affairs or the USDA the buyer pays a guarantee fee.

Closing Costs for Home Sellers

The fees that the seller is responsible for can vary greatly from sale to sale. Buyers will often negotiate to have the seller pay some or even all of the closing costs. One fee that sellers always pay is the real estate commission which is usually 5% to 6% of the selling price. 

Negotiable closing costs for home sellers

Almost all fees are negotiable and may be paid by the buyer or the seller. What the seller pays is largely dependent on how motivated they are to sell.

For example, if the seller has had their property listed for a long time and hasn’t had many offers they may choose to pay most or all of the closing costs. On the reverse, if the seller has just listed a property in a desirable neighborhood and has already had several offers they are less likely to agree to pay any of the closing costs.

Closing costs with a cash sale

When paying cash for a property, some of the fees are eliminated. When paying cash there’s no need to pay lender associated fees such as the credit report fee and the origination fee. 

Now that you know which closing costs the buyer and seller are responsible for, you should be ready to go to your closing.  If you have any questions about closing costs, title insurance, or escrow services, or click here to email us and we’ll be happy to assist.

Are you looking to buy a gorgeous waterfront property or invest in and flip something along the Chesapeake Bay? If so, you likely have questions about critical areas in Maryland, specifically what you can and cannot do when it comes to landscaping and natural vegetation.

Let’s face it, part of the experience of living on the water is the view, and this guide to real estate and Maryland critical areas will help answer your questions.

Before we jump in, it’s important to understand what constitutes a critical area in Maryland. According to the Maryland Department of Natural Resources, a critical area is considered to be land “within 1,000 feet of Maryland’s tidal waters and tidal wetlands.” This includes property that exists along some of Maryland’s most famous waterways, like the Chesapeake Bay.

Note: If you have your eye on a Maryland property, then you’ll need to determine if it’s protected under the Critical Area Program. To do so, you can contact the Planning and Zoning office for the jurisdiction in which you plan to build. Physical maps of Critical Area Program land should be available in the office, though many jurisdictions now offer electronic maps online. For instance, if you’re considering investing in property in Annapolis, you can review the critical land map for Annapolis on the government’s website.

However, we also recommend that you contact the title company to find the most recent boundaries and line surveys. They can help you locate information specifically relevant to building within the Critical Areas of Maryland.

Often times, you can still build and invest in property within a Critical Area, but you will need to adhere to some rules and regulations, many of which have to do with buffers.

Buffers, which are often composed of shrubs, plants, and trees, help to minimize the impact that man-made structures, like buildings and paved areas, have on the Critical Area. Buffers are adjacent to the critical area land and typically at least 100 feet wide, though some can be 300-ft or more. In this case, it’s also helpful to contact a title company to determine the width requirements of a Critical Area buffer as it relates to your property.

When you build or invest in a property in a Critical Area of Maryland, it’s important to make sure you meet all the local and state requirements. Here are some common questions and concerns that home buyers and real estate investors frequently have when it comes to Critical Area requirements as they relate to building and landscaping.

Can I remove a tree if it blocks my view of the water?

If the tree is not located in a buffer zone and you plan to plant new trees, you can typically remove a tree after requesting approval from the local planning office. If the tree is in the buffer zone and otherwise healthy, it cannot be removed. [Read more…]

If you’re considering purchasing real estate, be it a home, land, or commercial property, your first inclination may be to seek financing through a lender. However, in some cases, a land contract may also be an option.

A land contract is a form of financing that allows buyers to make regular payments directly to the seller or real estate owner in exchange for ownership.  This is different than a traditional mortgage where a house or condo buyer finances the property through a lender and makes payments to the lender for the duration of the mortgage.

Though a land contract is not considered a traditional mortgage, the two share some similarities. For instance, both are legally binding documents that outline the terms of a real estate transaction. Both also typically require the buyer to make a set amount of payments over a specified period of time. Once the payment agreement is met in full, the legal title will transfer to the buyer who will then own the property outright.

Why would someone use a land contract?

This type of seller financing can make it easier for buyers and sellers by negating the need for mortgage approval. For buyers, this makes purchasing property easier even if they aren’t eligible for a traditional mortgage. For sellers, a land contract can give them access to more buyers, create a steady income, and potentially sell their property for a higher purchase price.  But there are risks for both parties.  Below you’ll find common questions and answers about land contracts to help you decide if one is the right option for you.  

What a Land Contract Is & How it Works

A land contract is an official agreement between the buyer, or vendee, and the seller, or vendor. When entering into a land contract, the buyer will make regular payments, typically monthly, to the seller.

Payments include the principal balance as well as any interest. During the payment period, the seller will maintain ownership of the legal title. The buyer, however, will maintain what’s known as equitable title, which prevents the property owner from selling the property, using it as a lien, or engaging in other activities that would infringe upon buyer’s rights to the property.  It is important to note that the seller’s inability to sell or otherwise act against the interest of the contract is achieved by recording the land contract in County Land Records.

Once the final payments are made, the seller transfers the title to the buyer, and the buyer owns the property outright. At that point, the appropriate paperwork will be filed with the county and any other required government parties. 

The Terms of a Land Contract Include:

Though land contracts vary from state to state and often seller to seller, they typically each include the following:

Repayment term, or how long you’ll have to pay the home off in full. While many mortgages extend to 30 years, land contracts are typically shorter. This is particularly important to note since some land contracts will allow for monthly payment for a specific period of time at the end of which the buyer will need to make a balloon payment for the remaining balance.

Down payment, or a lump sum payment made at the start of the land contract. Though these vary, they are often lower than the traditional 20% required of a traditional mortgage.

Interest rate, or the “cost” of borrowing. Land contract interest rates are typically set by the seller and therefore vary.

Are Land Contracts The Same As Rent to Own?

No, land contracts are different from rent-to-own agreements. Both are considered a form of seller financing, but there are significant differences between the two. For instance, under a rent-to-own agreement, the seller is still responsible for things like property maintenance, insurance, and taxes. A land contract, on the other hand, is very similar to a mortgage in that those responsibilities and costs shift to the buyer.

Further, in a land contract, the buyer also gains many of the typical rights extended to a homeowner, like the ability to make home improvements or other alterations to the property. Under a rent-to-own agreement, those rights can be limited.

Finally, and perhaps most importantly, is expected ownership. In a rent-to-own agreement, the intended buyer often chooses to purchase the home for a predetermined price, but they are not necessarily obligated to do so. In a land contract, however, the agreement is a binding one in which the buyer agrees to purchase the home. Failure to make payments and carry out the agreement would result in a default.

Is it smart to use one?

That depends on your situation.

For home buyers, a land contract can be a good idea if:

• You can’t qualify for a traditional mortgage
• Have a poor credit history
• Can’t meet deposit requirements of a traditional mortgage

For home sellers, a land contract can be a good idea if:

• You’re looking for a built-in income with interest
• Your property has been on the market for a significant period of time
• There are limited buyers and you want to attract more
• You either own your home or are confident your current mortgage agreement will allow for a land contract

What Happens if a Buyer Doesn’t Pay Monthly Payments?

If a buyer doesn’t make the required monthly payments or defaults on the contract, the seller can take legal action against the buyer.

Up until the end of the contract, the buyer maintains an “equitable title,” which refers to, among other things, their right to work towards complete ownership of the property in question. This differs from the legal title, which is held by the seller until the buyer makes payment in full.

When the buyer fails to make payments, the seller can file a land contract forfeiture, which is a court action that ends the buyer’s equitable title. Once filed, the land contract is no longer valid and the buyer gives up all money previously paid as well as the future rights to the property. The seller maintains all monies paid as well as full ownership of the property.

Do Land Contracts Need to be Recorded With the State?

Real estate law varies from state to state, and so whether you need to record a land contract with the state depends on the state in which you live. For instance, sellers in Ohio are required to record the land contract within twenty days of signing. In Illinois, however, land contracts for residential property, also known as installment sales, must be recorded within ten business days of sale.

If you’re considering or in the process of entering into a land contract, consult a certified real estate lawyer in your state to find out exactly when and if you must record the contract with the state.

Who Pays Property Taxes on a Land Contract? 

Typically, the buyer is responsible for paying property taxes on a land contract. However, in some cases, the buyer will only take on the financial responsibility and the owner will continue to make the actual payments, passing the cost along to the buyer. 

Who Chooses the Interest Rates on a Land Contract?

The seller determines the interest rate on a land contract.