Home Insurance (10)
That is a loaded question. It depends on your personal situation. If your buying a home and using a mortgage company to do so they will tell you the minimum you need. That is not always enough though. Its best to work with a professional and get a policy tailored to your situation.
Short and easy answer it only gives you the money back for the value of the item at the time of loss. Very similar to how you insure a car. Example: If you have a 2013 Honda that you paid $30k. If you crashed said vehicle today its only worth say $15k. that is what you receive. This coverage can be applied to your home and personal property depending on the policy.
Real Estate Attorney (10)
This final number comes together a couple of days prior to closing as the Seller finalizes his/her final tax and Seller credits and as the lender finalizes all of it’s figures. A good real estate attorney will work closely with the Buyer, the title company and the lender to ensure that these figures come together in sufficient time to ensure Buyer obtains the funds and brings them to closing in the manner acceptable to the title company. Typically, if the cash to close is less than $50,000, Buyer may bring a cashier’s check to the closing. If the cash to close is more than $50,000, then the funds need to be wired.
A good Buyer’s real estate attorney should review the Contract during the Attorney Review period to make sure the real estate tax prorations are appropriately calculated in the contract. Property taxes are paid in arrears in the state of Illinois. For example, real estate taxes payable for 2018 are paid in installments in 2019. Therefore, if a property closes in 2019, the Seller will give Buyer a credit at closing for the 2018 real estate taxes that are payable in 2019. If the 2018 real estate tax bill has already arrived, then the Seller will give Buyer a credit at closing for the actual amount disclosed on said real estate tax bill. If the 2018 real estate tax bill has not arrived as of the time of closing, Seller is required to give Buyer a credit at closing for a set percentage of the last ascertainable real estate tax bill to cover any increase in taxes there might be in the 2018 real estate tax bill. Typically in Cook County, this percentage is 110% of the last ascertainable real estate tax bill. Typically, in Lake and other collar counties, this percentage is 105% of the last ascertainable real estate tax bill. The Seller will also give Buyer a credit for either 110% or 105% of the last ascertainable real estate tax bill for the number of days in 2019 that Seller owned the property. Typically, the prorations are final at closing and Buyer bears the responsibility of paying the real estate taxes when the real estate tax bills arrive post-closing.
Typically, the Seller chooses the title insurance company that will issue the title insurance policy and conduct the closing. As soon as the attorney review and inspection issues are resolved, a good Buyer’s real estate attorney should request a copy of the title commitment to review the state of title and the invoice for title services so the Buyer can understand and prepare for the closing costs that are payable at the closing.
Title insurance insures the state of title on the property prior to the Buyer’s purchase of the property – It is insurance that the property the Buyer is about to buy does not contain any restrictions, encumbrances, liens or judgments that would affect the Buyer’s ability to live at and enjoy the property. Just like any kind of insurance, title companies routinely raise exceptions on the policy that are not covered under the insurance. A good real estate attorney will review the title commitment closely prior to the closing on the transaction to ensure that the title is clean and that there are no unwanted exceptions raised on the policy that would affect the Buyer’s ability to live at and enjoy the property.
Buyer can ask Seller to fix things that are broken, constitute a current threat to health or safety or are not performing the function for which the item is intended. An item or appliance that is very old in age may not be part of the inspection contingency as long as it is performing the function for which it is intended. It is crucial for Buyers to be aware of this standard so they can determine if they still want to place an offer on the property fully knowing that the Property has a very old HVAC system or very old roof. Sometimes motivated Sellers may be willing to extend credits to compensate for these items. However, the Contract does not require Sellers to fix or replace these old, yet functioning items.
The 5 business day period following the Seller’s acceptance of the Contract during which time legal changes to the Contract are negotiated with the Seller, via the Attorney Review Letter, taking into account the Buyer’s specific circumstances. This is a very important period in the Contract which allows Buyer’s attorney to suggest changes to the Contract and raise inspection related issues to the Seller. Failure to timely send the Attorney Review Letter will result in Buyer forfeiting the ability to negotiate key issues with the Seller.
: The role of a real estate attorney is primarily to guide the client through the entire process and answer questions related to whatever comes up, i.e. contract matters, title related matters, inspection and loan issues. However, the following is an overview of what the attorney does:
a. Review the Contract and suggest revisions that are favorable to the Buyer during the attorney review period;
b. Negotiate inspection related fixes, repairs and credits with Seller within the inspection contingency period;
c. Review the title commitment and confer with Seller and title insurance company regarding exceptions raised on title that may be unacceptable to Buyer;
d. Negotiate appropriate extensions to the mortgage contingency period to assure that Buyer has the desired amount of time to obtain mortgage approval prior to being obligated to purchase the property;
e. Attend closing and ensure that Buyer gets clean title from the title insurance company and Seller;
f. Attend closing and fully explain the loan documents and all of Seller’s closing documents (including the settlement statement) to the Buyer.
Just like all services, you get what you pay for when it comes to legal services. A typical real estate attorney would charge anywhere from $500-$600 for a routine residential transaction. If you are a first time home buyer and need a lot of guidance and advice, interview a couple of attorneys to get a feel for their personality and their willingness to spend time on your matter. Shopping around for the cheapest attorney may not always yield the best result because an attorney who is charging below market rate may have no incentive to spend time on you and your matter prior to the closing date if you are not compensating them appropriately. Often times, purchasing a home is the single most important and expensive purchase of your lifetime. Do not cheat yourself out of the proper guidance and advice you deserve from a qualified attorney!
While it is ideal to consult with an attorney while contemplating a purchase, that doesn’t always necessarily happen. However, it is a good idea to have someone in mind and have a preliminary consultation with right before placing an offer on a property. An attorney should be brought in immediately after the Seller formally accepts the offer since that acceptance date triggers several deadlines under the Contract in the way of Buyer and Seller obligations.
What Home Buyers Should Know (10)
Understanding the type of loan you have will dictate the type of home you will be eligible to purchase. FHA and VA loans have additional inspection rigor vs. a Conventional Loan
a. VA loans are mortgages guaranteed by the U.S. Department of Veterans Affairs. They’re for people who have served in the military. VA loans’ claim to fame is that they allow
qualified home buyers to put zero percent down and get 100% financing. Borrowers pay a funding fee in lieu of mortgage insurance.
b. USDA loans can be used to buy homes in areas that are designated rural by the U.S. Department of Agriculture. Qualified borrowers can put zero percent down and get 100% financing. You pay a guarantee fee and an annual fee in lieu of mortgage insurance.
c. FHA loans allow for down payments as small as 3.5%. What’s more, the Federal Housing Administration can be forgiving of imperfect credit. When you get an FHA loan, you pay mortgage insurance for the life of the mortgage, even after you have more than 20% equity.
d. Conventional loans is a traditional mortgage from a private lender. It is typically fixed in
its terms and rate
The term “AS-IS” in real estate indicates that the home is being sold in it’s existing condition. The homeowner will not be making repairs nor offer credits for problems the property may have. The sellers still need to disclose what they know are issues with the home according to the “Residential Real Property Disclosure Report”.
The buyer has the responsibility of doing their own due diligence in any purchase. As long as the buyer receives the disclosures and does appropriate inspections the buyer should have a good handle on the condition of the property.
In some cases the seller will grant the buyer a Closing Credit which can be applied to closing costs, however please note that the Closing Credit is negotiated alongside the purchase price and terms. Closing Costs are often between 3%-5% and Sellers do not pay for the buyers costs as they have their own costs to pay, however Closing Cost credits can be negotiated within the purchase price.
Closing costs are the fees and expenses associated with the closing transaction of the home. Closing costs for homebuyers typically ranging from 3% to 5% of the purchase price.
As a buyer, your closing costs may include, but are not limited to:
– Attorney fees – real estate closings usually involve an attorney for the buyer
– Credit report fees – to qualify for a mortgage, your lender will check your credit and may pass this expense on to you
– Loan origination fees – this is a fee your lender charges for processing your loan’s
– Home Inspection – is a limited, non-invasive examination of the condition of a home. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections.
– Appraisal fees – an appraisal is required to verify that the sale price of the property
– Lender’s title insurance – sellers pay the majority of title insurance costs, but the policy that protects the lender is typically the buyer’s responsibility.
– Title search fees – a background check on the title is run to search for unpaid liens
on the property
– Escrow deposits — your lender will probably require you to pre-pay a few months of taxes and insurance to form a “cushion” in your loan’s escrow account
– Recording fees — these are paid to your city or county for recording your purchase.
– Underwriting fees — these are the cost of evaluating your loan application
a. Principle – is the amount of money you borrowed
b. Interest – is the fee the bank/lender charges for the use of their money/loan
c. Taxes – apply to the property itself and are based on the rates the city/county in which the property is in has determined. Taxes are a big part of owning a property, as they can cost the homeowner thousands of dollars per year. Taxes can be built into the mortgage via an escrow account however if not included in escrow you are responsible for timely payment on your own.
d. Insurance – lenders require that the property from which you are seeking a mortgage
are covered by homeowners insurance. In almost all cases, the price of this insurance is included into the monthly mortgage payments.
If you have been pre-approved or you have applied for a home loan DO NOT make any major purchases (such as a car, appliances, furniture) during the home buying process as it may change your debt-to-income ratios which can disqualify you from purchasing a home.
Tax exemptions allow the homeowner a certain dollar amount or percentage of the home value from property taxes. Types of exceptions include:
– Homestead/Homeowner – apply to primary residences, not rental properties or
– Senior Citizen – provides tax relief by reducing the equalized assessed valuation of an eligible residence. This savings is in the form of a deduction on the second- installment real estate tax bill. The home must be the primary residence and the homeowner must be at least 65 years of age (other criteria may apply)
– Senior Freeze – allows qualified senior citizens to apply for a freeze of the equalized assessed value (EAV) of their properties for the year preceding the year in which they first apply and qualify for this exemption
– Disabled Veterans Homeowner – Veterans with a service-connected disability as certified by the U.S. Department of Veterans Affairs are eligible for this annual
exemption. It reduces by certain amounts the Equalized Assessed Value (EAV) on a disabled veteran’s primary residence, very likely lowering the tax bill.
– Disabled Person – this exemption provides disabled persons with an annual $2,000 reduction in the equalized assessed value (EAV) of the property.
Make sure to fully understand the tax history of the property as well as what you will be expected to pay once purchasing the home. The home you are looking to purchase may have tax exemptions that you may not qualify for therefore increasing the taxes you are expected to pay.
In most cases the buyer does not pay their realtor a commission, the realtor gets paid by the seller at the time the home closes. The seller in essence is paying a buyers realtor to bring them a buyer that will purchase their home. Buyers should keep in mind that a listing agent and/or the sellers agent doesn’t protect their interests that is what it’s very important for a buyer to have their own realtor who works for them and guides them through the home-buying process from beginning to end.