Mark Don McInnes Sandpoint Realty 208-255-6227

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  • Title Insurance When Refinancing Your Loan

    Lower interest rates have motivated you to refinance your home loan. The lower rate may save you a tremendous amount of money over the life of the loan, but you should also expect to pay the lender the typical closing costs associated with any new loan, including service fees, points, title insurance protection and other expenses.

    Why do I need to purchase a new title insurance policy on a refinanced loan?

    To the lender, a refinance loan is no different than any other home loan. So, your lender will want to insure that their new loan is protected by title insurance, just as the original lender required. Therefore, when you refinance you are buying a title policy to protect your lender.

    Why does a Lender need title insurance?

    Most lenders generate loans and then immediately sell those loans to secondary market investors, such as FannieMae.

    FannieMae, in order to protect its security interest in the loan, requires title insurance coverage. Even those lenders who keep original loans in their portfolio are wise to get a lenders policy to protect their investment against title related defects.

    When I purchased my home, didn’t I also buy a lender’s policy?

    Perhaps. Who pays for the lender’s policy on a purchase loan varies regionally and by the terms of individual contracts.

    However, even if you did buy a lender’s policy when you purchased your home, the lender’s policy remains in force only during the life of the loan that was insured. If you refinance, the old loan is paid off (the “life” of the loan expires) and a new loan is issued for which the lender will require a new title insurance policy.

    What about my original title insurance policy?

    When you bought your home, you purchased a Homeowners title policy. The Homeowners’ policy stays in force as long as you or your heirs own the home. When you refinance, your lender will often require that you purchase a new lender’s policy to protect their new security interest in the property. Thus, you are buying a policy to protect your lender, not a new Homeowner’s policy.

    What could possibly have happened since I purchased my home which warrants a new lender’s policy?

    Since the time that the original loan was made, you may have taken out a second trust deed on the house or had mechanic’s liens, child support liens or legal judgments recorded against you – events that could result in serious financial losses to an unprotected lender. Regardless if it has been only 6 months or less since you purchased or refinanced your home, a myriad of title defects could have occurred. While you may not have any title defects, many Homeowners do. The only way for a lender to adequately protect itself is to get a new lender’s policy each time you purchase or refinance your home.

    Are there any discounts available for title insurance on a refinance transaction?

    Yes. Title companies offer a refinance transaction discount or a short-term rate. Discounts may also be available if you use the same lender for your refinance loan and your original loan. Be sure to ask your title company how they can save you money.

    Article by CLTA

  • Title Insurance Requirements for Insuring Trusts

    In today’s world of busy probate courts and exorbitant death taxes, the living trust has become a common manner of holding title to real property. The following may help you understand a few of the requirements of the title insurance industry if title to property is conveyed to the trustee of a living trust.

    What is a trust?

    An agreement between a trustor and trustee for the trustee to hold title to and administer designated assets of the trustor for the use and benefit of one or more beneficiaries.

    Can a trust itself acquire and convey interests in real property?

    No. The trust is an arrangement between a trustee and the trustor. Only the trustee, on behalf of the trust, may own and convey any interest in real property. The trustee may only exercise the powers granted in the trust.

    What will the title company require if a trustee holds the title to the property which is part of the trust?

    A certification of trust containing the following information:

    1. Date of execution of the trust instrument,
    2. Identity of the trustor and trustee,
    3. Powers of the trustee,
    4. Identity of person with power to revoke trust, if any,
    5. Signature authority of the trustees,
    6. Manner in which title to the trust assets should be taken,
    7. Legal description of any interest in the property held by the trust, and
    8. A statement that the trust has not been revoked, modified, or amended in any manner which would cause the certification to be incorrect and that the certification is being signed by all currently acting trustees of the trust

    My trust contains certain amounts of money to be given to various charities which is none of your business. Can I omit these pages?

    Because many different provisions may be on the same page, the answer must be no — but if the title company requires a copy of the trust, it may accept a copy with those amounts blacked out.

    If there is more than one trustee, can just one sign?

    Maybe. The trust must specifically provide for less than all to sign.

    Can the trustee give someone a power-of-attorney?

    Only if the trust specifically provides for the appointment of an attorney-in-fact.

    What will the title company require if all the trustees have died or are unwilling to act?

    If the trustor is not able to do so, or the trust provisions prohibit the trustor from appointing a new trustee, the court may do so.

    How does a notary acknowledge the signature of the trustee?

    Title is vested in the trustee. Hence, if the trustee is an individual or a corporation, then the new general form of acknowledgment will be prepared to reflect the intrinsic nature of the trustee.

    How would the deed to the trustee ordinarily be worded to transfer title to the trustee?

    “John Doe and Mary Doe, as trustees of the Doe family trust, under declaration of trust dated January 1,1992.”

    Are there any limitations on what a trustee may do?

    Yes, the trustee is limited principally and most importantly by the provisions of the trust and, thus, may only act within the terms of the trust. The probate code contains general powers which, unless limited by the trust agreement, are sufficient for title insurers to rely on for sale, conveyance, and refinance purposes.

    Article by CLTA

  • Thinking About Buying a Foreclosure?

    With the housing bubble burst and the subprime mortgage crisis, millions of homeowners found themselves unable to make their mortgage payments. Many found themselves owing more on the house than the home was worth. Many just walked away from their homes. As a result of these complicated issues, millions of homes were foreclosed.

    While this isn’t the only reason for which homes are foreclosed, it has been a widespread one. With all the foreclosed properties, there has also been extensive interest in buying these properties at a bargain price.

    It is true that foreclosed properties can be priced at a significant discount, but they are also a much riskier investment. Before making an offer on a foreclosed property, do your due diligence.

    Things you must do before buying a foreclosure:

    • Do a title search – make sure that when you purchase a foreclosure that you are the only person who has any ownership claim
    • Check for liens – find out if there are any liens against the property because you will be responsible for paying them
    • Check for a second mortgage – you don’t want to be surprised by an extra mortgage that you will need to pay
    • Know how good of a “bargain” you’re getting – foreclosures are sold “as is” and in many cases you will not be able to do a proper inspection. You may end up paying thousands of dollars repairing the property before it is fit to be lived in.

    It is also important to consider that there are different types of foreclosure properties and each type comes with its own advantages and disadvantages. The different types of foreclosure purchases are:

    1. Pre-foreclosure
    2. Auction
    3. Real Estate Owned (REO), also called “bank owned”

    Pre-Foreclosure

    A pre-foreclosure is when you buy the home directly from the homeowner, before the bank officially forecloses. This type of purchase does not require as much capital as other foreclosures. Also, since you are purchasing straight from the homeowner, you will be able to gather all of the necessary information, such as inspection reports, title information, etc. that may not be available with other foreclosure properties. Once you take over the mortgage, you will be responsible for all future payments as well as any overdue back payments.

    Auction

    A foreclosure property will usually end up at an auction. Real estate auction practices vary by state but common practice is for the auction to be held on courthouse steps, in front of the foreclosed home, or at the county clerk’s office.

    Real estate auctions offer the best chance for a great deal but also hold the greatest risk. Auction properties are sold as is, with no opportunity for potential buyers to perform inspections. When buying a home at auction, the buyer must pay cash, usually a cashier’s check. It is also possible that there may still be tenants living in the home. In such a case, you would be responsible for the often costly eviction process.

    REO

    Once a foreclosure has gone to auction and failed to sell, it becomes a Real Estate Owned, or bank owned, property. Most homes do not sell at auction, most fail to even get any bids.

    An REO property is the least likely of the foreclosure properties to represent a bargain, but it is also the least risky. The property can be fully inspected, any title issues can be found and dealt with, and the sale can be subject to a mortgage. REO properties also tend to be in better condition than other foreclosure properties.

    Another thing to keep in mind when purchasing a foreclosure is that some states have a redemption period that allows the original owner to buy back the property by paying the remaining balance owed. You may be able to have this redemption period waived, so check the state laws on this topic before purchasing.

    Still interested in buying a foreclosure property? If so, always do your research before purchasing!

  • The No-Cost Thirty Year Fixed Rate Mortgage

    There really is no such thing as a no-cost mortgage loan. There are always costs, such as appraisal fees, escrow fees, title insurance fees, document fees, processing fees, flood certification fees, recording fees, notary fees, tax service fees, wire fees, and so on, depending on whether the loan is a purchase or a refinance. The term “no-cost” actually means that your lender is paying the costs of the loan. All a no-cost loan means is that there is no cost to you, the borrower.

    Except that you pay a higher interest rate.

    Understand How Loans Are Priced

    A variation of the no-cost loan is the “no points” loan, or even the “no points, no lender fees” loan. On these loans you pay all the costs associated with buying a house or refinancing, but you do not have to pay the lender associated fees or points. However, since lenders and loan officers do not do anything for free, the profit has to come from somewhere.

    So where does it come from?

    First, you have to understand how loans are priced and how mortgage lenders and loan officers earn income. Each morning mortgage companies create rate sheets for loan officers. The rates usually change slightly from day to day. In volatile markets they change several times a day. On the rate sheet, there are many different programs, including the thirty year fixed rate.

    There will be one column that lists several different interest rates and another column that lists the cost for that particular rate. For example:

    Rate Cost (points)
    6.250% 2.000
    6.375% 1.500
    6.500% 1.000
    6.625% 0.500
    6.750% 0.000
    6.875% (0.500)
    7.000% (1.000)
    7.125% (1.500)
    7.250% (2.000)

    In the above example, 6.75% has a “par” price, which means it has a zero cost. The lower in rate you go, the higher the cost, or points. A point is equal to one percent of the loan amount. The parentheses in the cost column for the higher interest rates indicate a negative number. For example, (1.500) equals -1.500, which means instead of having a cost associated with the loan, the lender is willing to pay out money for those interest rates. This is called premium or rebate pricing.

    Zero Cost Loans

    How Mortgage Companies and Loan Officers Make Money

    The above rate sheet is not a rate sheet designed for public review. In fact, most lenders have a policy that the public cannot see their internal rate sheet. This rate sheet is designed for loan officers and the cost column is the loan officer’s cost, not the cost to the borrower. When the loan officer gives you an interest rate quote, he will add on a certain amount, usually one to one and a half points. Most companies leave it up to the loan officer’s discretion how much to add on to the base cost. However, they usually require at least a minimum add-on, which is usually one point.

    The loan officer’s commission depends on his split with the company, which varies. He receives a portion of the add-on and the rest goes to the company.

    If we assume the loan officer is adding on one point, and you were willing to pay one point for your loan, then your rate would be (according to this rate sheet) 6.75%. You would pay one percentage point and receive an interest rate of six and three-quarters. If you wanted a lower rate and were willing to pay two points, you could get 6.5%. If you wanted a “no points” loan, then your rate would be 7%. The loan officer and the mortgage company would split the one point rebate, listed as (1.000) on the rate sheet.

    See how it works?

    In addition to the cost noted on the rate sheet above, lenders have certain other fees they collect, too. These can include document fees, processing fees, underwriting fees, warehouse fees, flood certification fees, wire transfer fees, tax service fees, and so on. Usually, you will not be charged all of these fees, it is just that different lenders call them different things. Some of them are legitimate costs to the lender and some of them are simply fees designed to generate additional income to the mortgage company. They are customary in today’s mortgage market and can vary from around $600 to $1,300. In addition, there will usually be an appraisal fee and a credit report fee. Appraisals and credit reports are usually contracted out to independent companies even though these are considered to be lender fees.

    Note that it is common for companies who charge higher fees to have a slightly lower interest rate and companies that charge lower fees will usually have a slightly higher interest rate. So if you shop entirely based on fees, you may actually spend more money in the long run because your interest rate may be higher.

    The point is that if you want a “no points – no lender fees” loan, then on our rate sheet above, you may get an interest rate of 7.125%. That is because the loan officer has to bump the interest rate even further than on a “no points” loan in order to cover his own company’s fees.

    If you want a “no cost” loan, then the loan officer has to bump your interest rate even further. That is because all of the costs on your purchase or refinance do not come from the lender. The escrow or settlement company involved in your transaction will charge a fee that must be paid. The lender will require title insurance and the title insurance company charges a fee for providing this insurance. If your new lender requires information from your homeowner’s association (if you have one) then the homeowner’s association will most likely charge a fee for providing those documents. If you are refinancing, your current lender will usually charge at least two fees: a demand fee, and a reconveyance fee. The demand fee is charged simply for providing payoff information. The reconveyance fee is charged because your current lender prepares a document that releases your property as collateral for their outstanding loan. This document is called a reconveyance.

    These charges will add about one additional point to how much the loan officer must collect in premium pricing in order to cover the costs associated with your refinance or purchase. For a zero cost loan, he will normally need to collect somewhere in the neighborhood of two and a half points. Because points are a percentage of your loan amount and most of the costs are fixed, it takes fewer points to provide zero costs on higher loan amounts. On smaller loan amounts it takes more. One percent of $200,000 is $2,000 and one percent of $100,000 is only $1,000, so you can see how it is easier to cover costs on larger loans.

    Does it make sense to do a zero cost loan?

    On a $200,000 thirty year fixed rate loan, the difference in monthly mortgage payments will be about $87, using the example rate sheet on the first page. Over thirty years, it works out that you will pay more than $30,000 extra for getting a zero cost loan. So if you intend to remain in the home for a long period of time it just doesn’t make sense.

    Suppose you intend to stay for only five years. On a purchase, using the $200,000 example, if you stayed longer than fifty-five months, it would make more sense to pay your own costs and get the lower interest rate. If you kept the loan for a shorter time, then it makes more sense to pay zero costs and get a higher interest rate.

    Except for one thing.

    If you knew you were only going to be staying in the home for five years you would probably not want a thirty-year fixed rate, anyway. You would get a loan that has a fixed payment for the first five years, then convert to an adjustable rate or whatever fixed rates are five years from now. These loans have an interest rate almost a half percent lower than thirty year fixed rate loans. Since it is practically impossible to do a zero cost loan on this type of loan, you would have to compare a zero cost thirty year fixed rate loan to paying points on a loan with a fixed payment for five years.

    The difference in payments would be about $150. The two and a half point rebate equals $5,000. Working out the math, if you stayed in the home longer than thirty-three months, it would make more sense to pay the points and get the loan with the five-year fixed rate.

    Finally, carry the discussion one step further. Suppose you know you are going to be in the new loan for less than three years? Doesn’t it make sense to get a “zero cost” loan then?

    No.

    Then you get an adjustable rate loan. As long as the start rate is two percent lower than the current fixed rate, you cannot lose. The first year you will save a lot of money. The second year you will probably break even. The third year, you will probably give up some of the savings from the first year, but not all of it.

    Zero cost loans just don’t make sense for most homebuyers.

    But they sound really good in an advertisement!

    Exceptions:

    • On a FHA Streamline Refinance Without an Appraisal (not a purchase – which is what the article talks about), it makes sense to do a zero cost loan. This is mostly because the new loan has to be exactly the same amount as the existing balance of the current loan.
    • If the homebuyer only has enough money for a down payment and none to cover closing costs, PLUS no arrangement can be made for the seller to pay closing costs, then zero cost may make sense. (However, I would still recommend negotiating terms with the seller – be willing to pay a higher price in exchange for the seller paying your costs.)

  • The Functions of an Escrow

    Buying or selling a home (or other piece of real property) usually involves the transfer of large sums of money. It is imperative that the transfer of these funds and related documents from one party to another be handled in a neutral, secure and knowledgeable manner. For the protection of buyer, seller and lender, the escrow process was developed.

    As a buyer or seller, you want to be certain all conditions of sale have been met before property and money change hands. The technical definition of an escrow is a transaction where one party engaged in the sale, transfer or lease of real or personal property with another person delivers a written instrument, money or other items of value to a neutral third person, called an escrow agent or escrow holder. This third person holds the money or items for disbursement upon the happening of a specified event or the performance of a specified condition.

    Simply stated, the escrow holder impartially carries out the written instructions given by the principals. This includes receiving funds and documents necessary to comply with those instructions, completing or obtaining required forms and handling final delivery of all items to the proper parties upon the successful completion of the escrow.

    The escrow must be provided with the necessary information to close the transaction. This may include loan documents, tax statements, fire and other insurance policies, title insurance policies, terms of sale and any seller-assisted financing, and requests for payment for various services to be paid out of escrow funds.

    If the transaction is dependent on arranging new financing, it is the buyer’s or the buyer’s agent’s responsibility to make the necessary arrangements. Documentation of the new loan agreement must be in the hands of the escrow holder before the transfer of property can take place. A real estate agent can help identify appropriate lending institutions.

    When all the instructions in the escrow have been carried out, the closing can take place. At this time, all outstanding funds are collected and fees- such as title insurance premiums, real estate commissions, termite inspection charges- are paid. Title to the property is then transferred under the terms of the escrow instructions and appropriate title insurance is issued.

    Payment of funds at the close of escrow should be in the form acceptable to the escrow, since out-of-town and personal checks can cause days of delay in processing the transaction.

    The following items represent a typical list of what an escrow holder does and does not do:

    THE ESCROW HOLDER:

    • serves as the neutral “stakeholder” and the communications link to all parties in the transaction;
    • prepares escrow instructions;
    • requests a preliminary title search to determine the present condition of title to the property;
    • requests a beneficiary’s statement if debt or obligation is to be taken over by the buyer;
    • complies with lender’s requirements, specified in the escrow agreement;
    • receives purchase funds from the buyer;
    • prepares or secures the deed or other documents related to escrow;
    • prorates taxes, interest, insurance and rents according to instructions;
    • secures releases of all contingencies or other conditions as imposed on any particular escrow;
    • records deeds and any other documents as instructed;
    • requests issuance of the title insurance policy;
    • closes escrow when all the instructions of buyer and seller have been carried out;
    • disburses funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs;
    • prepares final statements for the parties accounting for the disposition of all funds deposited in escrow (these are useful in the preparation of tax returns).

    THE ESCROW HOLDER DOES NOT:

    • offer legal advice;
    • negotiate the transaction;
    • offer investment advice.

    Your local title company should be happy to provide additional information.

    Article by CLTA

  • The Advantages of Different Types of Mortgage Lenders

    What kind of lender is best?

    If you ask a loan officer, “What kind of lender is best?” the answer will be whatever kind of company he works for and he will give you a list of reasons why. If you meet the same loan officer years later, and he works for a different kind of lender, he will give you a list of reasons why that type of lender is better.

    REALTORS® will also have differing opinions, and those opinions have and will continue to change over time. In the past, it seemed like most would recommend portfolio lenders. Now, they usually recommend mortgage bankers and mortgage brokers. Most often they direct you to a specific loan officer who has demonstrated a track record of service and reliability.

    This article discusses the advantages and disadvantage of different types of institutions, not the individual loan officers. However, it is often more important to choose the correct loan officer, not the institution. The loan officer has many responsibilities, one of which is to act as your representative and advocate to the lender he works for or the institutions he brokers loans to. You want someone who has proven dependable and ethical in the past.

    Regarding the institutions, the truth of the matter is that each type of lender has strengths and weaknesses. This does not even take into account the variety of other factors that influence whether a lender is good or bad. Quality can vary, depending on the loan officer, the support staff, which branch or office you are obtaining your loan from, and a variety of other factors.

    PORTFOLIO LENDERS

    Savings & Loans are quite often portfolio lenders, as are some banks. Portfolio lenders generally promote their own portfolio loans, which are usually adjustable rate loans. They will often pay more compensation to their loan officers for originating a portfolio product than for originating a fixed rate loan. You may also find that they are not as competitive as mortgage bankers and brokers in the fixed rate loan market.

    However, it is often easier to qualify for a portfolio loan, so borrowers who may not qualify for a fixed rate loan may be able to obtain a loan from a portfolio lender. A borrower may be able to qualify for a larger loan from a portfolio lender than he could obtain from a fixed rate lender.

    Portfolio lenders also can serve as niche lenders because certain things are more important to them than meeting the more standardized underwriting guidelines of a mortgage banker. An example would be a savings & loan, which is more concerned with an individual’s savings history than being able to fully document income and other things.

    If you apply for a loan with a portfolio lender and you are declined, you usually have to start the process over with a new company.

    MORTGAGE BANKERS

    If we are talking about the larger mortgage bankers, you can count on them having several strengths. For the biggest ones, you will recognize the brand name.

    Usually, they are much better at promoting special first time buyer programs offered by states and local governments, that have lower interest rates and costs than the current market rate. These programs are often available to buyers who have not owned a home in the last three years and fall within certain income guidelines.

    Mortgage bankers may incur problems because they are just too big to manage, or they may operate like well-oiled machines.

    If you are buying a home and you need a VA or FHA loan and the development you are buying in has not yet been approved, they will be better at getting it approved than other lenders.

    If your home loan is declined for some reason, many mortgage bankers allow their loan officers to broker the loan to another institution. However, because your loan officer is so used to promoting the company’s product, he may not be familiar with which institution may be the best one to submit your loan to. Another reason is because wholesale lenders do not expect to get many loans from direct mortgage bankers, so they do not expend much marketing effort on them.

    BANKS and SAVINGS & LOANS

    Their major strength is that you will recognize their name. In addition, they will usually be operating as a mortgage banker, a portfolio lender, or both, and have the same weaknesses and strengths.

    MORTGAGE BROKERS

    The major strength of mortgage brokers is that they can shop the wholesale lenders for the best rate much easier than a borrower can. They also learn the “hot points” of certain wholesale lenders and can handpick the lender for a borrower that may be unique in some way. He will be able to advise you whether your loan should be submitted to a portfolio lender or a mortgage banker. Another advantage is that, if a loan gets declined for some reason, they can simply repackage the loan and submit it to another wholesale lender.

    One additional advantage is that mortgage brokers tend to attract a high number of the most qualified loan officers. This is not universal because mortgage brokers also serve as the training ground for those just entering the business. If you have a new loan officer and there is something unique about you or the property you are buying, there could be a problem on the horizon that an experienced loan officer would have anticipated.

    A disadvantage is that mortgage brokers sometimes attract the greediest loan officers, too. They may charge you more on your loan, which would then nullify the ability of the mortgage broker being able to shop for the lowest rate.

    WHOLESALE LENDERS

    Borrowers cannot get access to the wholesale divisions of mortgage bankers and portfolio lenders without going through a broker.

    When REALTORS® or Builders Recommend a Lender

    If your REALTOR® or builder makes a suggestion for a lender, be sure to talk to that lender. One reason REALTORS® and builders make suggestions is the fact that they have regular dealings with this lender and have come to expect a certain amount of reliability. Reliability is extremely important to all parties involved in a real estate transaction.

    On the other hand, a recent trend in mortgage lending has been for real estate companies and builders to own their own mortgage companies or create “controlled business arrangements” (CBA’s) in order to increase their profitability. These mortgage brokers sometimes become used to having what is essentially a captured market and may not necessarily offer you the lowest rates or costs.

    Some real estate companies also offer different types of incentives to their REALTORS® in exchange for recommending their company-owned mortgage and escrow companies or lenders with whom they have CBA’s. Dealing with one of these lenders is not necessarily a bad thing, though. The builder or real estate company often feels they have more ability to expedite matters when they own the company or have a controlled business relationship. They cannot usually influence the underwriting decision, but they can sometimes cut through red tape to handle problems or speed up the process. Builders are especially forceful on having you use their lender. One reason is that there are certain intricacies in dealing with new homes. If you use a loan officer who usually deals with refinances or resale home loans, he may not even be aware of how different it is to close a mortgage on a new home and this can lead to problems or delays.

    It is in your interest to know if there is any kind of ownership relationship or controlled business arrangement between the real estate or builder and the lender, so be sure to ask. Do not automatically disqualify such a lender, but be sure to be more vigilant on getting the best interest rate and the lowest costs.

    Conclusion

    Make sure to do a little shopping. By knowing the interest rates in your market and making sure your loan officer knows you are looking at rates from other institutions, you can use that as leverage to make sure you are obtaining the best combination of service and the lowest rates.

  • Statements of Information

    What’s in a name?

    When a title company seeks to uncover matters affecting title to real property, the answer is, “Quite a bit.”

    Statements of Information provide title companies with the information they need to distinguish the buyers and sellers of real property from others with similar names. After identifying the true buyers and sellers, title companies may disregard the judgments, liens or other matters on the public records under similar names.

    To help you better understand this sensitive subject, the Land Title Association has answered some of the questions most commonly asked about Statements of Information.

    What is a Statement of Information?

    A Statement of Information is a form routinely requested from the buyer, seller and borrower in a transaction where title insurance is sought. The completed form provides the title company with information needed to adequately examine documents so as to disregard matters which do not affect the property to be insured, matters which actually apply to some other person.

    What does a Statement of Information do?

    Every day documents affecting real property–liens, court decrees, bankruptcies–are recorded.

    Whenever a title company uncovers a recorded document in which the name is the same or similar to that of the buyer, seller or borrower in a title transaction, the title company must ask, “Does this document affect the parties we are insuring?” Because, if it does, it affects title to the property and would, therefore, be listed as an exception from coverage under the title policy.

    A properly completed Statement of Information will allow the title company to differentiate between parties with the same or similar names when searching documents recorded by name. This protects all parties involved and allows the title company to competently carry out its duties without unnecessary delay.

    What types of information are requested in a Statement of Information?

    The information requested is personal in nature, but not unnecessarily so. The information requested is essential to avoid delays in closing the transaction.

    You, and your spouse if you are married, will be asked to provide full name, social security number, year of birth, birthplace, and information or citizenship. If you are married, you will be asked the date and place of your marriage or registered domestic partnership.

    Residence and employment information will be requested, as will information regarding previous marriages or registered domestic partnerships.

    Will the information I supply be kept confidential?

    The information you supply is completely confidential and only for title company use in completing the search of records necessary before a policy of title insurance can be issued.

    What happens if a buyer, seller or borrower fails to provide the requested Statement of Information?

    At best, failure to provide the requested Statement of Information will hinder the search and examination capabilities of the title company, causing delay in the production of your title policy.

    At worst, failure to provide the information requested could prohibit the close of your escrow. Without a Statement of Information, it would be necessary for the title company to list as exceptions from coverage judgments, liens or other matters which may affect the property to be insured. Such exceptions would be unacceptable to most lenders, whose interest must also be insured.

    Conclusion

    Title companies make every attempt in issuing a policy of title insurance to identify known risks affecting your property and to efficiently and correctly transfer title so as to protect your interests as a homebuyer.

    By properly completing a Statement of Information, you allow the title company to provide the service you need with the assurance of confidentiality.

    Article by CLTA

  • Setting the Price

    The price is the first thing buyers notice about your property. If you set your price too high, then the chance of alienating buyers is higher. You want your house to be taken seriously, and the asking price reflects how serious you are about selling your home.

    Several factors will contribute to your final decision. First, you should compare your house to others that are in the market. If you use an agent, he/she will provide you with a CMA (Comparative Market Analysis). The CMA will reflect the following:

    • houses in your price range and area that were sold within the last half-year
    • asking and selling prices of houses
    • current inventory of houses on the market
    • features of each house on the market

    From the CMA, you will learn the difference between the asking price and selling price for all homes sold, the condition of the market, and other houses comparable to yours.

    Also, try to find out what types of houses are selling and see if it applies to your area. Buyers follow trends, and these trends can help you set your price.

    Always be realistic. Understand and set your price to reflect the current market situation.

  • Required Reporting to the I.R.S.

    Sellers of real property will have certain information regarding the sale reported to the Internal Revenue Service.

    This required reporting is a consequence of the Tax Reform Act of 1986; it is intended to encourage taxpayer compliance and aid in audit and enforcement efforts by the I.R.S.

    To help you better understand this subject, the Land Title Association has answered some of the questions most commonly asked about Required Reporting to the I.R.S.

    Who is required to report to the I.R.S.?

    Sellers of real property, under guidelines established by the I.R.S., are required to have their gross proceeds from the sale reported on a Form 1099S. When a settlement agent is used, the I.R.S. makes this agent responsible for the delivery of the information on the Form 1099S.

    The settlement agent generally will be the escrow agent or title company; however, it may be an attorney, real estate broker or other person providing settlement services.

    What is an I.R.S. Form 1099S, and what will be reported?

    The Form 1099S is the reporting form adopted by the I.R.S. for submitting the information required by law.

    The information will be transferred onto magnetic media by the settlement agent who will store the information and make the required report to the I.R.S. The settlement agent is also responsible for keeping a master copy of all transactions reported.

    In general, information required by the I.R.S. falls into the following categories:

    1. The name, address and taxpayer ID number (social security or tax identification number) of the seller(s)
    2. A general description of the property (in most cases an address)
    3. The closing date of the transaction
    4. The gross proceeds of the transaction (even though gross proceeds do not correspond to taxable income)
    5. Any property involved as part of the transaction other than cash or cash equivalent
    6. The name, address and taxpayer identification number of the settlement agent.
    7. Real estate tax paid in advance that is allocable to the buyer.

    On what type of transactions is a Form 1099S required?

    Currently, typical homeowner transactions covered include sales and exchanges of 1-4 family residential properties such as houses, townhouses, and condominiums. Also reportable are sales or exchanges of improved or unimproved land, commercial or industrial buildings, condominiums, stock in a cooperative housing corporation and mobile homes (manufactured homes) affixed to real property.

    Specifically excluded from reporting are foreclosures and abandonment of real property and financing or refinancing of properties.

    What happens if the seller(s) refuses to provide the taxpayer identification number for the Form 1099S?

    The settlement agent is required to request the transferor’s taxpayer identification number(s) (TIN(s)) before the time of closing. You may request a TIN on Form W-9 or use an alternative written request. The IRS has included sample wording of an alternative written request in the instructions for preparation of Form 1099S.

    Should the seller fail to provide the identification number and certify its correctness, the settlement agent may choose to:

    1. Delay the closing of the transactions until the information is furnished, or
    2. Complete the transaction and report to the I.R.S. that an attempt was made to obtain the information from the seller.

    How is the sale reported when there is more than one seller involved or when multiple sellers do not own equal interests in the property?

    Multiple sellers may allocate the gross proceeds among themselves for purposes of reporting. If there is no allocation, an incomplete allocation or conflicting allocations, then the entire gross proceeds will be reported for each seller.

    Where can I go for further information on taxation of real property?

    The I.R.S. provides free publications that explain the tax aspects of real estate transactions. You may wish to order:

    • Publication #523 “Tax Information on Selling Your Home”
    • Publication #530 “Tax Information for Home Owners”
    • Publication #544 “Sales and Other Dispositions of Assets”
    • Publication #551 “Basis of Assets”

       

    To place your order, phone toll-free (800) 829-3676.

    Article by CLTA

  • Plan of Action

    1. Analyze why you are selling – If you understand your motives, you will be able to better negotiate and to get what it is that you want, whether it be a quick sale, high price, or somewhere in the middle.

    2. Prepare your home for the buyer – Maximize the strengths of your property and fix up its weaknesses. You want the buyer to walk away from your home with a lasting good impression.

    3. Find a good real estate agent that understands your needs – Make sure that your agent is loyal to you, and can negotiate to help you achieve your goals. In addition, they should be assertive and honest with both you and the buyer.

    4. Be prepared for negotiation – Learn and understand your buyer’s situation; what are their motives? Can you demand a big deposit from them? Try to lock in the buyer so that the deal goes through.

    5. Negotiate for the best price and the best terms – Learn how to counter offer to get maximum value from every offer.

    6. Make sure the contract is accurate and complete – Be honest with your disclosures; you do not want to lose the deal because you were lying or diminishing your home’s defects. Insist the buyers get a professional inspection. This will protect both you and the buyer.

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