Start Your Journey
A Comprehensive Homebuyer's Guide
A Message for My Buyers
I'm providing this buyer's guide as a resource for the ever-changing process of buying your home. Whether you've purchased a home before or are considering owning your first home, the buying process is almost never routine.
The information in this guide, along with my experience and expertise, will help you navigate the process of finding, negotiating, and settling on your next home. While the information is important, I'll provide you with additional assistance that will be essential to a successful experience.
Thank you for trusting me to assist you with your real estate goals.
Enjoy your journey!
Jean Beatty
Finding a home seems easy —
buying a home is hard.
I'M HERE TO HELP YOU WITH THE HARD PART
My Buyer's Guide is designed with YOU in mind. I know you have questions about how to achieve the goals you have set for your next home, and I have the strategies to get you there. But more importantly, I want you to feel empowered by the choice you made to purchase your home with my expertise.
I WILL HELP YOU GET IT RIGHT
That means due diligence, a legal term for being careful. What are the market dynamics impacting the value of the property? Today - not last month. What is the right offer and negotiating strategy? What should you look for regarding property condition, improvements, maintenance? What are the big problems that matter, and how can I handle them? I'm your trusted advisor and I can help you answer these questions.
I WILL PROTECT YOUR MONEY (AND YOUR SANITY)
Some buyers may think they are overpaying for a house right now. But how do you know what's enough, and what's too much? Tens of thousands of dollars may hinge on the answer to that question, and I'm prepared to help you answer it. I will fight for you, and guide you along the way.
A real estate agent who represents a seller has a legal responsibility to their client to have you pay as much as possible for their home, on terms most favorable to the seller. My job is to have you keep as much of your money as possible, and secure the terms that work best for you. And remember: I don't get paid just for what I do. I earn my professional fees because of what I know.
WHAT HOMEBUYER REPRESENTATION MEANS WORKING WITH my team
Here's the truth: Interest rates have been persistently high. Home prices also remain high. Many sellers are resistant to negotiating, even as the number of homes available to buyers grows.
It can be a tough market for buyers. I said tough, but not impossible. If you want to purchase a home right now, I'm prepared to help make that happen. It just takes strategy, smarts, and tenacious representation.
What your real estate agent does for you
Clarifies your wants and needs
Start the process by creating a list that identifies your "wants and needs" for the perfect home. I will advise you on prioritizing this list to help you meet your goals.
Leads the home search
I will set up a customized on-line search using BrightMLS and our online search tool. These are the most comprehensive tools available to find homes that are for sale or coming soon. During your search, you will receive real-time notifications of new listings and price changes based on your search criteria.
Help determine suitability
I'll help you strategically manage your home search. After analyzing your wants and needs, I'll preview properties and outline the strengths and weaknesses of each listing to help you determine which homes you want to tour in person. In competitive markets, it's critical to take the time to know what you're looking for so that you're confident in your offer and ready to take action.
PREPARES AND NEGOTIATES PURCHASE AGREEMENTS
When you find the home of your dreams, I'll help you craft a strategic offer that stands the best chance of success. Every real estate market is unique, and the negotiation approach needs to be tailored precisely to the current conditions. As your experienced agent, I'll leverage my expertise to guide you through the offer process, ensuring we put forward the most compelling proposal possible.
OVERSEES THE CONTRACT PROCESS
After ratification, there are many deadlines and contractual obligations. Attention to detail is important and I will ensure those deadlines are met. Although real estate transactions should be well planned and managed, there are no guarantees that last-minute issues will not arise. It is my systems, experience, and transaction management skills that will help minimize the impact of any surprises and lead to a resolution to get your contract to the finish line.
Types of representation in MD, DC, and VA
What is Agency?
When you're buying or selling a home, understanding agency is crucial. In real estate, agency is the legal relationship between you and your real estate brokerage that clearly defines our duties and obligations to each other. Essentially, it's how I, as a licensed agent, become your trusted representative and advocate throughout the entire sales transaction.
The agreement you will sign establishes an exclusive relationship between you and Washington Fine Properties. I always encourage my clients to carefully review all paperwork. This includes understanding not just my role, but also the associated costs and your responsibilities in the process.
Choosing the right agent is like selecting a guide for an important journey. I'm here to help you navigate the complex world of real estate, offering expertise and support every step of the way. Take the time to ask me questions, understand the process, and ensure you're completely comfortable with our partnership before we move forward. Your confidence and understanding are key to a successful home buying or selling experience.
Seller representation
The property owner has signed an agreement with the brokerage. The brokerage and agent work for the seller. The agent will explain all seller costs upfront, including whether to offer buyer incentives to help sell the property.
BUyer representation
The buyer has signed an agreement with the brokerage. The brokerage and agent work for the buyer. The agent will explain all buyer costs upfront, including the agent's fee that the buyer pays.
Maryland
Dual Agency: One real estate company represents both the buyer and seller
Intra Company Agent: Two different agents from the same company represent the buyer and seller separately
Note: One agent cannot
represent both parties in the same deal
Washington, DC
Dual Agency: One agent works for both the buyer and seller
Designated Representation: Two different agents from the same company work separately - one for the buyer, one for the seller
Virginia
Dual Agency: One agent or company represents both the buyer and seller in the same transaction. Both parties must agree to this arrangement in writing
Designated Representation: Two separate agents from the same company each represent one party - one works for the buyer, the other for the seller
All Jurisdictions
Washington Fine Properties does not represent both parties through Dual Agency.
Offers of compensation for your agent
Real estate agents are skilled professionals who oversee every facet of property transactions, often dedicating months or even years to helping clients reach their homeownership objectives. They leverage their knowledge, connections, and negotiation expertise to minimize your time investment and reduce stress while securing your ideal property under your preferred terms.
During your first consultation, your agent will explain their compensation structure and detail how they'll safeguard your interests while ensuring a smooth, predictable experience. Compensation typically takes the form of either a percentage of the final sale price.
Your agent's professional fee covers numerous essential services, including managing all paperwork and documentation, leveraging technology and industry connections for property searches, monitoring critical deadlines, interpreting complicated legal agreements, arranging inspections and coordinating access for contractors and vendors, analyzing inspection findings, overseeing the final steps to closing, and maintaining clear communication with timely updates, expert recommendations, guidance, and ongoing support throughout the entire process and beyond.
What you should consider before buying your home
Your Realtor® will discuss with you the different disclosure laws in your jurisdiction. The obligations of the seller vary by locality. To make sure you are comfortable with the condition of the home you are buying, you may consider including the following in your offer:
- A home inspection contingency — I recommend hiring a licensed expert to inspect the home, which will give you important information about its condition.
- You might also want to negotiate additional inspections, such as radon, lead paint, or chimney.
- A wood destroying insect inspection — this will let you know that the home is free of active infestation and visible structural insect damage.
- A survey to identify the relationship of existing structures to the property lines and any easements of record.
- An appraisal to determine whether the value of the home is sufficient collateral for the mortgage. This is typically required by the lender.
Unless you and the seller agree otherwise, the property will be conveyed free and clear of debris, broom clean, and in substantially the same condition as the date identified in the contract.
If the property was built prior to 1978, the seller must disclose the existence of lead-based paint in the home if they have actual knowledge. If they have knowledge, they should give you copies of any lead-based paint reports.
You should receive a copy of the HUD Lead-Based Paint booklet "Protect your Family from Lead in your Home" and the seller should allow you the opportunity to inspect the property for lead.
What's the Washington area real estate market like?
Agents write contracts
Real estate agents prepare the purchase contract on behalf of the buyer, typically using standardized forms provided by their local Realtor® Association for submitting offers and conducting negotiations. It's crucial to remember that only terms documented in writing and accepted by all parties will be legally binding, making it essential to ensure all agreed-upon details are included in your purchase agreement.
Different Housing Costs
Housing costs in our market often exceed those in other regions, which may come as a surprise even to buyers expecting premium prices. Your real estate agent will deliver a detailed market comparison and walk you through what makes your chosen community worth the investment.
Kitchen appliances are usually part of the purchase price
In this market, it's standard practice for sellers to include appliances and certain fixtures with the home sale. The seller will specify which items are included, and these should be clearly listed in the sales contract. These are called conveyances.
EXPECT LARGER EARNEST MONEY DEPOSITS
While many parts of the country accept home purchase offers with deposits of 1% of purchase price, the Washington metro area typically requires much more substantial amounts. Here, earnest money deposits generally range from a minimum of 3% to 5% of the home's purchase price.
TRANSACTION SPEED
Contract negotiations typically move at a fast pace under normal conditions. You can expect to receive responses from sellers or need to provide your own responses within just a few hours of exchanging information.
Property Condition Disclosure Requirements
Property condition disclosure laws exist in all states and jurisdictions within our region, though the specific requirements vary by location. Please review the disclosure obligations that apply to your property with your Realtor based on where your property is located.
The home buying process
FINANCING YOUR HOME: ESSENTIAL STEPS
Getting pre-approved for financing should be your first priority before house hunting. Speaking with an experienced lender early helps you understand your budget and monthly payment capacity. You'll want to know exactly what you can afford for mortgage payments, closing costs, agent fees, and other expenses before making any offers.
When you're ready to make an offer, sellers will expect you to include a pre-approval letter that outlines your loan type, interest rate, and demonstrates your qualification for financing. This letter strengthens your position as a serious buyer.
We recommend completing a full loan application with a trusted lender as soon as possible. Once your offer is accepted, you'll typically have just seven days to submit your formal written application, so having this done beforehand keeps you ahead of the timeline and reduces stress during the buying process.
Lender Letter Types
- Pre-Approved: You've submitted a complete written loan application with supporting documents, and the lender has given preliminary approval based on this documentation.
- Pre-Qualified: You've had an initial discussion with the lender about your finances, but they haven't verified your information or made any lending commitments.
WHAT YOU NEED FOR PRE-APPROVAL
To evaluate your application and provide preliminary approval, lenders require these essential documents: a completed loan application (submitted in writing, electronically, or by phone), a credit report review, income verification through pay stubs and tax returns, and confirmation of your assets.
FINAL COMMITMENT LETTER
Once the lender's underwriter has thoroughly reviewed and approved your complete loan application and documentation, you'll receive a commitment letter. This represents the final step after meeting additional requirements.
This commitment is tailored to both you as the borrower and the specific property you're buying. Before issuing this letter, the underwriter will need to review and approve four key items: the property appraisal, termite inspection report, property survey, and title search results.
Executing Your Strategic Home Search
DEFINE YOUR PRIORITIES AND MOTIVATIONS
Work with your agent to clearly outline what matters most to you in a home and explain the reasons behind these preferences. Understanding your underlying motivations helps uncover viable alternatives you might not have initially considered.
COMPREHENSIVE PROPERTY DISCOVERY
Your agent will leverage multiple resources to locate your ideal home, including:
- BrightMLS Access Your agent utilizes BrightMLS, our region's primary multiple listing service, ensuring you receive real-time updates on the newest available properties as they enter the market.
- Washington Fine Properties' search platform is designed to connect you and your agent through every step of your real estate journey including your initial home search.
- New Construction Opportunities Since new homes aren't always listed in BrightMLS, our team draws on previous builder relationships, maintaining ongoing connections to stay current on available inventory from developers of all sizes.
- Exclusive Off-Market Listings Your agent's industry connections provide access to properties not yet publicly marketed, giving you a competitive advantage and potentially expanding your options in tight markets.
- Pre-Market Intelligence Through our weekly team meetings and daily internal communications, our associates share upcoming listings and buyer needs, often providing advance notice of properties before they're officially available.
- For Sale By Owner Properties Many homeowners selling independently are willing to work with buyer's agents. Discuss with your agent whether pursuing these opportunities aligns with your search strategy.
DISCOVER YOUR IDEAL NEIGHBORHOODS
EXPLORE LOCAL MARKET INSIGHTS
Real estate success depends on local knowledge, and The Jean Beatty Group specializes in hyperlocal expertise. We connect you with communities where you'll feel at home. Your agent will guide you toward the areas that resonate most with your lifestyle and goals.
FOCUS AND DECIDE
The home buying process involves narrowing down options as much as discovering possibilities. Work with your agent to clarify your essential requirements.
- Love versus Like: Finding a home with every desired feature is rare. Most buyers purchase homes that meet about 85% of their wishlist, making it crucial to distinguish between homes you truly love and those you simply like.
- Maintain Flexibility: When making offers and negotiating terms, having backup options provides confidence and leverage throughout the process.
- Measure Your Enthusiasm: Ask yourself: would you feel genuinely disappointed if someone else bought this home? If so, it's time to move forward with an offer.
IMPORTANT CONSIDERATION
While numerous websites offer automated property valuations during your search, these computer-generated estimates often rely on incomplete or outdated information. These algorithmic valuations can be significantly over or under actual market value.
Nothing replaces the accuracy of a professional comparative market analysis conducted by your knowledgeable real estate associate.
When Your Search Comes Up Empty
REASSESS YOUR PRIORITIES
This is the perfect time for most buyers to reconsider their must-haves versus nice-to-haves.
- Budget: If available homes don't meet your needs within your current range, discuss expanding your budget with your lender to access more options.
- Property Type: When price and location matter most, explore different housing styles. Condos or townhomes in desirable areas might check more of your boxes.
- Space Requirements: If budget and location can't budge, consider adjusting your space expectations. You might find happiness in a cozy home with fewer bedrooms, less square footage, or a smaller yard.
- Neighborhood: If the first three factors are set in stone, broaden your geographic search. Nearby neighborhoods or adjacent zip codes often offer similar amenities at different price points.
STAY MOTIVATED
Take time to reassess what matters most to you. Understanding your flexibility opens doors to possibilities you might not have considered. Fresh listings appear regularly, and your perfect match could hit the market tomorrow. The home buying process can feel emotionally draining when nothing seems to fit, but remember that market conditions are always shifting. Rather than trying to predict whether more inventory will appear or rates will change, focus on staying ready for the right opportunity when it comes your way.
Crafting your strategic purchase offer
Your primary goal when submitting an offer is securing the property you desire with the best possible terms. The key is balancing an appealing proposal for the seller while maintaining your own protections and interests.
UNDERSTANDING SELLER PRIORITIES TO ACHIEVE YOUR OBJECTIVES
The Jean Beatty Group works to identify what matters most to the seller through communication with their listing agent. When you can address their key concerns, sellers are often more willing to accommodate terms that benefit you. Your offer involves negotiating eight essential components:
- Purchase Price: Most sellers focus on this element first. Structure your price to motivate serious consideration of your entire proposal.
- Earnest Money: Deposit requirements differ by location. The amount you put down demonstrates your commitment to the purchase, and insufficient deposits may weaken your offer's appeal.
- Contract Conditions: Standard conditions typically cover financing approval, property inspection, and appraisal requirements. Your agent will clarify your rights and responsibilities for each condition you include.
- Seller Contributions: Also known as closing cost assistance, these vary by local market practices. Before requesting seller contributions for items like buyer agent fees or loan costs, verify with your lender that you can fully utilize any credits received.
- Closing and Move-in Dates: Property transfer typically occurs on the closing date. If you need earlier access or the seller requires additional time after closing, your agent will include a pre-closing or post-settlement occupancy agreement in the offer.
- Property Standards: Include a home inspection contingency in your offer to ensure the property meets acceptable standards. Any repair negotiations will follow the procedures outlined in the contract.
- Included and Excluded Items: Sellers specify which fixtures, appliances, and personal property transfer with the sale. Some sellers offer replacements for items they plan to remove. Ensure your offer clearly addresses both categories.
- Financial Documentation: Some markets require buyers to provide financial verification to sellers. Your agent will advise whether this applies to your situation. Usually this is a proof of funds or pre-approval letter from the lender.
Applying Proven Offer Strategies
CRAFT A STRAIGHTFORWARD AND EASY-TO-UNDERSTAND OFFER
Complex offers create barriers to acceptance. When your proposal involves multiple conditions or intricate terms, it weakens the offer. Consider what terms are essential to you and build the offer from there.
TAILOR YOUR OFFER TO BOTH THE PROPERTY'S APPEAL AND CURRENT MARKET DYNAMICS
Competition levels vary regardless of overall market trends. Even when inventory is abundant, certain properties will draw multiple interested buyers while others won't. Each home exists within its own micro-market influenced by location, neighborhood desirability, architectural style, condition, and pricing strategy. Understanding these specific factors will help you craft a competitive offer that reflects the unique circumstances surrounding your target property.
Understanding Real Estate Market Dynamics and Negotiation Strategy
When negotiating property purchases, your success hinges on four key factors:
- Your qualifications and flexibility as a buyer
- How desirable the property is to others
- The seller's urgency to sell
- Current market conditions
Market conditions reflect the balance between available homes and active buyers at any point in time. Real estate markets typically fall into three categories: buyer-favorable, seller-favorable, or balanced.
Buyer-Favorable Markets occur when inventory sits on the market longer, giving purchasers more options and negotiation power. You can often secure properties at or below comparable sales prices while obtaining favorable terms like closing cost assistance, commission coverage, or repair credits beyond what's typical in other market conditions.
Seller-Favorable Markets feature rapid sales, sometimes within days of listing. Multiple interested parties frequently drive prices above asking, often through escalation clauses. Buyers may choose to waive certain protections or seller concessions to strengthen their offers, requiring careful consideration of which safeguards are essential for their specific situation.
Balanced Markets create a mixed environment where highly sought-after properties move quickly at premium prices, while others require more time to sell. Properties with longer market exposure typically offer more room for negotiated terms.
Market conditions vary significantly by price point, property style, and geographic area. A seller-favorable environment in one neighborhood or price bracket may coexist with buyer-favorable conditions just blocks away.
Your real estate agent can provide current market insights for your target areas and price ranges, along with strategic advice on how these conditions might influence your specific transaction.
Examining homeowner's / condo / co-op association documents
When buying a condominium, cooperative unit, or home within a Homeowner's Association, you're entitled to obtain and examine all legal and financial records related to the community.
This review period also grants you the right to withdraw from your purchase contract if the documents reveal concerning information. The timeframe for contract cancellation differs by location, so check with your real estate professional to ensure you meet all required deadlines.
Your document review should encompass several key areas.
- First, examine the fee structure and reserve funds, including what services are covered and whether increases are planned.
- Next, study the community's rules and regulations, which may address parking arrangements, waste management, pet policies, exterior appearance standards, approved paint colors, fencing requirements, shared space usage, insurance coverage, and rental restrictions.
- Additionally, review any disclosed pending litigation involving the association, as well as any violations the seller has not yet resolved.
- Finally, look for information about upcoming major repairs or special assessments that could affect future fees.
Similar to property inspections, these document review deadlines are firm and non-negotiable. Missing these deadlines will forfeit your legal protections and right to cancel based on your findings.
Complete Your Loan Process with Your Lender
Great news – your offer has been accepted! Now it's time to move forward with your financing by providing your lender with these essential documents:
- A copy of your accepted purchase contract
- The property's MLS listing details
- Public records for the property
- Any additional documents needed for your loan application
You have 7 days from contract acceptance to submit your formal loan application and begin arranging the required homeowner's insurance coverage.
Your lender will handle ordering the property appraisal and prepare an estimate of your closing costs during this period.
Stay in close contact with your lender and respond quickly to any requests for additional documentation. If your contract includes a financing contingency, remember it has a specific deadline. You may need to provide a loan commitment letter to the seller to fulfill this requirement.
Your lender will need all previously requested materials, plus the completed appraisal and information from the title company, before they can issue this commitment letter.
Your real estate agent will help coordinate this process and maintain communication with your lender to ensure all deadlines and your closing date are met.
Note: Removing your financing contingency means you're committed to proceeding to closing with full payment. If your lender cannot deliver as promised, you could be considered in breach of contract, and the seller may enforce penalty provisions against you.
This is why choosing an established, reputable local lender with a strong track record is essential – their professional reputation depends on following through on their commitments.
Choosing Your Settlement Company
YOUR RIGHT TO CHOOSE
In Virginia, Maryland, and Washington DC, buyers have the right to select their own settlement company. While sellers may express preferences for valid reasons, buyers should consult with their agent before making this important decision.
Sellers may reasonably request a specific settlement company in certain situations: when coordinating the sale with another property purchase, facilitating a 1031 Tax-Deferred Exchange, or when the property is being sold by an estate. Additionally, relocation companies and new home builders typically mandate the use of their designated settlement company or attorney.
ROLE OF THE SETTLEMENT COMPANY
The title company or attorney serves as a neutral party, representing neither buyer nor seller. Their duties include verifying contract completion, ensuring all financial details are accurately reflected on the Closing Disclosure, recording the transaction with local authorities, and distributing funds to all appropriate parties.
TIMELINE AND NEXT STEPS
The Jean Beatty Group is available to assist you in selecting a qualified settlement agent. The team's transaction coordinator will help keep you on track for closing as well as facilitate scheduling your closing.
TITLE AND SURVEY COORDINATION
Your settlement company will conduct the necessary title search and order required surveys. Surveys are an additional cost you need to consider when tallying your closing costs. For any questions during this process, please contact your associate.
Understanding Title Insurance
What Does "Title" Mean?
Before exploring title insurance, it's important to understand what "title" represents. Title refers to your legal ownership rights in real estate. When you hold title to a property, you have the legal authority to live in, use, enjoy, and sell that property without outside interference, except for restrictions set by government agencies or previous property owners.
Typically, ownership transfers through a deed that gets filed in the local land records office. When a property changes hands, a title examiner reviews these land records and court documents to identify any potential issues with the ownership history.
What Is Title Insurance?
A title defect is any problem in a property's ownership history that could threaten your rights as the current owner. These defects might result in you losing part or all of your property to someone with a stronger legal claim.
Title insurance protects you from these risks. When you have a title insurance policy, the insurance company will defend your ownership rights at no extra charge if someone challenges your claim to the property. You'll also receive financial protection against losses caused by title defects. Essentially, title insurance safeguards your property ownership.
Why Do I Need Insurance After a Title Examination?
Even the most thorough title search cannot reveal every potential problem. Some issues that examinations typically miss include:
- Whether previous owners' spouses properly gave up their ownership rights
- Whether all property-related documents were correctly filed in public records
- Whether signatures on important documents are authentic
- Whether unknown heirs of former owners might have valid claims to the property
Without owner's title insurance, resolving these issues could be extremely costly and complicated.
Lender's vs. Owner's Title Insurance
Most lenders require borrowers to purchase lender's title insurance, which protects the lender's investment up to the loan amount. However, this coverage has important limitations:
- It only protects the lender, not you as the property owner
- The coverage amount decreases as you pay down your mortgage
- As you build equity, your potential exposure to title-related losses increases
While the lender remains protected, you could face significant financial risk from title defects. Owner's title insurance provides you with comprehensive protection for the full policy amount, covering any qualifying losses related to title problems.
For specific questions about what your owner's title insurance policy covers, consult with your settlement company to review the details of your particular situation.
Why Should You Consider Owner's Title Insurance?
Owner's title insurance safeguards you against concealed property ownership risks that wouldn't surface even through thorough public record searches. These hidden issues include:
Document and Legal Issues:
- Forged signatures on property documents
- Fraudulent execution of legal papers
- Deeds signed under invalid or expired powers of attorney
- Documents with incorrect property descriptions
- Clerical mistakes in recorded legal documents
- Problems with document indexing
Ownership and Inheritance Concerns:
- Unknown or missing heirs to the property
- Improperly probated wills
- Misinterpretation of wills and trusts
- Rights of former spouses from previous owners
- Property transfers by minors
- Deeds delivered after the grantor's death
- New heirs born after a will was created
Fraud and Misrepresentation:
- False impersonation by people claiming to own the property
- Incorrect statements about grantors' marital status
- Mental incompetency of those transferring property
- Undue influence over property owners or executors
- Identity confusion from similar names
Survey and Claims Issues:
- Inadequate property surveys
- Outstanding claims not appearing in public records
- Undelivered deeds
Types of Title Insurance Available
There are three main categories of title insurance policies:
Lender's Policy: Required by mortgage companies, this policy protects only the lender's financial interest up to the loan amount. It uses the standard American Land Title Association (ALTA) loan policy format and covers the lender against title defects that could compromise their security interest in the property.
Standard Owner's Policy: This ALTA policy protects property owners against fraudulent documents, misrepresentations, improperly handled wills, and undisclosed claims not found in public land records.
Enhanced Owner's Policy: This comprehensive option includes everything in the standard policy plus additional protections such as:
- Protection against mechanic's liens for work completed before your policy date
- Zoning verification ensuring your property is properly designated for single-family residential use
- Subdivision compliance coverage if your property is part of an improperly established subdivision
- Protection if you must remove existing structures due to previous owners' permit violations
- Coverage against neighboring construction that encroaches on your property
- Protection against post-policy forgeries affecting your ownership
Coverage specifics may differ between insurance providers and locations, so consult with your settlement company to understand the exact protections offered under their policies.
Title Insurance Terms
| What IT IS | Why it matters | How you benefit | |
|---|---|---|---|
| Title | Title is your ownership right to your property. | No homebuyer wants to inherit existing debts or legal issues that could interfere with their property rights in the future. | Clear title allows you to use or modify your property. |
| Title Professional | The settlement company will examine or research public records to see if there are any problems or defects that could cause you legal issues. They may also manage the closing process. | The settlement company ensures the title search is completed, writes the title insurance policy and works to reduce your risk of ownership issues in the future. | The settlement company has your back. They worry about the small stuff so you don't have to, giving you peace of mind. |
| Title Search | A title search is an early step in the home buying process to uncover issues that could limit your rights to the property. | If a title issue is discovered, most often your title professional will take care of it without you even knowing. After the title problem is fixed, you are able to purchase owner's title insurance. | The title search protects you from unknowingly inheriting a previous owner's debts, legal obligations or other title problems. |
| Title Insurance | There are two different types of title insurance: the owner's policy and the lender's policy. The owner's policy is purchased by you, the homebuyer. While it is your choice, purchasing an owner's title insurance policy is the best way to protect your property rights. The lender's policy is usually paid for by you, the homebuyer. It is almost always required by the lender and only protects the lender's interest. | Sometimes undiscoverable defects can come up after the title search. Title issues may include forgery, fraud or clerical errors. Owner's title insurance is the best way to protect yourself from losing your property. | Every year, the vast majority of homebuyers in America elect to protect their home purchase by buying title insurance. |
| Closing | Closing is the final step in executing the home buying transaction. | It is the process that allows the transfer of ownership to occur. | Upon completion of the closing process, you get the keys to your home! |
Property Insurance Requirements
Your mortgage lender mandates that you maintain insurance coverage on the property to protect against damage or loss, with the lender listed as a co-insured party. This coverage is commonly called Hazard Insurance or Homeowners Insurance.
Purchase of this type of insurance is optional for cash buyers, though it's strongly recommended in order to protect your investment. Your settlement agent can address any questions about coverage requirements.
Local contracts typically require buyers to start securing Hazard or Homeowners Insurance within seven days of contract ratification.
This coverage typically includes liability protection and coverage for your personal belongings. Start your insurance search immediately, as recent significant rate increases have made some policies costly or difficult to obtain. Shopping early gives you time to find the most suitable policy for your situation.
Your insurance policy must be fully paid with a binding agreement in place before closing. Your lender must receive proof of coverage before loan funding.
Important timing note: Insurance companies will not issue hazard policies during active hurricane watches. Avoid last-minute applications to prevent settlement delays.
Condominium Buyers
The building's master insurance policy, funded through your HOA fees, covers the structure for you and your lender. However, this policy doesn't include liability coverage, personal property protection, or coverage for damage to neighboring units caused by incidents in your unit. Consult your insurance agent about obtaining separate coverage for these gaps.
Flood Coverage
Properties in designated flood zones may require additional flood insurance as mandated by your lender. The settlement company will notify you of this requirement. FEMA updates flood maps annually, so confirm your property's flood certification status with your lender or settlement company prior to contract ratification.
Getting Ready for Closing and Your Move
After completing your inspections and securing financing, you'll need to handle several important details. Taking care of these items early in the process helps avoid last-minute issues or stressful situations.
CLOSING FUNDS
- Coordinate with the settlement company to arrange certified funds or wire transfers.
- Important: Never follow wiring instructions received via email without verification. If you receive emailed wire instructions, call the settlement company first using the phone number your agent provided (not the one in the email) to confirm the details are legitimate. You'll sign a wire fraud disclosure as part of your buyer agency agreement.
- Contact your attorney or title company a few days before closing to determine the exact cash amount you'll need.
- Planning to use proceeds from selling another property for your down payment? Make sure your agent has coordinated with the settlement company to time both closings properly. This may involve an assignment of funds, where one settlement company transfers money to another after the first transaction closes and funds are distributed. Note that sellers must give written approval before an assignment of funds can be processed.
- Small amounts can be paid by personal check if final numbers change at the last moment.
SCHEDULING YOUR FINAL WALKTHROUGH
- Your agent will coordinate the walkthrough appointment for you.
- Your contract allows you to inspect the property up to seven days before closing. Consider doing an initial walkthrough to confirm all agreed-upon repairs are complete, then a final walkthrough after the seller moves out to verify the property remains in "substantially the same condition" as specified in your contract.
GETTING TO THE CLOSING
Ensure you have clear directions to the settlement office from either the company or your agent.
PLANNING YOUR MOVE
While preparing for closing, it's smart to begin preparing for your relocation. This involves finding a moving company and transferring utilities to your new address. Your agent can provide additional guidance on these matters.
HIRING MOVERS
Start by confirming your preferred moving date as soon as possible. Your agent has a list of moving companies recommended by other agents and past clients. It's wise to obtain quotes from multiple companies for comparison.
SETTING UP UTILITIES
Contact your utility providers directly (electricity, water, phone, cable/internet) using the utility company directory included at the end of this guide. Your agent will inform you of the local utility companies that you will need prior to settlement.
Complete Your Final Walkthrough
YOUR WALKTHROUGH ENTITLEMENT
Before closing, your purchase agreement grants you the right to perform a final walkthrough inspection. Upon completion of this inspection, you'll sign the Walkthrough Inspection Form, which documents your acceptance of the property's current state and records any contract-related issues. Whenever possible, this inspection should take place after the seller has moved out, though your agent will help coordinate appropriate timing if needed. The walkthrough should be conducted as close to settlement as possible.
The walkthrough serves to verify:
- All items specified to remain with the property are present and in the agreed-upon condition
- Required repairs or improvements outlined in the contract have been properly completed by the seller
- The property is clean, free of debris, and remains in substantially the same condition as when the contract was signed
- All other contract terms and obligations have been fulfilled
Your Settlement Appointment
What to Expect
Settlement appointments are generally scheduled in one-hour blocks, so plan to spend approximately one hour completing the process. If you prefer to review each document carefully and thoroughly, we recommend contacting the settlement agent in advance to arrange additional time for detailed document review.
Buyers and sellers commonly attend separate settlement meetings.
Settlement Process Overview
The settlement meeting typically follows this sequence:
- Documentation and Verification All parties will have their driver's license or other valid identification photocopied for records.
- Financial Review You'll review and sign the closing disclosure, which outlines all final costs and financial details of the transaction.
- Title Insurance Selection The buyer will choose their preferred title insurance coverage options.
- Property Transfer Documents The seller will sign the deed to officially transfer ownership of the property.
- Loan Documentation (for buyers with financing) If you're financing the purchase, you'll sign several loan-related documents including the loan application, Truth in Lending statement, promissory note, and deed of trust.
- Final Steps Once the buyer's funds are verified and confirmed, the seller will provide the house keys and any garage door openers. At this point, the buyer receives the keys and takes possession of the property.
The Real Estate Marketplace Glossary
- Adjustable Rate Mortgage (ARM): A mortgage with interest rates that are periodically adjusted up or down based on a specified financial index.
- Agent: A professional who acts on behalf of another party, representing their interests and serving as an intermediary in real estate transactions.
- American Land Title Association (ALTA): A detailed breakdown of closing costs provided to both sellers and buyers, which you will receive at closing.
- Amortization: A repayment method that equalizes monthly mortgage payments throughout the loan's life, though the ratio of principal to interest changes over time. Early payments consist mostly of interest, while later payments are primarily principal.
- Annual Percentage Rate (APR): The true finance charge for a loan, which includes points and loan fees in addition to the stated interest rate.
- Appraisal: An expert assessment of a property's value or worth conducted by a qualified professional.
- ARM: Abbreviation for Adjustable Rate Mortgage.
- Assumption of Mortgage: An arrangement where the buyer takes over liability for an existing mortgage note held by the seller, subject to lender approval of the buyer and release of the seller.
- Assessed Value: The value assigned to property by a municipality for tax purposes, which may differ significantly from appraised or market value.
- Balloon Payment: A substantial principal payment that becomes due in full at the end of certain loan terms.
- BrightMLS: The regional multiple listing service that provides members with comprehensive information about available properties for sale.
- Broker: A real estate professional with advanced training beyond that of an agent, typically serving as the legal representative or owner of a real estate office.
- Cap: The maximum limit on how much an interest rate can change in an Adjustable Rate Mortgage.
- Closing: See "Settlement" - the final step in a real estate transaction where ownership is transferred.
- Closing Disclosure: The document that replaced the HUD-1 form, which you will receive at closing along with your ALTA document.
- Commission: The fee, typically calculated as a percentage of the total transaction amount, paid to a broker for services rendered.
- Concession: A monetary credit provided to a buyer for use at closing, which can cover home inspection items, closing costs, and other fees, including buyer agent professional fees.
- Condominium (Condo): A form of real estate ownership where the owner holds title to a specific unit and shares interest in common areas with other owners.
- Contingency: A specific condition written into a contract that must be satisfied for the contract to become binding.
- Contract: A legally binding agreement between two or more parties that outlines the terms and conditions for exchanging value, such as money for property title.
- Conversion Clause: A contractual provision that permits converting an Adjustable Rate Mortgage to a fixed-rate loan after a specified time period.
- Deed: Official legal document that transfers property ownership from the seller to the buyer.
- Down Payment: Initial cash payment representing a portion of the purchase price that the buyer must provide upfront and cannot finance through the lender.
- Earnest Money: Substantial deposit submitted by the buyer when the purchase agreement is executed, demonstrating serious intent to complete the transaction.
- Equity: The homeowner's actual financial stake in the property, calculated as the purchase price plus any appreciation and improvements, minus outstanding mortgages and liens.
- Escrow: Protected account or fund managed by an independent third party to hold money or documents until all contractual obligations are fulfilled.
- Fannie Mae: Common name for the Federal National Mortgage Association.
- Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae): Government-sponsored enterprises that purchase mortgage loans from originating lenders and establish the underwriting standards used by most mortgage lenders.
- Finance Charge: Complete borrowing cost encompassing all fees, points, and interest payments that a borrower pays to secure a loan.
- Fixed Rate Mortgage: Mortgage loan with an interest rate that remains constant throughout the entire loan term, providing predictable monthly payments.
- Fixture: Permanently installed item or component that becomes part of the real property and transfers with the property upon sale.
- Good Faith Estimate: Required disclosure document that lenders must provide within three business days of receiving a mortgage application, detailing estimated loan costs and settlement expenses.
- Hazard Insurance: Property insurance coverage that protects against damage from specific perils like fire, wind, and other natural disasters; also called Homeowners Insurance.
- Home Inspection Report: Professional assessment conducted by a certified inspector that evaluates the property's structural integrity and mechanical systems.
- Interest: Fee charged for borrowing money, typically expressed as an annual percentage rate.
- Lien: Legal claim placed against a property as security for unpaid debt or obligations.
- Listing Contract: Formal agreement between a property owner and real estate agent authorizing the agent to market and sell the property in exchange for a commission.
- Market Value: Estimated worth of a property based on current economic conditions, location factors, and market trends.
- Market Price: Actual transaction amount for which a property was sold.
- Mortgage: Legal instrument that pledges real property as collateral for a loan until the debt is fully repaid.
- Negative Amortization: Loan structure where monthly payments are insufficient to cover interest charges, causing unpaid interest to be added to the principal balance.
- Origination Fee: Processing charge imposed by lenders for evaluating and preparing a mortgage loan application.
- PITI: Acronym representing the four components of a typical monthly mortgage payment: Principal, Interest, Taxes, and Insurance.
- Point: Upfront fee equal to one percent of the total loan amount, paid in addition to interest and other charges.
- Pre-Payment Penalty: Fee charged to borrowers who pay off their mortgage loan ahead of the scheduled maturity date.
- Pre-Qualification: Preliminary assessment of a potential borrower's creditworthiness and estimated loan capacity, typically conducted before formal application submission.
- Principal: Either a primary party to a contract or the original loan amount on which interest is calculated.
- Prorate: Method of dividing expenses or credits proportionally based on time periods or usage.
- Realtor®: Licensed real estate professional who maintains membership in the National Association of Realtors®.
- RESPA: Acronym for Real Estate Settlement Procedures Act, federal legislation governing mortgage lending disclosures and practices.
- Settlement: Final stage of a real estate transaction where all parties sign closing documents, transfer ownership, and complete financial arrangements.
- Title: Legal documentation establishing ownership rights to a specific piece of real property.
- Title Insurance: Protection policy that safeguards property owners and lenders against financial losses due to title defects or ownership disputes.
- Title Search: Comprehensive review of public records to verify clear ownership and identify any existing liens or encumbrances on a property.
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Types of Ownership: Four distinct forms of property ownership:
- Sole Ownership: Single individual holds complete ownership rights.
- Tenants in Common: Multiple owners hold undivided interests in varying percentages, with inheritance rights passing to heirs.
- Joint Tenants: Co-owners hold equal shares with automatic transfer of ownership to surviving owners upon death.
- Tenants by the Entireties: Married couples hold joint ownership with survivorship rights, excluding deceased spouse's heirs from inheritance.
- Unreleased Trust: Outstanding mortgage or lien that remains on public record without documentation showing it has been satisfied or released.