1. Who is eligible to receive the South Carolina Homestead Exemption discount? |
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In South Carolina, this program exempts the first $50,000.00 of the value of your home from all property taxes, and you may apply to the County Auditor's Office for the Homestead Exemption discount only for your legal residence if you are:
- 65 years old on or before December 31 preceding the tax year in which you wish to claim the exemption;
- totally and permanently disabled
- legally blind;
- at least 50 years of age when your spouse (who was eligible for the Homestead Exemption) died.
- the fee simple title owner of the property
- a legal resident for one year preceding the year in which you wish to claim the exemption
The earliest that an application can be made for the homestead exemption is on or after July 16 preceding the year that the exemption is to be claimed.
Deadline for filing is the day before the tax bill would incur penalties. A failure to apply by that date is considered a waiver of the exemption for that tax year. |
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2. What is an Agent's responsibility to a Client? |
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The Agent owes the Client specific fiduciary duties of trust and confidence. They are not simply moral or ethical. The South Carolina law of agency requires them. These duties include:
1. Care: The agent must exercise a reasonable degree of care and skill in handling the transaction. This protects the client from risks.
2. Obedience: The agent must act in good faith and obey any instructions given by the client unless these instructions are unlawful and unethical.
3. Accountability: The agent is held accountable for all funds handled for the client. South Carolina Real Estate License Laws are very specific as to how those funds must be handled.
4. Loyalty: The agent owes the client 100 percent loyalty, so the client's needs always comes first in a transaction.
5. Disclosure: The agent must at all times disclose any information to the client that may be helpful. The agent must submit all offers to the client and any third party information that would influence the client's decision to complete the transaction, but the agent can never disclose issues that might breach Fair Housing Laws.
THE AGENT ALSO OWES THE CLIENT CONFIDENTIALITY FOREVER.
To establish a Client relationship, a buyer must enter into a Buyer Agency Agreement with the Agent. |
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3. What is an Easement? |
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| An Easement is the right to use the land of another for a particular purpose. It is an intangible right in land and is not ownership but only a right to use. Once properly established, easements run with the land. |
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4. What is an Encroachment? |
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| Encroachment is when someone illegally builds part of their house on someone else's property. If only the eaves of the house were over the property line it would also be an encroachment. Encroachments are normally found during a survey, and you must go through an ejectment proceeding to remove the encroachment. |
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5. What are Deed Stamps? |
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A Deed Stamp is a state documentary stamp fee, a transfer fee which is normally paid by the seller. Currently deed stamps are $1.85 per $500.00 on any part of $500.00 based on the sales price less any mortgages assumed.
Example with no mortgage assumed: The sales price is $106,100.00, to calculate deed stamps, Round up to the next highest increment of $500 ($106,500.00 / 500 = 213. Then 213x1.85 = $394.05 deed stamps)
Example with a mortgage assumed: The sales price is $100,001.00 and a $50,000.00 mortgage is assumed. To calculate the deed stamps, ($100,001.00 - $50,000.00 = $50,001.00 Round up to $50,500.00 / 500 = 101, then 101x$1.85 = $186.85 deed stamps) |
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6. What is an Earnest Money Deposit? |
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| Earnest money deposit is used in a real estate transaction as a show of good faith, however they are not required under the law of contracts. Sometimes earnest monies are kept by the seller as liquidated damages. |
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7. How do you know for sure how much home you can afford? |
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| We've found that affordability is probably the single biggest concern of today's first-time homebuyers. Our advice. Talk to a good real estate agent who is committed to honestly and responsibly working with you to determine your affordable price range. There are many financing options available today, and some include low or no down payments. We will put you in touch with a lender who will help you find an option that fits your budget, and you may be surprised at just how much home you can afford! |
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8. What should I consider when I'm deciding which community I want to live in? |
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| Good city services, nice parks and playground facilities, convenient shopping and transportation...these are just a few considerations that are important to people when they choose a community in which to live. As for individual neighborhoods within a village or city, there is no better source of information than your real estate agent. Agents know the people and the communities they serve and chances are we can help find a neighborhood that fits your family's needs. |
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9. Where can I get information about local schools? |
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| Again, a good real estate agent is perhaps your best source. They know where the local schools are and can provide you with valuable information about school districts, bus services and more. If you're relocating, an agent may even be able to put you in touch with teachers and principals when you visit the area. |
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10. How can I find out what homes are selling for in a given neighborhood? |
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| Home sales are a matter of public record. You can get all the information you want about recent sales, including prices and time on the market, by asking your realtor. If you're interested in a particular home, we will be able to provide you with a list of comparable sale prices of homes in your area that are roughly the same size and age as the home you're considering. Although there will certainly be some differences between the homes...the house next door may have an extra bedroom, or the one down the block may be older than the one you're looking at...it's a good way to evaluate the sellers asking price. |
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11. When I start visiting homes, what should I be looking for the first time through? |
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The house you ultimately choose to call home will play a major role in your family's life. A home can be an excellent investment, of course, but more importantly, it should fit the way you really live, with space and features that appeal to everyone in the family.
As you look at each home, pay close attention to these important considerations...
. Is there enough room for you now and in the near future?
. Is the home's floor plan right for your family?
. Is there enough storage space?
. Will you have to replace the appliances?
. Is the yard the size you want?
. Are there enough bathrooms?
. How much maintenance and/or decorating will you need to do right away?
. Will your present furniture work in this house? |
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12. How many bedrooms should I be considering? |
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| Whether you are married or not, or have kids or not, spare bedrooms come in handy when family and friends come to stay. When you're not having guests, extra bedrooms are useful as a library, den, or TV room. Another good reason to choose a home with extra bedrooms...extra space will make your home more appealing to a larger number of interested buyers when it comes time to sell. |
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13. What should I ask about each home that I look at? |
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| As a rule of thumb, ask any questions you have about specific rooms features or functions. Pay particular attention to areas that you feel could become "problem" areas - additions, defects, areas that have been repaired. And above all, if you don't feel your questions have been answered, ask until you do understand and are satisfied. |
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14. What should I tell my agent about the homes I looked at? |
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| Open communication is critical. Tell us everything you liked and didn't like about each home that you see. Don't be shy about talking about a home's shortcomings. Is the home too small for your needs? Let your agent know. Was the home perfect except for the carpeting? Let your agent know that too. The more open and descriptive you are, the easier it is for us to "zero in" and find a home you'll love. |
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15. How many homes should I look at before I buy? |
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| There is no set number of homes you should look at before you decide to make an offer on one. That's why providing your agent with as many details as possible up front is so helpful. The perfect home may be waiting for you on your first visit! Even if it isn't, the house-hunting process will help you get a feeling for the homes in each community and narrow your choices to a few homes that are worth a second look. Sometimes seeing many houses can become confusing! An excellent way to differentiate each home is to name it! Call it the "cat house" if there were several cats or the "deck house" if the main feature is the deck. This will make it easier to remember and reach a decision. |
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16. I'd like to have a professional look at the home before I buy it. What does a Home Inspector do? |
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For your own safety, and to make sure you're not going to have any surprise repair expenses, using a professional home inspector is highly recommended. A home inspector will check a home's plumbing, heating, cooling, and electrical systems, plus look for structural problems, check the roof for water leakage, and look at the exterior and interior finishes throughout the property. Usually you call an inspector immediately after you've made an offer on a home. However, before you sign any written offer, make sure that it includes an inspection clause or other language that says that your offer is conditional upon having a satisfactory home inspection.
Your home cannot pass or fail an inspection and your inspector will not tell you whether he or she thinks the home is worth the money you are offering. The inspector's job is to make you aware of repairs that are recommended or necessary plus health and safety issues.
A seller may be willing to renegotiate a price to accommodate needed repairs, or you may decide that the home will take too much work and money. A professional inspection will help you make a clear-headed decision. |
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17. Should I be present during the inspection? |
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Absolutely! It's not required, but it is very much to your advantage. You'll be able to clearly understand the inspection report and know exactly which areas need attention. The inspection usually takes about 3 hours. Hint: wear your Saturday work clothes and sturdy shoes.
Plus, you can get answers to many questions and tips for maintenance and a lot of general information that will help you when you move into your new home. Most important, you'll see the home through the eyes of an objective third party.
Inspection Checklist:
Your professional home inspector will visually examine all parts of a house and property on both the interior and exterior!
Items on your inspection report will include...
FOUNDATIONS, BASEMENTS, AND STRUCTURES
Basement floor and walls, proper drainage and ventilation, evidence of water seepage.
EXTERIOR SIDING, WINDOWS, DOORS
Exterior walls, windows, and doors; porches, decks, and balconies; garage.
ROOF
Roof type and material, condition of gutters and downspouts.
INTERIOR PLUMBING SYSTEM
Hot and cold water systems; the waste system and sewage disposal; water pressure and flow; and hot water equipment.
ELECTRICAL SYSTEM
Type of service, the number of circuits, type of protection, outlet grounding, and the load balance.
CENTRAL HEATING & COOLING SYSTEM
Energy sources, heating equipment, age, capacity, and distribution.
INTERIOR WALLS, CEILINGS, FLOORS, WINDOWS, AND DOORS
Wall, floors, ceilings, stairways, cabinets, and countertops.
ATTIC
Structural, insulation, and ventilation information.
FIREPLACE
Notes about the chimney, damper, and masonry and cleaning.
GARAGE
Doors, walls, floor, opener.
APPLIANCES
Including a wide range of built-in and other home appliances, smoke detectors and television/cable hookups.
LOT AND LANDSCAPING
Ground slope away from foundation, condition of walks, steps, driveway. |
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18. Are there any other inspections I need to have done? |
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| In addition to the overall inspection, most lenders require to have a separate test conducted to check for termites. Depending on the house and location, you may also want to conduct a separate test to check for radon gas. Talk to your real estate agent for information about these tests and to companies in the area that perform them. |
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19. Do I need to talk to an insurance agent? |
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Yes, and the sooner, the better. Most insurance professionals have a lot of experience in working with homeowners and can offer useful tips about home ownership, particularly regarding home safety and keeping your premiums low.
Once you've found a home, work together to develop a homeowner's policy that meets your individual insurance needs. You'll need to bring proof that you have a paid-up policy in place for your mortgage lender when you go to your lawyer's office to sign all the closing documents.
Ask us for some recommendations for insurance agents...realtors have dealt with several in their years of experience. |
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20. When I've found the home I like, how do I make an offer? |
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When you've found a special house you want to call home, you'll probably feel excited and a bit nervous. We are ready to help you through this important time. With me, you'll write an Agreement of Purchase and Sale...a written document that declares how much you will pay for the home provided that certain conditions are met.
This is a legally binding contract that you will sign and date. Your offer will have a time limit for the seller to accept, reject, or make a counter-offer. If a counter-offer is made, you have time to respond. Often, offers go back and forth until accepted or one party decides to end negotiations.
Be prepared to encounter a phenomenon called buyer's remorse. This occurs after you make a large purchase of anything, let alone a house. You will ask yourself Did I make the right decision? The answer is, YES...consider this self-analysis to be entirely normal! |
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21. How do I determine the amount of my initial offer? |
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There is really no rule to use in calculating a realistic offer. Naturally the buyer wants the best price, but negotiations can be influenced by many factors.
After you've looked at the home's features, asked questions, checked comparable sales in the neighborhood, and talked about it with your agent, you should have a good idea of what the home's value is in the current market.
Consider what you can afford and make an offer that's fair.
Most buyers and sellers negotiate on price, with both sides giving a little until both agree. When the price is agreed upon, both parties will initial the paperwork. Our skills are in negotiating a fair price for you...so use those skills to the fullest!
Now you and your agent typically begin the process of arranging an inspection and applying for a mortgage. Often you can be pre-approved for a mortgage prior to signing an offer. |
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22. What's an Earnest Money Deposit and how much do I need? |
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When you sign an offer to purchase, the seller will require a deposit...that is, money that shows you are serious about wanting to buy.
Usually, you will be asked to write a check for a specified amount, typically from $1,000 to $10,000 or more...depending upon the value of the property being purchased and the norm in your community.
We will hold this check until you have an accepted offer. Then, within 48 hours after acceptance, that check will be deposited by the broker holding it and escrow will be opened.
Therefore, your deposit funds must be made readily available before you consider signing an offer.
Once the offer is accepted and acknowledged, your deposit will be included as part of your down payment. If your offer is not accepted, you'll get back your deposit.
Keep in mind, though, that if you back out of an offer once it's accepted and all conditions have been removed, you may forfeit the full amount of the deposit and may be liable for other costs incurred by the seller. |
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23. Is there any way I can protect myself against emergency repair bills in my new home? |
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Yes. Home Warranties offer you protection against many potentially costly problems not covered by your homeowner's insurance.
They've become increasingly popular in recent years and for a good reason: the coverage can save you thousands in the event of a major mechanical breakdown, at a time when your cash reserves have been depleted by your down payment and moving expenses. |
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24. There's so much to remember... what do I have to do? |
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Your agent can help you with many of these things and a good realtor will keep in close contact with you right through the closing period!
Here's a partial closing checklist...
1. Are all the necessary inspections complete?
2. Are all the required repairs complete?
3. Is your insurance policy paid up and ready to go into effect on the day you close?
4. What form of check can you use (and who should it be made out to) to pay for the closing costs? |
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25. Is there anything I should do immediately after closing? |
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The first thing you'll want to do is have the locks changed. Also, make sure that all your utilities have been switched on and are now in your name (electricity, gas, water, telephone and cable television).
Remember to put your deed, survey and other important paperwork from the closing in a secure place, preferably a safety deposit box. Even though it's all on file at the registry office, it's smart to know where your copies are and that you have access to them at all times. |
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26. What is an \"as is\" sale? |
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| An "as is" property is sold without a warranty as to condition, repairs, or structure. With an "as is" sale, the buyer is on notice that the seller makes no promises regarding the property's physical status. With an "as is" sale, it is extremely difficult to make a claim against a seller if something is found to be wrong with the property after closing. "As is" clauses should be seen as an absolute requirement to make the transaction contingent on a professional inspection "satisfactory" to you. With a properly written sale agreement contingency, if you are not satisfied, then the deal is dead and you can get back your deposit in full. |
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27. How long must I live in a house once I buy? |
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When you apply for a loan, a lender will ask if you intend to use the property as a prime residence. If the answer is "yes," then it is expected that you will physically move into the property and live there for some time. There does not seem to be a set definition in the term "some time," but what lenders are getting at is this: They do not want to make residential loans with low rates and little down to investors.
Thus, if someone gets a residential mortgage, instantly moves out, and quickly rents the place, lenders will be more than unhappy - they may call the loan. They may also review the loan application to see if fraud was involved. Lenders do not want borrowers to move in and then rapidly move out, but they will look at the "facts and circumstances" if such an event occurs. For instance, a sudden job change not known in advance might be a valid reason for a move after several months of occupancy. What lenders do not want are situations where a "residential" borrower is actually a disguised investor. Given that most homes are occupied for 8-10 years, a move after several months or a year is likely to set off bells. |
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28. Can I buy real estate with no money down? |
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Yes. Millions of people have bought real estate with no money down through the VA loan program.
If you mean, can you buy real estate at a discount of 20% or 25% with no cash or credit, and then instantly sell or rent the place at a profit, then the answer is probably not. Why "probably" instead of "absolutely" not? Because in a marketplace with millions of transactions each year, somebody somewhere has made a deal with no money down and rented or sold at a profit. But it is also true that somebody somewhere was hit by lightening. The problem is that the term "no money down" is sometimes in the worst cases a code expression for a deal where someone without cash or credit wishes to buy property from someone who is needy, unsophisticated, desperate, in mourning, etc. Under the guise of "helping" the owner, buyers offer to purchase property at 20% off, or more, and with subordination and substitution clauses. Of course, if purchasers really meant to be helpful, they would surely pay full market values. Let+s be clear. If no-money-down schemes are so wonderful, why do folks who engage in such investments have a need for "partners" with cash?
Rather than get-rich-quick tapes and seminars, prospective investors are best served by taking a basic real estate license class in your state. This will explain much about financing, marketing, title, and other issues. It will also allow an individual to take the entry-level real estate exam and qualify for a license. |
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29. We made an offer on a home that was about 5% below the asking price. Our offer was rejected. What can we do to make the owners more reasonable? |
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Who says the owners aren+t reasonable? They have established a market price for their home. If they can get that price within a reasonable time frame, then they have logically priced their home. If the price cannot be obtained, they will lower either the price or the property will be withdrawn from the market. Because your experience in a different market made selling at a loss acceptable, that does not mean the same logic applies in other markets, or that your choice should in any way impact the sellers. Perhaps it would make sense to restructure your offer - maybe raise your price but seek better terms. |
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30. Where can I get more information regarding accessible housing options? |
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Try the following sources:
" State architectural associations.
" Local builders.
" State and local builder organizations.
" Hardware and building supply outlets.
" University architectural schools.
" The library of the National Association of Home Builders in Washington, DC.
" Local public housing agencies.
" Local chapters of associations that serve those with special needs. |
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31. We are handy and want to buy a house using sweat equity for a down payment. Will lenders go for this? |
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From time-to-time, you hear about lenders that allow the use of sweat equity as a credit toward a down payment, but not all of it. Most lenders, however, are not thrilled with this concept. The problem is valuing labor. If a professional paints a house there is work completed to a given standard (that helps maintain the value of the home, and the lender+s security if the loan is defaulted) and there is a bill for labor and expenses (paint, caulk, etc.).
With sweat equity, there can be a cost for supplies, but how is labor valued? At the same rate as for a professional? A discount? And what about workmanship?
The best approach is to speak with as many lenders as possible to see if they have a program that allows the use of sweat equity. Ask about the maximum sweat equity contribution allowed, total cash needed to close, rates, points, etc. |
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32. Can I discount the sale price to create a down payment? |
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No. Lenders provide financing based on the sale price or the appraised value, whatever is less. In the case of a "discounted" price, say selling a home worth $150,000 for $140,000, the sale price is $140,000. Lenders do not recognize a discount.
A better approach is to pay full market value but to make the transaction dependent on a "seller contribution" at closing. The effect is the same, but the accounting makes more sense to lenders. |
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33. What is a \"due-on-sale\" clause? |
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When a home is financed, the borrower agrees to make regular monthly payments. However, if those payments are not made, if they are late, or if the lender's security is reduced (by not making payments, damaging the property, not maintaining insurance, not paying property taxes, selling the property, selling a part of the property by placing someone else on the title, etc.), then the lender has the right to call for the complete and immediate (say within 30 days) repayment of the loan. The mortgage language outlining the lender's rights is generally called a "due-on-sale" or "acceleration" clause. One effect of a due-on-sale clause is that it effectively prevents a loan from being assumed.
Borrowers should note that state and federal law may limit the ability of lenders to enforce a due-on-sale clause. For instance, a title change in the event of an estate situation may be allowed. |
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34. What is a \"land contract? |
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A "land contract" or "contract for deed" or "agreement for sale" is an installment sale you buy today but only get title after some or all of the payments are made. If you miss a payment, you could lose some or all your equity. Because title has not been transferred, there is nothing to foreclose. Some states, however, have special provisions protecting those who buy property with a land contract.
Be careful in a land contract situation to look at the proposed financing. Is lender approval required? If yes, and such approval is not received, the loan could be called.
State rules regarding land contracts vary extensively and such arrangements should be reviewed by an attorney or legal clinic before acceptance. |
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35. What are the pros and cons of a land contract? |
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A land contract may allow a buyer to obtain real estate even if he or she is not able to obtain financing through regular loan channels. A land contract may allow a seller to market a property when interest rates are high.
If a buyer with limited financial capacity purchases with a land contract, then a seller may have problems collecting monthly payments. However, since a buyer with a land contract does not have title until all conditions are met, it is often possible for the seller to get the property back with a "forfeiture" rather than a "foreclosure." The attraction of a forfeiture is that it is much quicker to obtain than a foreclosure. It is also a complex undertaking that should only be done with an attorney.
If a land contract involves the use of existing financing that cannot be assumed, that could set-off a due-on-sale clause. Both buyers and sellers could lose the property if the loan cannot be repaid.
Or, suppose Seller Jones sells a property to Buyer Smith using a land contract. Title will remain in Jones' name until Smith makes a certain number of payments. But suppose that Jones goes bankrupt. What rights does Smith have to the property? Or, suppose Jones does not pay the property taxes? If the local government forecloses, what rights does Smith have?
Also, what happens if Seller Jones goes off to Tahiti? How does Buyer Smith get title?
Land contracts should be seen as complex arrangements. Both buyers and sellers should consult an attorney or legal clinic (separately) to assure that all aspects of the transaction are fully understood. |
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36. What is a \"seller contribution? |
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A sale agreement typically includes both a purchase price for the property as well as terms and conditions. It sometimes happens that a buyer will make an offer subject to certain terms. (I'll buy your house, but I want to keep the washer and dryer, etc.)
One possible condition concerns "seller contributions." (For example, I'll buy your house if you will pay the first $x of my closing costs.) Lenders will generally accept seller contributions as part of a transaction providing they are written into the sale agreement, fully disclosed and only represent a limited fraction of the sale price. Different loan programs have different contribution caps. Lenders and brokers can provide specific advice.
A seller contribution can be a useful bargaining chip in slow markets. (Buy my house and you can have a credit of $x at closing.) It's a thought that goes a long way with cash-strapped buyers. |
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37. Can I rent out a room to help me qualify for a loan? |
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| Generally no. Lenders have no assurance that such income will be regular and continuing. |
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38. Can we use private financing to buy real estate? |
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| In theory, yes. In practice, not really. The odds against private financing are substantial. In 1997, according to the NATIONAL ASSOCIATION OF REALTORS?, 74% of all first-time buyers obtained financing from mortgage companies, 19% from commercial banks, 1% from Saving & Loans, 1% from "other" sources, 1% from credit unions, and 1% from private investors. |
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39. We have stock that has significant value and we think its price will increase. How can we come up with a down payment without selling our shares? |
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This is an increasingly common and delightful problem. A home purchase typically requires either a sizable down payment, say 20%, or some form of backing by a third party, perhaps the FHA, VA, or a private mortgage insurance (PMI) company to buy with less down. With a third party, loans with 15, 10, 5, and 3% and even nothing down are possible. So, one choice is to look for financing with as little down as possible. A second choice is to look at RAM financing, a reserve account mortgage.
With a RAM loan, you might get 100% financing. At the same time, you would deposit an asset with the lender; say the stock you do not want to sell. The lender then holds onto the stock until the property has a certain level of equity caused loan amortization (reducing the size of the loan through payments) and, hopefully, increasing property values. The borrower has 100% financing.
RAM financing raises important questions: Who gets the interest on the account? What if the value of the securities declines? How is the new value for the property determined? What is the monthly payment? Is all interest deductible? Mortgage lenders and securities brokers can provide additional information. |
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40. What is \"MCC\" financing? |
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Because states have better credit than people do, they can borrow money at low rates. Under Mortgage Credit Certificate (MCC) programs, states lend money to first-time buyers and low-income buyers (usually) at below-market rates (but at rates that cover the interest cost of floating bond issues) and with little down (say 1% to 5%).
MCC's allow you to borrow money and to write off a portion of the interest, up to 20%, as a tax credit. The remaining interest deduction is just a write off.
For example, suppose your interest cost for a year is $5,000 and that 20% can be used as a tax credit. On your federal taxes, you would deduct $4,000 as an itemized expense, and you would deduct $1,000 (20% of $5,000) from your tax bill. See a tax pro for details.
Speak with local lenders to see if MCC financing is now available. Because funding is limited, these programs often run out of money quickly. |
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41. How quickly must I apply for a loan? |
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Many sale agreements require buyers to apply for a mortgage within a specific time period, say seven days after the contract is signed. This is a negotiable item, however, and can be any period agreeable to both parties.
This is an important matter because if an application is not made, then a buyer may be in violation of the sale agreement. A violation of the sale agreement, in turn, could be grounds to forfeit the deposit. Thus, buyers should go through the sale agreement with great care before signing to assure that all obligations are known and understood. Work with an appropriate professional such as a buyer broker when reviewing a sale agreement.
When you meet with a lender, be certain to obtain a letter stating that you met and showing when. Immediately provide this letter to the seller's broker in the manner required by the sale agreement. |
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42. Can I buy a house with an award from a lawsuit? |
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Sure, if the money is there. But until the matter is finally resolved (appeals run out, and a check is cashed) how does anyone know that there will be money available for a realty purchase?
What if someone contracts to buy a home today with $20,000 in cash due at closing in 60 days, money that will be generated from the settlement of a suit. And what happens if the suit is delayed? Money at closing is still required, and if the buyer does not close, there could be substantial damages-and maybe another suit. |
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43. I am getting married in two months. I have lousy credit, but my spouse-to-be has excellent credit. Can my future spouse buy a home individually? |
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| Yes. However, he or she can only borrow based on one income and his or her credit standing. Together you might have far more income. Lenders, incidentally, will probably want both parties on the property title even if you are not on the mortgage. This removes a barrier should foreclosure be required. |
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44. What rules prohibit discrimination in real estate sales and financing? |
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The Fair Housing Act is the major legislation prohibiting discrimination in real estate. It provides that there can be no offer to sell, rent, buy, or exchange property that contains any preference, limitation, or discrimination based on race, color, religion, sex, national origin, handicap, or familial status, or an intention to make such preference, limitation, or discrimination.
This federal law applies to the sale and rental of housing, residential lots, advertising the sale or rental of housing, real estate financing, the provision of realty services, and the appraisal of real property. It also prohibits the practice of "blockbusting."
Other federal laws that offer protection include:
" The Civil Rights Act of 1866
" The Civil Rights Act of 1968
" The Americans with Disabilities Act
" The Equal Credit Opportunity Act
State and local laws may also identify additional discriminatory factors that are prohibited.
Brokers, lenders, and attorneys can explain such matters in detail. |
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45. If the appraised value and the sale price of a home are different, what will lenders use when granting a mortgage? |
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| Whatever is lower. Lenders want as little risk as possible, so they will look at both the sale price and the appraised value and then make a loan based on the lower of the two numbers. |
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46. What is \"buyer's remorse?\" |
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With some frequency it happens that buyers often have a sense of remorse after contracting to buy a home. Why?
A home is a very large purchase. Not just in terms of dollars, but also in the sense of status, ego, and commitment. And because it is such a transforming event, it naturally and reasonably causes some concern.
But not to worry. Buyer's remorse typically passes in quick order. |
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47. Can I buy a house after a bankruptcy? |
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Probably. There are two issues to consider.
First, lenders like to see two years of good credit after a bankruptcy is resolved. However, there are instances where lenders will finance with a year of good credit.
Second, lenders want to know why you have gone bankrupt. There is a substantial difference between a bankruptcy that is caused by reckless financial habits and simple financial disasters (a car wreck, medical costs, the plant closed after 30 years, the town was underwater for three weeks, etc.). In other words, not every bankruptcy is a by-product of financial negligence. |
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48. What is a \"stigmatized\" property? |
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There are properties that are in flawless physical condition but may nevertheless present unusual marketing issues. For instance, homes that have been the site of murders, suicides, or that are reportedly inhabited by ghosts are known as "stigmatized" properties. This is a home with a condition that is psychological in nature rather than a matter of bricks and mortar.
The subject of stigmatized houses is complex. While some people may want a house with a ghost, others do not. The subject gets tangled even further when one is asked whether murders and suicides at a property must be disclosed.
The rules on this matter vary by state. Some say a given condition must be disclosed, others say "no." Some say disclosure is not necessary after so many years, and some states say nothing one way or the other. For specifics, please speak with a broker or real estate attorney in your community. |
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49. What is the difference between a co-op and a condo? |
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In general terms: A co-op is a corporation that owns real estate. If you belong to a co-op, you own stock in the corporation and the exclusive right to a given unit. There is usually an underlying mortgage on the property and your co-op fee includes some or all mortgage payments as well as other costs.
With a condo, you own real estate and you have access to certain common facilities. The condo is typically responsible for exterior maintenance and you pay a monthly condo fee. You have your own title and mortgage, so mortgage costs are not part of the condo fee. |
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50. What are some of the basic questions to ask when looking at a co-op? |
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Co-op ownership raises a number of issues that should be of concern:
1. What is the value per unit of the underlying mortgage?
2. What is the voting system (one vote per unit or voting based on unit size)?
3. Is there a reserve fund for repairs? If so, is it adequate?
4. Are major repairs anticipated in the next two years? If so, how will they be funded?
5. Is the co-op now facing or likely to face a lawsuit for any reason? If yes, what are the possible damages?
6. What pricing trends are associated with the co-op? Are prices rising? Falling? Can you review all sales for the past year?
7. Is a property tax rise known or expected? |
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51. We are considering the purchase of a condo in a complex that has an interesting pet rule: You can only have a dog or cat that can be carried into the building. Is this fair? |
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The obvious intent is to limit larger dogs since domesticated cats can be readily carried by most adults. The real test here is the strength of the owner rather than the size of the animal.
Not all animals make good pets, regardless of size. Venomous creatures, wild animals, and endangered species are certainly inappropriate.
A more difficult question concerns larger dogs. There are noise and sanitation issues, and there are special questions regarding breeds with a history of attacks. It may well be that Rover is the best of his breed, but if Rover has a bad day and mauls a child the liability could be substantial.
The condo association, for the protection of unit owners, raises a valid issue. However, a better approach would be to speak with insurance carriers to determine how pet coverage is handled, exclude animals not covered, evolve a more precise pet standard, and make certain that owners understand both the condo policy and their personal liability.
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52. What is a broker's \"trust\" account? |
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In terms of a real estate sales agreement, a "trust" account is typically an account operated by a real estate broker that is used to hold buyer deposits until closing.
Example: Buyer Smith makes an offer to purchase a home. With the offer is a $10,000 deposit. That deposit is held by Broker Smith in a trust account. The money in a broker's trust account is typically a credit to the buyer at closing. If the sale does not close, however, then several alternatives are possible:
First, buyer and seller may agree to return the trust money to the purchaser. Second, buyer and seller may agree to give the money to the seller to resolve claims that the buyer did not perform as agreed under the sales contract. Third, buyer and seller may dispute how the funds should be distributed. In this situation, the money is usually turned over to a court or, in at least one jurisdiction, the state real estate commission. |
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53. What is a lender's escrow account? |
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When homes are bought with 80% or more financing from a single lender, the lender generally requires the borrower to make monthly payments to a lender "escrow" (trust) account.
The purpose of the lender escrow account is to accumulate money to assure that the borrower's property taxes and property insurance are paid (and thus reduce the lender's risk).
Lenders typically collect 1/12th of the annual costs for property insurance and taxes each month. They are allowed to keep as much as one full year's worth of tax and insurance payments in the account, plus a two-month safety margin, plus $50. The only time the account is likely to have 12 monthly payments plus the two-month cushion is just before property taxes or insurance are due.
Lenders must account to borrowers annually with a statement showing how much is in the account, whether monthly payments will rise or fall in the coming year, and whether any surplus or shortage appears in the account. If the surplus is more than $50, the excess must be returned to the borrower. Note that some states require lenders to pay interest on escrow accounts, others do not. |
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54. How are escrow accounts used at closing? |
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It sometimes happens that not all agreed promises found in a sale agreement can be fulfilled by closing. For instance, if closing takes place in January in a cold climate it may not be possible to test the air conditioning system.
How does the buyer know the system works? It is best to wait until warmer weather to test the system. But what if something is wrong with the system? To resolve buyer concerns, an "escrow" account can be created at closing. In this situation, money from the seller is held in reserve to pay for needed repairs as defined in the escrow agreement. If repairs are not required, or if the cost is less than the amount of money set aside, the difference is returned to the sellers. |
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55. What is 3/2 financing? |
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There are a number of loan programs directed toward first-time buyers that allow the purchase of property with as little as 3% down.
The way they work is that a purchaser puts up 3% of the sale price and another party puts up 2%. Who puts up the additional 2%? Programs differ, but some choices include:
" A friend or relative providing a gift.
" A friend or relative providing a loan.
" An employer providing a loan.
" An employer proving a loan that does not have to be repaid if the individual stays with the company for a certain amount of time.
" A community group providing a loan or grant.
" A government agency providing a loan or grant.
" Amazingly enough, a lender who provides both 95% financing and a 2% loan.
For details, please contact local lenders and real estate brokers. |
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56. How can I buy real estate with my children using \"shared equity?\" |
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Shared equity is generally seen as a way that families can buy real estate together. The kids live on the property and get the benefits of property usage and ownership tax advantages while Mom and Dad get an investment write off equal to their proportional interest. (Shared equity arrangements, incidentally, can also be among friends, relatives, or business partners.)
Under a shared-equity arrangement, if you own half and the kids own half, you must pay half the mortgage, taxes etc. The kids must pay their half, plus they must pay a market-rate rent for your half of the property in order for you to have a deduction. Of course, once they have paid, you can also give them a gift equal to some portion, or maybe all, their rent.
You will need to work out an equity-sharing arrangement with the help of a local attorney and CPA. A broker can find an appropriate property. Both you and your children will need wills, living wills, and a proper equity-sharing agreement. You will need to understand what happens if your kids are laid off (you are responsible for the mortgage), or if you and your children become estranged. You will also have to consider the interests of any other children you may have. |
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57. How can our family buy real estate together? |
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There are a number of choices including: Equity-sharing deals. These have potential for everyone if a home in poor condition is purchased and the adult child will put in the sweat equity required to fix it up. Partnerships. Family partnerships are common but everyone has to understand their obligations.
A corporation could be formed, with shares for everyone. The problem here is selling shares in a small entity if someone wants out. All familial arrangements should be based on a written agreement developed by an attorney, wills and living wills for everyone, and advice from a tax professional for each party. Also, speak with lenders before making a final arrangement. Some approaches may be easier to finance than others. |
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58. We are buying a home and have a copy of the seller's disclosure form. Should we also get a home inspection? |
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Most states have a mandated seller disclosure form that must be used for most properties, but not all. This form provides an opportunity for the seller to answer certain questions regarding the property's condition. Just ask the broker or the owner for a copy.
But a seller disclosure form is not a substitute for an independent examination by a professional home inspector. A seller may well complete a form to the best of his or her ability, but without knowledge of home construction, that ability may be limited. And a state-written form may not ask the questions you want answered. For example, when was the owner last in the attic to check for leaks? When was the furnace last examined? Does the home have aluminum wiring? |
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59. What is a \"CMA?\" |
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| When owners offer a home for sale, they logically want the best possible price and terms for their property. A "comparative market analysis" or "CMA" is an estimate of value prepared by a real estate broker or salesperson that shows recent past sales for like properties and suggests a possible asking price for the owner's property. |
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60. What is the difference between a \"warranty\" and an \"inspection?\" |
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| A warranty and an inspection are different creations. An inspection shows the condition of a home at a particular time. A warranty provides compensation if an approved repair is required during the warranty period. Not all warranties are alike. Some cover repairs only above a certain minimum (that is reasonable). Some have defect lists, but the standards for each list vary (some lists are vastly more liberal than others are). Some warranty programs charge an inspection fee for each item. |
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61. What is a contract \"contingency?\" |
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A sale agreement between buyer and seller typically outlines a series of obligations for each party. Also, usually a sale agreement has one or more clauses that make the transaction dependent on certain events. Such contract language is a "contingency" and the agreement itself can be seen as a "contingent" arrangement.
For example, you will buy the Smith house if you can get a mortgage at not more than 8% and one point. If such financing is not available, if the contingency has not been met, then a contingency may provide that the deal will fall through and your deposit will be returned in full.
The words used in a sale agreement outline important rights and terms and should be written and reviewed with great care. |
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62. What stays with a home and what goes? |
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In general, items that are physically attached to and intended to be part of a home are expected to stay. Example, if there is a built-in dishwasher it should stay. If the sellers take it, there would be a large hole in the kitchen cabinets.
Items that stay are called "fixtures" but it is sometimes difficult to determine what is or is not a fixture. Moreover, one can "create" a fixture in a purchase offer by saying that as a condition of the deal, the backyard swing set (or whatever) will stay.
The best approach to fixtures is to list what stays in the purchase offer. For details, speak with a broker as appropriate.
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63. What is a lease option? |
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It sometimes happens that a buyer does not want to purchase, or cannot purchase, immediately, and a seller does not want to sell, or cannot sell, immediately. In this situation, both parties may want a "lease option" arrangement.
In general, a lease option is an arrangement where a prospective buyer moves into a property as a tenant. The buyer has the right to buy the property for a specific price during the option period. The monthly rent is equal to the fair market rental rate plus an additional sum. The additional sum is credited to the buyer at closing, should the buyer exercise the option to purchase. If the buyer does not buy the property, then the additional monthly payments go to the owner.
Lease option properties can be located by real estate brokers. Lease options contracts should be reviewed by attorneys for each party to the transaction before signing. Also, before entering into a lease option arrangement, speak with lenders to review current financing requirements. |
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64. Can all the rent paid in a lease purchase be credited toward a down payment? |
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| If the purchase is being financing by a commercial lender, the lender will want to know the fair market rental for the property. Anything above the fair market rental can be considered a credit toward the purchase, anything below a fair market rental represents a discounted sale price. A lower price, in turn, means the lender will not provide as much financing as buyer and seller may have wanted. Speak with lenders for details. |
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65. What is a seller \"take-back\" or \"carry-back?\" |
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A seller "take-back" works like this. A home is worth $100,000 and has an assumable $60,000 mortgage. You assume the mortgage. Instead of taking $40,000 in cash from YOU, the seller instead takes back a note, secured by the property. For example, the seller might take-back a note for $30,000 if you will put up $10,000 in cash.
A seller take-back is just like a loan from any lender. It must be repaid according to the terms and conditions outlined in the note. If not repaid, the property can be foreclosed. The rules that apply generally to mortgages may not apply to seller take-backs. For example, some attorneys argue that a seller take-back is not subject to state usury rules (interest rate caps) because a seller take-back is NOT a loan, no money changed hands. |
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66. Is an owner \"take-back\" a good way to finance a home? |
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Such financing is fine as long as it meets the usual standards you would expect with a loan. These would include a competitive interest rate, no short-term balloon note, the right to prepay in whole or in part without penalty, or a deed of trust rather than a "mortgage," so there is a trustee to accept a pay-off in case the owner is not available.
But since a commercial lender is not involved, you will want many of the protections lenders require such as a title search, title insurance, termite inspection, survey, a proper deed, etc. |
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67. Does it make sense to buy real estate for cash? |
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Probably the best answer works like this: Is there a better place to put your money? Is there an alternative investment that will produce like returns with equal risk? Is it simply more comfortable as a matter of personal preference to pay cash? The decision to pay cash or not pay cash includes both economic considerations and personal choices. Many people simply prefer a home that is free and clear of all debt. Several advantages can be obtained by paying all cash. There is no mortgage application and no need for private mortgage insurance. There is also no mortgage interest to write off.
However, if you elect to pay all cash, be sure to insist on the protections that a lender would want a title inspection, title insurance, survey, termite inspection, appraisal, etc.
It may be worthwhile to sit down with a tax professional or a fee-only financial planner to review the consequences of paying all cash or financing. |
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68. What is a \"cash-back\" transaction? |
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It is sometimes claimed that it is possible to buy a home and receive both the house a substantial amount of cash at closing.
For example, a home will be "sold" for $100,000. The deal will be financing with a 95% loan-to-value mortgage. However, the seller will provide a $15,000 certificate of deposit to the buyer at closing.
On the surface, we have a deal with a $100,000 purchase price, $5,000 down, $95,000 in financing, and a $15,000 TD. Alas, $100,000 was never paid for the house. There was a "sales price" of $100,000, but then as part of the deal, the seller provided a $15,000 rebate in the form of a CD. Since a CD is a certificate of deposit that presumably is worth $15,000 in this example, this property was sold at discount - the real price is $85,000. This is a classic "cash plus" deal where the amount financed is greater than the debt to the owner.
The surplus would be returned to the buyer at closing, if there was a closing. Lenders will decline this transaction because the amount of financing sought is greater than the discounted value of the property. Even if this property appraises at $100,000, lenders will value the deal at the appraised value or the true sale price ($85,000), whatever is less. Worse, if the lender is not told, in writing, in the loan application and in the sale agreement about the CD, there may well be grounds to consider charges involving fraud.
Bottom line: Should someone propose a cash-plus deal, sign nothing until you have spoken with an attorney. |
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69. Why does closing cost so much? |
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State and local governments have discovered that real estate transfers are wondrous opportunities to tax with little political responsibility. If a politician says that taxes should be raised, the individual may well be out of work when elections next roll around. But if real estate transfer taxes are raised, the game changes because many of those impacted by the higher tax will move elsewhere, and thus they cannot vote against the politician.
The result is that transfer taxes and "stamps" often amount to thousands of dollars per transaction, income that is enormously profitable to states and local communities.
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70. Must I physically attend closing? |
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Check with your closing provider, but in most jurisdictions, if not all, the answer seems to be "no."
The purpose of closing is to assure that all requirements of the sale agreement have been met. The closing papers need to be signed by all parties to the transaction, and often notarized or witnessed.
However, the signing process need not be done at the closing table. Documents can be reviewed and signed away from the closing table and sent to the closing provider by overnight delivery. |
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71. What is a \"walk-through?\" |
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When you purchase an existing home, you enter into a sale agreement at one point but only close on the sale some weeks later. To assure that the property is in substantially the same condition as when the sale agreement was signed, a buyer will "walk through" the property just before closing.
If you are a buyer, be sure to allocate enough time for a thorough walk-through.
In the case of a new home, the situation is a little different. Typically, there is a walk-through with the builder's representative. Items not completed, or not properly completed, are entered onto a "punch list." The punch list items are then detailed at closing and the builder is obligated to make required repairs and completions.
When going through a new home, buyers should make their own punch list and compare it with the builder's representative to assure that nothing is missed by accident. |
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72. Must real estate brokers disclose the fact that they are licensed when they buy or sell for themselves? |
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All states license the practice of real estate brokerage. A common provision of such laws is that real estate licensees must disclose their license status when they buy or sell a property for themselves, for a spouse, or for an immediate member of the family such as a parent or child.
The reasoning behind such disclosure rules is that brokers and salespeople, by virtue of the fact that they are licensed, are presumed to have a marketplace advantage over those who have not studied real estate, passed various tests, and obtained a license. To have a fair playing field, brokers and salespeople must disclose the fact that they are licensed so that consumers know about such training and experience. Speak with brokers regarding specific requirements in your state. |
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73. Can a real estate broker assist me in the purchase or sale of a business? |
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In some states there traditionally were "business chance" brokers, individuals specifically licensed to buy and sell businesses for another and for a fee. Such licenses in many states have been combined with real estate licenses, meaning that a real estate broker is allowed to buy and sell a business for another. Please speak with local brokers for specifics related to your state.
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74. Do people really make millions of dollars buying with no money down? |
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It's a big country and you can be sure that each year someone will win the lottery, someone will be hit by lightening, and someone will buy a home at a steep discount, with predatory terms, and no money down. The odds in every case are grim.
The essential issue is NOT buying property with no money down, it is buying property that can produce a positive cash flow and/or be sold at a profit. Unless one or both of these conditions can be met, then the economics of buying a home with no-money-down are unlikely to make sense.
Those buying under the VA program can buy with no money down, and residential financing with 5% down or less is widely available, especially for first-time homebuyers. However, all of these programs require appropriate credit and income. |
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75. What are the forms of real estate ownership? |
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1. TENANCY IN SEVERALTY: Property owned by one individual or by one corporation is said to be ownership in severalty. If you own property in severalty, you own it by yourself cut off from all others.
2. JOINT TENANCY: This is ownership of property by two or more persons with right of survivorship built in. If two parties own a parcel of property as joint tenants and one of them dies, the survivor owns the property in severalty. If individuals wish to become joint tenants, then the deed must specifically state joint tenants or right of survivorship. If the deed does not indicate this and there is more than one owner, they automatically become Tenants in Common. South Carolina only recognizes two forms of co-ownership, and they are: Joint Tenancy and Tenants in Common. Each joint tenant is said to have an undivided interest. Each party has the right to sell their share; however, after the sale they may no longer be joint tenants. If one owner wants to sell and the other owners do not want him to sell; the owner that wants to sell the property can take the others into court and file a suit to partition the land. The right to partition is a legal way to dissolve co-ownership when the parties do not agree to its termination. In other words the court will cut off your share and let you sell it. The following four unities are required to create a joint tenancy:
a} Unity of Possession: All joint tenants hold an undivided right of possession. Each owns all and no one can find their exact piece of dirt.
b} Unity of Interest: All joint tenants must hold equal interest. If there are two owners, then each must own half, if there are three owners then each one owns one third.
c} Unity of Time: All owners must acquire their interest at the exact same time.
d} Unity of Title: All joint tenants must be named in the same deed.
3. TENANCY IN COMMON: This is the most used form of ownership in South Carolina. It is used for concurrent ownership between two or more parties. Instead of having right of survivorship as with joint tenants, there is right of inheritance. For example, if two people own a piece of property as tenants in common and one of them dies their share goes to their heirs not to the survivor. Unlike joint tenants they need not have equal interest nor do they have to be on the same deed. There is also no requirement that they receive their ownership at the same time, but they do have to have possession. For example, if there are three owners and one owns one half and the other two each own one quarter, the one that owns one half owns one half of every molecule of dirt. The other two would each own one quarter of every molecule of dirt. As with joint tenants, no one can find their exact piece of dirt. No special wording is required to establish a tenancy in common.
4. TENANCY BY THE ENTIRETY: Tenancy by the entirety is not recognized as a form of ownership in South Carolina. Under early common law, a husband and wife were held to be one person. Therefore, ownership of real estate by husband and wife was considered to be owned by one person with right of survivorship.
5. STATUATORY OWNERSHIP: There three forms of Statuatory Ownership, and they are:
A} SOUTH CAROLINA HORIZONTAL PROPERTY ACT(Condominiums): This legislation is usually called the Horizontal Property Act and it deals with condominiums and the following:
I) Property Rights: The owner of each unit gets a deed to that particular unit. If one person owns it that person would own the unit in severalty. If two or more parties own the unit it may be held as Joint Tenants or Tenants in Common. The owners of the individual units also own a share of the common elements, such as the parking lot, pool, and lawn. All of the owners of the individual units would own the common elements together as Tenants in Common. The owner's share of the common elements is equivalent to a percentage represented by the owner's unit in relation to the entire property. This percentage is expressed at the time the horizontal property regime is established, and cannot be altered during the life of the project.
II) Master Deed: The master deed establishes the Horizontal Property Regime. The master deed covers the entire project including all units and all the common elements. The master deed must be recorded.
III) Owners Association: Condominium by-laws provide for the operation of the association by the owners. At least 51% of the members are required to adopt decisions. They are responsible for such things as care, upkeep, services, security, fee collection, etc. Two thirds of the members must agree to changes in the by-laws.
IV) Allienation: Each owner has the right to sell his/her unit.
B} COOPERATIVES: A cooperative development is owned by a corporation in severalty. Each owner owns stock in the corporation, with the right to occupy a unit under a proprietary lease. The corporation is responsible for all taxes, mortgages, and common areas. A cooperative differs from a condominium in that the condo owner gets title to his unit (real property) and is responsible for the taxes and so forth on his individual unit only, and a co-op owner gets stock (personal property) rather than real estate and all shareholders are responsible for the entire project.
C} BUSINESS ENTITIES:
I) Partnership: A partnership is an agreement of two or more co owners to conduct a business for a profit. Unlike a corporation, partners are only taxes once. The two types of partnership are:
1. General Partner: A general partner is an active partner and would have unlimited persnal liability for the debts of the partnership. One general partner can personally obligate the other partner(s).
2. Limited Partner: A limited partner is an inactive partner who contributes only money to the partnership. Limited partners have limited liabilities only to the extent of their investment.
II) Corporation: A legal entity created by state law, consisting of individuals, but regarded by law to be an artificial person. The owner's liability is limited to the amount of his investment. The corporation becomes the liable person and will own property in severalty. The disadvantage is that profits are taxable at corporate and personal income levels.
III) R.E.I.T: Ownership in Real Estate Investment Trust (REIT) is held in trust form for the beneficiaries by a trustee. Under federal law, an REIT must have 100 or more investors. REIT shareholders are exempt from corporate income tax because it is treated as a trust, not a corporation. Passive Investor is an investor with no management control and invests capital only.
IV) Syndicate: Several people could form a syndicate and own property if they so desired. Two or more people involved in an investment, regardless of their legal association, for structuring or operating a particular business venture. Profits come from buying and selling real estate |
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