The Real Estate Book
A Guide to Buying and Selling Real Estate
By Vaughn Stewart

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What are the advantages of working with a Real Estate Professional?

     A true sign of a professional is a person who can make the most complicated task simpler and yet affordable. A real estate professional offers this service. Through extensive training and experience, a real estate professional provides market advice, community information, loan data, closing communications and much more.
     A real estate professional is always 'on call'. In today's time-starved society, this means a lot to most consumers. Further, the resources a real estate professional has at his or her disposal is impressive. Advertising opportunities to sell houses and loan programs for qualified buyers are two such notable resources.
     To journey through the often-complex maze of a real estate transaction, alone, can be both costly and overwhelming. A real estate professional, by simplifying this process, can save homebuyers and sellers time and money.

What is The Multiple Listing Service?

     The MLS or Multiple Listing Service is a computerized system under which participating real estate professionals agree to share commission on the sale of houses listed by any one of them. So, for example, if you list your house with one broker and another actually sells it, they split the commission. The advantages to the seller and homebuyer are as follows: more exposure for a house to sell; more houses to choose from to purchase; and more brokers interested in selling a seller's house.

How can my Loan Application Process be accelerated?

     Sometimes even the best intentions can't enhance the loan application process. Unexpected delays sometimes just happen. To prevent unnecessary delays, however, most lenders advise homebuyers, as follows:
     a. Pre-qualify for a loan prior to choosing a house. This pre-qualification will help the homebuyer determine the price of a home he or she can afford and an affordable house payment.
     b. Be prepared to provide loan documentation to the lender immediately upon request. Examples of commonly requested loan documentation include: W-2 forms; copies of tax returns; pay stubs;
copy of sales contract; gift letter documentation, if any; divorce decree, if any; old survey; and title insurance policies.
     c. Lock in your interest rate at the most opportune time and obtain a written lock-in confirmation from your lender.
     d. Obtain a written good faith estimate of the closing costs and prepaid items prior to closing.
     e. Begin shopping for homeowners insurance early and finalize your choice of policies prior to closing.
     f. Keep in constant contact with the lender. Call the lender weekly for a status report on your loan application and be responsive to any and all lender requests.

What are Debt To Income Ratios?

     In order to determine affordable mortgage payments for homebuyers, lenders customarily utilize debt-to-income ratios. Current conventional loan guidelines, based upon a 5 percent down payment, limit a homebuyer to a total monthly house payment not exceeding 28 percent of his/her gross monthly income. This total monthly house payment includes mortgage principal, interest, taxes and insurance (i.e. PITI). Furthermore, the current conventional loan guidelines limit such a homebuyer to total monthly debt payments of 36 percent of his/her gross monthly income. Total monthly debt payments include the above referenced monthly house payment (PITI) plus any other reoccurring debt obligations.

What are the advantages of a FHA loan?

     A FHA loan allows the homebuyer to put down a smaller down payment than a conventional loan and to qualify using a greater percentage of their income for housing. Closing costs, also, can be financed by the homebuyer in a FHA transaction.

What are the advantages of a VA loan?

     A VA loan requires no down payment but a funding fee of 1.25 percent of the loan amount must be paid in lieu thereof. VA guidelines are more generous than FHA's in relation to the price a homebuyer can pay for a house. Further, the VA qualifying ratios are more liberal than conventional ratios.

What is a Note and Mortgage?

     A note is a written promise to pay a sum of money according to its terms, including the interest rate; amount of principal and interest payments; payment due date; and the repayment period. A mortgage is a pledge of property (i.e. a house) as security for repayment of a debt (i.e. loan) given by the mortgagor (i.e. borrower) to the mortgagee (i.e. lender). The mortgage document sets forth certain covenants of the mortgagor, such as, among other things, the obligation to maintain the premises, to pay the property taxes promptly and to keep the house insured. Once the loan is paid in full, the pledge becomes void and the mortgage is satisfied of record.

What is a Prepayment?

     A prepayment is the payment of a mortgage loan prior to maturity. There are two types of prepayments: (1) partial and (2) full. A partial prepayment is a principal only payment during the loan term, which reduces the amount of the outstanding principal balance of the loan. This principal reduction triggers a reduction in the total amount of interest paid during the loan term. A full prepayment, on the other hand, is a total ~'payoff" of the loan by the homebuyer. A full prepayment customarily takes place when a house is sold. It is wise to ask your lender initially about its prepayment penalty, and to avoid loans, which assess a prepayment penalty.

What is PITI?

     PITI is an acronym for principal, interest, property taxes and insurance. These are the most common fixed costs associated with homeownership.

What is an Escrow Account?

     To insure that the homeowner's insurance, property taxes and mortgage insurance, if applicable, are paid promptly, lenders commonly require an escrow account. An escrow account is an account maintained by the lender in which is deposited that portion of the monthly payments by mortgagors intended for the payment of property taxes and insurance.
     Upon the due date of the property taxes and the insurance premiums, the lender will deduct the amount due from the escrow account and pay them. Escrow accounts are fluid, which means as property taxes and/or insurance premiums increase, so does the monthly escrow payments. Under certain circumstances, lenders will waive the escrow account requirement.

What is Private Mortgage Insurance?

     Private Mortgage Insurance is insurance written by a private mortgage insurer that protects a lender against loss caused by a homebuyer's default under a mortgage loan. It allows a homebuyer to make a small cash down payment of less than 20 percent and still buy a house.
     The rationale behind PMI is based upon the risk factor imposed by homebuyers who have less than 20 percent equity in their property. According to lenders, the default rate amongst such homebuyers is much greater. Thus, they must procure PMI to protect the lender against this additional risk. PMI is usually paid in monthly installments, a year in advance.

Is PMI required for the life of a mortgage loan?

     Private Mortgage Insurance can be cancelled by the lender subject to certain preconditions being met. A homebuyer usually has to request such action. Homebuyers should inquire about their lender's PMI cancellation policy during the loan application process.
     Once 20 percent equity in the house is accumulated, you should request the lender to cancel your monthly PMI premium. In order to track your equity accumulation, you should obtain an amortization schedule.
Most lenders require certain preconditions prior to releasing homebuyers from the PMI obligation such as:
     (a) Length of Ownership: A "seasoning" or waiting period of two (2) years is often required.
     (b) Prompt Payment History: Lenders require a prompt payment record prior to the cancellation of a PMI premium.
     (c) Appraisal: Lenders often order a new appraisal upon a PMI cancellation request to insure that the sufficient equity does exist.

What is an Appraisal?

     An appraisal is an estimate of value. It is the price at which the property would be sold by a willing and knowledgeable seller after bargaining with a willing and knowledgeable Homebuyer.
     In appraising real estate for residential loan purposes, two important factors are: (1) value of comparable nearby properties as established by recent sales and (2) replacement or reproduction cost of the property. Comparables or "comps" are comparable values of similar properties that have recently sold located in the same vicinity of the subject property.
     If an appraisal is made for residential loan purposes, its sole purpose is to determine the value of the property as adequate collateral for the lender's loan. Certain repair items may be noted on the appraisal, but such notation is not intended to be an exhaustive list of all defects.
     An appraisal report should not be relied upon as an inspection report as to the condition of the property. Rather, a homebuyer should procure the services of a professional inspector to inspect the property and render his or her report.

What is Earnest Money?

     Earnest money is a cash amount that the homebuyer furnishes up front to demonstrate his or her seriousness about purchasing the property. It represents the homebuyer's commitment to purchase.
     The earnest money is customarily held by the real estate professional in an escrow account. If the sale does not close due to no fault of the homebuyer, the homebuyer is usually due a refund of his or her equity money. If, however, the homebuyer is at fault usually the earnest money remains with the seller subject to the terms of the sales contract the parties executed.
     Typically, real estate professionals require both the homebuyer and seller to sign releases prior to the relinquishment of the earnest money to either party. If a dispute arises between the homebuyer and seller, most sales contracts direct the real estate professional holding the earnest money to interplead it into Court.

What is a Contract Contingency Clause?

     A contingency clause inserted in a sales contract provides that the contract is "subject to" the occurrence of a subsequent event. The event may be the homebuyer's loan approval; the sale of the homebuyer's prior residence; a satisfactory home inspection; a satisfactory termite inspection report; marketable title; and etc. In other words, a contingency clause is a safety valve designed to provide a way for a homebuyer to terminate the sales contract should the contingency event not occur.
     The exact wording of the contingency clause is most important. It must be clear and concise in order to avoid subsequent misinterpretations.

What is an Inspection Contingency Clause?

     An inspection contingency clause provides the homebuyer a right to have a qualified home inspector inspect and examine the house and/or property prior to closing. This right is not automatic in most standard sales contracts. Rather, it must be inserted in the sales contract by the parties. The purpose of this clause is to protect the homebuyer from buying a house that contains hidden defects.
     Typically, inspection contingency clauses, like other contingency clauses, place a deadline on the homebuyer to have the inspection completed and to report its results to the seller. The seller is then afforded the opportunity to respond to the inspection report. This is important. Contingency clauses should state with specificity the rights and remedies of the parties once the inspection is completed.

What is a Termite Contingency Clause?

     Most standard sales contracts contain some type of a termite contingency clause. Typically, such clauses require the seller to provide the homebuyer a wood infestation report at closing stating that the house is free of active termites and other wood destroying organisms. If termites or other wood destroying organisms are detected during the inspection, such clauses usually require the seller to have the house treated by a termite company prior to closing.
     What about termite damage? The termite contingency clause should further clarify whose responsibility it is to repair any damage detected by the termite inspection.

What is the difference between a Termite Wood Infestation Report and a Termite Bond?

     A wood infestation report is merely a report of the termite company's findings on the day the inspection was performed. These reports are typically limited to visual inspections and expire 90 days from the date of inspection. A termite bond, on the other hand, is a contract akin to an insurance policy. Most termite bonds are issued initially for a one (1) year period subject to annual renewals by the homeowner. If a termite bond is not renewed in a timely fashion, it will lapse and become void.
     Most termite bonds obligate the termite company to re-treat the house at no charge in the event termites are found during the term of the termite bond. These types of termite bonds are commonly referred to as "treatment contracts". Another type of termite bond is a "treatment and damage contract". Under these bonds, the termite company agrees not only to retreat, but to also repair any subsequent damage caused by termites.

What is Caveat Emptor?

     Caveat emptor is a Latin phrase meaning "Let the Buyer Beware". The sale of previously owned houses in Alabama is governed substantially by this legal doctrine in relation to material defects.
     Under current Alabama law, if a homebuyer discovers after a sale that the used house purchased has a material defect, neither the seller nor the seller's agents will be held responsible unless the homebuyer can prove all the following:
     (a) There was a material defect, which adversely affects health and safety;
     (b) The Seller or the Seller's agents knew of the defects before the sale;
     (c) The defect was such that it could not be discovered by due diligence (i.e. latent defect); and
     (d) The house was not bought "as is".
     The principles of caveat emptor do not allow a Seller or the Seller's agents to engage in fraud, or deceit, or to make misrepresentations about the condition of the property.

What are the merits of a Home Inspection?

     A home inspection by a professional inspector can alleviate problems after the closing. A recent study reflects that most lawsuits arising out of real estate sales concern property defects. Alabama law, generally, places the burden upon the Purchaser of a previously owned house to thoroughly inspect prior to purchase. (See Caveat Emptor, above.)
     The preferred time for a home inspection is prior to the signing of the sales contract. An early inspection alleviates the potential necessity of amending or terminating the sales contract upon receipt of the inspection report. An inspection contingency clause, however, can be inserted into the sales contract by the parties as an alternative to a pre-contract inspection. (See Inspection Contingency Clauses on Page 6.)
     Since Alabama law generally requires a "due diligent" inspection by the homebuyer, the retainer of a professional inspector makes good sense. Most homebuyers are simply not qualified to conduct their own home inspections. The homebuyer should accompany the inspector in order to observe first hand the various components of the house.

What is an "As Is" Sale?

     An "As Is" sale can generally be categorized as follows: (1) strict "as is" sale or (2) qualified "as is" sale. A strict "as is" sale basically envisions a sale without any warranties, implied or expressed, flowing from the seller to the homebuyer. If this is the seller's and homebuyer's intent, then certain language must be inserted in the sales contract and other preprinted language deleted.
     A qualified "as is" sale is an "as is" sale as stated above but subject to certain warranties and repair clauses contained in the sales contract. For example, a seller may sell his/her house "as is" subject to a satisfactory termite inspection and/or any repairs required by the homebuyer's lender.
     The type of loan the Purchaser applies for can dictate certain warranties required of the seller. Current VA guidelines require sellers to make any repairs required by the VA inspector. Further, both FHA and VA guidelines require sellers to furnish a satisfactory wood infestation report at closing and/or pay for a termite treatment. Thus, it is important for the parties to know the type of loan the homebuyer desires prior to the execution of a sales contract.
     Most preprinted sales contracts provide for a qualified "as is" sale subject to repairs demanded by the VA/FHA or lender; a termite contingency clause; and a "walk-through inspection" immediately prior to closing. A "walk-through inspection" is discussed below.
     Caveat: An "as is" sale does not, in and of itself, exempt a seller from a subsequent challenge by a homebuyer based upon fraud, misrepresentation or suppression of facts. Thus, it is incumbent upon a seller selling a house "as is" to speak truthfully and accurately; to disclose to the homebuyer any known defects concerning the property; and to encourage a detailed inspection prior to signing the sales contract.

What is a "Walk-Through" Inspection?

     Most preprinted sales contracts specify certain house components to be warranted by the seller such as heating/cooling systems; plumbing and electrical systems; and any built-in appliances. The homebuyer is given the opportunity to make a "walk through" inspection immediately prior to closing to satisfy himself or herself that such warranted components are in normal operating order. Too often, however, a homebuyer attempts to utilize such a "walk through" inspection to inspect other components of the house not specifically warranted in the sales contract.
     In the absence of fraudulent suppression or misrepresentation, a "walk through" inspection should be solely for the purpose of inspecting the components expressly warranted by the seller in the sales contract. It is not an "all inclusive inspection", but rather a narrow inspection of only the warranted components specified in the sales contract. If the homebuyer desires other components to be warranted by the seller, he or she should (1) state so in the sales contract and/or (2) conduct an "all inclusive" inspection prior to signing the sales contract or, (3) insert an inspection contingency clause in the contract.

What is a Home Warranty Contract?

     There are generally two categories of home warranty contracts: a warranty for previously owned houses; and a warranty for newly constructed houses.
     Home warranties for previously owned houses are akin to service contracts. Upon payment of a deductible, these warranties usually cover costs for the repair or replacement of certain appliances or mechanical systems. Home warranties for previously owned houses do not, however, cover preexisting conditions. The appliance or mechanical system must be in normal operating condition on the closing date to be covered.
     The scope of coverage of home warranties for previously owned houses is narrower than that found in warranties for newly constructed homes. They do not cover structural defects, such as foundation cracks or roof repairs. These warranties typically cover the heating and air conditioning systems, interior plumbing system, electrical systems, and certain home appliances. A deductible amount per service call is required.

What are the benefits of a Survey?

     A survey is the process of determining the precise boundaries of a parcel of property, a map and description are the end results. It shows the location of the improvements on the parcel, as well as the location of any easements, rights of way, encroachments, and other physical features of the parcel.
     Since only through a survey are encroachments and certain easements discoverable, an up-to-date survey is indispensable. An examination of the title to a parcel of property, alone, cannot detect such encroachments and easements. For example, fence lines are not detectable in a title examination; however, they can over a period of time displace property lines through adverse possession.

What is Adverse Possession?

     Adverse possession is a method of acquiring title to property through the possession of the property for a statutory period of time. In order to ripen into title, the possession must be adverse, actual, continuous, under a claim of right and inconsistent with the claim of another.

What are Restrictive Covenants?

     Restrictive Covenants are limitations imposed on the use of property. Restrictive covenants may be created in deed or by a declaration of restrictions for a subdivision. Restrictive covenants governing subdivisions are sometimes referred to as "private restrictions". They are designed to promote and protect all of the property located within the subdivision. Matters customarily addressed by restrictive covenants include building setback lines; type of architecture that may be utilized; the use of the property and the sizes of proposed dwellings.

What are Zoning Laws & Regulations?

     Zoning laws and regulations are sometimes referred to as "public restrictions". Zoning laws and regulations are enacted by local entities in order to foster public health, safety, morals and welfare. Zoning regulates such matters as the use of land, the size of lots and the proportion of a lot, a house or building may occupy.

What is an Easement?

     An easement is a right to use all or part of the property owned by another for a specific purpose. A grant of an easement is the grant of a use, not a grant of title. Common examples of easements are: access easements; drainage easements; and utility easements. Easements may arise by express grant, implied grant or by operation of law.

What is a Building Setback Line?

     A building setback line is the distance from the front, rear or side of a lot beyond which the land must remain unimproved. A building setback line may be established by zoning ordinances, by a subdivision plat and by restrictive covenants in a deed or declaration.

What is Title Insurance?

     Title insurance is an indemnity against such unknown defects including objections to your title that exist as of the date of a title insurance policy. A title insurance policy does not guarantee that your title is perfect. However, it is a contract of insurance through which you can protect yourself from serious financial loss if a problem should arise which challenges your title.

What are the types of Title Insurance Policies?

     (A) Loan Policies: Most lenders request that the home buyer purchase a loan policy to safeguard the lender's security interest in the real estate being purchased. This policy is sometimes called a "mortgagee policy", and is issued in the amount of the mortgage loan. There is a one-time premium payment for this policy. The amount of coverage decreases as your loan amount decreases with each mortgage payment.

     (B) Owner's Policies: This policy covers the homebuyer's interest in the home. Because a policy safeguarding the lender's security interest may not ensure the homebuyer's right to the use and enjoyment of the property, it is wise for homebuyers to protect themselves with an owner's policy. This policy should be purchased for the full value of your property. Under its terms, the owner's policy will provide a defense for any legal action brought against all matters covered by your policy, at no cost to you. There is a one-time premium, which will protect your equity for as long as you own the property. And, if you sell the property this policy will protect you on your deed warranty.

     (C) Simultaneous Issue: Most title insurance companies offer a special rate when a homebuyer purchases both types of insurance at the same time. This is called a simultaneous issue, and is considerably more economical than buying separate mortgagee and owner's title insurance policies.

Why buy Title Insurance?

     When a person buys a previously owned car or consumer goods, they seldom need to know whether the former owner is married, single or divorced; whether they paid their taxes or are involved in a lawsuit. But when a person buys a home, it is essential to have all that information and much more.
     When your title is examined, the title examiner may fail to uncover such items as unpaid taxes, easements, restrictions and more. There is also the possibility of human error in numerous situations. These are just a few of the reasons a property owner needs the protection afforded by a title insurance policy.

What are Title Defects?

     Some causes of title defects include:
     (a) Fraud: False claims of ownership; forged deeds, wills, or signatures; false representations and records; illegal acts of trustees, guardians, attorneys and administrators of the property.
     (b) Human Error: Errors in copying, indexing and recording, or the destruction of records.
     (c) Improper Deeds and Wills: Deeds by persons of unsound mind or by minors; deeds delivered after death or without the grantor's consent; invalid, suppressed, or erroneous wills, missing heirs, unsettled estates.
     (d) Liens and other rights: Liens for unpaid estate, inheritance, income, property and gift taxes; homestead rights, community property rights; irregular court proceedings, court opinion reversals, lack of court jurisdiction; defective foreclosures.

What is the Closing?

     A closing is the completion of the real estate transaction. At such event, the title to the property passes from the seller to the homebuyer and the consideration for the purchase passes from the homebuyer to the seller. The closing documents are signed and delivered and closing adjustments are made.
     The closing attorney presides over the closing for the lender. The real estate professionals are present for advice and guidance. The closing attorney prepares the HUD-1 Settlement Statement, the Deed, and certain lender documents including the Mortgage, the Note and the Truth in Lending Disclosure. These documents plus other miscellaneous documents are presented by the closing attorney to the parties for review and execution.
     Also, at the closing, the survey and termite inspection report are reviewed by the Purchaser. After about 45 minutes to an hour, the closing attorney concludes for questions.

What are the Services provided by the Loan Closing Attorney?

     The loan-closing attorney generally provides the following services to the lender:
     1. Examination of the records in the Probate Office, which form the basis of title to the property and examination of the ad valorem tax records
     2. An assessment and the furnishing of a preliminary legal opinion as to the status of title as shown from such an examination of the foregoing records;
     3. The preparation, where appropriate, of documents in order to satisfy defects found in the title through such examination.;
     4. The preparation of documents necessary or appropriate to consummate the loan, including the transfer of title;
     5. The recording of the appropriate documents on the official public records to insure record title;
     6. After such recordation of closing documents and canceled prior liens, an examination of public records again to verify that all of same have been properly entered on record;
     7. The issuance of written certificate to the lender that record title appears vested appropriately.
     8. Any and all other services incident to the foregoing.

How is the Loan Closing Attorney's Fee determined?

     The basis for arriving at a loan closing fee generally includes the following considerations: (1) the complexity and difficulty of work performed and (2) the responsibility and ultimate continuing liability of the law firm as measured by the loan am6unt and/or sales price.
     In most instances, the loan-closing fee can be accurately measured by a schedule of fees, which increases in amount as the loan amount, and/or sales price increases. This schedule of fees enables the Lender to estimate the total closing costs for the homebuyer prior to the closing.

How can Closing Delays be avoided?

     A timely closing, like a timely loan approval, cannot always be guaranteed. Unexpected dilemmas often creep up at the last minute causing a delayed closing. Delays are often due to "the walk-through inspection", the survey, the termite inspection report, the title examination and preconditions imposed by the lender. Some of these delays can be alleviated through prior planning.
     Both homebuyers and sellers can work toward avoiding closing delays by doing the following:
     a. A home inspection performed by a professional inspector prior to the signing of the contract may alleviate subsequent surprises.
     b. By furnishing previous surveys and title policies to the real estate professional, upon listing the house, the seller can help the closing attorney detect any "red flags" that need to be corrected ahead of closing.
     c. Special circumstances, such as divorces, estate sales, and bankruptcies, should be disclosed by the seller to the real estate professional upon listing the house. This will enable the real estate professional to seek legal assistance early in order to cure any potential problems.
     d. The seller should furnish the real estate professional information regarding his/her current mortgage loan (i.e. lender's name and account number) upon listing the property so that a timely "payoff" of the mortgage loan can be ordered. Further, the seller should be assured that the survey and termite inspection report are ordered on a timely basis.
     e. The Purchaser or Seller should order the survey, termite inspection and homeowners insurance in a timely fashion.
     f. The Purchaser should request that the lender provide him/her a list of pre-closing conditions prior to closing.

What can be done to help assure a smooth closing?

     Smooth closings don't just happen. They are the result of prior planning on the part of the homebuyer and seller (i.e. see "How Can Closing Delays Be Avoided" on Page 14) and "the closing team" chosen by them.
The closing team consists of the real estate professional, the lender, the closing attorney, the surveyor, the termite inspector, plus any other third party provider chosen by the sellers and homebuyers. It is important to choose this team carefully because too much is at stake to do otherwise. A real estate transaction represents the largest lifetime investment for most sellers and homebuyers. Professionalism and excellence should be demanded and expected.

Can a Seller or Homebuyer send a proxy to the closing?

     A seller or homebuyer can sometimes be represented at closing by a representative if such representative has been duly authorized by the seller or homebuyer to sign closing documents. This authority flows from a "Power of Attorney", a written legal document that authorizes a person named in the document (known as the attorney-in-fact) to act in place of the signing party.
     Conveyances by representatives acting under powers of attorney, however, are only as valid as the underlying instrument conferring the authority. This makes Powers of Attorney extremely powerful in the real estate setting. They have the power to make or break a closing. Don't let a defective Power of Attorney stop yours.
     If a seller or homebuyer is unable to attend the closing, he/she should notify their real estate professional or closing attorney immediately. Subject to the lender's approval, the loan closing attorney can then draft a specific "Power of Attorney" for the party's execution prior to the closing. Upon closing, this instrument is recorded at the recordation office.
     If there is an existing "Power of Attorney", the original must be furnished to the loan-closing attorney at least a week prior to the closing date for approval by the lender and the title insurance company. In this regard, powers of attorney prepared by out of state attorneys may not be adequate to validly convey Alabama real estate.

What Are Typical Settlement Charges?

     Settlement charges are typically broken down into three categories: (a) Prepaid items, (b) Closing costs and (c) Discount points. While homebuyers routinely pay prepaid items, the payment of closing costs and discount points can be negotiated between the parties.

     a. Typical Prepaid Items:
          (1) Prepaid Interest. The per day interest charge on the loan calculated from the date of closing to the first day of the successive month. This is paid at closing because loan payments are paid in arrears. This means that the first payment due date will typically be 30 days or more after the date of closing. The amount of prepaid interest varies depending upon the time of the month the closing is scheduled.
          (2) Homeowners & Mortgages Upfront Insurance Premiums. These premiums are typically paid one year in advance at closing.
          (3) Escrow Impound Fund. This represents the monthly escrow payments for taxes, homeowners insurance and mortgage insurance, if applicable, paid into the lender's escrow account at closing.
     b. Typical Closing Costs
          (1) Lender's Origination Fee
          (2) Lender's Processing Fee
          (3) Lender's Document Preparation Fee
          (4) Appraisal Fee
          (5) Credit Report Fee
          (6) Lender's Underwriting Fee
          (7) Lender's Tax Service Fee
          (8) Lender's Inspection Fee
          (9) Lender's Assignment Recording Fee
         (10) Title Insurance Premium and Binder Charge
         (11) Title Examination and Closing Fee
         (12) Recording Fees
         (13) Survey Fee
         (14) Termite Inspection Fee

What Is Right Of Survivorship Deed?

     A right of survivorship deed gives the living of two or more persons ownership of the property. For example, on the death of a spouse (1oint tenant), the entire estate (ownership) passes to the surviving spouse. The estate that passes to the surviving spouse does so automatically by operation of law. This means that it passes outside the deceased spouse's estate or will.

What is a Homestead Exemption and when do I file for it?

     A homestead exemption is an exempted amount subtracted from your property taxes provided to all homeowners who actually occupy the home in the State of Alabama. The amount is currently $45.00, and must be applied for. Of greater significance, is the residential assessment afforded to homeowners, which is based upon a 10% residential assessment, rather than a 20% commercial assessment. This can be requested at the same time a homestead exemption is applied for.
     To apply, a new homeowner must go in person to the County Tax Assessor's office, sometimes referred to as Revenue Department, in the county in which the property lies. There are certain time frames in which this must be done so it's important to telephone the office upon receipt of your deed. For example, in Calhoun County, you must claim your homestead exemption and assess your property during the time frame of October I through December 31 following the closing date.
     This is a one-time application and the homestead assessment is good so long as you own and reside in your home. The only thing you need to take with you is your deed and sometimes your sales contract. Homeowners who fail to claim their homestead and assess their property are in for a huge surprise- a huge property tax bill.

What should Sellers know about FHA/VA Guidelines?

     Sellers are sometimes surprised after the execution of a FHA or VA sales contract to discover certain repairs they are required to pay. Further, VA/FHA dictate certain closing costs, which the Purchaser is not allowed to pay. These closing costs are mandated seller's costs. Thus, a wise seller presented with a VA/FHA offer should ask questions first, not later.
     To alleviate these concerns, a seller can cap the dollar amount of repairs or closing costs in the contract he/she is willing to pay. For example, an inserted contract clause limiting the seller's total closing costs to a fixed dollar amount should specifically state "including all VA/FHA seller-mandated closing costs," plus the deed preparation fee and termite inspection and/or treatment fee.

What Is Specific Performance?

     This is an equitable remedy afforded to sellers and homebuyers, alike, in order to compel performance of a sales contract according to its terms rather than to recover money damages. The basis of this remedy is that real estate is unique and that a mere recovery of money damages would not properly compensate the injured party.

     Briefly, What Are the New Lead-Based Paint Regulations?

     Lead was widely used as a paint additive until banned in the use of paint in 1978. Lead-based paint can cause paint chips, dust and contaminated soil inside and outside of a house. If ingested, damage to the nervous system can result.
     To address this concern, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992, which requires disclosure of lead based paint hazards to homebuyers. This disclosure is mandatory in conjunction with the sale of homes, condos and apartments constructed prior to 1978.
     Disclosure means disclosing "all known information" concerning lead based paint hazards at the property; the completion, signing and dating of a disclosure form certifying compliance with the Act and identifying the information disclosed; the distribution of an EPA-developed pamphlet; and inclusion of a statutory "Lead Warning Statement" in every rental or sale agreement.
     In addition to the above Disclosure, in the case of a sale, the buyer shall be given a 10-day period to inspect the property and the right to rescind the sales contract or renegotiate the sales price if a lead-based paint hazard is discovered.

What Are The Basic RECAD Choices?

     The Real Estate Consumers' Agency & Disclosure Act (RECAD), effective October 1, 1996 in Alabama, addresses the types of relationships between Real Estate Professionals and consumers and the different services that flow from those relationships. In a nutshell, Alabama homebuyers and sellers now have a choice when it comes to the type of representation and services they desire from a Real Estate Professional. By making this choice clear, all parties will now know their specific rights and duties at the outset. The relationships are, as follows:
     1. Contract Brokerage: A contract Broker is a Real Estate Professional who assists one or more parties in a contemplated real estate transaction without being an agent or an advocate. The Real Estate Professional serves as an intermediary or facilitator for either or both the homebuyer and seller. The homebuyer or seller receiving this service is called a "Customer", not a "Client" of the Real Estate Professional.
     2. Single Agency: A single agency relationship is premised upon an agency agreement between the Real Estate Professional and her client. For instance, if a seller hires a single agent, the agent (i.e. Real Estate Professional) must represent only that seller in any negotiations. On the other hand, a buyer's agent represents only the buyer and owes his loyalties solely to his buyer client. Unlike a contract broker, a single agent can advocate, advise, and negotiate on behalf of her client.
     3. Limited Consensual Dual Agency: Under this type of relationship, the Real Estate Professional may assist both the homebuyer and the seller in the same transaction. While the range of services are more restricted under this type of relationship than single agency, it can prove helpful to both buyers and sellers under certain circumstances. For instance, limited consensual dual agency can prove advantageous to sellers by broadening the marketing opportunities of their homes.