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What are closing costs?
Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless these charges are rolled into the loan, they must be paid when the home is closed.
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Who pays the closing costs?
Closing costs are either paid by the seller or buyer, which often depends on local custom and what the two parties negotiate.
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Why do I need a title report?
As much as you as a buyer may want to believe that the home you have found is perfect, a clear title report ensures there are no liens placed against the prior owners or any documents that will restrict your use of the property. A preliminary title report provides you with an opportunity to review any impediment that would prevent clear title from passing to you.
When reading a preliminary report, it is important to check the extent of your ownership rights or interest. The most common form of interest is "fee simple" or "fee," which is the highest type of interest an owner can have in land. Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the report. You also may have to consider interests of any third parties, such as easements granted by prior owners that limit use of the property. Some buyers attempt to clear these unwanted items prior to purchase. A list of standard exceptions and exclusions not covered by the title insurance policy may be attached. This section includes items the buyer may want to investigate further, such as potential building and zoning laws.
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What do all of those real estate acronyms in the ads mean?
If you find yourself stumbling over weird acronyms in a real estate listing, don't be alarmed. There is method to the madness of this shorthand (which is mostly adopted by sellers to save money in advertising charges). Here are some abbreviations and definitions from a recent newspaper classified section:
- assum. fin. -- assumable financing
- dk -- deck
- gar -- garage (garden is usually abbreviated "gard")
- expansion pot'l -- may be extra space on the lot, or possibly vertical potential for a top floor or room addition. Verify actual potential by checking local zoning restrictions prior to purchase.
- fab pentrm -- fabulous pentroom, a room on top, underneath the roof, that sometimes has views
- FDR -- formal dining room (not the former president)
- frplc, fplc, FP -- fireplace
- grmet kit -- gourmet kitchen
- HDW, HWF, Hdwd -- hardwood floors
- hi ceils -- high ceilings
- In-law potential -- potential for a separate apartment. Sometimes, local zoning codes restrict rentals of such units, so be sure the conversion is legal first.
- large E-2 plan -- this is one of several floor plans available in a specific building
- lsd pkg. -- leased parking area, may come with an additional cost
- lo dues -- find out just how low these homeowner's dues are the scale by which they're measured.
- nr bst schls -- near the best schools
- pvt -- private
- pwdr rm -- powder room or half-bath
- upr- upper floor
- vw, vu, vws, vus -- view(s)
- Wow! -- better check this one out.
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Do I need a home inspection?
Yes. Buying a home "as is" is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.
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How do I find a home inspector?
Your realty agent is one source. But keeping them independent from the agent may be a good idea. Inspectors are listed in the yellow pages or you can ask for referrals from friends. Ask to see the inspector's credentials, such as a contractor's license or engineering certificate. Also, check out their references. One can usually find an inspector by looking in the phone book, by inquiring at a real estate office or sometimes at an area realtor association. Rates for inspection services vary greatly. Many inspectors charge about $400, but costs go up with the scope of the inspection.
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Should I include an inspection contingency in my offer?
An "inspection contingency" protects you as a buyer in a purchase offer by allowing you to cancel closing on the deal if an inspector finds problems with the property.
As soon as the seller accepts a written offer, the document becomes a legally binding contract. The purchase contract can be written to include a contingency for any repairs found to be needed or related items the seller must take care of before closing. If these are not dealt with, and you have such a clause in your contract, you can delay or possibly cancel the closing. If it's not stated in the contract, you could face losing your deposit. There also may be costly legal implications stemming from backing out of a contract.
You usually will have the right to choose the inspector (and be responsible for paying for the inspections). In addition to an overall inspection for structural soundness, you can request a satisfactory pest control inspection report, roof inspection report or contingency for no potential environmental hazards such as asbestos or radon gas.
Contingency clauses should satisfy the concerns of both the buyer and seller. Buyers also can protect themselves by inserting additional necessary contingencies. Indicate which items like curtains and appliances are to remain with the house. Then stipulate you have the right to personally inspect the home 24 hours before closing to make sure all is in order.
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What is the best time to buy?
Because many buyers prefer to move in the spring or summer, the market starts to heat up as early as February. Families with children are eager to buy so they can move during summer vacation, before the new school year begins. The market slows down in late summer before picking up again briefly in the fall. November and December have traditionally been slow months, although some astute buyers look for bargains during this period.
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What is the first step to buying a home?
Finding out what you can afford is one of the fist steps, which can be done by pre-qualifying for a home loan. This step will help you narrow your search for both a neighborhood and particular houses. A pre-qualification is a simple calculation that considers several factors, but primarily your income. There are no guarantees with a pre-qualification, but it will be expected of you when you make an offer on a home.
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