r · common mistakes fsbo sellers make . 1 repairs or decorating that may need to be done prior to...
TRANSCRIPT
The Decision to Sell Your Ovvn Home
Sel ling your home yourse lf depends on your personal
preferences and how much time and energy you' re willing
to invest in your home sale.
Industry experts advise against owners selling their
own homes, citing that an experienced real estate sales
professional can find the right buyer, the best price and
often prevents costly and time-consuming problems that
may arise during the t ransac t ion.
Many sellers choose to market their homes themselves and
pay a flat fee to have a professional handle the paperwork.
Some services will negotiate counteroffers, handle
paperwork, contracts and the correspondence between
appraisers, lenders and insurance providers. Some real
estate offices provide marketing assistance, writing up ad
copy and p ricing your property.
Home sellers need to be prepared to do a lot of the work,
like holding their own open house. You will need to be
outgoing and comfortable answering endless questions
about your property. You will need to accept t hat strangers
are going to look in your closets, under your sink and
cabinets, etc.
Patience can also be important when holding out for the
best possible offer. A good eye and a willingness to spend
time staging your home are helpful, too. You can hire
staging consultan ts to give advi ce on how to make your
home look its best. Sometimes an objective set of eyes can
see "curb appeal" that you may have overlooked.
MAKING THE COMMITMENT TO SELL YOUR OWN HOME
The first decision a home sel ler must make is whether, as a
consumer, you should decide if the services of a real estate
professional is worth the cost price. Once the decision is made,
you must consider alternative marketing possibilities and develop a
home selling marketing plan to succeed at selling your own home.
Some homeowners who try to sell their own home fail.
THERE ARE A FEW COMMON REASONS FOR THESE FSBO FAILURES:
The single most common reason owners fa i l to sell their own home
is the owner's sheer lack of commitment to the FSBO stra t egy.
Examining the most common reasons for FSBO failures is a usefu l starting
place for home owners to begin evaluating what type of marketing plan
they want to form ulate to se ll their real estate.
Sometimes, owners "give up" their efforts prematurely before their
strategy has had time to work. Selling a house takes a good plan, a
commitment to that plan, and the patience to let the plan work. Selling
a house usually does not happen "right away" . If you go into the effort
expect ing to call an agent if you do not sell your home right away, why
not just ca ll the agent today and save yourself wasted time, money, and
aggravation? If you are not committed to se lling a home yourself, you
probably should not try.
The second most common explanation for fail ure is a poor plan.
Even the most committed FSBO selle r will not achieve opt imum
results f rom a poor plan. Too many home sellers put an ad in the
newspaper before they do anything else. This is a bad plan because you
will need to determine the right selling price, and be prepared to show the
property. These issues are not overwhelming, but mus t be focused on and
dealt with in advance of inviting a buyer to come see your home.
For Sale by Owner Guid e 3
For Sale by Owner Guide 4
COMMON MISTAKES FSBO SELLERS MAKE
1 Repairs or decorating that may need to be done prior to presenting
your home for sale vs. repairs that are to be done after you find a
buyer are important decisions and may affect your asking price for
the home in addition to requiring contracting and scheduling the
work, which takes time and planning.
2 Are you going to prepare the contract yourself or are you going to
have an attorney prepare it for you? Either way, you need to have a
copy ready for the buyer to sign on the dotted line at a moment's
notice.
3 Select a title or esc row company before putting your home o n the
market so that the company can take del ivery of the contract and the
buyer 's earnest money check. Too many FSBO sellers are simply not
prepared to sell their home and more than a few seriously interes ted
buyers have just gone on down the road while an unprepared FSBO
se l ler was flipping through the yellow pages looking for a lawyer or a
title company when they should have been handing a signed contract
and check to the escrow agent.
4 What is a competitive price for a home? Are you informed enough or
can you do research to obtain enough information to competently
make this d ecis ion or do you need the assistance of a professional
appraiser?
If you price your property too high, it could take forever to sell it. If you
price the home too low, you lose money. You can obtain comparuble
p rices for homes sold in your area recent ly from your local First American
Title office. Also, many appraisers wi ll sell you a competent and objective
"paper appraisa l".
The rea l estate agents keep property in f ront of buyers all the time with
thei r rea l estate agents Co-Op known as M LS: Mult iple Listing Service.
The MLS database is the re for all real estate agents to work on when
someone calls them after seeing the real estate agent's phone number
on a yard signs.
Reasons to Use a Real Estate Professional
It pays to use a real estate professional because
real estate has b ecome a very complicated business,
and se lli ng (or buying) a home wi l l b e one of the most
important f inancial transactions of your life. From the
moment you consider selling you wil l benefit from choosing
a professional to li st you r hom e, and the combined efforts
will ensure a smooth and p leasant expe rien ce for everyon e
invo lved. Yo ur home may be li sted in the Multiple Li sting
Service, providing you w ith incomparable exposure and
ensuri ng you have as many real estate professiona ls as
possible helping to fi nd a buyer. Additionally, you r agent
kn ows how to specifical ly target advertising and use al l th e
m arketing too ls avai lable to sel l your home expediently
by conducting a var iety of efforts on your behalf. Most
importantly, when it comes to closing escrow, you r
PROFESSIONAL can be invaluable, leading you through the
paperwork and fam iliarizi ng you with insurance, property
disclosures, inspection procedures and so much more.
It 's always a good market in real estate -when you know
what you're doing - and no one knows as mu ch as you r
rea l estate professional ab out today's real estate market.
Helpful Hints for Selling Your Home
WHEN SHOWING YOUR PROPERTY
You do not know the people viewing your home in most cases, so
beware of shady characters . Make sure your va luables are safe, in a
safety deposit box o r another loca t ion com p letely.
MAKE A PROFESSIONAL LISTING FLYER
You may want to include photos, depending upon the curb appeal
of you r home.
For Sale b y Owner Guode 6
FINANCING OPTIONS FLYER
This will give pot ential buyers an idea of what income wi ll be
required by the lender, what the mortgage payments will be,
including the taxes and insurance, what loan programs are
available and t he cu rrent interest rates.
FILLING OUT DOCUMENTS
If you don't understand completely, do not sign! Get a professional.
Some real estate professionals will do it for you for a flat fee or you
may want to work with a real estat e attorn ey. Don 't forget, if you li st
with a real es t ate p rofess ional, this is no longer a concern.
A GUEST REGISTRY
Have every potential buyer sign a guest registry. Keep it handy so
you can re-contact them at a later date if any of the terms change.
Recipe for a Sa I e There are 5 main ing redients that make up the sa le of your home.
1 LOCATION
2 CONDITION
3 PRICE
4 TERMS
s THE MARKET
We usually cannot move a home! To coin the favorite phrase of appraisers:
"Location, Location, Location". The pricing of your property must reflect its location.
T he upkeep and presentation of your p roperty is crucial t o obtain the highest value for
your home in any g iven ma rket at any g iven time. The pricing of your property must
refle ct its condition.
Price is the number o ne factor in the sale of a home. A property is really only worth
what one person is wi lling to pay another to ga in ownership of it. Price must be direct
relationship to the other four ingredients and it is the most important of all!
The more terms available on your property the m o re potential purchasers you reach.
The pricing of your property must reflect th e kinds of terms available t o pu rchase it.
Interest rates, co mpetition, and the econo my all m ake up and influence t he state of the
market when you se ll your home. The pricing of your property must refl ect the current
status of the market.
When all of the above ingredients are in agreement .. . then we have a sale ! If j ust one of t hem is out of line, it will take
a longer time to sell, and ... the more ingredients t here are out of line ... the longer it will ta ke before you can begin
packing and moving to your new ho me.
For Sale by Owner Gu1de 7
pI ann in 9 to s e II A homeowner's checklist to prepare your home.
So you're planning to sell your home. You have decided on a price, based on current market values, but your home may sell faster and bring a higher price if it shows well.
Potential buyers will get the best impression if your home is clean. neat, uncluttered, in good repair, light, airy, fragrant, and quiet. This checklist will help you get your home ready
to show. Here are a few general guidelines:
CLEAN EVERYTHING . Cleanliness signals to a buyer that the home has been well cared for and is most likely in good repair. A messy or dirty home will cause prospective buyers to notice every flaw.
UNCLUTTER YOUR HOME BEFORE YOU SHOW IT. Have a garage sale. Empty closets. Throw away what you can't sel l. The less "stuff" in and around a home, the roomier it will seem.
LET THE LIGHT IN. Raise the shades. Open the blinds. Pull back the curtains. Put brighter bulbs in all the lamps (but not bright enough to cause a glare). Bright, open rooms feel larger and more inviting. Dark rooms feel small and gloomy.
LET FRESH AIR IN . Get rid of odors that may be unfamiliar or unpleasant. People are most ohen offended by odors from tobacco, pets, cooking, and musty or sour laundry. Fresh flowers and potpourri can be used to your advantage. Other smells that attract posi tive attention include fresh baked bread and cinnamon.
For Sale by Owner GUide 8
FIX ANYTHING THAT IS BROKEN . This includes plumbing, electrical systems, switches, windows, 1V antennas, screens, doors, and fences; if it can't be fixed, replace it or get r id of it (no window screens are better than broken ones).
A buyer may make a much lower offer if your house is in disrepair and will probably still insist that everything be fixed before taking occupancy. You're better off if you leave potential buyers no reason to offer less than you are asking.
SEND PETS AWAY or secure them away from the house when prospective buyers are coming. You never know if people will be annoyed or intimidated by your pets or even allergic to them. And you never want a prospective buyer to have to avoid animal droppings.
SEND THE KIDS TO GRANDMA'S or take them on a walk around the block. Children can be noisy and distracting to someone interested in looking at a home.
PAl NT. There's nothing that improves the value of a home for a lower cost than a fresh coat of paint. And it's so often easier to paint a room than it is to scrub it. Stick with neutral colors - off-white is the safest. Be sure to avoid black, violet, and pink.
KEE P NOISE DOWN. Si lence is a restful sound that offends no one. Turn off the 1V and radio. Soft instru mental music is fine but avoid vocals. If necessary, close the windows to eliminate any street noise.
FIX SQUEAKY FLOORBOARDS. Don't run any noisy equipment like a vacuum cleaner or table saw whi le people are looking at your home, and if possible, ask your neighbors to avoid irksome noises.
This checklist wi ll help you get your home ready to show
./ EXTERIOR
Clean around service areas/trash cans
Haul away rubbish
Straighten woodpile
Repair leaky faucets
Clean up pet droppings
Pamt or varnish doors
Polish door hardware
Make sure doorbell/knocker works
Paint or replace street numbers on house
Make sure septic tank is odor free
Clean oil stains from dnveway/street
Patch/reseal driveway of necessary
Replace, repair, and/or paint any damages:
Plaster
Wood siding
Trom
Rain guners
Shutters
Doors
Window frames
Glazing
Screens
Hardware
Fences/gates
Outdoor lighting
Landscaping
Mow/edge lawn regularly
Aerate/feed lawn
Overseed bare spots m lawn
Water lawn regularly
Remove/replace dead plants
Prune overgrown/diseased/damaged shrubs
Prune or remove shrubs/trees blocking view
from windows (unless view is undesirable)
Stake up any sagging trees/shrubs
Keep flower beds free of weeds
Trim around base of trees/walls/fences
Repair or remove any broken or damaged landscape accessories such as:
Fences
Walls Gazebos
Fountains
Trellises
./
./
./
./
Trellises
Planters
Other
Replace any broken stepping stones
Adjust any sprinkler system; repair any broken/leaky heads
Install fences or shrubs to hode any unsightly views
CLEAN/WASH
Siding
Windows
Screen
Outdoor BBO
ACunot
Pool/Spa
PUT LIGHT BULBS IN:
Porch Lights
Carport
Garage
CLOSETS
Keep closets clean and free of clutter
Throw out or pack away non-essentials
Adjust/repair sliding doors
Lubrocate sliding door hardware
Paint. if needed
ALL ROOMS, Clean especially around:
Doors
Windows
Light switches
Baseboards
Chaor raols
Wash lace curtains and have draperies
cleaned if necessary
Remove or pull back dark curtains
Lubricate window slides (soap for wood
silicon or a candle stump for metal)
Make sure doors open smoothly
Clean ceiling light fixtures
Check for cobwebs on all corners
Fix any scratches in wooden floors
Replace worn/broken flooring
Remove or replace worn carpet
Use area rugs where needed
Empty wastebaskets
Make the beds
Fluff the pillows
./ KITCHEN
Keep d ishes and food ou t of sight
Clean appliances
Clean range hood. including light bulbs
Clean behind appliances
Keep floor clean
Clean light fixture
Make sure all electrical outlets work
Eliminate cooking odors
Deodorize garbage d osposal. d ishwasher. and refrigerator
Repair faucets
Put fresh shelf paper on cabo nets
Organize cupboards
Clean out under sink
Replace garbage disposal gasket to reduce noise
./ BATHROOMS, Keep them spotlessly clean:
Shine mirrors
Keep wastebaskets empty and clean
Clean out cabinets and remove non-essentials
Keep fresh. clean towels on towel racks
Clean shower door - of sloding door, keep
track well lubricated
Remove soap residue, mildew and mold
from sink/tub/shower
Remove stains from porcelain sink tub toilet
Replace torn/moldy shower curta on
Clean tile grout
Make sure toilet flushes properly- replace mechanism if necessary
Clean exhaust fan/heater - replace of broken or noisy
./ GARAGE/CARPORT/ SHED
lnstall 100-watt light bulb
Keep area clean/uncluttered
Hang up/put away tools
Clear away any cobwebs
Remove oil/paint stains from floor
Adjust tension rod to eliminate sag from overhead garage door
Lubricate/adjustlrepaor garage
door opener
Paint if needed
./ LAUNDRY AREA
Clean out area behind washer/dryer
Eliminate any mildew odors
./ BASEMENT
Eliminate any signs of dampness
Check for and eliminate cracks
./ HEATING/ AIR CONDITIONING UNIT
Vacuum
Replace filter
Clean intake vent
Remove any stored items
./ Make sure the temperature on your home os comfortable - keep it cooler on the summer and warmer in the wonter. If ot's cooler out· side and you have a fireplace. a nice fire will make your home seem cozy and inviting.
./ Provo de an exhaustive written lost of the features of your home.
./ Know the distance to schools and shopping centers.
For Sale by Owner Guode 9
Congratulations, You Found a Buyer and Signed a Contract
Now it's time to open escrow. You need to provide the title and escrow company w ith
a copy of the fully signed purchase contract.
Please be aware that the escrow company cannot prepare or advise you on the contract or addendums. The escrow company also cannot negotia te any
terms between buyer, seller or lender in the transaction.
Understanding the Escro\N Process
An escrow is a process wherein the buyer and sel ler deposit written
instructions, documents, and funds with a neutral third party until certain
conditions are fulfilled. It ena bles the parti es to the escrow to deal with
each other without risk , provides an accounting of al l the funds deposited
in the escrow, and provides the buyer and the seller with a settlement
statement . In a real estate transaction, the buyer does not pay the seller
directly for the property. The buyer deposits the funds to an escrow
holder. Th e escrow holder, acting as a neutral thi rd party, verifies that a
title insurance policy can be issued pursuant to the terms of the contract.
Then, the escrow holder arranges for the documents transferring title
to the property to the buyer to be recorded, for the issuance of the title
pol icy, pays any liens and all the costs associated with the sale that are
chargeab le to the buyer and seller, and disburses the sa les proceeds
to the seller. If the buyer gets a new loan, th en the lender's money is
deposited into the escrow and the lender's security documents are
recorded at the same time as the deed .
For Sale b y Owner Guide 11
Working with Lenders
PRE-QUALIFICATION OF ALL PROSPECTIVE BUYERS
A lender should p re-qua lify each potent ial buye r.
EFFICIENT FOLLOW-UP AND TEAMWORK
Once the transaction has been negotiated, the lender will
work hand-in-hand with the other real estate professionals in
order to make sure the loa n is approved and funded in a ti m ely
manner. Experience and knowledge are critical to get ting t he
job d one right.
QUALIFICATION
What is involved in the qualification process? The lender will
begin the process by completing an estimate statement of
fees and costs to determine the loan amount and by verifying
the information provided on the applicat ion concerning
credit h istory, employment sta t us and financia l situation. The
borrower wi ll be req uested to p rovide copies of recent fina ncia l
information and documents.
Having established preliminary qualification, the lender o rders
a title search, property appraisal and cred it report. Usually,
t he borrower pays fo r the cred it report and property appraisal,
which is used to determine t he value of t he property and,
u ltimately, t he am ou nt a lender is wil ling t o lend. The len d e r
will requ ire title insura nce to assure the priority of the new
loan. Lenders insurance is provided by the tit le company afte r
the title search is completed and is general ly paid for by the
borrower as a part of the final closing costs.
For Sale by Owner Guide 12
<
WHY DO YOU NEED A TITLE SEARCH?
The title search wi ll d isclose t he current condition of the tit le,
according to pub lic records. The lender will be interested in
how and in whom title is vested, any special conditions or
restrictions affecting the use of the property and existence of
voluntary liens (existing loans) and/or involuntary liens (liens
and judgment s) . The search wi ll also show the current status
of taxes and assessments and the conditions under which title
insurance w il l be issued.
With the title search, f inancial and personal qualification and
property appraisa l completed, t he lender will p repare loan
documents to be executed by the borrower upon loan approval.
WHAT ARE LOAN DOCUMENTS?
Loan documents wil l include the fo rma lization of t he terms and
conditions of the loan, a p romisso ry note and deed of trust
and va rious state and federal disclosure documents. They also
provide a breakdown of the financial accounting of the loan,
including fees and charges.
The Appraisal
The appraisa l process consists of several steps.
The following are t he majo r steps in t he seq uence
normally fo llo wed by app raisers :
Research the subject property as to size, bedrooms, baths, year
b uil t, lot size and square footage.
Gather data of recent sa les in the subject's neighb orhood .
The appraiser needs to locate at least 3, preferab ly more,
similar-s ized homes t hat have sold and closed escrow in the
neighborhood. The hom es should be with in one m ile of the
subject p roperty and sold w ith in the past 6 mo nt hs. These
homes are considered t he "Comparable Pro p erti es", o r
"Camps" for short.
Fie ld inspection consists o f two part s: Fi rst, t he inspect ion of
the sub ject property; and second, t he exteri o r insp ect ion of the
compara b le properties that have been selected to estimat e the
value of the subjec t p roperty.
The subject inspectio n cons ists of taking p hotos of the st ree t
scene, fro nt and rea r o f t he ho me that may include por t ions of t he
yard. The appraiser will make an inter ior inspection fo r condition
noting any items that would detract from or add to the val ue of the
home. He will also draw a floor plan of the home whi le doing t he
insp ection. The inspection of the comp arab le p rop erti es is lim ited
to an exterio r inspection.
For feat ures that cannot be seen f ro m the street, the appraiser has
repor ts f rom Multiple Listing Services (M LS), county public records
and appraisal files alo ng w ith ot he r sources to help det ermine t he
cond it io n and amenit ies of t he comparab le.
Afte r the fie ld inspection has been completed, t he appraiser
must determine wh ich compara b le properties most resembl e the
subject , maki ng slight adjustments in va lue fo r any d ifferences
b etwee n them. After making t he requi red adjustments, the
appraiser w ill go throug h the reconciliat ion process with t hree
comparable properties t o determine a final estimated va lue.
A n appraise r wi ll call in adva nce to set up an appo intment. At
that t im e, offer to supp ly any informat ion about the home's size,
number of bedrooms, bathroo ms, pool, enclosed patio, etc. The
more t hat is known about the p rop e rty prior to the inspection,
t he b etter the apprai ser can fo cu s o n resea rching t he m ost simil ar
com p arable. "Doing your homework " w ill maximize your chances
of having a good appraisal.
Wh ile your home is being inspect ed, do not follow the appra iser
from room-to- room causing d istraction. Instead , allow the inspect ion
to go smooth ly. In the event the appraiser has any questions, b e
close by to answer them. The t ime to mention t he th ings you t hink
are important is either before or followi ng the inspection.
For Sale by Owner Guide 13
Your Escrow Professional May:
Open escrow and deposit good f aith funds into an escrow account
Conduct a tit le search t o d ete rm ine t he ownership an d t it le st atus of the rea l p rop e rt y
Review the pre liminary report and begin the process of working with you and the title officer to eliminate the t itle exceptions the buyer and the buyer's new lender are not w illing to take subject to. Th is includes ordering a payoff demand from your existing lender.
Coordinate with the buyer's lender on the prepa ration of the Clos ing Disclosure (CD)
Pro rate fees, such as real prope rty taxes, per the contract and prepare the sett lemen t statement
Set sepa rate appoin t me nts allo w ing th e buyer and se ller to sign docum ents and deposit funds
Review documents and ensure all conditions are fulfilled and certain legal requirements are met
Request funds from buyer and buyer's new lender
When all funds are deposited and conditions met, record documents with the County Recorder to transfer the real property to the buyer
After reco rding is conf irm ed, close escrow and d isbu rse funds, incl ud ing p roceeds, loan payoffs, tax payments , and more
Prepare and send final documents to all pa r ties
For Sale by Owner GUide 14
J
The Life Of An Escro\N
THE BUYER
Chooses a Real Estate Agent
Gets pre-approval letter from Lender and provides
to Real Estate Agent.
Makes o ffer to purchase. Upon acceptance. opens escrow and
deposits earnest money.
Finalizes loan application wit h Lender. Receives a
Loan Estimate from Lender.
Completes and returns opening package from First
American Title.
Schedules inspections and evaluates findings.
Reviews ti tle commitment/ preliminary report.
Provides all requested paperwork to Lender (bank
statements, tax returns, etc.) All invoices and final
approvals should be to the lender no later than 10 days prior to loan consum mation.
Lender (or Escrow Officer) p repares CD and delivers to Buyer at least 3 d ays prior to
loan consummation.
Escrow offi cer o r real estate agent contacts the buyer to schedule signing
appointment.
Buyer consummates loan, executes settlement
document s, & deposits funds via w ire t ransfer.
Documents are recorded and the keys are delivered!
For Sale by Owner Guide 16
THE SELLER
Chooses a Real Estate Agent
Accept s Buyer's o ffer to purchase.
Completes and returns o p ening package fro m First
American Title, including information such as
forward ing address, payoff lender contact information
and loan numbers.
Orders any work for inspections and/or repairs to be do ne as required by the purchase agreement.
Escrow o fficer o r real estate agent contac t s the seller to schedule signing
appo intment.
Documents are recorded and all p roceeds from sale
are received.
THE ESCROW OFFICER
Upon receipt of order and earnest money deposit, ord ers t it le examination.
Requests necessary information from buyers and sellers via opening packages.
Reviews title commitment I pre lim inary report .
Upon receipt of opening packages, orders d emands for payoffs. Contac ts b uyer or seller when additional information is required
for the t itle commitment/ pre liminary report.
All demands. invoices, and fees must b e collected and sent to lender at
least 10 days prior to loan consu mmation.
Coordinates with lender on the p reparation o f the CD.
Reviews all documents, d em and s. and instructions and prepares sett lement statements and any other
required documents.
Schedules signing appointment and mforms buyer of funds due
at settlement.
Once loan is consummated, sends funding package to
lender for review.
Prepares recording instructions and submits
docs for recording.
Documents are recorded and funds are disbursed. Issues final settlement statement.
THE LENDER
Accepts Buyer's applicat ion and begins the qua lification
process. Provides Buyer with Loan Estimate.
Orders and review s ti tle commitment I prelim inary repor t, property appraisal, credit repo rt, employment
and funds verification.
Collects information such as title commitment
I preliminary report, appraisal, credit report, employment and funds
verification. Review s and requests additional in formation for final loan
approval.
Underwriting reviews loan package for approval.
Coordinates w ith Escrow Office r on the preparation o f the Closing D isc losure,
which i s delivered to Buyer at least 3 days prior to loan
consummation.
Delivers loan documents to escrow.
Up on review of signed loan documents, authorizes loan
funding.
Understanding Title Insurance The Title Industry & T it le Insurance 1n Brief
Prio r to the d evelopment of the title industry
in the late 1800s, a home-buyer received a
grantor's warranty, attorney's t itle opinion, or
abstractor's certificate as assurance of home
ownership. The buyer relied on the financial
integrity of the gra ntor, attorney, or abstractor
for protection. Today, home-buyers look primari ly
to title insurance to provide this protection.
Tit le insurance companies are regulated by
state statute. They are required to post financial
guarantees to ensu re that any claims w il l be
paid in a timely fashion. They also must maintain
th eir own "title p lants" which house duplicates
of recorded deeds, mortgages, p lats, and other
pertinent county property records.
WHAT IS TITLE INSURANCE?
Titl e insurance provides cove ra ge for certain losses due to defec ts in the title that , for
the most pa rt, occurred prior to your ownership. Title insurance protects against d efects
such as prior fraud or forgery that m ight go undetected until after closing and possibly
jeopard ize your ownership and investment .
WHY IS TITLE INSURANCE NEEDED?
Title insurance insures buyers against the risk that they d id not acquire marketable title
from the seller. It is primarily designed to reduce risk or loss caused by defects in t itle from
th e past. A loan policy of ti tle insurance p ro tects the interest of the mortgage lender, whi le
an owner's policy protects the equit y of you, the buyer, for as long as you or your heirs (in
certain pol icies) own the rea l property.
WHEN IS THE PREMIUM DUE?
The owner's policy is pa id for only once, at the close of escrow. Who pays for the owner's
policy and loan policy varies depending on loca l customs.
For Sale by Owner Gu1de 17
Terms You Should Knovv APPRAISAL
An estimate of value of proper ty resul t ing from analysis of facts about the property; <Jn opinion of value.
ANNUAL PERCENTAGE RATE (APR)
The borrower's costs o f the loan term expressed as a rate. Th1s 1S not the1r mterest rate.
BENEFICIARY
The recip1ent of benefits. often from a deed of trust; usually the lender.
CLOSING DISCLOSURE (CD)
Closin g Disclosure form designed to provide d isclosures that wdl be helpful to borrowers in understanding all of the costs of the transaction. This form wdl be g1ven to the consumer three (3) business days before closing.
CLOSE OF ESCROW
Generally the date the buyer becomes the legal owner and ti tle msurance becomes effective.
COMPARABLE SALES
Sales that have s,m,Jar characteristics as the subJeCt real property, used for ana lys1s m the appraisal. Commonly called "comps
CONSUMMATION
Occurs when the borrower becomes contractually obligated to the cred1tor on the loan. not. for example. when the borrower becomes contractually obligated to a seller on a real estate transaction The point in time when a borrower becomes contractually obligated to the crednor on the loan depends on applicable State law. Consummat1on 1s not the same as close of escrow or settlement.
DEED OF TRUST
An instrument used in many states in place o f a mortgage.
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DEED RESTRICTIONS
Limitations in the deed to a parcel of real property that dictate certain uses tha t may or may no t be made of the real prop ert y.
DISBURSEMENT DATE
The date the amounts are to be disbursed to a buyer and seller m a purchase transac tion or the date funds are to be paid to the borrower or a thlfd party in J transaCtiOn that IS not a purchase transaction
EARNEST MONEY DEPOSIT
Down payment made by a purchaser of real property as ev1dence of good fdlth; a deposit or partial payment
EASEMENT
A right. privilege or interest limited to a spec1f1c purpose that one party has in the land of another.
ENDORSEMENT
As to a t itle insurance policy, a rider or att achment forming a part of the msurance policy expandmg or l1miting coverage
HAZARD INSURANCE
Real estate msurance protectmg agamst fire. some natural causes, vanda lism, etc .. depending upon the policy. Buyer o ft en adds liabili ty insurance and extended coverage for personal property.
IMPOUNDS
A trust type of account establ1shed by lenders for the accumulation of borrower's funds to meet penodic payments o f taxes. mortgnge insurance premiums and/or future 1nsurance policy prem1ums. required to protect their security
LEGAL DESCRIPTION
A descript1on of land recogn1zed by law, based on government 5urveys. spell1ng out the exact boundaries of the enti re parcel of land. It should so thoroughly ident ify a parcel of land tha t i t cannot be confused with any other
LIEN
A form of encumbrance that usually makes a specific parcel of real p roperty the security for the payment of a debt or d1scharge of an obligation. For example. judgments. taxes. mortgages. deeds of t rust.
LOAN ESTIMATE (LE)
Form des1gned to prov1de d1sclosures that wdl be helrf lll to borrowers in understanding the key fea tures. costs and risks of the mortgage loan for wh1ch they are applying. lnn,al disclosure to be g iven to the borrower three (3) business days after application
MORTGAGE
The instrument by which real property is pledged as security for repayment of a loan.
PIT I
A payment that 1ncludes Pnnc1pal. Interest. Taxes. and Insurance.
POWER OF ATTORNEY
A written Instrument whereby a pnnc1pal g1ves authority to an agent. The agent acting under such a grant 1s somet1mes called an "Attorney-in-Fact."
RECORDING
Filing documents affecting real property wnh the appropriate government agency as a matter of public record.
SETTLEMENT STATEMENT
Provides a complete b reakdown of costs involved in a real estate transaction.
TRIO
TILA-RESPA Integrated Disclosures
Congratulations on Your Sale!
FIRST AMERICAN TITLE is p leased to have been chosen to hand le t he escrow
process fo r you as yo u prepa re to se ll yo ur property.
Your escrow officer and the assistant will be more than happy to answer any of you r questi ons o r concerns about the
escrow process during th e transaction , so please feel free t o cal l our office any tim e. We look forward to seeing you soon.
For Sale by Owner Guide 19