A Message for Our Buyers
We are providing this buyer’s guide as a resource for the ever-changing process of buying your home. Whether you have purchased a home before or are considering owning your first home, the buying process is almost never routine.
The information in this guide, along with your agent’s experience and expertise, will help you navigate the process of finding, negotiating, and settling on your next home. While the information is important, your agent will provide you with additional assistance that will be essential to a successful experience.
Thank you for trusting our Associates to assist you with your real estate goals.
Enjoy your journey!
Maureen McEnearney Dunn, President
Peter Pejacsevich, Chief Operating Officer
Finding a home seems easy, buying a home is hard
WE’RE HERE TO HELP YOU WITH THE HARD PART
Our Buyers Book is designed with YOU in mind. We know you have questions about how to achieve the goals you have set for your next home, and we have the strategies to get you there. But more importantly, we want you to feel empowered by the choice you made to purchase your home with the expertise of our brokerage.
In working with us, you can count on our Associates to do the following.
WE WILL HELP YOU GET IT RIGHT
That means due diligence, a fancy legal term for being careful. We’re your trusted advisors. What are the market dynamics impacting the value of the property? Today – not last month. What is the right offer and negotiating strategy? What should you look for regarding property condition, improvements, maintenance? What are the big problems that matter, and how can we handle them?
WE WILL PROTECT YOUR MONEY (AND YOUR SANITY)
It’s very easy to overpay for a home right now. But how do you know what’s enough, and what’s too much? Tens of thousands of dollars may hinge on the answer to that question, and we’re prepared to help you answer it. WE WILL FIGHT FOR YOU.
A real estate agent who represents a seller has a legal responsibility to their client to have you pay as much as possible for their home, on terms most favorable to the seller. Our job is to have you keep as much of your money as possible, and secure the terms that work best for you. And remember: We don’t get paid just for what we do. We earn our professional fees because of what we know.
WHAT HOMEBUYER REPRESENTATION MEANS AT OUR BROKERAGE
Here’s the truth: Interest rates have been persistently high. Home prices also remain high. Many sellers are resistant to negotiating, even as the number of homes available to buyers grows.
It can be a tough market for buyers. We said tough, not impossible. If you want to purchase a home right now, we’re prepared to help make that happen. It just takes strategy, smarts, and tenacious representation.
What your real estate agent does for you
CLARIFIES YOUR WANTS AND NEEDS
Start the process by creating a list that identifies your ‘wants and needs’ in the perfect home. Your agent will advise you on prioritizing this list to help you meet your goals.
LEADS THE HOME SEARCH
Your agent will set up a customized on-line search using BrightMLS and our partner app RealScout. These are the most comprehensive tools available to find homes that are for sale or coming soon. During your search, you will receive real-time notifications of new listings and price changes based on your search criteria.
HELPS DETERMINE SUITABILITY
Your agent will help you strategically manage your home search. After analyzing your wants and needs, your agent will preview properties and list the strengths and weaknesses of each
listing to help you determine which homes you want to tour in person. In competitive markets, it’s critical to take the time to know what you are looking for so that you are confident in your offer and ready to take action.
PREPARES AND NEGOTIATES PURCHASE AGREEMENTS
Once you have found the home to purchase, your agent will discuss strategies and tactics that will make your offer a strong one. Remember, all negotiations are not the same. Your strategy will need to be specific to the current market, and your experienced agent is one of the best assets to make sure you submit the best offer possible
OVERSEES THE CONTRACT PROCESS
After ratification, there are many deadlines and contractual obligations. Attention to detail is important and your agent will ensure those deadlines are met. Although real estate transactions should be well planned and managed, there are no guarantees that last-minute issues will not arise. It is the systems, experience, and transaction management skills of your agent that will help minimize the impact of any surprises and lead to a resolution to get your contract to the finish line.
Types of representation in MD, DC, VA, and WV
WHAT IS AGENCY?
Agency refers to a legal relationship between a real estate brokerage and a client that outlines the duties and obligations of both sides. It is the agreement by which an agent is “hired” by their client and begins the process of representation during a sales transaction. A licensed agent or Realtor® acts as a representative of the brokerage and an advocate for the client during the homebuying or selling process. Agreements are negotiable and can be exclusive or non-exclusive so it’s important to get clarification from your agent regarding all paperwork you’ll be signing regarding not only the agent’s role but your associated costs and responsibilities.
Having your own “Trusted Advisor” to guide you through the buying process is the first of many important choices you’ll make on the path to homeownership. Take the time and ask the questions to ensure you’re ready for the journey ahead with your chosen agent.
A written listing agreement has been signed by the owner of the property and the Brokerage. Brokerage and agent represent the seller. Agent will review associated seller’s fees at the initial meeting, including the possibility – but not obligation – of offering buyer concessions as part of a sales strategy.
A written buyer agreement has been signed by the potential buyer. Brokerage and agent represent the buyer. Agent will review associated buyer fees at the initial meeting, including their agent’s professional fee for service (paid by the buyer).
SELLER REPRESENTATION
BUYER REPRESENTATION
MARYLAND
Dual Agency: When the seller and buyer are represented by the same Brokerage (company).
Intra Company Agent: When the seller and buyer are represented by different agents who are both affiliated with the same Brokerage.
Note: A salesperson is not allowed to represent more than one party in a transaction in the state of Maryland.
WASHINGTON, DC
Dual Agency: When one agent represents both the seller and the buyer in a transaction.
Designated Representation: When the seller and buyer are represented by different agents who are both affiliated with the same Brokerage.
VIRGINIA
Dual Agency: Broker and agent represent both parties in a transaction. Dual agency is created when one agent has signed representation agreements with both the buyer and the seller. Both parties must agree in writing to dual agency.
Designated Representation: When the seller and buyer are represented by different agents who are affiliated with the same Brokerage.
WEST VIRGINIA
Dual Agency: Brokerage represents both parties in a transaction (even if one agent works with the seller and the other with the buyer). All parties must agree in writing to dual agency.
Offers of compensation for your agent
Agents are real estate professionals who manage multiple aspects of a real estate transaction, sometimes investing months if not years in helping their clients achieve their housing goals. Their goal is to use their expertise, network, and negotiating skills to save you time and stress in securing the home you want on the terms you’ve set forth.
Your agent will discuss their fees at your initial meeting, outlining the things they will do to ensure that your interests are protected and your experience is as stress- and surprisefree as possible. The fee may be a percentage of the home sales price or a flat price.
Here are just a few things your agent does to earn their professional fee:
• Handling paperwork and managing documentation
• Utilizing technology and professional networks to conduct home searches
• Tracking deadlines
• Explaining complex legal contracts
• Coordinating inspections, contractors, vendors, and other access to the property
• Evaluating home inspection reports
• Managing the countdown to closing
• Providing clear communication, updated information, recommendations, advice, and support before, during, and after the home sale
What you should consider before buying your home
Your Realtor® will discuss with you the different disclosure laws in your jurisdiction. The obligations of the seller vary by locality. To make sure you are comfortable with the condition of the home you are buying, you may consider including the following in your offer:
• A home inspection contingency — hire a licensed expert to inspect the home giving you important information about its condition.
• Additional inspections may be negotiated, such as radon, lead paint, roofing.
• A wood destroying insect inspection — this will let you know that the home is free of active
infestation and visible structural insect damage.
• A survey to identify the relationship of existing structures to the property lines and any easements of record.
• An appraisal to determine whether the value of the home is sufficient collateral for the mortgage. This is typically required by the lender.
Unless you and the seller agree otherwise, the property will be conveyed free and clear of debris, broom clean, and in substantially the same condition as the date identified in the contract.
If the property was built prior to 1978, the seller must disclose the existence of lead-based paint in the home if they have actual knowledge. If they have knowledge, they should give the buyer copies of any lead-based paint reports. The buyer should receive a copy of the HUD Lead-Based Paint booklet “Protect your Family from Lead in your Home” and the seller should allow you the opportunity to inspect the property for lead.
Washington area real estate customs differ from other markets
AGENTS WRITE CONTRACTS, NOT BINDERS
Agents write the contract for the buyer. Realtors® use forms created by local Realtor® Associations to enter offers and negotiate contracts. Please be aware that only the terms agreed to by all parties in writing are enforceable, so it is important to include everything in your purchase agreement.
HOUSING COSTS ARE DIFFERENT THAN IN OTHER AREAS
While everyone expects that homes will be expensive, housing prices in our market may be higher than other areas. Your agent will provide you with a comparative market analysis and explain the value of the community you are considering.
KITCHEN APPLIANCES ARE TYPICALLY INCLUDED IN THE SALES PRICE
Standard business practices in this market will convey appliances and some other fixtures. These items will be identified by the seller and should be included in the contract.
EARNEST MONEY DEPOSITS ARE HIGHER
In many areas of the country, an offer to purchase a home will be accepted with a deposit of $500 to $1,000. In the Washington metro area, the expected deposits will run from a low of $2,500 to a high of 5-10% of the purchase price.
SPEED OF THE TRANSACTION
Contract negotiations are handled fairly quickly in most circumstances. It is common that you will receive a response from a seller or will need to respond within a couple of hours of sending or receiving information.
SELLER DISCLOSURE OR DISCLAIMER
All states or jurisdictions in our region have property condition disclosure laws. Each jurisdiction is different. Discuss this with your Associate in the context of your property location.
The home buying process
STEPS YOU NEED TO TAKE TO FINANCE YOUR HOME
Before you start your home search, it is important for you to talk with an experienced lender. You need to understand your financial qualifications before you start your housing search. Knowing and being comfortable with your monthly payments, closing costs – including your agent’s fee – and other financial obligations will give you confidence as you negotiate your contract.
Sellers will expect the buyer to submit a lender letter with the purchase offer. The letter will identify the type of financing and interest rate, and will reference your ability to secure a mortgage.
We strongly encourage you to make a full written loan application with a reputable lender very early in the process. The contract will require you to make a written application within seven days after your contract has been accepted.
Congratulations on your new home! Time to move in STEP 8 08
Conduct final walk-through & attend settlement STEP 7 07
Finalize financing & prepare for settlement STEP 6 06
STEP 5
Conduct home inspections & obtain Hazard Insurance 05
TYPES OF LENDER LETTERS
• Pre-Approved: A written loan application with documentation has been preliminarily approved by the lender.
• Pre-Qualified: A conversation with the lender has taken place but nothing has been verified and no commitment has been made by the lender.
REQUIREMENTS FOR PRE-APPROVAL
The following documents, at a minimum, will be required by the lender in order to evaluate your application and issue a preliminary approval; written, electronic, or telephonic loan application; credit report reviewed by lender; verification of income; pay stubs; tax returns; and verification of assets by lender.
LENDER’S COMMITMENT LETTER
When your full loan application and documentation have been reviewed by the lender’s underwriter and approved, you will receive a commitment letter. There are a number of additional requirements and steps prior to this letter being issued by the lender. The commitment is specific to you and the house you are purchasing, and the lender’s underwriter will typically require review and approval of: (1) Appraisal, (2) Termite Inspection, (3) Survey, (4) Title Search.
Conducting a strategic search
IDENTIFY AND CLARIFY WHAT YOU ARE LOOKING FOR
Identify and communicate to your agent what is important to you and why. It is important to identify the ‘why’ so that you can find acceptable alternatives.
CUSTOM HOME SEARCH
Your agent will provide you with access to a wide range of resources to find your home. They will include, but are not limited to:
• BrightMLS. Your agent will have access to BrightMLS which is the multiple listing service used by our region’s real estate agents. BrightMLS will be the fastest source to get information about the newest listings in real time.
• RealScout. We have partnered with RealScout, the industry’s number one collaborative home search platform. RealScout allows you to have a highly curated search experience using smart technology to better refine exactly what you are looking for.
• New Construction. New Homes are not always listed in BrightMLS. Our Associates have worked with large and small builders throughout the region since 1980, and consistently network with builders to stay informed of the latest inventory.
• Private Exclusives. Working with an agent who networks within the industry to learn about listings that are currently not being publicly marketed could really give you an edge and, especially in a competitive market, potential access to more homes.
• Coming Soons. At our weekly Business Meetings and through our daily internal communications, our Associates routinely announce their buyer needs and properties that will be coming on the market in the near future. This often gives you advance knowledge of properties before they hit the market.
• For Sale By Owner. Most people who are marketing their own home are prepared to work with agents with buyers. Please discuss this with your agent to determine if this is an important option for you.
Find neighborhoods that you love and want to live in
RESEARCH NEIGHBORHOOD INFORMATION
Real estate is hyperlocal, and McEnearney Associates | Middleburg Real Estate | Atoka Properties are hyperlocal. For more than 40 years we have been your local experts and neighborhood matchmakers and your agent will help you identify which communities that you feel connected to the most.
PRIORITIZE AND SELECT
The home search is about eliminating homes that don’t fit your needs as much as it is about finding a home that does. Discuss your ‘must have’ list with your agent.
• Love or Like: Finding a home that has everything a buyer wants can be difficult. Typically buyers will buy a home that has 80% of their desired list, so it is important to make a distinction between whether you love or like a home.
• Keep options open: When submitting an offer to a seller and negotiating the terms, it can be empowering to know, if this one doesn’t work out, there is another home that meets your needs.
• How much do you love it: If the home was sold to someone else, would you be disappointed? If the answer is yes, then the time has come to prepare an offer to purchase.
A CAUTIONARY NOTE
There is a lot of information available to you during your home search. There are several websites that use an automated valuation system that estimates the value of homes on and off the market. As interesting as these sites might be, our research tells us that Automated Valuations Systems predict values based on computer models and much of the information that feeds these models may be inaccurate or incomplete. These estimated values are as likely to be very low as very high. There is no substitute for a comparative market analysis prepared by your experienced and knowledgeable Associate.
What if you don't find what you are looking for
REVIEW YOUR CRITERIA
Most buyers use this opportunity to change some or all of their purchase criteria.
• Price range: If the homes in your price range do not fit your needs, you may want to talk with your lender about increasing your price point.
• Type: If price and location are most important, you may want to consider different types of homes. There may be condominium or townhouse communities that will meet your criteria.
• Size: If you cannot increase your price point and your location is nonnegotiable, you may consider looking at smaller homes. You can adjust the square footage, bedrooms, levels, or garage spaces.
• Location: If these three factors cannot be changed, then the next step may be to look at different locations. An adjoining neighborhood or zip code may present homes that meet more of your priorities.
HANG IN THERE!
Review your criteria. Knowing your options may allow you to consider different possibilities. Remember new listings are constantly coming on the market. Managing your emotions during this time may be difficult. There is no way to predict what the future holds, whether there will be more listings or fewer, or whether the interest rates will rise or fall. Don’t give up!
Prepare a strategic purchase offer
The main objective in preparing your offer is to purchase the home you want at the most favorable terms possible. The challenge is to make your offer as attractive to the seller as possible, while preserving your protections.
GIVING THE SELLERS WHAT THEY NEED IN RETURN FOR TERMS THAT ARE IMPORTANT TO YOU
Your MCE | MRE | AP Associate will try to find out from the listing agent what the seller’s critical needs are. If you can meet these, it may give the seller a reason to accept other terms that suit your needs. There are eight areas of negotiation in your offer:
• Offer Price: The price you offer is the first thing that most sellers want to know. Offer a price that will encourage them to consider your contract.
• Deposits: The amount of deposits vary by jurisdiction. Your deposit amount reflects your commitment to the transaction and a low deposit could make your offer less attractive.
• Contingencies: The most common contingencies are financing, home inspection, and appraisal. Your agent will help you understand your rights and obligations in the offer you submit.
• Subsidies: Sometimes referred to as closing cost credits, you should consult with your agent to see if they are common in your area of choice. If you are considering asking for a seller subsidy — for example to cover the Buyer Broker fee, lending fees, or other monetary concessions — consult with your lender to make sure that you can take advantage of the entire amount.
• Settlement & Occupancy: Possession is usually transferred the day of settlement. If there are circumstances that require you to pre-occupy, or if the seller needs to stay past settlement, your agent will ensure that you are protected.
• Property Condition: It is recommended that any offer should include a contingency for a satisfactory home inspection report. Requests for repairs, if any, will be made in accordance with the procedures established in the sales contract.
• Inclusions & Exclusions: The seller will specify which appliances or other items will or will not convey with the sale of a property. Sometimes sellers offer to replace an item they wish to remove from the home when they move. Make sure that your offer accurately reflects both of these lists.
• Financial Statement: In some jurisdictions, it is typical for the purchaser to provide a financial statement to the seller — your agent will discuss this with you.
Using time-tested purchase offer strategies
WRITING A CLEAR AND CONCISE OFFER
The more difficult your offer is to understand, the more challenging it will be for the seller to accept. If your offer is a complicated one, have your agent draft a bullet-point summary to accompany the contract.
FINALLY, REFLECT BOTH THE DESIRABILITY OF THE HOME AS WELL AS MARKET CONDITIONS IN YOUR OFFER
No matter what the condition of the market, you may or may not be competing with other buyers when you submit your offer. Even in markets where supply is high, some homes will attract more buyer interest than others. Market conditions vary on every property. There are zip codes, communities, and styles of homes that are more attractive to buyers. The condition and list price of the property may attract more interest. It will be important to use this information as you structure your offer to purchase.
Notes on negotiating in different types of markets
Your ability to negotiate the price and terms on any specific property depends on four things:
1. Your ability to be a qualified and flexible buyer
2. The desirability of the home
3. The motivation of the seller
4. The state of the market
The state of the market is defined by the relationship between the supply of homes and the number of people buying them at any given moment. The markets are usually defined as a Buyer’s Market, a Seller’s Market, or a Balanced Market.
In a Buyer’s Market, homes stay on the market longer, creating more choices and more leverage for the buyers. In general, you should be able to purchase the home at a price consistent with or even less than prior sales, and perhaps obtain more flexible terms, such as closing help, payment of agent fees, and/or repairs in excess of those available in other markets. Specific terms, however, will be determined by other factors present in the transaction.
In a Seller’s Market, homes may last only a few weeks or even days. It is not unusual for properties with more than one interested buyer to sell over the asking price, often with the use of Escalation Clauses. Some buyers will decide to remove some contingencies or requests for seller concessions to make their offer most attractive. The buyer must decide which contingencies and concessions are important to protect their position in the contract they submit.
In a Balanced Market, highly highly desirable homes sell quickly and at higher prices while others take more time. Flexible terms are found more often with homes taking longer to sell.
Markets differ by price range, property type, and location. It is entirely possible to have a Seller’s Market in one neighborhood or price range while Buyer’s Market conditions exist nearby.
Consult your Realtor® Associate for information on the state of the market for the property type and location that interest you. They will provide advice on how that may affect your transaction.
Reviewing homeowner’s/ condo/co-op association documents
If you are purchasing a condominium, a cooperative, or a property that is part of a Homeowner’s Association, you have the right to receive and review the legal and financial documents connected with the community. You also have a right to cancel your contract, based on your review of the documents. The period of time during which you may cancel the contract varies by jurisdiction; please consult your Associate so that you comply with the deadline.
Your review might include, but is not limited to, the following:
• Fees and Cash Reserves: What they include and any planned increases.
• Rules and Regulations: Parking, trash removal, pets, property appearance, paint colors, fencing, common areas, insurance, limitations on renting are all things to consider.
• Pending Lawsuits: The HOA/COA is required to disclose any pending lawsuits.
• Anticipated Major Renovations or Special Assessments: Renovations could potentially impact the HOA/COA fees.
As with physical inspections, deadlines for reviewing these documents are ‘hard dates’ and if they are missed, your protections will terminate.
Finalize your financing with your lender
Congratulations, you are one step closer now that your offer has been ratified! The next step is for you to send the following to your lender:
• A copy of the ratified sales contract
• The MLS printout for the listing
• Public record information
• Documents pertinent to the loan application
Within 7 days of ratification the contract requires the buyer to make a formal application to their lender and start the process for lender required hazard insurance.
The lender will order the appraisal and will prepare a loan estimate of your settlement charges.
During this time, it is important to work with your lender to provide all documentation in a timely manner. Your financing contingency, if your contract includes one, has a deadline. You may be asked or required to provide a commitment letter to the seller to satisfy this contingency. Your lender will need everything they already requested from you, plus the appraisal and other information provided by the title company, in order to issue the letter.
Your agent will guide you through this process and communicate with your lender to make sure things will meet the deadlines and settlement date.
Note: Once you remove your financing contingency, you are representing that you will be at settlement with all necessary funds. If for any reason your lender fails to perform, you may be held in default and the specific provisions of the contract regarding default may be enforced by the seller.
For this reason alone, it is critical that you work with a good, reputable local lender whose business reputation is on the line if they should fail to perform as promised.
Schedule your settlement
YOUR SETTLEMENT COMPANY
In VA, MD, DC, and WV, the buyer has the right to select the settlement company. There may be reasons to allow the seller to have input or a preference, but the purchaser should discuss this with their agent prior to making a decision.
It is not unreasonable, however, for the seller to request the use of a particular entity to coordinate their sale with the purchase of another property, to facilitate a 1031 Tax-Deferred Exchange, or when you purchase from an estate.
Relocation companies and new home builders routinely require settlement with a pre-determined settlement company or attorney.
REPRESENTATION
Ordinarily, the title company or attorney does not represent either of the parties. It is their responsibility to ensure the sales contract has been completed and that the financial aspects of the transaction are fully and accurately reflected on the Closing Disclosure. The title company will also make sure that the transaction is recorded at the local jurisdiction and disburse all funds to the appropriate parties.
TIMING
Your MCE | MRE | AP agent can help you with the selection of a settlement agent. The settlement company should be contacted within 10 days after ratification of the contract to schedule settlement.
TITLE SEARCH & SURVEYS
The settlement company will search the title and order any required surveys. Reach out to your Associate for any questions.
Title insurance
WHAT IS TITLE INSURANCE?
Before answering “What is title insurance?”, first answer, “What is title?”
“Title” is the ownership in real property. Among other things, it means that you have the legal right to possess, occupy, peacefully enjoy and sell your property without interference from others, subject only to restrictions imposed by governmental authorities or previous owners. In most cases, a title is transferred by deed which is recorded in the land records of the jurisdiction in which the property is located. Generally, when property is sold, a title examiner researches land records and court records searching for any title defects. A title defect is anything in the entire history of ownership of a piece of real estate which may encumber the owner’s rights under the title. A title defect may cause the property owner to lose all or part of their land to a superior ownership interest or claim of another. This is the type of loss that title insurance protects against. In short, if
you own a title insurance policy, the title insurance company will defend you without additional cost against an attack or claim upon your ownership interest in your property, and you will be protected against financial loss caused by a title defect. Title insurance insures your ownership of the property.
IF MY TITLE HAS BEEN EXAMINED FOR DEFECTS, WHY DO I NEED INSURANCE?
There are many defects that even the most meticulous title search will not uncover. For instance, it is impossible for an examiner to know whether the marital rights of all previous owners have been relinquished; whether all deeds, mortgages and judgments affecting the property have been properly indexed in the land records; whether all signatures are valid; or whether an unknown heir of a previous owner had a valid claim against the property. Without owner’s title insurance, any avenue of recovery for these types of problems may be very difficult and very expensive.
IF I AM REQUIRED TO PURCHASE LENDER'S INSURANCE, WHY DO I NEED OWNER'S COVERAGE AS WELL?
In almost every instance, a lender will require you to purchase lender’s title insurance, protecting it up to the value of its loan on the property. This coverage only protects the lender, not you, and the coverage diminishes as the loan is paid off. As you build more equity in the property, you expose yourself to a higher risk of loss occasioned by a title defect. In this situation, the protected lender will suffer no loss while you as the owner of record bear the substantial risk of the damage. Owner’s title insurance will protect you against any covered loss from failure of title to the full amount of the policy. The following information outlines many of the items that would be covered by owner’s title insurance, and you should discuss any questions you have with your settlement company.
WHAT ARE SOME REASONS OR EXAMPLES OF WHY I SHOULD HAVE OWNER’S TITLE INSURANCE?
Owner’s Title Insurance will protect you against those hidden risks which would not be disclosed by even the most meticulous search of the public records. Some examples of those hidden risks are:
• Forgery
• Inadequate surveys
• Fraud in connection with execution of documents
• Incorrect legal descriptions
• Undue influence on a grantor or executor
• Non-delivery of deeds
• False impersonation by those purporting to be owners of property
• Unsatisfied claims not shown on record
• Incorrect representation of the marital status of grantors
• Deeds executed under expired or false powers of attorney
• Undisclosed or missing heirs
• Confusion due to similar or identical names
• Wills not properly probated
• Dower or curtesy rights of ex-spouses of former owners
• Mistaken interpretation of wills and trusts
• Incorrect indexing
• Mental incompetence of grantors
• Clerical errors in recording legal documents
• Conveyance by a minor
• Delivery of deeds after death of grantor
• Birth of heirs subsequent to date of will
ARE THERE DIFFERENT TYPES OF TITLE INSURANCE?
Yes. There are three different types of Title Insurance: A Lender’s Policy, Standard Owner’s Policy and the Owner’s Enhanced Policy.
Lender's Coverage is required by all corporate lenders as a condition of the purchaser’s loan. This covers only the lender for the amount of the loan they are making to a borrower. The Lender’s Policy that the lender is provided with is the standard American Land Title Association’s (ALTA) Loan Policy. It provides coverage to the lender against such title encumbrances as fraud in connection with the execution of documents, incorrect representation of the marital status of grantors, wills not properly probated, and many other circumstances that might jeopardize the lender’s security in the property.
The Standard ALTA Owner's Policy protects you as the owner of real property against fraudulently executed documents, incorrect representations and improperly probated wills, as well as any unsatisfied claims that may not appear in the jurisdiction’s land records.
The Owner's Enhanced Policy covers you, the owner, against all that is included in a standard ALTA Policy but with additional and enhanced coverage. Subject to limitations, some of the benefits of an Enhanced Policy include:
• Mechanic’s lien coverage is provided for work done prior to the date of your policy.
• Zoning coverage is now provided, ensuring that your land is properly zoned for a single-family residence.
• Subdivision coverage is now provided in the event that your land is a portion of an improperly created subdivision.
• Coverage is provided if you as the owner are forced to remove an existing structure, other than a boundary wall or fence, due to a previous owner’s failure to obtain the necessary building permit.
• Coverage is provided if an adjacent builder builds onto the homeowner’s property without permission.
• Coverage is provided for forgeries affecting your ownership after the date that your title insurance policy is issued.
Please note that the specific coverage available may vary to some degree among title insurance providers and based on the jurisdiction of the property. The company that you select to conduct settlement can provide you with the details of the coverage provided under their policies.
Title insurance
Information provided by SMART Settlements
WHAT IT IS WHY IT MATTERS HOW YOU BENEFIT
Title is your ownership right to your property.
Smart Settlements will examine or research public records to see if there are any problems or defects that could cause you legal issues. They may also manage the closing process. A title search is an early step in the home buying process to uncover issues that could limit your rights to the property.
No homebuyer wants to inherit existing debts or legal issues that could interfere with their property rights in the future.
Smart Settlements ensures the title search is completed, writes the title insurance policy and works to reduce your risk of ownership issues in the future.
If a title issue is discovered, most often your title professional will take care of it without you even knowing. After the title problem is fixed, you are able to purchase owner's title insurance.
Clear title allows you to use or modify your property.
There are two different types of title insurance: the owner's policy and the lender's policy. The owner's policy is purchased by you, the homebuyer. While it is your choice, purchasing an owner's title insurance policy is the best way to protect your property rights. The lender's policy is usually paid for by you, the homebuyer. It is almost always required by the lender and only protects the lender's interest.
Sometimes undiscoverable defects can come up after the title search. Title issues may include forgery, fraud or clerical errors. Owner's title insurance is the best way to protect yourself from losing your property.
Smart Settlements has your back. We sweat the small stuff so you don't have to, giving you peace of mind.
The title search protects you from unknowingly inheriting a previous owner's debts, legal obligations or other title problems.
Every year, the vast majority of homebuyers in America elect to protect the largest investment of their lives, and purchase owner's title insurance. Owner's title insurance protects your interests after you purchase your home.
Closing is the final step in executing the home buying transaction.
It is the process that allows the transfer of ownership to occur.
Upon completion of the closing process, you get the keys to your home!
Hazard insurance/ homeowners insurance
Your lender requires that you keep the property insured against damage or destruction and name them as the co-insured. This is referred to as Hazard Insurance or Homeowners Insurance.
If you are making an all-cash purchase, the decision to have Hazard or Homeowners Insurance is the buyer’s decision. It is absolutely recommended that you purchase this insurance to protect your investment. The settlement agent will be able to answer any questions you may have.
Contracts in our areas require the buyer to begin the process of obtaining Hazard or Homeowners Insurance within seven days of a ratified contract. This insurance includes liability coverage and content coverage of the owner’s personal property. Buyers should begin the search for insurance as soon as possible as the recent sharp rise in rates may make some policies unaffordable, if insurance can be secured at all, and you will need time to shop for the best policy for your needs.
Your policy must be paid for and a binder issued prior to settlement. Evidence of such must be delivered to the lender prior to funding the loan.
Please note: Insurers do not issue hazard insurance policies when a hurricane watch is in effect. Please do not wait until the last minute or settlement may be delayed.
FOR CONDOMINIUM PURCHASERS
The master policy covers the structure of the building on behalf of you and your lender and is paid for in your condo fees. However, this provides no liability or content coverage for you, and no coverage if another unit is damaged by something that occurs within your unit. Please speak with your insurance agent to discuss adequate separate coverage.
FLOOD INSURANCE
Some properties are in flood zones. In these situations, the settlement company will advise you, but your lender may require you to add flood insurance to your transaction. The FEMA flood map is updated every year. Please ask your lender or the settlement company about the flood certification after ratification of your contract.
Prepare for settlement and preparing to move
Once your inspections have been completed and your financing has been finalized, you will need to arrange a number of other details. Scheduling these things earlier in your transaction will hopefully eliminate last minute surprises or uncomfortable situations.
SETTLEMENT FUNDS
• Arrange certified funds or wire transfer with the settlement company.
• Note: Do not accept instructions to wire funds through an email. If the settlement company emails instructions, call first to confirm that the information is accurate. Use the phone number provided by your agent, not one included in the email. You will be asked to sign a “Wire Fraud” disclosure when you sign your buyer agency agreement.
• The amount of cash needed at settlement can be obtained from the attorney or title company several days prior to settlement.
• Are you going to be using funds generated by the sale of another property as all or part of your down payment? If so, make sure that your agent has discussed this with your settlement company and has coordinated the timing of the two settlements to allow for an assignment of funds. This assignment of funds allows one settlement company to deliver funds to another settlement company once the first transaction has been recorded and disbursed. However, an assignment of funds cannot be used without the prior written consent of the seller.
• Personal checks may be used for small amounts owed at settlement, if the final figures change at the last minute.
ESTABLISH TIME OF WALKTHROUGH
• Your agent will schedule the walkthrough for you.
• The contract permits you to conduct a walkthrough seven days prior to settlement. You may want to conduct a walkthrough to verify all repairs have been made and a second walkthrough once the seller has vacated the property to ensure that the property is in “substantially the same condition” as the contract identifies.
DIRECTIONS TO THE SETTLEMENT OFFICE
Make sure you have received directions to your settlement office, either from the company or from your agent.
PREPARING TO MOVE
As you are preparing for settlement, this is a good time to start planning your move. This includes helping to identify a mover and updating your new address for utilities. Reach out to your agent for more information.
CONTACT A MOVING COMPANY
The first step is to confirm your preferred move date as early as possible. Your Associate has a list of movers recommended by agents and previous clients. You are encouraged to get quotes from more than one company.
CONTACT UTILITY COMPANIES
You can contact your utility companies directly (e.g. Electric, Water, Telephone, TV/Internet) via the list of utility companies found at the end of this book.
Conduct the final walkthrough
YOUR RIGHT TO A WALKTHROUGH
Prior to settlement, the sales contract allows for the purchaser to conduct a final walkthrough inspection. At the end of the walkthrough, the buyer signs off on the Walkthrough Inspection Form. This form signifies the buyer’s acceptance of the property in its current condition and notes any contractual deficiencies. Ideally, this inspection is best performed after the seller has vacated the property, but if this is not possible, your agent will coordinate timing.
The purpose of the walkthrough is:
• To ensure that all items that are supposed to convey with the property are in place and in the condition specified in the contract.
• To ensure that repairs or improvements required in the contract have been completed by the seller.
• To ensure that the property is free and clear of debris, broom clean, and in substantially the same condition as on the date of the contract.
• To ensure that all other contractual obligations have been met.
Attending your settlement
WHAT TO EXPECT AT A SETTLEMENT
• Settlements are typically scheduled every hour, so please allow for one hour in order to complete the process. If you are inclined to read each document thoroughly, it is preferred that you talk with the settlement agent ahead of time to schedule adequate time to review the documents in detail.
• It is very common for Buyers and Sellers to settle separately.
TYPICAL SETTLEMENT MEETING AGENDA
• Photocopy driver’s license or other appropriate ID for all parties.
• Approve and sign the closing disclosure.
• Purchaser selects title insurance coverage.
• Seller signs the deed.
• Purchaser signs loan documents:
- Loan application
- Truth in Lending statement
- Note
- Deed of Trust
• Seller provides the keys and, if any, garage door openers.
• Purchaser funds are verified and will receive keys and possession.
Real estate glossary
Adjustable Rate Mortgage (ARM): Interest rates on this type of mortgage are periodically adjusted up or down, depending on a specified financial index.
Agent: Acts on behalf of another, representing that person’s interests and serving as an intermediary.
American Land Title Association (ALTA): A precise breakdown of closing costs for both Sellers and Buyers. You will receive your ALTA document at closing.
Amortization: A method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, principal repayment is very small and interest repayment very high; at the end of the loan, that relationship is reversed.
Annual Percentage Rate (APR): The actual finance charge for a loan, including points and loan fees in addition to the stated interest rate.
Appraisal: An expert judgment of the value or worth of a property.
ARM: Adjustable Rate Mortgage
Assumption of Mortgage: Buyer assumes liability for an existing mortgage note held by the Seller. This is subject to approval by the lender, who must be willing to approve the Buyer and release the Seller.
Assessed Value: The value placed on property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value.
Balloon Payment: A large principal payment due all at once at the end of some loan terms.
BrightMLS: The regional multiple listing service that provides to its members detailed information about properties for sale.
Broker: A real estate professional who has a higher level of training than an agent. Generally, this is one who is the legal representative or proprietor of the office.
Cap: Limit on how much the interest rate can change in an ARM.
Closing: See “Settlement.”
Closing Disclosure: Replaced the HUD-1 document. You will receive your ALTA document at closing.
Commission: Fee (usually a percentage of total transaction) paid to Broker for services performed.
Concession: Monetary credit offered to a buyer to use at closing. This can be for home inspection items, closing costs, and other fees (including a buyer agent’s professional fee.)
Condominium (Condo): Type of real estate ownership where the owner has title to a specific unit and shared interest in common areas.
Contingency: A condition in a contract that must be met for the contract to be binding.
Contract: Binding legal agreement between two or more parties that delineates the conditions for the exchange of value (e.g. money exchanged for title to property).
Conversion Clause: A provision that allows converting an ARM to a fixed-rate loan after a specified interval.
Deed: Legal document that formally conveys ownership of property from Seller to Buyer.
Down Payment: Percentage of the purchase price that the Buyer must pay in cash and may not borrow from the lender.
Earnest Money: A large deposit paid when the sales contract is signed before the closing.
Equity: The value of the property actually owned by the homeowner, it is purchase price plus appreciation plus improvements, less mortgages and liens.
Escrow: A fund or account held by a third-party custodian until conditions of a contract are met.
Fannie Mae: Federal National Mortgage Association.
Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (FNMA, called “Fannie Mae”):
Privately owned corporations created by Congress that buy mortgage notes from local lenders and are responsible for the guidelines a majority of lenders use to qualify borrowers.
Finance Charge: The total cost, including all fees, points and interest payments a borrower pays to obtain credit.
Fixed Rate Mortgage: Interest rates on this type of mortgage remain the same over the life of the loan term. Compared to “Adjustable Rate Mortgage.”
Fixture: A recognizable entity (such as a toilet bowl, kitchen cabinet, or light unit) that is permanently attached to property and belongs to the property when it is sold.
Good Faith Estimate: A document that must be provided by the lender within three days of mortgage application and that specifies the costs
associated with the loan as well as settlement costs that will be incurred by the borrower.
Hazard Insurance: Compensates for property damage from specific hazards such as fire and wind. More complete coverage is given by allrisk homeowner’s insurance.
Home Inspection Report: Prepared by a qualified inspector, it evaluates a property’s structure and mechanical systems.
Interest: The cost of borrowing money, usually expressed as a percentage over time.
Lien: A security claim on property until a debt is satisfied.
Listing Contract: Agreement whereby an owner engages a real estate agent for a specified period to sell property. The agent receives a commission from the sale.
Market Value: The price that is established by present economic conditions, locations, and general trends.
Market Price: The actual price at which a property sold.
Mortgage: Security claim by a lender against property until the debt is paid.
Negative Amortization: A method of calculating fixed monthly payments in combination with a variable interest rate. When monthly payments are not enough to cover interest costs, unpaid interest is added to the principal balance.
Origination Fee: Application fee(s) for processing a proposed mortgage loan.
PITI: Principal, interest, taxes, and insurance, forming the basis for monthly mortgage payments.
Point: One percent of the loan principal. It’s charged in addition to interest and fees.
Pre-Payment Penalty: A fee paid by a borrower who pays off the loan before it is due.
Pre-Qualification: Informal estimate of how much financing a potential borrower might expect to obtain – done before paying substantial loan application fees.
Principal: One of the parties to a contract; or the amount of money borrowed, for which interest is charged.
Prorate: Divide or assess proportionately.
REALTOR ®: A member of the National Association of Realtors®.
RESPA: Real Estate Settlement Procedures Act.
Settlement: Also known as Closing, is the completion of your real estate transaction. At settlement, all parties, including the buyer, sellers and both of their agents sign the transaction's closing documents. After closing, the buyer's closing attorney finalizes the transaction and handles the payment of closing costs.
Title: Document that indicates ownership of a specific property.
Title Insurance: Protects against loss from defects in the title.
Title Search: Detailed examination of the entire document history of a property title to make sure there are no encumbrances.
Types of Ownership: There are four types of property ownership.
1. Sole Ownership: Only one person owns the property.
2. Tenants in Common: Two or more persons have an undivided ownership in the property. The percentage of ownership need not be equal; each party has a right to sell his interest, and upon the death of any of the owners, that owner’s interest in the property goes to his/her heirs.
3. Joint Tenants: Ownership taken by two or more persons at the same time in equal percentages with an undivided right to possession. If one owner dies, his or her interest automatically goes to the remaining owner(s).
4. Tenants by the Entireties: Owners are a married couple and together they hold title to the property with a right of survivorship. Upon the death of either, the survivor takes sole ownership to the exclusion of the deceased spouse's heirs.
Unreleased Trust: A mortgage or lien recorded in the court records that appears to be outstanding (where no Certificate of Satisfaction/release has been recorded).
A T C M G H O M E L O A N S
K A Y P E A R C E
Important numbers
ELECTRIC
Pepco (DC and MD) www.pepco.com
202-833-7500
Dominion Virginia Power (VA) www.dom.com
866-366-4357
City of Manassas Utilities www.manassascity.org 703-257-8219
Northern Virginia Elec. Coop (NOVEC) www.novec.com
888-335-0500
Shenandoah Valley Electric Cooperative www.svec.coop 540-434-2200
Rappahannock Electric Cooperative www.myrec.coop 800-552-3904
First Energy www.firstenergycorp.com 800-686-0011
GAS
Washington Gas (serves most of metro area) www.washgas.com 800-752-7520
Columbia Gas Maryland www.columbiagasmd.com 888-460-4332
Virginia www.columbiagasva.com 800-543-8911
Thompson Gas (WV) www.thompsongas.com 304-725-9776
WATER AND SEWER
DC Water www.dcwater.com 202-354-3600
WSSC (MD)
www.wsscwater.com
301-206-4001
Frederick Water www.frederickwater.com 540-868-1061
Virginia American Water www.amwater.com 800-452-6863
Arlington Deptarment of Environmental Services www.arlingtonva.us 703-228-6570
Fairfax Water www.fairfaxwater.org 703-698-5800
Town of Vienna Water & Sewer www.viennava.gov 703-255-6385
Town of Herndon Utilities www.herndon-va.gov 703-435-6814
Loudoun Water www.loudounwater.org 571-291-7880
Town of Leesburg Utilities www.leesburgva.gov 703-771-2701
Town of Middleburg Water & Sewer www.middleburg.org 540-687-5152
Prince William County Service Authority
www.pwcsa.org 703-335-7900
City of Manassas Utilities www.manassascity.org 703-257-8245
Dale City Service Corp. 703-590-4495
Fauquier County Water and Sanitation Authority www.fcwsa.org 540-349-2092
Winchester Public Utilities 540-773-1340
Town of Front Royal www.frontroyalva.com 540-635-7799
West Virginia American Water (Note: they just acquired Jefferson Utilities in Oct 2023) www.amwater.com/wvaw/ 800-685-8660
Berkeley County Public Service Water District www.berkeleywater.org 304-267-4600
Berkeley County Public Service Sewer District www.bcpssd.org/new-customers 304-263-8566
Charles Town Utility Board www.ctubwv.com 304-725-2316
TELEPHONE
Verizon www.verizon.com 800-837-4966
CABLE SERVICE
Comcast www.comcast.com 800-934-6489
Cox Communications (Northern Virginia) www.cox.com 703-378-8422
Verizon (FIOS) www.fios.verizon.com 855-849-3623
Glofiber www.glofiber.com 833-926-8456
Frontier (WV) www.frontier.com/resources/movers 877-649-3380
We represent DC/MD/VA/WV
Since 1980, we have represented sellers and buyers throughout the DC metropolitan region.
ALEXANDRIA OFFICE
109 S Pitt Street Alexandria, VA 22314 703-549-9292
CHARLES TOWN OFFICE
215 W Washington Street Charles Town, WV 25414 304-918-5015
KENSINGTON OFFICE
3804 Howard Avenue Kensington, MD 20895 301-979-7270
McLEAN OFFICE
1320 Old Chain Bridge Road McLean, VA 22101 703-790-9090
SPRING VALLEY OFFICE
4910 Mass Ave, Suite 119 Washington, DC 20016 202-552-5600
ARLINGTON OFFICE 3135 Langston Boulevard Arlington, VA 22201 Opening Fall 2024
CLARENDON OFFICE
3033 Wilson Boulevard Arlington, VA 22201 703-525-1900
LEESBURG–HARRISON ST
458 Harrison Street Leesburg, VA 20175 703-777-1170
MIDDLEBURG OFFICE 10 E Washington Street Middleburg, VA 20118 540-687-6321
VIENNA OFFICE
374 Maple Avenue, E #202 Vienna, VA 22180 703-839-8200
ASHBURN OFFICE
42795 Generation Drive Ashburn, VA 20147 703-436-0077
FRONT ROYAL OFFICE
400 N Royal Avenue Front Royal, VA 22630 540-631-9009
LEESBURG–MARKET ST
10 W Market Street Leesburg, VA 20176 703-738-8282
PURCELLVILLE OFFICE
115 N 21st Street
Purcellville, VA 20132 540-338-7770
14TH STREET OFFICE 1803 14th Street, NW Washington, DC 20009 202-903-2200