FAQ

Typical Buyer’s Step-by-Step Progression

  1. Buyer makes offer, seller accepts (that sure sounds easier than it actually is!)
  2. Buyer’s earnest money (good-faith deposit) is placed in either the closing attorney or an agents to the transactions trust account
  3. Lender orders appraisal (buyer or agent might order it for a cash purchase)
  4. Inspections are ordered after an acceptable appraisal is received (If time is a factor, and we’re confident the home will appraise, inspections can be done earlier)
  5. Any repair issues are negotiated with the seller
  6. Termite inspection is ordered (must be within 30 days of closing)
  7. Surveys are ordered after a successful appraisal and inspections–buyers don’t want to invest too much into the property until they are sure it’s a go
  8. Buyer applies for hazard insurance and the information goes to the lender and closing attorney
  9. Nearing closing date, buyer arranges for utilities to be switched over
  10. Closing takes place at the office of the buyer’s attorney
  11. Buyer gives attorney certified funds to pay for closing and signs loan papers and other required documents
  12. Attorney electronically (in most counties) records the deed and deed of trust (if applicable) and disburses funds consistent with the NC Good Funds Settlement Act
  13. Learn about the new Consumer Financial Protection Bureau Regulations (effective Oct. 3, 2015) by visiting their website CLICK HERE

In Answers to Your Questions

Do I Need a Survey?

Please mention at least 21 days in advance.

A Survey of the property conducted by a Registered Land Surveyor is strongly recommended in order to uncover problems such as encroachments, restrictive covenant setback violations, boundary disputes, deed gaps and overlaps, etc., before you buy. It should be considered an integral part of your due diligence investigation of the property. In addition, if you have plans for adding a pool or a fence to the property, for example, obtaining a survey is the only way for you to proceed with accuracy and avoid costly mistakes. Although it may be a prudent investment, unless it is a specific requirement of your lender, the decision to invest in a survey is yours. Please let us know as soon as possible, and in no case less than 21 Days prior to closing, whether or not you wish for us to arrange for the survey. The cost of the survey will typically be added to your closing disclosure and can be paid at closing. Please note that most surveys do not include staking the corners of the property. If you want this done, be sure to ask for this to be done at the time the survey is requested.

When Will I Get the Keys to My New Home?

The most exciting thing about buying your new home is attending the consummation, obtaining the keys, and walking through the front door.

So when does this happen?

Keep in mind that consummation (sitting down and signing the paperwork) and closing (when the attorney records the Deed and accompanying documents) occurs in different ways in different states. In some locales you may sit down with your agent and an attorney, or some other professional, to sign paperwork and then receive your keys right there.

Here in North Carolina you normally receive the keys once the closing attorney’s office has received all the paperwork, your loan has been funded (i.e., the money is in the attorney’s trust account and your lender has authorized the disbursal of such), and the recording of the deed and other documents has occurred. You might meet your agent at the house, or be able to pick up the keys somewhere else once closing has occurred and you receive a call to that effect.

Check with your agent as the consummation date approaches so you know what to expect. It’s never good to find out at consummation that you won’t be getting keys at that time, and many buyers assume that this is the case.

We understand that sometimes folks want to get the keys early so they can start moving in, especially if they have movers bringing things. You will have to obtain permission from the sellers in order to do this, and often they are unwilling to do so because of liability issues. But there are exceptions so speak with your real estate agent in advance. Communication between the buyers, sellers, and their respective agents is of utmost importance with respect to the turning over of the keys. A general guideline is that for consummation that occur at or before 2:00pm, documents will generally be recorded around 4:30pm that same day. For consummation occurring 3:00pm or later, documents will generally be recorded the next day.

What is a Closing Disclosure?

A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).

When Will I Know How Much Money I’ll Need to Bring to Closing?

The lender is required to give you the Closing Disclosure at least three business days before you close on the mortgage loan. This three-day window allows you time to compare your final terms and costs to those estimated in the Loan Estimate that you previously received from the lender. The three days also gives you time to ask your lender any questions before you go to the closing table.

What Risks Are Covered with Title Insurance?

A title search and the issuance of title insurance means the ownership of the property can be cleanly conveyed to the new owners. During the search, the history of the property is researched verifying that all previous claims or liens have been satisfied, allowing a clear title to be issued. If any claim is overlooked, the title insurance protects the owner from the claim. Remember that if it’s not in writing on a real estate deal, it’s not enforceable.Lender’s Title Insurance insures the priority and validity of the mortgage loan and is required by banks and mortgage companies.Owner’s Title Insurance protects your investment by:

• Errors in the public records such as incorrect information in deeds and mortgages regarding names,signatures or legal descriptions.
• Judgments, liens, mortgages, unpaid taxes and assessments claimed against the property.
• Claims of ownership by others to your insured property.
• Invalid Deeds due to forgery, fraudulent transfers or transfers by previous owners who were minors or not mentally competent.

What Good is Title Insurance?

A title search and the issuance of title insurance means the ownership of the property can be cleanly conveyed to the new owners. During the search, the history of the property is researched verifying that all previous claims or liens have been satisfied, allowing a clear title to be issued. If any claim is overlooked, the title insurance protects the owner from the claim. Remember that if it’s not in writing on a real estate deal, it’s not enforceable.Lender’s Title Insurance insures the priority and validity of the mortgage loan and is required by banks and mortgage companies.Owner’s Title Insurance protects your investment by:

• Providing a corporate indemnity against insured defects.
• Paying the legal expenses to eliminate any title defects.
• Paying claims arising from errors in title examinations and recordings.
• Paying losses from hidden defects in title and defects not of record.

What Can I Expect When Buying a Home?

If you are buying a new home, you can anticipate that the process will generally be the same for most real estate transactions. Knowing the process will help you successfully find the right home, negotiate a fair price, secure financing, request needed repairs, and come to the closing table ready to be a home owner.

So what can you expect when buying a home?

Step 1: Understanding Your Needs/Financial Ability and Finding a Property
The goal is to find a home that matches up with the majority of your basic life requirements, as well as your budget. If you are a first time home buyer, or not sure what you can afford, you may want to advise your financial institution to get a base range for your lending qualifications.

Step 2: Initial Negotiation
Now that you’ve found that perfect slice of real estate, it’s time to make an offer. The offer engages the negotiation phase. Most agents will help you establish the right ‘offer price’ according to real estate market trends. Ultimately, the offer price is always up to you. Along with the initial offer to purchase, you will have the opportunity to request paid closing costs by the seller, the closing time frame, appliances and fixtures, etc.. Once you’ve submitted your offer, the seller has the opportunity to counter offer which may ultimately change the terms of the original offer.

Step 3: Earnest Money & Due Diligence Fees
The Due Diligence (DD) fee essentially buy the purchaser time to investigate the property to determine whether or not that purchaser wants to move forward with the ultimate acquisition of the home. Until the expiration of the DD period, the buyer reserves the right to terminate the contract for any reason or no reason, The DD fee is non refundable in all events, absent a seller breach, and will be credited to the purchase price if the home is ultimately purchased.

The Earnest Money(EM) fee is also credited to the purchase price as well in the event the home is ultimately purchased. If the buyer terminates the contract AFTER the expiration of the DD period, the buyer forfeits the EM deposit.

Because of the structure of our North Carolina contracts, the buyer should complete all matters of investigation and negotiate any repairs or other concessions prior to the expiration of the due diligence period.

Step 4: Appraisal
Your lender will order an appraisal of the home (with a cash purchase, you or your agent can order the appraisal to verify the value of the property).

Step 5: Inspections & Repairs
Once an acceptable appraisal is received, inspections (home inspection / termite inspection ordered 30 days before the closing) will be ordered. (The Inspection process can be completed earlier if all parties are confident the home will appraise at an acceptable amount.) Once the inspectors have provided their reports, you will be able to negotiate necessary repairs with the sellers.

Although the time line referenced herein is a good guide, we would always defer to the opinion of your real estate agent as it relates to timelines, as each situation can present a particular set of circumstances that may require more or less time.

Step 6: Property Survey
After you successfully receive an acceptable appraisal and inspection report, you can order a property survey. The survey can be ordered earlier in the process but it will risk investing money that is unnecessary if the appraisal and inspection reports are not adequate.

Step 7: Hazard Insurance
Different than home owner’s Insurance, hazard insurance gives you peace of mind when it comes to natural disasters, vandalism and theft. This policy is sometimes covered by your lender to provide protection for their investment. Proof of insurance is required to be sent to the closing attorney.

Step 8: Schedule Utilities to be Switched Over/Turned On
As you get closer to the closing date, check with your utilities providers to make sure they service your area and schedule a date to switch your utilities over to the new location. If you are moving to a new area, we have compiled a list of utility service providers by location.

Step 9: Attend Closing
The closing will typically take place at the office of the buyers’ attorney. See seller tab for additional information if seller is unable to attend closing on the scheduled date and time.

Step 10: Payment and Signatures
During the closing, you’ll provide the attorney with certified funds to pay for the closing and sign all of the loan papers and other required documents.

Step 11: Record the New Deed
Once all documents are signed and paperwork is verified, the closing attorney electronically (in most counties) records the deed and deed of trust (if applicable) and disburses funds consistent with the NC Good Funds Settlement Act

I’m Buying/Selling a For Sale By Owner (FSBO) Home. What Do I Need to Know?

Note that while FSBO’s are appropriate in a variety of circumstances, such as sales to family members, it is highly recommended that a seller consider hiring a real estate agent to sell their home. Statistically, a good agent will be able to market and present your home in such a way as to bring a higher selling price than a layperson or seller would be able to attain on their own. Also, if a prospective purchaser is already represented by a buyer agent, that buyer agent will typically require that you pay between 2.4 and 3 percent of the sales price to provide their services to facilitate the transaction.

If you do decide to sell your home “By Owner”, please contact us and we at Zdenek Law Firm can provide a range of services to you based on your needs that will enable you to complete the transaction legally and seamlessly. This includes consultations to walk you through the process, contract and disclosure preparation, repair negotiation assistance, and a variety of other services that are essential to the home buying and home selling process.

What Does the Buyer Need to Bring to Closing?

Buyer should bring 2 current forms of ID to closing, one drivers license or passport and one separate form of ID that contains the buyers name.

• The buyer will need to bring money owed for the completion of the transaction in the form of “certified” funds, such as an official bank check, certified check, cashiers check, or money order (or wire transfer, or even cash), made payable to Zdenek Law Firm, PA

• Sellers often think they need to bring their original deed to closing, but this is not really necessary in North Carolina. The recorded copy of the deed in the County Register of Deeds office, which the attorney examines during the title search before closing, is more important than the actual original deed.

The above guidelines are only general; in your specific situation the closing attorney might modify or add to them. Check with your agent or the attorney a few days before closing to confirm you have everything you need.

If the Mortgage Will Be In My Name, and My Spouse Will Not Be a Co-borrower, Will My Spouse Need to Go to the Closing?

Yes, with one exception (see below). This situation is really the same as the one in the question just above. Even if your spouse does not co-own the property with you, he or she must also sign the mortgage (which is almost always called a “deed of trust” in North Carolina). When you get a mortgage loan, you convey to your lender a property interest in your house, and your spouse’s potential property rights need to also be subject to the mortgage.

The rule is, “One to buy, and two to sell.”

There is one possible exception to this, that applies only to closings where you are purchasing the property in your name only and simultaneously getting a first mortgage loan for said purchase. If the proceeds for the first mortgage loan are being used for purchase money and closing costs only, it is probably not necessary for your spouse to sign the deed of trust. You will need to discuss this with your closing attorney, to see if the exception applies to you. This exception does not apply to second mortgages to finance part of the purchase price, or to mortgage loans you get later; such as a refinance first mortgage loan, or a home equity line of credit.

Of course, if you are buying real property in your name only, for cash, that is, you are not getting a mortgage loan, your spouse is not needed at the closing.

What Costs Are Involved in the Purchase of a New Home?

Typical Home Buyer Expenses:

• Home inspections
• Surveys
• Their share of yearly property taxes
• Property association dues, and other similar fees (prorated for date of closing)
• Fees for a title search and duties performed by their attorney, title insurance policies, hazard insurance for a year, down payment and lender fees, flood zone certification fees, funds to open lender escrow accounts for property taxes and insurance that will be paid by lender the following year

Should I Make My Next Payment to My Mortgage Company?

You should discuss this with your lender, broker or agent, but generally if, as a result of the sale or refinance, your old loan will be paid off by the 15th of the month, then you will not need to make that payment for that month. This is because typically no late charges accrue until after the 15th.

Why Is My Payoff Higher than My Newest Statement I Received From My Lender?

Mortgage payments are made in arrears, meaning that the month in which you pay your mortgage actually covers the interest from the prior month ( i.e. October payment covers September’s interest. Because you will not be making the payment for the month following the closing (i.e. October closing, you will not make November payment), the interest from the 1st of the month through the closing date must be added to the principal balance to calculate the “payoff”. Also, most mortgage companies charge between $10-75 to provide the payoff information, which further increases the payoff amount.

Can I Sign the Seller Closing Documents Prior to the Scheduled Closing Date?

Yes. We understand that with all of the moving parts associated with a seller exiting their home, the scheduled closing time may not be convenient for the seller. We are sensitive to that issue and are more than happy to accommodate the seller to that end. If you would like to come to our office to execute the closing documents prior to the scheduled closing date, please contact our office to set up a time. We DO NOT charge an extra fee for this service.

Please be aware that pursuant to the terms of your contract with the buyer, you must provide documentation at or before closing that effectively transfers or conveys your interest in the property. Commonly referred to as a Deed and Lien Waiver, these documents must be prepared in conformity with North Carolina Law to effectively convey title. North Carolina Law allows us to perform this service on your behalf, or you can make other accommodations to prepare the requisite documentation. In the event we are not providing this service, please provide the documents, or at least a copy of the documents, two days prior to closing for our review.

In either case, please provide your preference on the SIS, so that we may plan accordingly. Our fee for facilitating the sellers side of the transaction is $150. If you would like us to prepare the transfer documents that are required per your contractual obligation, that fee is only an additional $100 for a total seller fee of $250.

When Can I, the Seller, Get My Money from the Closing?

In North Carolina, the closing attorney is not allowed, under the current rules of the North Carolina State Bar, to disburse any funds, including the seller’s proceeds and/or the realtor’s commission, until the deed and deed of trust are recorded in the County Register of Deeds office. This means that you will not get your proceeds check at the closing table. If you recall a closing where you got your check during the closing, then it took place in another state, or the attorney was operating at a time when the applicable State Bar rules were different. The attorney’s office will need at least one hour after closing to deposit the purchase funds, update their title search (to make sure no liens or adverse conveyances have been recorded just before or during the closing), and to record the documents.

Click here for more information about the NC Good Funds Settlement Act.

The House I am Selling Is In My Name Only, Does My Spouse Have to Attend the Closing?

Yes, your spouse must also sign the deed. This is because spouses have potential property rights in any real property their spouse owns, and they must release those rights if the property is conveyed. This is true even if you, the owning spouse, got the property before you were married, or inherited the property from your family, or you have a prenuptual agreement.

What Do I, the Seller, Need to Bring to Closing?

Everyone will need to bring some current (not expired)government-issued identification with your photo on it, such as a driver’s license, passport, or military ID.

• The buyer will need to bring money owed for the completion of the transaction in the form of “certified” funds, such as an official bank check, certified check, cashiers check, or money order (or wire transfer, or even cash), made payable to the trust account of the closing attorney.
• Sellers often think they need to bring their original deed to closing, but this is not really necessary in North Carolina. The recorded copy of the deed in the County Register of Deeds office, which the attorney examines during the title search before closing, is more important than the actual original deed.

The above guidelines are only general; in your specific situation the closing attorney might modify or add to them. Check with your agent or the attorney a few days before closing to confirm you have everything you need.

What Costs Are Involved in Selling a Home or Property?

Typical Home Seller Expenses:

• Deed preparation (attorney fee)
• Excise stamps paid by the seller to the State of North Carolina are $1.00 per $500.00 of sales price.
• Sellers share of property taxes based on the calendar. Note that any closing after July 7 will require us to pay the tax bill at closing. Closings prior to July 7 will require seller to credit buyer the sellers portion of the tax bill based on a calendar year, as per the Offer to Purchase. These prorations are NOT based on the counties fiscal year.
• HOA transfer and certification fees
• Real estate commission if an agency is involved
• Fees associated with loan payoff or transferring funds into a checking account (overnight fees, electronic fund transfer)
• Any costs seller has agreed to under the Offer to Purchase

My Spouse Has My Power of Attorney. Can She Sign for Me at the Closing, So I Won’t Have to Attend?

Possibly. You need to inform the closing attorney that you want to do this, because he or she will need to see the Power of Attorney beforehand to see if it is valid for your real estate closing. Also, the attorney will need time to prepare additional documents in this situation, and the original Power of Attorney will have to be recorded. I often see Powers of Attorney that the persons filled out on a form they got at an office supply store; I HAVE NEVER SEEN such a “homemade” Power of Attorney that was valid for a real estate closing.

(IMPORTANT NOTE, added 1-27-2000: Thanks to a recent change in North Carolina Law, eliminating the requirement of a “seal,” many such “homemade” Powers of Attorney, prepared from software, etc., might now be valid for a real estate closing, but it is still critical that they be reviewed by the attorney before closing.)

Please note also that a Power of Attorney, though perfectly valid, might have been written to be used only for an earlier, specific closing or transaction. Such Powers of Attorney, containing a limitation to specific property, a specific mortgage loan or lender, or an expiration date, are very common.

In this case you will need to sign a new Power of Attorney.If you are a borrower on the mortgage, your lender also has to approve your non-attendance at the closing through the Power of Attorney; many lenders will require you to attend anyway (if you want the loan). Most lenders that allow Powers of Attorney, require that they be specific for the transaction, as described above.

How Do the New Regulations Implemented by the CFPB Affect My Home Purchase?

The Consumer Finance Protection Bureau (CFPB) was created as an advocate for consumers that require a loan for purchases such as a buying a home, a car or paying for a college education. The Bureau’s intent is to help place regulate and simplify the process of financing in an effort to mitigate the confusion often associated with taking out a large loan.

Click here for more information about “Know Before You Owe” initiative.

I Am Expecting Proceeds After Closing. May I Have Those Proceeds Wired to My Bank?

Yes. Our fee to wire the funds to your account is $25 and can be deducted from your proceeds. You will need to provide our office with your wiring instructions prior to or at closing.

I Want to Terminate My Contract. What Should I Do?

You should contact your agent and let them know that you would like to terminate the contract. If there is a dispute with regard to the release of the earnest money or who is entitled to it, the agent by law may not disburse the money to anyone but the clerk of court, and the parties will be forced to plead their case, so to speak, in front of a judge or magistrate, who will then decide how the earnest money is to be distributed. A termination of contract should be executed so that the buyer and seller can move on. In the event the parties are able to negotiate the terms of the release of the earnest money, a termination of contract setting forth those terms should be executed by the parties and the disbursement should be made by the agent according to those terms.

I’m Buying/Selling a Home in Foreclosure. What Do I Need to Know?

Purchasing a home in foreclosure often appears to be a good value, but you should consider factors outside of the price so you will know what to expect with a foreclosure listing.

• The purchase of a foreclosure often is a “cash only” sale.
• Can you view the actual condition of the home inside and out before placing a bid? The home may be in need of extensive repairs which can drive up the actual cost of the home.
• Are there liens for taxes or mechanics liens that the winning bidder will be responsible for?
• Is there a redemption period for the previous owners? If so, how long do they have the ability to buy the house back before you can move in?

Zdenek Law Firm, PA represents several investor clients that are always looking for a “good deal”. While foreclosures often provide that benefit, the foreclosure landscape is filled with potential pitfalls that can severely affect the “deal” you are getting. If you are an investor or would like to become one, please contact us so that we can consult you on the process. Jeff Zdenek has bought/sold/flipped several foreclosures in his 20 years of practice, and has counseled countless individuals on the process, from beginning to end. He is well suited to guide you through the process when you are ready, from the formation of your LLC to your bid on the proverbial “courthouse steps”.

When Will My Documents be Recorded?

Typically any purchase closing completed before 3:00pm will be recorded the same day, subject to lender approval. Because the lender is typically the final voice as to whether our office has the authority to record, this general rule is subject to change for each closing. An example would be if the lender has yet to send us a wire for the loan proceeds. In that event, we cannot record until we receive the money. In the event the seller will not provide keys to the home until we record the deed of public record, please notify someone in our office so that the buyer can be advised to alert the lender to the issue.

On a refinance, the Deed of trust will be recorded after the expiration of your 3 day rescission period.

When Will I Know the Date of Closing?

We make scheduling your closing easy. You can schedule your closing on our website, or you can call and email us to do so. If you are paying cash, we need at least one week to complete the title work and otherwise prepare for your closing. If you are getting a loan, you should communicate with your lender to determine how long they will need to underwrite and prepare your loan for closing. Once your lender furnishes you a date, you can then schedule your closing with our office. Typically the closing is scheduled by the buyers real estate agent.

What Is a 1031 Exchange?

In a typical transaction, the property owner is taxed on any gain realized from the sale. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date.

Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a property owner trades one or more relinquished properties for one or more replacement properties of “like-kind”, while deferring the payment of federal income taxes and some state taxes on the transaction.

The theory behind Section 1031 is that when a property owner has reinvested the sale proceeds into another property, the economic gain has not been realized in a way that generates funds to pay any tax. In other words, the taxpayer’s investment is still the same, only the form has changed (e.g. vacant land exchanged for apartment building). Therefore, it would be unfair to force the taxpayer to pay tax on a “paper” gain.

The like-kind exchange under Section 1031 is tax-deferred, not tax-free. When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

What Is a Lease Option (Lease to Own)? How Do Lease Options Work? What Are the Benefits?

A lease option is an arrangement with the buyer and the seller to exercise the option to buy a house after renting it for a specific period of time. A portion of the rent paid would be applied toward the purchase of the home if the option is exercised at the end of the rental contract. The excess rent paid during the agreement is typically referred to as rent credit, which most, but not all, institutional lenders will accept as part of the down payment for the purchase of the home. The seller and renter/buyer should make sure the rental payments exceed the local market rental rate and that the lease-purchase agreement in effect is valid according to the buyer’s lender. When a buyer applies for a loan with a financial institution, a copy of the lease to purchase agreement must be attached to the loan application and could offset the final sale if the contract is deemed invalid by the loaning financial institution.

Lease to own agreements can benefit both parties in a real estate transaction. The seller will receive monthly rent higher than market rent (with a portion applied towards to buyers’ down-payment), top-market value for the property and tax-free use of the option consideration until the option expires or is exercised. In slow real estate markets, home sellers may find a lease to own agreement more beneficial than a lower sale price. This route also gives the buyer a pride of ownership, often ensuring that the property is treated like a homeowner.

The downside of a lease to own option is often the extended timeframe required to build up the down payment portfolio, which may tie up a sellers’ equity/cash flow. The benefits of a lease to own option for a home buyer and a home seller should be considered closely before entering into a contract. Both parties should carefully read and understand the lease-option arrangement for details on transferring the property, along with other important concerns such as maintenance of the home throughout the contract.

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