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Buying and Selling Real Estate
Congratulations on your decision to enter the real estate market! The process of buying or selling a property can prove very exciting, but many also consider the process a bit intimidating and confusing at the same time.
The professionals at ASH MCGINTY believe that knowledge empowers our clients, and your full understanding of the real estate transaction will greatly enhance your experience. We hope the info provided on ashmcginty.com helps to minimize any confusion or uncertainty, allowing you to enter the real estate market with knowledge and confidence.
If you have additional questions not addressed on our site, please do not hesitate to contact the team at ASH MCGINTY.
The role of the real estate agent, often referred to as the Realtor®, can cause enormous confusion to real estate buyers and sellers, alike. With that said, a Realtor® typically assumes one of the following roles:
- Listing Agent or
- Buyer’s Agent
Realtors That Represent the Seller
A seller would engage a Realtor® to “list” the seller’s property, and that Realtor® would serve as the listing agent. Listing means that the Realtor® will register the property with a “Multiple List Service”, also simply called the MLS. The MLS is a vast database of available properties, giving a property the greatest possible exposure to qualified buyers.
Only licensed Realtors have access to the MLS. A seller who wishes to take advantage of the MLS must engage the services of a Realtor® to list the property.
Listing agents will also conduct a thorough comparative market analysis (or CMA) and use their expertise to assist the seller to determine the most appropriate listing price. The listing agent provides invaluable insight to the seller on strategies to make the property as attractive as possible to potential buyers. Once interested buyers present contract offers, the listing agent will assist the seller in analyzing each offer and negotiating the final terms of sale with the selected buyer. The listing agent will help to ensure the proper submission of each offer, and, upon contract ratification, help enable the completion of settlement.
Realtors That Represent the Buyer
A potential buyer would engage a Realtor® to act as the selling agent (yep, selling agent—confused yet?) to represent the buyer’s interests. If a buyer chooses to engage the services of a Buyer’s Agent, the buyer and agent, through the agent’s real estate brokerage, must formalize the relationship by executing a written Buyer Agency Agreement.
Engaging the services of a Realtor as a buyer’s agent to find the perfect property often constitutes the single most significant decision a buyer will make.
To achieve the buyer’s goals, a buyer’s agent will consult with the buyer to establish the characteristics of the ideal property including:
- How much can the buyer afford to spend;
- Where does the buyer wish to live or where the property should be located;
- What style of property the buyer prefers, including the preferred number of bedrooms and bathrooms.
Once the buyer and the buyer’s agent establish the criteria, the agent will research the MLS listings and prepare a list of available homes that meets the buyer’s needs. From that search, the buyer will select properties to visit, and the buyer’s agent will work with the Listing Agent to arrange the showing of these properties.
Upon choosing a property, the buyer submits a contract offer to the seller for consideration. The services of the Realtor® then prove even more critical. A Realtor® can easily access up-to-date contract forms. In addition, many counties adopt their own laws, requiring the use of particular localized forms, and the Realtor® will have access to these documents as well.
After the buyer’s agent prepares a contract offer and the buyer signs the offer, the buyer’s agent will submit the offer to the seller for consideration.
Once receiving the offer, the seller may do one of the following:
- make a counter-offer
The buyer’s agent will assist throughout the negotiation process and provide valuable insight and advice at each stage.
When the parties agree to the final contract terms and fully sign and ratify the contract, the post-ratification process, begins. Realtors receive extensive training to guide the parties through this important part of the transaction.
For the vast majority of residential real estate transactions, the seller pays the listing agent an agreed-upon percentage of the sale price. The listing brokerage then offers to pay a portion of the listing broker’s commission to an agent that finds a ready, willing and able buyer to purchase the seller’s property. Thus, the seller ultimately pays the real estate broker’s commission (except for any customary brokerage flat fees), and the buyer will generally not pay for the Realtor’s services. For this reason, we highly recommend that buyers hire a Realtor® to represent their interests.
The buyer and seller should read and fully understand the terms of compensation to their respective real estate brokerage before executing a brokerage representation agreement.
Historically, the concept of caveat emptor, a Latin phrase meaning “let the buyer beware”, led the sale of real estate. Traditionally, the seller did not make any implied representations or warranties concerning the condition of the property, and the buyer assumed the burden of discovering the condition of the property before purchase.
Today, caveat emptor (buyer beware) still controls real estate transactions except that local (DC and Maryland) real estate laws require sellers to provide buyers with a written disclosure of known material defects.
In Maryland, sellers have the option to “disclaim”, thereby relieving sellers of the duty to disclose such defects. Even if a seller chooses to disclaim, the seller must still disclose all material latent defects (i.e., defects that are: 1) known by the seller; 2) cannot be discovered by the buyer upon a careful inspection of the property; and 3) pose a direct impact to the life, safety and health of occupants of the property).
However , the District of Columbia does not provide sellers with the option of disclaiming.
Real estate law in both Maryland and DC exempt certain types of real estate transactions from disclosure, such as estate sales and the sale of REO/bank owned properties.
Defects may exist that remain unknown to the seller. Since a buyer has no automatic right under the law to conduct inspections of the home before purchase, buyers, through their real estate agent, should strongly consider negotiating a home inspection contingency into their contract.
The Realtor® will help the buyer use the proper contract forms to ensure that the buyer has the right to conduct inspections. The Realtor® can also help the buyer select qualified professionals to inspect the property and help oversee the inspection process.
Unless a buyer purchases a new construction property from a builder, the buyer of an existing aka resale property will not enjoy the protection of a warranty against defects and/or mechanical failure.
For resale properties, buyers may consider the purchase of a third-party home warranty plans as part of the settlement process. Often sellers will offer to purchase a home warranty for the buyer as one of the terms of the contract. Buyers should understand, however, that such warranties generally limit their scope to defects in mechanical systems such as heating and air conditioning and do not cover all defects that one may find throughout the home. Buyers should ask the Realtor® about the terms and limitations of any home warranty coverage offered.
Once a buyer decides to purchase a property, he or she must prepare and submit a contract offer to the seller. Most Realtors® are not lawyers and, therefore, cannot draft a contract. However, local Realtor® organizations have developed up-to-date contract forms. The contract form and appropriate addenda will vary from jurisdiction to jurisdiction and will further differ depending on the property property.
Realtors receive extensive training to ensure the proper utilization of these documents.
In DC, the Greater Capitol Association of Realtors (GCAAR) developed a contact form for use in the District of Columbia and limited parts of Maryland, such as Southern Montgomery County.
The Maryland Association of Realtors (MAR) developed a contract that remains commonly
used throughout the entire state of Maryland.
GCAAR and MAR, as well as all local Realtor® associations that develop forms for use by their members, review and update their forms and addenda on a regular basis to ensure compliance with changes in the law or local practice. Thus, by using such standardized forms, the parties ensure that the transaction will comply with the law and remain binding and enforceable.
Once the seller accepts the contact offer, the clock starts on certain deadlines. A buyer’s failure to comply with such deadlines may negatively impact the transaction.
Some of the typical deadlines found in real estate contract forms and addenda include:
- Deadline to apply for financing;
- Deadline to receive financing commitment;
- Deadline to obtain a termite inspection;
- Deadline to conduct home inspections;
- Deadline to request repairs;
- Deadline to complete repairs; and
- Deadline to conduct settlement.
Your Realtor® will establish a complete list of contract deadlines and regularly monitor the progress toward completing each contingency item.
Most buyers purchase property with the assistance of financing through a residential mortgage lender. The buyer/borrower will need to provide the lender with financial and other personal data that will assess their credit worthiness.
The following is a list of some of the most commonly requested items requested by a lender and required for mortgage loan approval:
- Social Security numbers of all applicants;
- List of the buyer’s addresses for the past seven (7) years and the complete name and address of landlords for the past two (2) years;
- Name, address, and income earned from all employers for the past two (2) years;
- Copies of W-2 forms for the last two (2) years;
- Copy of most recent year-to-date pay stub;
- Name, address, account number, monthly payment, and current balance for installment loans, revolving charge accounts, student loans, mortgage loans, auto loans, and other debt;
- Name, address, account number and balance of all deposit accounts, including: checking account, savings account, stocks, bonds, etc.; and
- Three (3) months of the most recent statements for deposit accounts, stocks, etc.
If the buyer is self-employed or paid by commission:
• Previous two (2) years of Federal Income Tax Returns with all schedules and a year-to-date profit and loss statement.
If the buyer includes income from child support/alimony:
- Court records and/or canceled checks showing receipt of payment.uyer chooses to include income from child support/alimony:
If the buyer owns other properties:
- Address of properties and current market value;
- Any debt owed on properties, including lender’s name, address, accounts number, monthly payment, and current balance;
- Copies of Federal Income tax returns with all schedules for previous two (2) tax years; and
- If rented, a copy of any lease(s).
If the buyer is applying for a Veterans Administration (VA) Loan:
• DD-214, Certificate of Eligibility, or statement from buyer’s Commanding Officer, if on active duty.
Buyers should begin working with a lender in advance to obtain a “pre-approval” letter. While a pre-approval letter does not constitute a final commitment to make a loan, it allows a potential seller to know that the buyer has met with a lender who reviewed basic financial information indicating that the buyer would likely qualify for a loan. (Your Realtor® can recommend a qualified mortgage lender if you do not already have one.)
Additionally, we strongly recommend that a buyer submits the above documentation to a lender or loan officer prior to submission of a contract. This will expedite the real estate process and make the transaction substantially less stressful.
Most mortgage loans require the borrower to repay the loan over a thirty (30) year period. The affordability of a mortgage depends on the terms of the loan—most importantly the interest rate and the number of years that the buyer has to repay the loan.
The lender will take into account the buyer’s total amount of debt repayments (both mortgage and non-mortgage) do not exceed the bank’s underwriting guidelines. The buyer will work with a loan officer to find which program best suits their needs. After reviewing the buyer’s preliminary financial information, the loan officer should have the necessary information to tell the buyer the approximate amount of mortgage that the buyer could afford and the ultimate sales price range.
Keep in mind that a buyer generally adds to the loan repayment 1/12th of the annual property tax bill and hazard (i.e., property) insurance costs, which the buyer pays into a special escrow account maintained by the lender. Adding the escrow items to the monthly loan repayment will provide the total monthly payment obligation and provide the buyer with an initial determination of how the mortgage will fit into their budget.
The following chart provides an approximate monthly mortgage payment based on the loan amount, interest rate, and number of years of repayment. Keep in mind, the payments does not include annual property taxes, homeowner’s insurance, and applicable homeowner’s
and/or condominium association dues.
The home loan term length that’s right for you.
The most common home loan terms are 30-year fixed-rate mortgages and 15-year fixed-rate mortgages.
With a 30-year fixed-rate mortgage, you have a lower monthly payment but over time you will pay more in interest. A 15-year fixed-rate mortgage has a higher monthly payment but you save thousands in interest over the life of the loan.
Per Thousand Dollars
Multiply your monthly payment per 1000 by the number of thousands you plan to borrow.
Typical costs included in a mortgage payment.
In addition to principal and interest, mortgage payments include other charges as well. Here are the key components of the monthly mortgage payment:
- Principal: This is the total amount that are borrowing. Each mortgage payment reduces the principal you owe.
- Interest: What the lender charges to lend you the money. Interest rates are expressed as an annual percentage.
- Property taxes: The annual tax assessed on your property by a government authority. You pay approximately 1/12 of your annual tax bill with your mortgage payment. The servicer of the loan saves these payments in an escrow account and paid when the taxes are due.
- Homeowners insurance: Your policy covers damage and financial losses from fire, storms, theft, etc. As with property taxes, you pay approximately 1/12 of the annual premium each month, and the loan servicer pays the bill when it’s due.
- Mortgage insurance: If your down payment is less than 20% of the home’s purchase price, you’ll typically pay mortgage insurance that protects the lender’s interest in case a borrower defaults on a mortgage. Once the equity in your property increases to 20%, the mortgage insurance is canceled.
Once the buyer receives a commitment for financing from the lender and complete any contract contingencies, the parties may then proceed to closing. The terms “Closing”
and “settlement” both describe the process of transferring title of real property from the seller to the buyer. In the District of Columbia and Maryland, title companies (i.e., settlement companies) typically oversee this process.
The buyer has the right to select which title company to conduct the closing— often based on
the recommendation of the buyer’s Realtor®. Buyers will usually make this choice at the time of contract acceptance in order to provide sufficient time for the title company to perform the title analysis, resolve any potential title issues, and coordinate with the buyer’s lender.
The title company does not exclusively represent the interests of the buyer or seller but serves the role of the:
- escrow agent (responsible for proper disbursement of all funds)
- settlement agent (the party conducting the actual settlement)
- title insurance agent (responsible for issuing the lender and owner’s title insurance policy, if applicable)
The title company has a fiduciary duty to all parties involved in the transaction, including the buyer, seller, and the buyer’s mortgage lender.
Feel free to contact us with any real estate questions.
Black History In Real Estate
From Restrictive Covenants to Racial Steering –
Oscarville, GA (Forsyth County)
Madam C.J. Walker built for $250K in 1917
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