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Welcome to our Library, which provides legal information on topics related to the firm's practice areas. This information is not meant to be a substitute for receiving personal legal advice from an attorney. For specific inquiries about legal issues, we invite you to contact us at (843) 626-9000. We update this section throughout the year, so please check back for new articles. We also welcome suggestions on topics for future articles and news.
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Jeffcoat Law Firm Article
Commonly Asked Questions Buyers and Sellers Ask About The Purchase Of Real Estate
By Otis Allen Jeffcoat, III
COMMONLY ASKED QUESTIONS BUYERS ASK ABOUT THE PURCHASE OF REAL ESTATE
1. HOW MUCH MONEY DO I OWE, TO WHOM DO I OWE IT?
Many costs make up a buyer’s “bottom-line” in a real estate closing. The contract price for the property accounts for most of the total cost. There are other closing costs such as attorney fees, recording fees, bank fees (such as an origination fee), inspection fees, and survey fees. Your lender may also charge interim interest, which is interest charged for the partial month after a loan is made, but before the first payment is due. Also, most lenders will require you to set up an escrow account in which you begin paying on the next year’s tax and insurance bills.
In order to determine the costs, a buyer needs to ask for a price quote from the provider of the service. Banks are required by law to give a borrower a “Good Faith Estimate” when they apply for a loan. This estimate will show a borrower what costs they should expect in taking the loan. Other costs will need to be handled individually, either by the buyer or the agent. By asking these questions, a buyer can get a rough estimate of what their total cost will be.
Before closing, your attorney’s office will prepare a Settlement Statement which will account for all of the charges reported to the attorney. The Settlement Statement will also provide a calculation, based on the reported costs, of how much you need to bring to closing. Your attorney will go over the Settlement Statement with you before closing, and you should question any charges which seem out of line with what you are expecting or which you do not understand.
After the Settlement Statement is approved by all parties, you will only need to bring to closing one certified check or wired funds for the balance shown on the Settlement Statement. Your attorney will make payment of all closing charges to the proper parties. This eliminates the need of exchanging numerous checks on various accounts at the closing.
The law limits what type of checks an attorney can accept in a real estate transaction. Personal checks are almost never allowed. In general, you must bring a certified check from a state approved bank, savings and loan or credit union, or have the funds wired to the attorney’s trust account prior to closing. Call your attorney if you have any questions-bringing the wrong type of check often results in closing delays. For security reasons many attorneys, including our firm, do not allow cash to be used at closings.
2. DO I REALLY NEED AN ATTORNEY?
You are not required to have an attorney to buy property. However, most people feel more comfortable in using an attorney. In addition to providing a complete accounting of the transaction at closing, attorneys also give opinions of title, advise parties regarding contractual rights, insure documents meet the requirements for recording, and prepare various deeds, tax statements, and other required documents.
3. WHO DOES THE ATTORNEY REPRESENT?
Who the attorney represents can differ from closing to closing. An attorney can represent the buyer, the seller and the lender at a closing. However, in order to represent multiple parties the attorney must first conclude that he can do so without compromising any of his obligations to any represented party. The attorney must inform the parties of his dual representation, and can undertake the dual representation only if the parties allow it. Many times, an attorney will perform certain acts for a party which do not amount to representing that client. Common examples would be preparing a deed or recording canceled liens for a seller.
Therefore, you should be sure to ask your attorney whom he or she represents and have the attorney explain the consequences of the representation. If you want the attorney to only represent you, be sure to tell your attorney those wishes when you first contact the attorney. Later on, if you decide you are uncomfortable with any multiple representation, you may hire another attorney—but the original attorney will often be disqualified from representing only you.
4. WHAT IS TITLE INSURANCE? WHY DO I NEED IT?
Title insurance protects the insured (usually owner or lender) against certain defects affecting their title to real property. Most title insurance companies charge a one-time premium and issue a policy, which is valid for the lifetime of the insured owner—and in some cases even longer. Your attorney will be happy to explain all the potential title defects which the policy covers that are not covered by the attorney’s title examination.
Title insurance is important because it protects the good title to your real property. Should a covered defect arise, you could make a claim for any damages you might suffer up to the coverage limits of the policy. In many cases these claims cannot be discovered by an attorney’s title search or any other methods and therefore, in the absence of title insurance, the buyer would suffer all of the damage.
5. HOW ARE TAXES, HOMEOWNERS ASSESSMENTS AND OTHER ITEMS BEING HANDLED AT CLOSING?
These are handled according to the contract, and the buyer and seller are therefore free to negotiate how they will be handled. Typically, these items are prorated up to the date of the closing and entered either as a credit to the seller, if the item has been paid, or a credit to the buyer, if the item will be paid after closing. When you receive your Settlement Statement, the exact figures will be disclosed. Special assessments, roll-back taxes, ect. Generally must be specifically addressed in the contract.
COMMONLY ASKED QUESTIONS SELLERS ASK ABOUT THE SALE OF REAL ESTATE:
1. HOW MUCH AM I GETTING? WHEN WILL I GET MY CHECK?
Just like the buyer’s transaction, there are many costs which make up a seller’s “bottom-line” in a real estate closing. Obviously, the real estate agent’s commission must be paid, along with all liens upon the property. In North Carolina there are also excise taxes, which must be paid by the seller before recording a deed. There are often other charges as well.
Before closing, your attorney’s office will prepare a Settlement Statement which will show all of the charges reported to the attorney and a calculation of how much you will receive after closing. Your agent will go over the statement with you and you should question any charges which seem out of line with what you were expecting or which you do not understand.
After the closing, the attorney must update the title and record the deed before any funds can be disbursed. Therefore, you should expect a small delay between closing and receiving your check. Please feel free to discuss any special concerns you might have with the closing attorney before closing.
2. DO I REALLY NEED AN ATTORNEY?
Many sellers do not have an attorney represent them at closing; however, since each closing is different one cannot make a blanket statement as to your particular need. Among other things, an attorney can assist you in performing your obligations under the contract, drawing up necessary paperwork, protecting your interests, and resolving any title problems which arise.
3. SHOULD I MAKE MY MONTHLY PAYMENT ON MY MORTGAGE LOAN?
In general you should make all loan payments when they are due. Closings are often delayed for a variety of reasons and such a delay could cost you additional interest and penalties should you be late in a payment. If your lender receives your payment after the loan is paid off, your lender must return any overpayment to you. Should your payment arrive after a payoff is quoted to the attorney’s office, the excess payment will be refunded to the attorney for payment to you.
4. WHY IS THE PAYOFF MY BANK GAVE ME DIFFERENT THAN THE PAYOFF ON THE SETTLEMENT STATEMENT?
Most monthly statements you receive from your bank show the principal balance on the loan but do not show the interest which has accrued on this principal. The payoff given to the attorney reflects this interest as well as the principal. Often, there will also be a small charge added onto a payoff by the lender for quoting the payoff or faxing it to the attorney. Escrow balances may also affect the pay off amount. If you have any questions regarding a payoff, the attorney will be glad to explain it to you.
5. I JUST GOT A TAX BILL FROM PROPERTY I RECENTLY SOLD. WHAT SHOULD I DO ABOUT IT?
Forward the bill to your buyer, or to the closing attorney if you do not have the buyer’s address. Sometimes, tax records will not reflect the change in ownership; however, the buyer remains responsible for bills after the closing date and any delay in getting the bill to the buyer could result in additional charges.
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The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
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