Buyer

5 Sticky Situations You Can Avoid If You Have A Real Estate Title Insurance

When you buy a home, you don’t only buy the land, the house, and any other physical structures that come with it. The most important thing is that you are also buying the legal rights of ownership to the property, which is referred to as “title.”

This title is indicated in the “deed” — an official record of your rights and ownership of the property that states that it has been legally transferred to you by the previous owner. When you sell your home in the future, you will also transfer this rights to your buyer.

Before officially taking this title and completing the closing of the real estate transaction, a title search will be required to find any defects in the title. Chances are, there could be one or more issues that could emerge in the title. These title defects could cause you to lose your property, or make it impossible to you to sell when the time comes.

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This type of insurance offers protection against any defects with the title or legal ownership status of a property. It covers financial loss from these problems or from any existing property liens. Title insurance may come in a bit hefty amount, but it is a one-time expense and does not carry with it additional monthly premiums. It will also cover the homeowner until the property is sold.

Is it worth it?

Because every property has a history, any defects in the title could hinder you from enjoying your ownership rights. But having a title insurance serves as your protection against possible title problems that may surface and could cause property loss or damage. Remember, any competing claim of ownership could seriously jeopardize your financial stake on your biggest investment. Because unfortunately, these problems may be discovered even after an initial title search was done on your property.

Title insurance is vital especially in purchasing rural property, since aside from any title claim, it will also advise you if the property has previously been used for non-residential purposes.

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There are generally two types of title insurance coverage: a lender’s title insurance and the owner’s policy. Most lenders require a buyer to purchase a lender’s policy as part of investor requirements. But this policy will not protect you but covers only the lender, hence its name.

It is the owner’s insurance policy that will protect your property — your biggest financial investment — against anyone who has a claim against your home.

 

So you think you really own your property? Here are the most common title problems that could arise and dispute your rights to ownership:

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1. There’s more than one home seller (or homeowner)

At the time of your purchase, you may not know that there’s another seller or homeowner, maybe a relative or an ex-spouse. This third party may surface with a claim that they actually own all or a part of your property. They would insist that the seller had no right to sell the home to you in the first place.

In this situation, a judge could confirm and favor this third party’s claim to the house, which could leave you with a huge financial loss (and no home to live in). Fortunately, your own insurance policy could cover this loss. Your title insurance will pay for expenses such as attorney’s fees and court costs, while the lender’s insurance policy will pay for court costs incurred by the bank. The sale, on the other hand, will be deemed null and void.

2. Property liens for delinquent taxes, unpaid contractors, and other debts

There are circumstances where, unfortunately, the former homeowners were not diligent bill payers. This is worrisome because even if the debt is not your own, banks or other financing companies can place liens on your property to cover for those unpaid debts.

These property liens can slow down the closing because your title won’t be considered clear until you pay the existing debt. Sometimes, even though a tax search hadn’t tracked down any unpaid taxes on the property, it’s still possible that you would get notified for any of these delinquent taxes after closing. It’s also a common issue if the property was foreclosed on or the home was bought in an online foreclosure auction website.

Fortunately, if you have an owner’s title insurance policy, it will cover for it and will give you documentation that the indicated debts are paid.

3. Survey or boundary disputes

Conflicts concerning the boundaries of your property may arise if, despite several surveys before closing, there are other existing surveys that show different property lines. This may lead to dispute especially when a neighbor or someone will claim ownership to a part of your property.

Likewise, if your neighbor happened to put up a fence or a driveway on a portion of your new property right before closing, you can count on your title insurance to settle the dispute. The policy will pay for the cost of any legal efforts to settle the issue out of court and have any of your neighbor’s item removed from it.

4. Clerical or filling errors in public records

When it comes to homeownership rights, a simple typo can lead to devastating title claim problems. These clerical errors in public records and/or courthouse documents could affect the deed or survey of your property. And while it isn’t impossible to resolve them, it can take an emotional and financial strain to any homeowner. Your title insurance serves as a cushion for this kind of problem.  

5. Undisclosed or missing heirs to the property

Imagine this scenario: the former property owner died. So, the ownership of the home may fall to his heirs or to anyone indicated in his/her will. However, those heirs were missing or unknown at the time of his death, so the state sold the property, together with all of the assets.

When you purchase this kind of home, despite assuming the rights as the new owner, family members of the previous owner could come forward and claim ownership of the property. This claim could seriously jeopardize your rights to the home, even if it happens years after you bought the property.

Bottom Line

With these situations, the last thing any homebuyer or homeowner would want are hurdles that will cripple their ability to purchase the home and claim full ownership to it.

Even if there’s a slim chance that past owners or unpaid property tax bills might emerge, the risk is still huge considering what is at stake — your beloved home. If you are still contemplating on whether you will allot money for it, just think how you will be affected if you’re suddenly faced with any of those title-related nightmares. Remember that you are entitled to choose the title company where you will get yours, so gather recommendations from your trusted real estate agent, lender, or family.



The Tax Benefits That Homeowners Can Enjoy

Is this your first year filing your taxes as a homeowner? If yes, then you’re in for some sweet treats. There are certain deductions you are entitled to and can take advantage of to lower your tax bill. Some of these tax breaks can be a one-time deduction or recurring on the life of your mortgage.

For buyers who are still contemplating whether owning a home is worth it, this is another good reason that might help with your decision. Aside from building wealth through home equity, owning a home can pay off at tax time.

And while itemizing tax deductions can be very complicated — homeowner or not — they are worth remembering so you can avoid missing out. Here are the latest tax credits brought by homeownership after the federal tax law was signed on December 2017:

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1. Property Taxes

Back in 2017, the deductions for property taxes were unlimited. All of your property taxes are deductible so if you live in an area where the property taxes are high, you could wind up deducting thousands of dollars.

But for tax year 2018 and beyond, state and local taxes are capped at a total of $10,000 combined. This includes property, income, or sales taxes.

Likewise, this tax deduction can still be helpful for your finances, although it can be tricky in the year you bought the home. You as the buyer and new homeowner will only get to deduct the property taxes you owed for the portion of the year you owned the home. The seller gets the rest of the deduction, regardless if you offered to pay the full year of property taxes during negotiations.  

 

2. Mortgage Interest

Many homeowners can deduct the interest portion of their monthly mortgage payments each year. It remains as a deductible under the new tax plan but with a new cap. Taxpayers are now allowed to deduct mortgage interest on loans of up to only $750,000, compared to the previous $1 million. The maximum mortgage debt on which you can deduct the interest also applies to secondary or vacation homes.

 

3. Tax credits from renewable energy products and upgrades

Homeowners who have installed alternative energy upgrades in their homes may qualify for tax credits as long as the products installed are also eligible. Most of these deductions are still available through December 31, 2021, such as the credits for solar electric and solar water heating equipment.

Homeowners are allowed to take a tax credit of up to $500 total for all energy efficiency upgrades. However, that $500 is already a lifetime limit for all qualified improvements combined.

The products used must meet the ENERGY STAR requirements, which are certified to save energy, money, and help protect the environment. Upgrades may include installing energy-efficient windows, doors, skylights, and others.

 

4. Mortgage Points or Prepaid Interest Deduction

If you itemize your deductions on Schedule A of IRS Form 1040, the prepaid interest you paid when you took out your mortgage is deductible in the year you paid it. Paying the prepaid interest or points makes more sense if you plan to stay longer in your home as they can bring down the interest rate on your loan or help with origination fees. This is a one-time deduction that many homeowners can take advantage of — just remember that it is often deductible in the first year.

Typically, a point is equal to 1 percent of your loan amount or $1000 for every hundred thousand borrowed. Tip: Mortgage points can be found on the Closing Disclosure and are often labeled as “loan costs.”

The rules for this deduction will only differ if you refinance your mortgage to get a better rate or shorten the length of your mortgage, or to use the money for other things rather than for home improvements. If your situation falls under one of these conditions, you will need to deduct the points over the life of your loan.  

 

5. Deductions for certain home improvements

  • Home Office

If you are using a part of your home regularly and exclusively for business, you may qualify for some tax breaks. With the new tax law, the home office deduction remains available for independent contractors or self-employed people whose home office is their primary place of business. However, if you’re an employee who has an office to go to but occasionally works from home, this deduction has been repealed.

  • Modifications needed for medical reasons and to age in place

For older homeowners who have medical concerns and plan to age in place, their home remodeling projects could involve modifications to support these needs. The projects may vary but could include installing wheelchair ramps, non-skid floorings, adding stair lifts, widening doorways, and even putting grab bars, shower seats, and anti-slip coating in bathrooms. The good news is that the cost of these modifications can be deductible.

However, there are specific conditions for you to qualify for this sweet tax break. For an instance, you will need a letter from your doctor that will certify these improvements were medically necessary. The modifications also need to exceed at least 7.5% of your adjusted gross income.

 

6. Home Equity Loan Interest

Home equity loans or HELOC allow you to get a tax break on the interest you pay. However, the deductible is applicable only if you’re planning to use it for major home improvements, like remodeling a bathroom or renovating a fixer-upper. It also has a maximum amount for all mortgages, which is $750,000.

The tax benefits of this credit will be most significant to any homeowner for the first years of the loan since most of the payments are going towards interest.

 

7. Capital Gains Exclusion

Any homeowner who has lived in their primary residence for at least two of the five years before they sell it may qualify for this tax break. The IRS may exempt up to $250,000 if you’re single, or $500,000 if you’re married filing jointly, of that gain from your income. This is to lessen the tax hit on taxable capital gains from the sale of your property. This advantage stays the same under the new tax law, and there’s no restriction on how many times you can use it.

 

8. Moving Expense Deductions for Military Homeowners

The moving expenses you pay out of your pocket for a job relocation, especially if it’s over 50 miles farther from your house than your current job, are also deductible.

Watch Out! These Neighborhood Features Can Drag Down Your Home’s Value

While there are certain home improvements you can add to your home to boost its resale value, there are also many external factors that can devalue your greatest investment. This is why the real estate cliché saying “location, location, location” will never be debunked or even grow old. Many of the things that can dampen your home’s value can actually be found in your neighborhood.

These factors are already outside the homeowner’s control and what appraisers refer to as external obsolescence. Understanding how these external factors can influence the long-term value of your home is paramount because decreasing property value can pose a challenge when it’s time to sell your home. In the worst-case scenario, you may have to sell it for less than what you purchased it for, causing you to lose money on the table.

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Bad Schools

Proximity to good quality schools is one of the most desirable factors for most home buyers. It is because neighborhoods near top-quality school districts almost always benefit when it comes to property values. However, the disastrous opposite of this is living in a bad school where there is a slim graduation rate.

Neighborhoods near low-ranking schools are less attractive to many buyers and have lower property values. According to realtor.com, the median home price of areas with schools that received a 1 to 3 GreatSchools.org Summary Rating is only $155,000. Repeatedly, there will always be a better demand for homes in good school districts.

 

Disruptive Neighbors

Don’t be surprised if noisy and disruptive neighbors can significantly reduce nearby home values. According to The Appraisal Institute, the nation’s largest professional association of real estate appraisers, a home’s proximity to a bad neighbor can impact the rate of potential decline in property value. Those “bad neighbors” include homeowners with unkempt yards, homes with unpleasant odors and poorly maintained exteriors, or own annoying dogs that are barking at night. Living near a troublesome neighbor can devalue your home by as much as 5-10%. If you’re a home buyer, it’s important to learn what is going on in the neighborhood before you sign the dotted line.

 

Excessive noise pollution—especially if your home is near an airport, train tracks, or highway

Ah, noise pollution. While you can learn to live with it, it is not a desirable factor for most buyers. If you live near an airport, train tracks, a highway, a loud factory, or near an industrial area where there is constant noise and you need to endure it every day, it can be a negative factor when it’s time for you to sell your property. The louder the noise and the more inconvenient it is, the more negative its impact could be on your home’s resale value.

If your home is located next to train tracks, it can deter buyers from purchasing it because they have to deal with the noise at various hours of the day. You will have the same scenario if your property is located on top of a freeway. While it is ideal to live near commuting routes, homes located adjacent to major highways have lower values compared to identical homes far from freeways. Ask your local real estate agent how much of an impact those nearby transportation facilities have on reducing your home’s market value.

 

Proximity to power lines and power plants

Having a power plant in the neighborhood is generally associated with lower property prices because of safety concerns. Likewise, having power lines near your home is also not a good thing. They are vital, yes, because they bring much-needed electricity that helps us live our modern life. But they are also unattractive and imposing. The perceived negative health effects of living near power lines can also make people worry so they may not purchase a home near one.

However, if you’re still planning on buying a home near power lines, it’s best to consult with your local real estate agent to know how much impact it will have on your home’s market value. There may be a reason for the low price so think carefully if it will be a good bargain.

 

Proximity to a cemetery

A graveyard next door can make many people uncomfortable. Some may even find the prospect of living near a cemetery downright terrifying. It isn’t surprising since cemeteries represent mortality so living next to one may not be ideal to many. And while there are certain pros and cons of living in proximity to those graves (just think how quiet your neighbors are), not all people can accept that. Research by realtor.com that used a list of federal and state cemeteries operated by the Department of Veterans Affairs, they found out that the median home price in ZIP codes with a cemetery is about 12% lower than similar homes in other neighboring areas without a graveyard. Many people also find it disturbing to witness a handful of funerals each year and see the road being lined up with cars of mourners.

 

Near a shooting range

While having a gun range nearby can be beneficial to some people because they can take part in such a hobby, a shooting range right next door can actually drag down your home’s value by 3.7%. If you’re looking to buy a home, think twice about purchasing one near shooting ranges. The noise of gunfire, especially from outdoor gun ranges, can be loud and disturbing. There are also environmental and safety concerns since the lead that leached out of spent shells might poison the soil and water. If you’re considering a home near a gun range, research the shooting schedule of the place and figure out whether you can tolerate hearing gunshots now and then.

 

Billboard/s near the home

Studies have shown that billboards also impact real estate prices. In urban areas where billboards stood near residential homes, the closer the billboard is to your home, the more it can lower its value. This is why many communities are implementing a no-billboard policy or enforcing strict billboard controls to protect home values and promote higher median incomes and lower home-vacancy rates.

 

Multiple foreclosures in the area

Multiple foreclosures in your neighborhood can also affect the resale value of your home. Foreclosures imply that something is wrong with the area, so they can be eyesores that can easily drag down the average home values. And since a bank-owned home is less likely to be properly maintained, they can also translate to unsightly yards with stubborn weeds taking over the lawn and poorly maintained exteriors prone to vandalism and deterioration.

According to studies have shown that living within a quarter-mile radius of a foreclosed home can cause a 4% decline in property values. A report by The Alliance for a Just Society also found that aside from a significant decline in the value of surrounding properties, areas with foreclosures also experienced an increase in property taxes.

Understanding The Roles Of Different Real Estate Experts

There are all sorts of questions that arise when you need to start seeking the help of a real estate professional, and one of the most common is: Who does what? The real estate industry is a complex system comprised of different key players, and the role of each person can sometimes be a little challenging to tell apart--which is why you should never feel embarrassed if you get a little confused!

Though many people use the terms "agent," "Realtor," and "associate" interchangeably, these are actually different titles for real estate professionals. We hope to eliminate the confusion by explaining the different types of real estate agents and the different titles that real estate professionals may have.

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Real Estate Agent

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Real estate agents are licensed salespersons who have passed a state-administered exam in order to qualify for the profession. Real estate agents are legally allowed to sell property, but they must act under a real estate broker’s authority and are in no circumstances allowed to work independently.

Requirements for a real estate agent license vary depending on where he/she wishes to be a practicing agent, but in most countries you must be at least 18 years old and have successfully completed college-level courses in real estate. This educational prerequisite must cover the specific state’s real estate laws and practices.

Real Estate Broker

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In the industry’s professional hierarchy, a real estate broker is one level above the real estate agent. The licensure exam for real estate brokers is generally longer and more difficult than a salesperson's exam, as brokers are held to higher standards of real estate knowledge. Without a broker’s license, a person is not allowed to act as a broker, run his or her own firm, or manage a team of agents.

Real estate brokers can choose to work independently, or employ real estate salespersons to whom they could distribute tasks and assign the legwork. And because they are the ones qualified to manage the agents, they generally hold bigger responsibilities. For every firm, there is only one principal broker.

REALTOR®

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The title “REALTOR®” is given to real estate agents or brokers who belong to the National Association of REALTORS® (NAR), subscribe to its extensive Code of Ethics, and pays annual dues. NAR members also belong to state and local trade associations, which means that complaints against REALTORS® can be taken to the local board.

Listing Agent

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A listing agent (also known as a seller’s agent) is a real estate agent or broker who works exclusively with the home seller, represents him/her in negotiations with potential buyers, and operates based on the seller’s best interests.

Listing agents owe a fiduciary responsibility to the seller under a listing agreement, and must guide the seller through every step of the way--from marketing to closing.

The listing agent’s responsibilities generally include the following:
- Helping you prepare and stage your home for selling
- Listing your home in the MLS
- Being on top of the open houses and private home viewings
- Negotiating with potential home buyers

Buyer’s Agent

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A buyer’s agent is a real estate agent who works in the best interests of the buyer, and is expected to help him/her navigate the process of home buying. The duties of a buyer’s agent begin as early as in the pre-approval phase, and should be carried out until closing.

Some buyer's agents never work for sellers, and offer their services exclusively to buyers. Many agents still choose to work with both sellers and buyers, although not always in the same transaction.

The responsibilities of a buyer’s agent generally include the following:
- Helping you find the best home that fits your needs AND your budget
- Negotiating with the home seller on your behalf
- Providing reliable home inspectors
- Completing and processing the necessary paperwork

Broker Associate

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A broker associate is a licensed real estate broker who chooses to work for another real estate broker. This usually happens when a broker wants to work with a larger firm to widen his or her real estate network. Some broker associates pay a flat fee to their employing firm/broker, and others earn a share percentage from each transaction.

Dual Agent

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A dual agent is a real estate agent who represents both the buyer and the seller in the same transaction. If you decide to work with a dual agent, he or she will also represent the home seller or buyer you’re negotiating with. However, dual agency is not legal in all 50 states, so you may have to check if this is a possible option in your case.

Transaction Agent / Transaction Coordinator

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In states where dual agency is not allowed, listing agents who are left with the task of writing an offer for the buyer may choose to act as a transaction agent. This means that he or she does not represent either party but simply facilitates the transaction. They assist in processing the administrative items for a real estate transaction, including gathering and sorting out all the necessary paperwork, opening an escrow account, making sure contingencies are met and disclosure forms are properly signed and filled out, and managing timelines.

What You Need To Know About Real Estate Purchase Contracts

One of the most important documents in purchasing property is the purchase contract, also known as a purchase and sale agreement. It stipulates the agreement between the parties, and prepares the transaction for closing.

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What is a real estate purchase contract?

A real estate purchase contract enumerates the participating parties’ -- could be two or more -- responsibilities during the period the property is taken off the market. It must be signed by both parties (buyer and seller), and it’s required by the United States Statute of Frauds to be enforceable. In essence, a real estate purchase contract is a binding, bilateral agreement with legal capacity to buy, exchange or transfer real property. Take note that the contract is based on a legal consideration, meaning that consideration is a medium of exchange for the property being purchased, which in most cases is money. There are other forms of consideration such as a promise to pay, or a property in exchange.

 

What does a real estate purchase contract contain?

  • Identification of the parties and details of the real estate property (the exact address of the property and a clear legal description)

  • The agreed upon purchase price and corresponding terms

  • The amount of the deposit

  • The essential details, rights, and obligations of the contract

  • Real estate taxes and special assessments

  • The condition of the property, what is included, and what is not included

  • Closing date and costs (and who shoulders them)

  • Terms of possession and contingencies that must be met

 

What is a contingency and what should be listed in this clause?

Contingencies serve as a preparation for the possibility of operational problems. The more thorough and defined a contingency clause is, the more it minimizes the potential loss for both parties. In the case when a contract is already in the works, a settlement contingency is used. This protects the buyer if the sale fails since the property is not really sold until the settlement or closing is finalized. In most cases, this type of contingency forbids the seller from accepting other offers on the property for a specific period. If the buyer’s home closes by the specified date, the contract remains valid. If the home does not close, the contract can be terminated.

Here are the common items listed in the contingency clause:

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Mortgage - A contract will usually require that the transaction will only be finalized if the buyer’s mortgage is approved on the same terms and numbers as are identified in the contract.

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Appraisal - This may be required by the mortgage company and the deal should be contingent upon an appraisal for at least the amount of the selling price.

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Professional Inspection - There are instances when upon initial negotiation prior to the handing out of contracts, the buyer agrees to taking the property “as is,” which is common in foreclosure deals when the property has been subject to neglect, and would most likely be torn down and rebuilt after purchase. But there are also contingencies in which a professional inspection is needed to negotiate repairs with the seller. But if the damages are so bad and/or the seller refuses to shoulder repairs, the sale can fall through.

2 important tips for getting the purchase contract right:

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1. Know your terms and adapt language and terms as needed. Take note that the standard language of a contract may vary in different situations, and real estate laws vary between states--which means standard forms are not the same in every location. Given that condition, you can go over the agreement, check for changes, and adjust accordingly.

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2. Consider getting professional assistance from a real estate attorney or real estate agent. If it’s your first time to engage in this kind of transaction (or even if it isn’t), it’s advisable to get help from the professionals. They can guide you through the whole process of either making or doing the contract, and will point out important things to consider that you might miss.

How To Make The Most Of Using Your 401(k) On A Home

Raising the money for a down payment on a home could be the most challenging step towards homeownership. One way to get the amount you need is to borrow against your 401(k)--although there are numerous options you can consider depending on what’s wise for you at the moment.

But first, what’s the real deal behind borrowing against your 401(k)?

More than 50 percent of 401(k) plans include a loan provision that gives participants the option to borrow against their savings. But is it really advisable to borrow against the balance of your employer-sponsored retirement account to cover your down payment? What are the potential risks to doing so?

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In this article, we’ll answer some questions about how you can effectively pull off getting a loan from your 401(k) without future repercussions on your financial health.

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Should I borrow against my 401(k)?

Frankly, there are only a few instances in which you should consider taking this kind of loan. It works only if you are a responsible and disciplined borrower--and even then, real estate experts advise considering this option only if you’ve exhausted all your other options.

Still, it can be a wise decision as long as you know what you’re getting into. If it is the most sensible way to start living comfortably in your own home, borrowing against your retirement savings could be worth it.

 
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How does it work?

You can borrow up to half of your 401(k) balance or $50,000, whichever amount is smaller. For example, if your balance is $90,000, you are allowed to borrow up to $45,000.00; but if you have, say, $130,000, you are allowed to borrow $50,000. However, just because you can borrow up to $50,000 doesn’t mean you should. Be wise in deciding how much to borrow, and avoid borrowing more than you really need for your down payment.

Once you’ve taken out the loan, you will then have to repay the amount and its corresponding interest on a monthly or quarterly basis. A typical 401(k) loan must be repaid in five years or less, although a longer repayment period may be approved for those who are borrowing for a down payment for a primary residence.

 
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What are the advantages?

There are a lot of reasons why a lot of home buyers are attracted to the option of borrowing from their 401(k) account. For one, most buyers like the idea of owing themselves money, instead of owing someone else (in this case, banks and financial institutions).

It also possible to receive the money quicker than you could with a traditional loan from a bank, since you won’t need to undergo a credit check in order to get approved. Interest rates are also relatively lower with 401(k) loans. This makes borrowing from yourself the quickest, simplest, and cheapest way to get the cash you need for your down payment. Receiving this loan is also non-taxable unless repayment rules are violated, and it does not affect your credit rating.

The great news is, if you pay back your loan on schedule or in advance, it will have little to no effect on your retirement savings progress.This being so, the impact of a 401(k) loan on the progress of your nest egg can be minimal, neutral or even positive--although the most common scenario is for the cost to be less than that of paying "real interest" on a bank or consumer loan.

 
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What are the risks?

Now that you know the advantages of borrowing against your 401(k), it’s time to learn about the substantial risks that come with it.

If you fail to make payments for three months, the amount you borrowed will be considered a distribution from the account, which the IRS will label as taxable income. A withdrawal penalty of 10% will apply to borrowers who are aged 59 ½ and below. These dangers may be fairly easy to prevent if you have a steady stream of income, but it will be a different case if you have to leave your job for any reason. If this happens before the loan is settled, you will be required to pay the entire outstanding balance within 60 days. If you are unable to do so, the IRS will charge you with the abovementioned penalties.

And then there’s the more subtle, but more significant long-term consequence: By borrowing from your retirement savings, you’re losing out on the possibility of compounding interest on that money. To make matters worse, people who take out a 401(k) loan often decrease or even stop contributions to their retirement account during the years they’re repaying it. Those factors can have a tremendous negative impact on your savings.

Impact at retirement: Retirement money that you’ve borrowed will not accrue interest until you’ve paid it back. Depending upon the amount you’ve taken out, it can make a big dent in your fund.
Some employers will disallow new 401(k) contributions if there’s an outstanding loan, thus compromising your future retirement nest egg.

 
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When should I NOT consider borrowing against my 401(k)?

While it is a sensible answer for short-term financial needs and highly important purchases, financing a home with a 401(k) loan is not for everyone.

When you purchase a home, you will immediately be required to pay for your monthly mortgage dues--not to mention, the added costs of homeownership such as utilities, maintenance, etc. If your monthly income can barely cover THOSE, taking on a 401(k) loan can end up taking a dangerous toll on your finances. Some people may justify this with plans of making a lump sum payment, but keep in mind that you would still have to qualify based on your monthly income and ability to make regular payments.

For further guidance, it’s highly recommended to speak to your financial advisor or ask your Realtor for local referrals to loan experts who will be glad to help you!

Important House Hunting Tips That Will Minimize Your Stress And Keep You Sane

There’s not an ounce of doubt that today’s home buyers know how to prepare for the house hunting process—especially in a market where competition is tight. Very seldom will you find a home buyer who isn’t pre-approved, and most savvy buyers are sure to have everything else sorted out financially.

A well-informed buyer will have a fixed budget, a sizeable down payment at hand, and even extra money to use just in case the bidding war gets vicious.

However, there are a lot of minor inconveniences that most buyers fail to anticipate, and you’d be surprised how much people develop so much unnecessary stress over things that could have easily been prevented. Buying a house is an emotional process, and it’s difficult to keep your emotions in check at all times. But don’t worry--the following tips will help keep you sane throughout this crazy and exciting time:

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1| Be on the same page about everything.

Whether you’re buying a house as newlyweds or as a family, be sure that you’re all on the same page about what you NEED and WANT in a home. It’s easy to say that you’ll know what you want when you see it, but this is actually a terrible idea when it comes to buying property.

You’ll be attending a lot of viewings, and will have to keep your enthusiasm at bay for each house you look at. If one family member gets overly excited about a house with five rooms, and you, on the other hand, have already decided on a house with just four--it won’t look good to the seller if you argue about it while you’re touring the house.

You can leave room for compromise, but be sure to discuss the non-negotiables before going on a house hunt.

2| Start your search online.

You can save yourself a lot of time and legwork when you start looking for your dream home online. In no way does this compare to looking at the actual homes in real life, but at least you can instantly narrow down your search to those that are within your price range. According to the NAR 2016 Profile of Buyers and Sellers, nearly a half of all home buyers bought a home that they first saw online. Looking at homes online can also be a way of minimizing arguments during the actual viewing!

3| Encourage healthy conversations.

Of course, no matter how much you try to come up with a criteria for the house you want, you’re still likely to come across some features that you could never have predicted prior to the viewing. The key is to be prepared to make unexpected decisions by knowing how to lead productive conversations.

For example, instead of flat out dismissing your spouse’s interest in a bigger-than-expected garage, find out if you can make this space work for you as well. If you like the color of the walls and the kids don’t, present a scenario in which you repaint their rooms in the color of their choosing. Be open to suggestions and make every discussion a productive one. Think in terms of possibilities instead of limitations--but be sure to think within your budget.

4| Let your agent do the talking on your behalf.

You were wise enough to hire a professional to help you navigate the home buying process. The only thing you need to do now is to trust him/her to represent you.

Real estate agents are trained communicators, and they’ll know how to voice out your concerns without offending the seller or putting your offer in jeopardy.

Buyers are encouraged to consult with their agents regarding technical matters of the sale, and it is the job of the agent to help buyers come up with a solid plan that would lead to a successful closing. Keep in mind, though, that you must always be in control of your own purchase. Don’t let your agent lead the way entirely. Your agent’s job is to guide you and present you with options, and not to take over the home buying process.

Do your own research, know what you want, and talk to your agent when you’ve set clear priorities. This way, you won’t end up with a house that your agent decided on for you.

5| Practice acceptance.

Be at peace with the possibility of you not getting the first home you fall in love with. When you find yourself caught in a bidding war for a house, learn to let go when you know that there’s no way you could win without breaking the bank. In such cases, it’s better to accept defeat and move on.

It may be hard to believe this when you’re still mourning the loss of your dream home, but trust us: There will always be a better house for you.

Home Viewing Etiquette For Buyers

Before landing your dream home, the first order of business would be the initial process of finding it. Buyers should expect a lot of tours before finding “the one”--but although sellers are often the ones who have to “impress,” buyers should not be too lax about their behavior. If competition ends up being tight, the seller is bound to choose a buyer they really like (with a strong offer to match, of course), which means that you’ll likely score low if you were an obnoxious home viewer during the open house.

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How should a buyer act during an open house?

We can all agree that any buyer would love the idea of getting a great deal, but arrogance and poor etiquette can sometimes enter the equation when the buyer is too focused on getting what he or she wants.

Remember: Respect for sellers, real estate agents and even your competition is crucial. Being an obnoxious home buyer could actually cost you in the hunt for your dream home. Here’s how you can remain professional and at your best behavior at all times:

1. Get pre-approved.

Perhaps the first thing any buyer must have before shopping for a home is a pre-approval letter from a lender. Looking at a house without knowing if you’ll be granted a mortgage is simply misleading--and could potentially waste the seller’s precious selling time.

A mortgage pre-approval is proof of your capability to finance the home, and sellers often don’t entertain buyers without a legitimate letter in hand.

2. Be on time.

Being punctual is a sign of respect for the seller’s time and effort. Arrive at the agreed-upon time, and call to inform the realtor or seller if you’re running late. While uncontrollable circumstances may cause some delay, it is unacceptable to make last minute changes, especially if it is a private home viewing and serious preparations have been made on the seller’s end. If you asked the seller to leave for the viewing, you should definitely show up on time.

3. Leave nothing, not even footprints.

The house you’ll be touring is sure to have been de-cluttered, deep-cleaned, kept shiny and left odor-free for your arrival, and it would be expected of you to extend the same amount of graciousness and courtesy by leaving the home as it was before you entered.

Avoid bringing in food and drinks (they’ll offer you some, anyway), and make sure that your shoes don’t leave any kind of marks on the floor. Ask the seller or realtor where you can wipe off the dirt under your shoes before entering--or better yet, just leave your shoes at the door.

4. Limit the entourage.

It is understandable for the entire family to want to see all the houses during the hunt, but you may want to save the family field trip for later (when you’ve narrowed down your choices to the final three). Bringing your children can lead to too much mess and noise, and it’s just rude to have unruly grade schoolers running around a house that was professionally staged for an adult viewing.

5. Keep rude comments to yourself.

While it is perfectly acceptable to voice out serious concerns about the home, it is best to keep opinions on taste and style to yourself. If you find the wall colors a little too playful for your liking, or if you think the paintings that are hung up on the living room are a little tacky -- it is best to just save the conversation for when you’re outside the house. These are things that could easily be remedied once you decide to buy the home, so don’t risk offending the seller by rudely commenting on their personal preferences.

6. Take nothing but photos (but ask permission first).

It should go without saying that you should NOT take anything from the home, and that it is your responsibility to make sure your children aren’t lurking around the rooms and putting things in their pockets. The only thing you can take with you are photos, but only after you’ve asked the seller or realtor permission. If the sellers are still living in the home, they may find it a little invasive for you to take too many photos. Ask them about any privacy concerns, and take your photos accordingly.

7. Don’t overstay your welcome.

Of course you want to see every corner of the home, since you may end up living in it--but make sure to walk through the house with purpose so as not to waste any time. Make a list of all the things you want to check in the home, and move through and around it with specific goals. Time is the seller’s most important resource during the home’s listing period, so limit your tour to 45 minutes, or 1 hour tops.

How To Pull Off A Long Distance Move To Your New Home

Congratulations, you just purchased a new house and are now ready to move. The hassle of the home buying process is over, but the settling-in process is not quite done yet. While the hassle of moving your things can sometimes be unnoticeable because of all the excitement, it wouldn’t hurt to do a few things that will help you save a lot of time, energy, and resources during the move.

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1. Make a detailed schedule.

Moving is not an easy task, especially if you’re transferring to a neighborhood far away from where you currently reside. It can be overwhelming to think about the move itself, but plotting it on your calendar and spreading out the tasks over a number of days is sure to make it less daunting.

Before you can move, you have to pack up your stuff first. If you’ve already braved the task of decluttering your home before the sale, then great! But if you haven’t gotten around to it yet, now is the time to write down how much you have to get accomplished, and when.

Once you can say for sure that packing up your things can be completed on a specific day and at a specific time, you may proceed to booking a date with your chosen mover. If you’re moving internationally, you may have to book your ticket at least a month in advance. If you’re driving yourself there, be sure you know how long the trip will take, and factor in any stopovers you may need so that you can get enough rest along the way.

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2. Pack carefully.

While moving your things across short distances is something you can do with ease even at the last minute—it’s a different story if you’re moving across the country or halfway across the world.

When you’re about to set off on a long journey to your new home, it is important to pack as meticulously as you possibly can. It may seem like a hassle while you’re doing it, but labelling all boxes (and even the the smaller boxes inside them) can make things a lot easier later on. Make sure your fragile belongings are properly wrapped and labeled, and identify which side of the boxes should face up. You also want to make sure that you’re not transferring loose items and haphazardly sealed containers.

This not only helps the movers handle your belongings with care, but it will also give you an easier time unpacking in your new home.

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3. Prepare a carry-on bag.

If you’re going to spend a lot of time on the road or on the plane, be sure that you have everything you need in a carry-on bag. Identify the things you’ll need while traveling, and pack them in a bag before having all your other things shipped.

Have an extra change of clothes, some toiletries, and enough snacks for the road. This way, you won’t have to search for them when your really need them.

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4. Check the weather forecast.

When you set a date for the move, make sure that you have an idea of what the weather will be on that day.

Especially for cross country moves, being aware of the weather will help you avoid unexpected drives under heavy rain, or having to wait for your movers to arrive in a snowstorm. Also, if the weather turns out to be horrible on the day of your move, you may be looking at quite a few delays.

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5. Bring entertainment for the kids.

This may seem like an unimportant part of moving, but you’ll be surprised how much of a hassle bored children can be during a long drive.

If you don’t want your patience tested during the ride to your new home, make sure you have something that will keep your kids occupied. This way, everyone can be in a good mood as you arrive at your new home!

Understanding Property Liens and How They Can Be a Nightmare To Your Home Sale

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First things first: you need to have a clear idea of what a lien is. A property lien, in simplest terms, is a legal claim a creditor can put against your property as a consequence of an unpaid debt. It is the creditor’s way of collecting debts you owe to them by intending to fund the money owed through the sale of one of your biggest assets—your home.

Liens filed against a property usually come from unpaid taxes, missed mortgage payments, unpaid bills, or any payments owed to contractors for work done on the home.

Property liens can slow down a real estate transaction because your title won’t be considered clear until you pay your debt. It can hinder your ability to refinance or sell your property until the lien is satisfied.

 

What are the common types of liens on houses?

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1. Voluntary liens

These are liens that are both agreed to by a creditor and a debtor. The best example of a voluntary lien is a mortgage, which a homeowner freely enters into in order to finance his/her property. In a mortgage, the bank holds the lien in the event of a foreclosure. A contract is usually involved to place the voluntary lien on the property. The best thing about this type of lien is that it does not negatively affect the property, its title, or the homeowner’s ability to convey or transfer title.

2. Involuntary liens

Involuntary liens are imposed by law and are placed on a property due to unpaid obligations. These liens can happen without notice depending on the situation. They are usually placed on a property when a debtor falls behind in tax payments, judgments, or home improvement invoices. Involuntary liens are detrimental as they can make refinancing or selling your home difficult. They can leave you without a clean title and a huge black spot on your public record.

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  • Property tax lien - If you neglect to pay your federal, state, or county taxes, the government may file a tax lien on your property. This lien usually takes priority over all other mortgages and liens on your home, even if it was placed last. Through this lien, the government can have your home sold to pay the real estate taxes. Nonetheless, you may still have the opportunity to get your property back by paying your overdue taxes and other costs.
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  • Judgment lien - This type of lien can be placed on your property after a creditor sues you and wins the case. The creditor can use a judgment lien on your home to ensure that they will receive money. The court can grant a creditor a certificate of judgment that can be given to a land records office in the county where the property is located. Judgment liens are most commonly used by unsecured creditors, such as the holders of credit card debt, medical bills, and personal loans. It can also be imposed by an attorney if you do not pay your bill for legal services.
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  • Mechanic’s lien - A mechanic’s lien (often known as a contractor’s lien) is a claim for payment from any contractor in the home improvement business. General contractors, carpenters, plumbers, electricians, handymen, and other repair companies who worked on your home may file this lien on your property as insurance to make sure that they are paid. It is their legal recourse to force payments of overdue invoices, especially when the property will transfer ownership soon.
 

3 common ways liens can slow down a real estate transaction

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  • Once the title company performs a search for any liens that have been filed against your property and they discover a lien, it will put the real estate transaction temporarily on hold and delay the closing.
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  • A property lien that is discovered before closing can delay or even cancel a buyer’s mortgage approval. Strictly speaking, mortgage companies will not agree to finance a property until the lien is satisfied or paid off, usually by the seller.
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  • If you’re the seller, it can be very difficult to sell your property because buyers won’t purchase a home without a clear title. As previously mentioned, lenders won’t approve the purchase nor agree to finance the property. Certainly, it is your responsibility to pay off the lien on your property before you may be able to sell.

Note:

Remember that the creditors’ primary objective is to get paid. A property lien will remain in effect until the debt is paid off or if the judgment expires. Once the lien on a house is paid off, the creditor will be satisfied and the sale will usually go through. Except for property tax liens, creditors can be lenient because they usually forego foreclosure and may choose to collect what’s owed to them when you sell the property.

 

If my property has a lien, what should I do?

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Home Sellers:

If a property lien was found on your home, the first thing you should do is to determine if it actually belongs to you. Liens can be searched for by name, so it isn’t impossible that multiple matches will appear. The best way to determine the validity of a lien is by working with your real estate agent and title company to find out how you can verify the issue.

However, if it is discovered that the property lien genuinely belongs on your house, you need to start resolving the issue as soon as possible. In most cases, there’s no need for you to be deterred from putting your property on the market. In the case of a mechanic’s lien, review the claim and match it against invoices and payment receipts. As a homeowner, if you’ve obtained a signed receipt from the contractor showing that the bill is already paid in full, it will be enough proof to file a lien release form.

In other types of liens, you need to get in touch with the lien holder and arrange how to pay off your debt. You might just have to bear with the additional expenses tied to clearing the lien and the delay in title transfer. In such difficult cases where you refuse to pay or want to contest the validity of the lien, you may consider the title company’s advice on how to best handle the situation or even seek legal counsel. The bottom line is that the sale of your home will be temporarily delayed until a definitive outcome can be reached between you and the lien holder.

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Home Buyers:

Usually, buyers will be apprehensive to purchase a property without a clear title. The lender or mortgage company won’t even approve the purchase or agree to finance the home, anyway. However, there are many instances where a buyer may be faced with the responsibility to pay off any lingering debts. There may be a lien against a previous owner, and now the debt is passed on to them. Such scenarios are possible especially if the buyer purchased a foreclosed home or a sale at auction, and if they skipped paying for a title insurance. It is crucial for buyers to know what they are getting into before bidding on such auctioned properties. They need to be aware of deals that are “too good to be true” because it can actually cost them much more than a traditional sale once they’ve become the new homeowner.