Frequently Asked Questions About Real Estate (mouse-over Questions for Answers) Q: What is Title Insurance? Q: What is an “Escrow Period”? Q: What are Closing Costs? Q: Should a Home Inspection be performed? Q: What is Earnest Money? Q: What is a “point”? Q: How are Realtors compensated? Q: What are the hazards of lead-based paint? Q: What is the difference between “Pre-Approved” and “Pre-Qualified”? Q: What is the difference between a “Buyer’s Market” and a “Seller’s Market”?

Title Insurance A: Title Insurance protects the named insured against loss because of defects, liens, encumberances, adverse claims or other matters not shown or disclosed to the new owner that attach before the date of policy Closing Costs A: Closing costs are an accumulation of charges paid to different entities associated with the buying and selling of real estate. For sellers, they are usually about 9.5 - 10% of the total sales price of a property. Some of the closing costs you might encounter are: discount points, escrow fee, documentation fee, homeowner's association fees, pest/rot inspection, real estate commission and title insurance premium. Earnest Money A: Earnest money is money that a potential buyer includes with his offer to buy, to indicate that he is serious about the offer. The earnest money deposit is generally around 1% of the offer price. Pre-Approved vs Pre-Qualified A: If a buyer is "pre-qualified" it has been determined, with a loan officer, what price the buyer can afford based on the down payment, debts and the amount the mortgage company will approve for the mortgage. Being "pre-qualified" is only a determination of probable credit. If "pre-approved", credit, employment and funds have been approved by the lender. Realtor Compensation A: Realtors receive compensation only after successful completion of a buying or selling transaction. Realtors are paid by their Managing Brokers after the Broker’s split is deducted. Broker splits are as high as 50%. Realtors use the remaining balance to pay marketing fees, MLS fees, advertising, lock boxes, signs, telephones, mail, automobiles, broker fees, business insurance and taxes. These expenses can be up to 50%. The Realtor’s profit is the remaining balance, or approximately 25% of the total commission. Escrow Period A: The Escrow Period is the amount of time needed to complete the real estate transaction. The realty agent will typically negotiate a closing date based on the time that it takes for a lending institution to process a loan, and for the contingencies agreed to in the purchase agreement to be satisfied. Unless the deal is all cash, a minimum of 30 days is generally needed for the loan to fund and for the necessary inspections to be completed. Home Inspection A: When buying a home, it is advisable to obtain a thorough home inspection prior to going to closing. The cost of a home inspection varies depending on the location and the inspector. This is another instance where shopping around for the best price can save the buyer quite a bit of money. Do not accept an inspection conducted by an inspector commissioned by the seller out of an interest in saving more money. You want to make sure that you receive an unbiased inspection on the home before you sign the final papers. Points A: Most lenders will charge points on the money they loan to you. Each point is equal to one percent of the loan amount. For instance, a loan for $15,000 with a fee of 5 points would cost you $750 at the time of a loan request. The point charges vary by lender or mortgage company, so it pays to shop around and search out a lower fee. Before you accept the loan, it is a good idea to get all the fees and terms in written form. The fees that second Mortgage Lenders can solicit are sometimes limited by state guidelines. To find out if there is a fee limit, you can contact the banking commissioner or consumer protection office in your state. Buyer's Market vs Seller's Market A: When the supply of homes for sale on the market exceeds the current demand, it is known as a "Buyer's Market". If the opposite is true - more buyers looking for homes than there are homes for sale, it is known as a "Seller's Market". The supply and demand of homes and buyers generally fluctuates throughout the year. The rise and fall of mortgage rates can also affect whether the market is a "Buyer's" or "Sellers Market". Lead-based Paint A: Lead-based paint is hazardous to your health! Lead-based paint is a major source of lead poisoning for children and can also affect adults. In children, lead poisoning can cause irreversible brain damage and can impair mental functioning. It can retard mental and physical development and reduce attention span. It can also retard fetal development even at extremely low levels of lead. In adults, it can cause irritability, poor muscle coordination, and nerve damage to the sense organs and nerves controlling the body. Lead poisoning may also cause problems with reproduction (such as a decreased sperm count). It may also increase blood pressure. Thus, young children, fetuses, infants, and adults with high blood pressure are the most vulnerable to the effects of lead.