Property Taxes During a Real Estate Transaction

There are a lot of moving pieces during a real estate closing and funds that need to change hands between the buyer and seller. Most transactions involve money that is required to change hands in person as well as escrow accounts that have been established along the way. All of these numbers and figures are reconciled at the day of closing. If it cannot, the closing does not take place. As a result, all parties involved in the real estate transaction are motivated to ensure that the closing takes place on time.

One of the primary line items to be reconciled at the time of closing between the buyer and sellers is the matter of property taxes and when that burden shifts from the seller to the buyer.

When Does the Burden of Property Taxes Change Hand?

The seller is typically responsible for paying taxes up to the day when the property transfers to the buyer. A prorated amount is then formulated based on what taxes are paid (or due to be paid) and is baked into the closing documents prepared for and managed by the title company.

The calculations can vary wildly based on what month the closing takes place. Buyers may need to be prepared to come to the closing table with several thousand dollars just to reconcile the cost of the taxes owed.

Other Variables

It’s not uncommon to see the burden of property tax payments used as a point of negotiation. If buyers are aggressive in their pursuit of a property, they may offer to pay taxes up front on the property to incentivize the sale. Similarly, if a seller is looking to speed up or progress a sale, they may incentivize the buyers by opting to pay additional taxes. Again, the management and reconciliation of all these numbers and stipulations are tracked and managed by the title company and settled at closing.

Principle Abstract and Settlement Services has years of experience preparing and managing closings for both residential and commercial real estate transactions. As an independent provider, we work to ensure an accurate and seamless experience for all parties. If you have a real estate transaction in mind, give our office a call and a member of our team will be happy to assist you.

What is Home Equity?

As costs increase and the economy teeters in the balance, many folks are starting to take a hard look at their financial situations and ensuring they are in a healthy position for any potential storms that might come their way. This can include a recession, a job loss, etc. In truth, this is a healthy practice and should be done regularly.When it comes to assets, there is usually none bigger for homeowners than their property. If positioned well, your home holds equity which can be leveraged in many ways.

Equity is the balance between the debt that you still owe against your property and the current market value of the home. As you pay down your mortgage, for example, your equity grows. Equity also grows if the real estate market around you grows. Once your mortgage is paid off, you own 100% of the property and have 100% equity.

Why is Equity Important?

Equity is one of the greatest benefits to owning a property. It’s a primary investment tool and once you have a good amount of equity, it can be leveraged in several different ways. For instance, it can be used as buying power towards a new home if you plan to move or downsize in your retirement. You can also borrow against the equity that you’ve built via a home equity loan. These loans can be used for many things, including college tuition payments, consolidating credit card debt, making improvements to your home, paying medical bills, buying a car, etc.

How Quickly Can You Access It?

A home equity loan can move quickly assuming there are no issues with credit, payment history on your mortgage and market value. Once you have that loan in place, you can start using it right away. In fact, it’s possible to sign up for a home equity line of credit before you ever need it as an emergency cash backup so that you don’t have to run through the administrative process during a time of need.

You can also access the equity in your home by refinancing it. A ‘cash out’ refinance essentially allows you to get a check at the closing of your refinance. How much you can get is based on how much equity is in your home, and what your new monthly mortgage payment would be based on the terms of the loan and what the bank believes you are able to afford monthly.

As with any financial decision, it’s imperative to have a competent team of professionals to help guide you in your decision making. A lender, accountant and/or investment professional would be good places to start if you need cash.

Principle Abstract and Settlement Services has years of experience guiding clients through purchases and refinances. We also hold close professional relationships with some of the very best industry professionals in the Bucks and Montgomery County areas. If you are interested in refinancing or learning more about how to tap into your home’s value, give our office a call and a member of our team can assist you.

When and Why to Refinance

Owning a property means a lot of things. Mainly, it’s a place where you live and/or work. For virtually everyone, it’s also an investment. A refinance is an important mechanism for both improving and leveraging your investment. There are several reasons for when and why you should consider a refinance – We explore some of these reasons in our latest blog.

Reduce Your Interest Rate

Interest rates are placed on any loan and is how a lender makes money. The interest rate you received at the time your loan was approved was based on several factors, including current market rates but also your personal credit score. Most homebuyers want to take advantage of the lowest rate possible. A couple of percentage points based on lower rates and/or better credit can make a huge difference. A dramatically increased credit score can make a big difference, even if market rates have not improved.

Take Equity from Your Home

You can also leverage the equity you’ve built in your home through a refinance. Whether you need to make home improvements, need money to pay for school or to eliminate other debt, a refinance can make a lot of sense.

Adjust the Repayment Period

People’s financial situations change all the time, and it’s possible that what might have worked well for you when you first closed on a property may no longer makes sense now. For instance, if you bought your first home on a modest salary with a 30-year mortgage and have since doubled your salary, you may want to refinance to a 15-year mortgage to save on interest. On the other hand, it’s possible that you’ve had a 15-year mortgage and the lower payment of a 30-year mortgage might make more sense for you and your budget at present time.

Switch to a Fixed Rate Loan

Mortgages are either adjustable or fixed rate. With the former, the interest rates adjust with the market – whether it’s going up or down. With the latter, the interest rate is fixed and will not go up or down with the market. Fixed rate loans are certainly more popular because they are predictable and won’t change, even if your job situation changes or your credit score drops.

Whatever you do, seek professional advice to ensure you are making the right decision.

Interested in learning more about refinancing options or ready to get started on one? Give Principle Abstract a call. Our team has years of experience assisting clients with refinancing, and can also refer you to the most reputable lenders and real estate professionals in the area.

Goals for Homebuyers During Uncertain Times

To say that the economy is unpredictable is an understatement, particularly in recent weeks and months. Economists, politicians, and industry leaders are offering their takes but at the end of the day, no one really knows how things will play out. In the meantime, policy changes are impacting pricing and industries, including banking and lending, in profound ways. The hope is that incremental interest rate hikes will thwart inflation and stabilize the economy. As a result, interest rates are at levels not seen in many years.

These are things that our out of our control.

For homebuyers, that means biting the proverbial bullet and purchasing a home if they must. For others, it means toughing it out in hopes that the climate changes for the better soon.

Control the Things That You Can

If you are planning to buy property, there are things you can control to ensure that you are in the best position possible when you either need or want to buy in today’s market.

Set Your Budget

Virtually everyone has lost buying power with the recent interest rate hikes. The 350k house you could have afforded last year may be out of reach today based on how your monthly payments are calculated once a larger interest payment is factored in.

In times like these, it’s best to be realistic. Overreaching on budget right now may not be the best course of action.

Manage Your Credit Score

Everyday credit management helps to improve your credit score. Even 10 or 15 additional points on your credit score can mean a significant improvement in the interest rate a bank will be willing to extend to you. Pay credit cards down, pay on time, and be mindful of the lines of credit that you open. There are many resources available to track and manage your credit score. Consider researching and choosing the tool that works best for you if you’re planning to buy a property soon.

Save for a Down Payment

If you’re planning on putting off a home purchase for a few months, keep saving. The larger the down payment, the smaller your loan will need to be. A larger down payment can mean thousands in savings in the long run.

Seek Out Knowledgeable Real Estate Professionals

Local real estate professionals have knowledge and resources within the area you’re looking and can help you navigate a home purchase. They are highly familiar with the local market, and can help you make the decision that is best for your situation. Most good agents want their clients to find the right home.

Nothing is Forever

As markets continue to shift and rates (hopefully) start to settle back down, you’ll be able to refinance your home for a more favorable rate. You can also move if you had to settle for less home than you originally wanted.

Principle Abstract and Settlement Service has years of experience assisting homebuyers through their home purchase. We have relationships with some of the most reputable lenders and real estate agents in the area, and can help you save on your title work.

Ready to get started? Give our office a call and a member of our team will be happy to assist you.

What To Do If a Co-Owner Sells Your Home

From time to time, relationships can break down with folks who you own significant property with, such as a spouse, partner, or siblings once an estate is inherited. It’s an unfortunate reality between co-owners, but it happens all the time, and real estate can get caught up in the fray.

When a deed has multiple owners listed, it requires that each party sign paperwork in order to legally transfer the deed to someone else. However, that doesn’t stop people from trying.

In the example of a divorce, real estate is often the biggest asset between the couple. During arbitration and/or court proceedings, it is typically decided that the real estate at hand is transferred to one of the individuals as part of the agreement, or both individuals agree to sell it together with proceeds to be distributed however it is agreed upon.

Again, that doesn’t mean that people try to bypass the process. Through forgery or other means, a partner, ex spouse, etc., may get away with selling the property before anyone catches on. As a victim, you are now faced with a co-owner who has all the proceeds from the sale, and someone else who now has a claim to the property itself.

How Title Insurance Helps

Title insurance helps in these situations. By having a title policy in place, the buyer who unknowingly bought the property will be made whole again and the co-owner who illegally sold the home will be sought after by the title company. You will then get the property back. With a title insurance policy in force, this is all handled with little to no legal complexity or heavy lift on your part.

How a Title Search Helps

A title search is typically performed before a property sale and before a title insurance policy is issued. Most title searches would catch this type of malfeasance, but there’s always the chance that things slip through the cracks.

What Happens If There Isn’t Title Insurance?

Not having a title insurance policy to lean on in these situations doesn’t mean you no longer have a legal claim to the property or proceeds at hand. However, it does make things much more complicated. At this point, your only recourse would be complex, expensive and often drawn-out legal action involving multiple parties (the co-owner, the buyer of the property, and yourself.) If you are OK with letting the buyer keep the home, it could be less complicated as you’re now only looking to claim your share of the proceeds from the co-owner. If you do want to property back, it will be much more involved.

With any real estate transaction, it is strongly advised that you seek professional guidance and consider a title insurance policy on your home. These policies are largely inexpensive considering the cost of other types of insurance, but the impact can be huge should you ever need it.

Again, a title search will very likely catch these types of issues, however, that is the purpose of insurance: You put policies in force (such as fire, flood, auto, life, etc.) with the hopes that you never need to use it. Like, any other event or loss, the financial and emotional cost of not having a policy in place can be devastating.

Principle Abstract and Settlement Services has years of experience performing robust title searches and protecting buyers from any issues that might come up.

Looking to buy a home? If so, contact our office and a member of our team will be happy to assist you.

Title Fraud and How to Protect Yourself

Identity theft is rampant, costing people as well as insurance and banking systems billions of dollars per year. Its proliferation is mainly due to the fact that it works – Of course more criminals will find ways to lie, cheat and steal what they can from innocent individuals if they can get away with it. Any piece of information you leave exposed in the digital or physical world can be taken and used to make money. Most often, people think about the common crimes of banking or credit card fraud. Yet, there is a more catastrophic form of identify theft that any homeowner should understand and be on alert for: Home title fraud.

Home title fraud is when a home or property you own is quite literally stolen out from under you. Through some identity theft measures, fraudsters will then forge a deed along with other records and submit it to your town. If that deed gets recorded, the ownership of your home essentially transfers from you to the ‘new’ owner. From there, the criminal can open a loan against the value of your property and withdrawal the funds before anyone catches on to the act. Or, they can sell the property outright, typically to accomplices in the scheme.

After the change in ownership, an unsuspecting homeowner may continue to pay the mortgage on a home that they legally no longer own. Simultaneously, debt piles up against the property creating a dire financial situation.

What Happens Next?

In many cases, home title fraud is only discovered after the crime has been committed and the perpetrators are long gone. At that point, there is little to no recourse. Often, the victim loses their home. Administratively, it can cost many thousands of dollars in legal and court fees, and it can also tank your credit score if you are unable to pay any loans that have been opened in your name.

When Does Title Fraud Happen?

Title fraud is not as prolific as credit card fraud, simply because it takes more steps and requires a higher degree of savvy. Yet, the payoff for them is huge if they are successful in their crime. In 2017, there were 9,654 cases of general real estate fraud, resulting in more than $56 million in losses. This number has skyrocketed with 11,578 cases of general real estate fraud reported in 2021, totaling more than $350 million, which means it’s happening more often and with greater effect.

Most often, vacant homes and seniors (who are more likely to have a lot of equity in their homes) are targeted.

How Do I Prevent Title Fraud?

As with most things, vigilance is key. Periodically check your public record filings for any changes in ownership. Also keep your eye on mail that comes to your property from a bank or lender as they may pertain to a new account opened using your address. You can also sign up for credit monitoring services or check for local programs that can help monitor and prevent these types of crimes. If you have elderly family, consider checking in on their records or set them up with similar monitoring services so they don’t become victims of home title fraud.

Protection is Available for Bucks County Residents

Bucks County has introduced a free fraud alert system that any Bucks County resident can take advantage of. In their own words:

“If you sign up, you will receive an email from our recording vendor, LANDEX, alerting you anytime a document has been recorded in our office against your name. Businesses are also welcome to sign up for this service.”

Principle Abstract and Settlement Services urges anyone in Bucks County to sign up for this service for added protection and peace of mind. You can find our recent blog on this service with instructions on how to sign up.

If you have any additional questions on home title fraud or would like assistance with a real estate transaction, give our office a call and a member of our team will be happy to assist you.

Common Closing Mistakes to Avoid

A real estate closing is complex and involve multiple parties to complete. Each party, from the realtor to legal representatives to mortgage brokers, are pulling to get the transaction completed. After all, they get paid upon the successful completion of the transaction. While most professionals act in the best interest of all parties, you should always be your own best advocate during a real estate transaction. Being prepared and aware during each step of a closing can help you avoid costly mistakes.

In this blog, we review common areas where buyers should be particularly aware to avoid major issues and costly mistakes.

Not Reading the Contract

Contracts are never easy or fun to read. Real estate transactions can include hundreds of pages of documents that you are required to sign. Once you sign those documents, they become binding. There are no ‘do -overs’ when all is said and done. You owe it to yourself to review the documents carefully, and to consider employing an attorney to help you navigate the documents at hand. Ask plenty of questions and come to the closing with a command of all the material you are signing.

Not Disclosing Major Events

Life happens. People lose their jobs, have changes in financial circumstances, etc. Real estate transactions are structured under the assumption that your financial situation has remained unchanged since the time of your pre-approval. Several months can pass between the pre-approval and your closing, and things can change in that timeframe. If they do, you must inform your lender and agents right away. Your lender will require additional copies of your most recent pay stubs as proof of employment. If you can’t provide them and folks only find out at the last minute, the sale will most likely fall apart or need to be restructured.

Using Different Versions of Your Name

Only your legal name as presented on legal documents should be used on your documents in a real estate transaction. Using different and/or shortened versions of your name, nicknames, etc., will cause confusion and require paperwork to be reprinted for the closing.

Not Knowing What to Expect at the Closing

When the closing date approaches, you should know what to expect, who to bring with you, what documents are being signed, what parties are involved and, of course, where and when the closing is taking place to avoid delays. You are certainly welcome to ask questions and take your time at the closing. However, being completely unaware of the process is irresponsible; Again, be your own best advocate.

Big Purchases on Credit

The vast majority of homebuyers use their credit to secure a loan for the purchase of property. A pre-approval is a snapshot of your credit worthiness and it is checked again once closer to closing. If you make a large purchase, such as a car, after a pre-approval your credit can be significantly impacted.

Avoiding these mistakes at closing can help to ensure a smooth transaction on settlement day. The only thing left do is grab your keys and enjoy your new space. Principle Abstract and Settlement Services offers comprehensive title searches, title insurance and work closely with all parties involved to ensure a smooth transaction.

Ready to get started on a residential or commercial real estate transaction? Give our office a call and a member of our team will be glad to assist you.

4 Steps To Avoid Real Estate Fraud

The internet has simplified our lives and changed the way we get things done in ways that people even 20 years ago couldn’t fathom. We can deposit checks, get medical care, close on a mortgage and pay our bills with just a few clicks. We’re not talking about things we use only occasionally – these technological processes that have become commonplace and engrained in our daily lives and it’s easy to forget just how much we rely on the internet and how much we share about ourselves while online.

With all the good that comes with technology, the bad is always right around the corner. Hackers, fraudsters, and thieves swarm the internet in droves looking for any vulnerability to steal someone’s identity and make money off their efforts. They are relentless and it’s not hard to see why: In 2021, the FBI reported nearly 7 billion dollars in potential losses due to internet based crime in their latest report. In other words, it works.

Real estate activity is not immune to fraud. In fact, the same report cited above ranks real estate fraud 5th in overall losses. In our latest blog, we list the steps you can take during a real estate transaction that can save you from undo loss or harm.

Create Different Passwords

You will use multiple online tools during a real estate transaction, including portals to upload documents, sign paperwork, collect banking information, etc. You should always use different passwords to prevent real estate fraud and make it harder for cybercriminals to gain access.

Confirm Contact Information

It is good practice to confirm that all professionals are licensed and in good standing with their respective industry authorities. Collect their email and phone numbers and save them. Once you start getting correspondence, always confirm the sender against the information you’ve confirmed. If someone contacts you from a different number or email, be suspicious. Reach out to your trusted contacts and confirm their involvement in your transaction.

Watch Out for ‘Buzzwords’

Lenders and real estate professionals have a fairly standardized way of communicating and will rarely use language that create unnecessary urgency. Words like ‘immediately’, ‘rush’, or ‘warning’ are hardly used in legitimate correspondence. These words are telltale signs of real estate fraud are meant to illicit emotion and can get people to act without thought.

Wire Transfers

Be particularly careful when it comes to wire transfers, requests for funds or account access. In almost every situation, the title company is the only party that will provide wire transfer requests. Any other requests for money should be confirmed through your trusted contacts.

In short, be hyper vigilant as you move through your real estate transaction to prevent real estate fraud. Mishandling sensitive information, responding to a spoofed or phishing email, or processing a wire transfer that isn’t legitimate can come at a significant cost. When it comes to cybercrime, by the time anyone suspects wrongdoing, the damage is already done.

Principle Abstract and Settlement Services has years of experience ensuring the privacy and security of our client’s information. Through secure file sharing tools and proper communication, we strive to ensure our clients feel confident and secure at each phase of the transaction. When it comes to cybersecurity, there is no such thing as overcommunication. If you suspect something is wrong, reach out immediately and we will investigate.

Ready to get started on a real estate transaction? Give our office a call and a member of our team will be happy to assist you.

What is an Independent Title Insurance Company?

A real estate transaction can overwhelm many buyers, particularly first-time homebuyers who have not been through the process before. There are many people, a ton of paperwork and, of course, significant money involved. With so many people pushing towards the closing, it can be tempting to step back and let the wheels turn on their own.

If a particular real estate transaction represents your single biggest expense, you can’t afford to blink during the homebuying process and you must be as big an advocate for yourself possible.

Title insurance represents one of those areas where you can advocate for yourself. Many national real estate brokerages provide their own title service in house and many agents push buyers into using their services. This makes complete sense for several reasons:

  1. They are familiar with the process and want a transaction process to be as predictable as possible
  2. They make more money for their brokerage
  3. The title service is invested in the success of the brokerage and the agent
  4. It’s simply easier for them

There is nothing wrong or unsavory with any of the above listed reasons for going with an in-house agency. That being said, homebuyers have the freedom to shop for and engage with an independent title insurance provider.

Independent Title Insurance Providers Are Impartial

Choosing an independent title insurance provider brings in a completely impartial entity to the closing. Their goal is a successful real estate transaction for both parties without the burdens of quotas, corporate mandates, etc.

Often, independent title insurance agents provide their services at a lower cost to the homebuyer, potentially saving hundreds of dollars that becomes even more costly once rolled into the total cost of your mortgage.

Principle Abstract and Settlement Services prides itself on providing robust, professional, and courteous title and settlement services to every real estate transaction. We work to ensure that each transaction runs smoothly and for the benefit of all involved, not just the brokerage.

Interested in learning more about our services and how we can help with your next real estate transaction? Give us a call today and a member of our team will be happy to speak to you.

Title Insurance Considerations with Inhereting Property

Title insurance protects property owners, whether they purchase the property or inherit it. In the case of inherited properties, some folks may let their guard down believing that there is no risk involved.

Unfortunately, this is not always the case. When it comes to inherited properties, complex issues can bubble to the surface. In this blog, we review the more common situations that can arise with inherited properties.

Title Issues can Exist

A home that was owned by a loved one for 30 or 50 years can still have title issues – old claims against the property, issues with the deed, such as a misprint on the address, forgery, or perhaps a survey issue can all rear their heads.

Inheritances Can be Tricky

Not all people get along- even families. When someone passes and wills begin to surface, tension and drama can hit a fever pitch. Once a home passes down, it’s not uncommon for aunts, uncles, siblings and cousins to stake a claim to the value of a property. Other non-traditional relationships such as adopted children, second and third marriages and stepfamily can add to the complexity and the number of claims that can exist.

If you’ve inherited a property, title insurance protects you from claims against it, regardless of the outcome.

Those Who Trespass May Claim Ownership

An estate that takes years to settle can make way for yet even more complexity. By the time one takes official possession of a home, a family member, renter or even a squatter may have been occupying that property and might want to lay claim to it.

Known as adverse possession, these situations can be tricky. Having an official title insurance policy in place can help navigate the process of repossessing and/or establishing legal ownership of the property.

Identity Theft Abounds

Thousands of people become the victim of identity theft daily. Unfortunately, older folks are more at risk than most as they are specifically targeted by scammers and fraudsters. Posing as the owner of a property, these con artists can open up lines of credit or other types of loans using the property as collateral. This can go unnoticed for years, until the family member passes and issues begin to pop up during the estate settlement. A thorough title search can help uncover these types of situations that, unfortunately, are becoming more commonplace.

Principle Abstract and Settlement Services has years of experience working exclusively for the benefit of their clients. Whether you are purchasing a property or inheriting one, a thorough title insurance search performed by Principle Abstract offers peace of mind during an already difficult time. Have a property you are in the process of inheriting? Give our office a call today.

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