Q: What is an Earnest Money Deposit and where does it go?

A: The earnest money deposit is an important element of the offer. Simply put, it is consideration for the offer to show the seller that you are serious. The amount can depend on several factors, but generally does not exceed 5% of the offer. The earnest money isdeposited in an escrow account and will be applied to your closing costs. It is not turned over to the seller unless expressly stated in the contract and agreed upon by both parties. This money represents your sincerity in the attempt to purchase and is totally refundable if the offer is not accepted.

Q: What Should I Know About the Title?

A: When property is to be sold or refinanced, the lender and/or buyer need a preliminary title report to see exactly what is against the subject property. Lenders will require a title search of the property before loaning money. However, it is recommended all buyers should have a title report done on a property(including vacant land and investment property) you intend to buy, even if you are buying from family and paying all cash. Items a preliminary title report will show are:

1. Taxes on subject property, amount owing, amount paid, and assessors parcel number.

2. Easements of record, if any.

3. Restrictions on subject property, if any.

4. Liens and/or judgments of record, if any.

5. Exact vesting of owner of record.

When the sale or loan of the subject property is final, and the title company has recorded the necessary documents in order to close escrow, they then issue a policy of title insurance to the new lender, and/or buyer showing clear title to subject property.

Q: What is the Procedure for Closing?

A: When the property has an accepted offer, the real estate agent will contact the designated escrow company or closing attorney and open an escrow according to the terms and conditions of the purchase and sale agreement. The escrow agent will then order a preliminary title report. The escrow agent will examine the report. Any liens or title problems that may interfere with the transfer of property will have to be cleared prior to the close of escrow. The escrow agent will draw escrow instructions and any other necessary papers in connection with the transaction. The escrow agent will obtain payoff figures from all existing lien holders of record in order to pay them off at close of escrow. The escrow agent will clear everything against the owner of record and/or subject property, and bring the seller current on any taxes upon close of escrow. The proper documents are then ordered and drawn up (deed, deed of trust, mortgage, etc.). The escrow agent will meet with both the buyer and seller to have documents signed. After that, documents are returned to the lender for review. Once approved, the recording of the documents, and the funding of the loan will occur.

Q: Why Own a Home?

A: Owning a home can provide you with one of the greatest investments for many reasons, including financial, stability, and independence. If you already own a home, trading up or down can either move you towards a greater equity potential or liquidate equity in a previousproperty. For many, building equity is reason enough to pursue the purchase of a home. While renting certainly has its advantages, owning a home offers the peace of mind that one's finances are being invested towards the future. The most obvious economic benefit to owning a homeis the interest deduction on your income taxes. For the first year of your ownership, assuming a 30-year mortgage, about 90% of your monthly payment goes toward interest on the loan. If you have a mortgage payment of $750 per month, totaling $9,000 per year, you can claim an $8,100 (90% of $9,000) deduction on your tax return for the first year. If you're in the 28% tax bracket, that means you'll pay $2,268 less on your taxes. Recent changes in tax law stipulate that if you've owned a house for five years and have lived in it for two years of the 5 years, you can sell the house and pay no capital gains tax on a profit of up to $250,000. For married couples, the exemption doubles to $500,000. This is not a one-time exemption - you can buy and sell multiple houses in your lifetime and never have to pay capital gains tax, as you would be required to do if you cashed in stocks or other investments.

Q: Should I Have A Home Inspection?

A: You should have your home inspected to assure that the home is safe and sound for your family to live in. A home inspection will also provide you with helpful information on howto maintain systems so that they continue running. It is recommended having a home inspection, even on new construction. The best time to schedule a home inspection is after you have already made an offer on a home. A conditional clause can be put in the contract so that the sale is contingent on the findings of the home inspection. I would recommend that you have a home inspector that is licensed, and is certified by ASHI Association. A home inspection will help assess whether or not there are any structural problems with the foundation, how the home systems are working, where necessary features are (water shut-off valves, electrical panels, etc.), and how to maintain the home's functionality. The cost of the home inspection is paid for by the buyer.