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Longmont Real Estate | What Protection Does Title Insurance Offer?

July 8, 2010 By Author 1 Comment

Title insurance is designed to provide protection to both mortgage lenders and home owners. It protects both against the possibility of hidden claims on the house or of any defect or flaws in the title. For example, if someone else claims after you have bought your house that your purchase is not a valid one; title insurance can protect both you and your lender against any financial losses arising from this claim.

When buying a There are two types of title insurance policies; a lender’s policy and an owner’s policy. A lender’s policy is to protect your mortgage lender against any financial consequences of issues related to the title to the house in any Longmont Colorado real estate deal. This insurance is mandatory with virtually all mortgage lenders. The coverage expires when the loan is repaid in full. On the other hand, an owner’s policy is designed to protect you, the homeowner, against any title issues. Owners insurance is not compulsory but it is useful to have as protection as long as you own the house.

Another reason your mortgage lender will insist on a lender’s policy is to ensure that the mortgage can be on sold to someone else. All mortgage lenders grant you the original loan (called origination in securitization jargon) and then proceed to sell the loan to another agency or investor so that the funds can be recycled. Quite naturally, the person buying the loan has never seen you and never will but will require assurance that he has a valid lien that is enforceable on your house. Title insurance provides this assurance and, quite honestly, without the title insurance, the loan to you would be unsalable.

The need for title insurance arises because public records relating to title may be incomplete or out of date. When a lender is considering a mortgage to you, he will hire an attorney to carry out a search of the title records to ensure that you do have a valid title to the property but this is not conclusive. For instance, there may be unpaid property taxes for which the county has placed a lien on the house. Or there may be an ex-spouse with a claim to the house who has not signed off on the transaction. Title insurance is intended as protection and will cover the costs of settling these claims including costs and legal fees.

The cost of title insurance depends on the location, the price of your house and the extent of the coverage that you would require. In some states, the rates are established by law and are therefore non- negotiable. All title insurance providers will give you the same quote. Other states do not mandate the rates so if your property is located here, by all means shop around for the best possible rate that you can get. Title insurance has to be paid for only once at the time of closing. Who will pay for it would be a matter of negotiation but if you can get the seller to shell out, so much the better for you.

Some of the real estate deals have an element of risk involved and the title insurance helps cover that risk. If you are looking to buy a home in Nederland CO, Niwot Colorado, or any city for that matter, ensure that you have a title insurance in place just in case.

Filed Under: Real Estate Information Tagged With: Longmont Colorado real estate, mortgage lenders, title insurance

Understanding Sweat Equity In The Longmont CO Real Estate Business

June 26, 2010 By Author Leave a Comment

Sweat equity is the value added to a company or an asset as a result of the personal time and effort contributed by another person. This contrasts with financial equity which is the money investment by a person. In a partnership, sometimes a partner is admitted without a financial contribution because of the skills that he can provide. In a startup limited company, especially in the high-tech business, it is not uncommon for founders or startup employees to be rewarded in the form of sweat equity in lieu of salary or other compensation. Sweat equity may also be provided to service providers in lieu of services received. This is why sweat equity is also known as "equity compensation" or "stock for services".

In the Longmont CO real estate business, sweat equity can be created by homeowners who create home improvements by the efforts of themselves and their families. As a general rule, these home improvements increase the value of the house and, the greater the effort, the greater the increase in value. For instance, new flooring or wallpaper or a fresh coat of paint can make a house look far more desirable and thus sell for more cash. The greatest value addition to a house comes from improvements to kitchens and bathrooms.

That is an interesting sweat equity scheme that is run by Habitat for Humanity. The scheme caters to, families who would otherwise be unable to own a home because they cannot make the requisite down payment or do not have the income level qualify for a mortgage. The family contributes up to 500 hours of sweat equity either to the building of their own home, the building of other Habitat for Humanity homes or the provision of services to Habitat for Humanity. In return, they receive their own house for which they have to make monthly interest-free mortgage payments. The mortgage payments go into a revolving fund that supports the creation of new homes.

For a homebuyer sweat equity represents an opportunity to finance part of the purchase price without a cash outlay. In effect, the homebuyer undertakes repairs and improvements that would otherwise have to be paid for by the seller. In return, the seller provides a discount on the purchase price in view of cash or stock. In undertaking this exercise, the homebuyer should ensure that he receives fair value for his contribution. This is achieved by:

  • proving to the seller that the buyer has the necessary skills to undertake the improvements
  • preparing a detailed list of materials with the prices of each item
  • preparing detailed estimate of the labor and the effort involved and the value to be applied

Instead of being adjusted against the purchase price, the sweat equity may be adjusted against the down payment. In fact there are lending companies that will take into account the value of the sweat equity while determining the size of the mortgage.

Hope this article gives you the basic understanding about the sweat equity option that you can look into when you are considering buying a real estate property in Frederick Colorado or Highlands Ranch CO.

Filed Under: Real Estate Information Tagged With: Habitat for Humanity, longmont co real estate, Sweat Equity

Buying Investment Properties In Longmont CO With Little Or No Cash Down

June 17, 2010 By Author Leave a Comment

If you are thinking of extending your Longmont Colorado real estate investment portfolio, and none of the schemes that you have researched suit you because you want to limit your cash, try these alternatives. They are not easy to accomplish because you would have to find a lender to whom the terms are acceptable as well as a property owner who’s prepared to go along with you. The truth is, without a substantial down payment, the lending risk is very high and mortgage lenders are rightly going to be cautious.

Enter into an option contract. This is particularly useful if there is a property that you’d like but you are short of cash at the present. You could have cash coming from the sale of another property or from maturing investments. So you would like to lock into the purchase contract and the price till the cash is available. An option gives you the right but not the obligation to buy the property within a specified period of time or by a specified date. In return, you pay the house owner an agreed sum of money called an option premium. If the purchase is accomplished, this money is set off against the down payment. If the purchase is not accomplished, you forfeit this money and the seller gets to keep it. The payment could be substantial because the seller is in effect withdrawing his property from the market during the tenure of the option.

Lease with option to purchase. In some circumstances, the seller may agree to lease the house and grant an option to purchase it by a predetermined date. This may be because the seller needs to relinquish the management of the property immediately because of say illness. The lease provides you with the time and the opportunity to arrange financing for the purchase. How the lease payments will be applied as a matter of each individual contract.

Buying distressed properties. This means that the owner has gotten into financial difficulty and has got to sell the property. Because a distressed property is available cheap, don’t jump into it without analyzing the property carefully. Without a careful analysis, you will find yourself in the same soup as the previous owner. Many people have made money by buying distressed properties cheap, fixing them up and then flipping them.

Mortgage hypothecation. This means that you offer the seller a second or third mortgage on your home or any other property that you own in lieu of down payment. Let us take your home equity to be $100,000 and the required down payment to be $75,000. You could offer the seller a second mortgage of say $80,000 just to sweeten the pot. You will require to be extremely careful in your evaluation of the properties that you are buying what you could end up losing your home.

Real estate deals can be tough to understand. You could use some help from a local real estate agent from Castle Rock CO to find you the property of your choice or you could hire an agent in Cherry Hills Colorado.

Filed Under: Real Estate Information Tagged With: Buying distressed properties, Buying Investment Properties, Longmont Colorado real estate

A Guide To Short Selling Your Longmont CO House

June 13, 2010 By Author Leave a Comment

Maybe you have just lost your job or your mortgage has been reset to a rate that is now unaffordable or maybe you have had a major financial setback. Whatever the reason, you need to sell your house and sell it quickly. Unfortunately, it is now worth less than what you owe on it. There is no need to panic because foreclosure is not the only solution. There is one final throw of the dice called a short sale in the Longmont CO real estate market that is available and there is no harm in trying it out.

Before you decide on a short sale, make sure that you have exhausted all your other options first. Talk to your lender about a revised repayment schedule or a loan modification. These will give you the opportunity of staying on in your house while providing you a breathing space to reorganize your financial affairs. If you have been paying for private mortgage insurance (PMI) cover, talk to the insurer as well. If the insurer feels that there is a chance that the mortgage may be repaid, they may provide funds to the lender to cover the shortfall. Of course, you would have to repay the insurer in due course but at least you would what some breathing space.

If none of this works, you are back to the ultimate option of a short sale. In a short sale, a homeowner in financial distress sells the house for an amount which is less than what is owed on it. The sale is to a third party and all the sale proceeds go to the lender. The lender may choose to forgive the balance that is due (in some states, this is mandatory for a short sale to be legal). The lender also has the option of obtaining a deficiency judgment requiring the borrower to repay all or some of the shortfall to the lender.

At this point, what you need to realize is that you have to convince your lender that you are a prime candidate for a short sale and that it is in his interest to forgive the deficiency. He is not legally obliged either to consent to a short sale or to give you any form of advantage. Also, if you are not yet in default, he is not likely to work with you. You should have a good reason for your financial predicament and this should not date back to the time when you took the loan. You are likely to get scant sympathy from the lender if he feels that you misled him at the time when the loan was approved. Make sure that you have all the documents you require to substantiate your case.

At this stage, you would be well advised to get an experienced real estate agent involved. Make sure that the agent has plenty of short sale experience and get him to sit in on all the meetings. To be sure, he is going to be expensive but you could be in for a worse financial trouble without expert guidance on your side. Let him advice you on what is the best method to arrange for his fee. Maybe the lender will consent to his being paid out of the sale proceeds. You will also the mental relief of having some of your burden placed on more experienced and knowledgeable shoulders.

Real estate agents can be a great help when you find yourself in such a situation. They will not only help you sell your home but will also help you find homes for sale in Superior CO or Sedalia Colorado.

Filed Under: Real Estate Information Tagged With: foreclosure, longmont co real estate, private mortgage insurance, Short Selling