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Factors to Consider when Buying a Home

Rathin Neogy, MBA

Buying a Home Buying a home is one of the most important decisions a buyer ever makes and there are various reasons why one has to be careful before you buy. Your interests are better protected if you work with a reputable buyer’s agent.

Once you have found the home you wish to purchase, you need to be fully aware of the various legal and administrative issues involved in purchasing a home. Your real estate professional should be able to guide you.

Before signing the purchase agreement, review the sellers transfer disclosure statement (TDS) carefully. Also ask for a preliminary title report (or Prelim) from the seller’s agent. The listing agent usually opens escrow with a title or escrow company when the listing is obtained and this report is run by the title company and should be available to the buyer upon request.

This report provides you with the opportunity, prior to purchase, to review the details of ownership interest as well as what liens are on the property. The Prelim is a report that is prepared prior to a Title insurance company issuing an insurance policy. This report shows the ownership interests of a specific property, together with the liens and encumbrances that exist. By reviewing, in advance of purchase, title defects, liens and encumbrances that exist, a buyer has the timely opportunity of discussing these issues and to seek removal of items referenced in the report that are objectionable to the buyer prior to the purchase.

The Prelim identifies what has been recorded relative to the property and the parties of all transactions upto the date of the report. Examples of recorded events include a lien against the property for an unpaid court award, unpaid property taxes, mortgage liens, home equity liens, different types of easements, CC&Rs, etc.

All these recorded items are listed in the report as “exceptions” and the buyer needs to know what will remain as “exceptions” from the title insurance policy coverage and what will be eliminated or released prior to the transfer of title.

The buyer is interested to know the extent of their ownership rights after transfer of title. Remember that a Prelim does not disclose the complete condition of the title to a property but gives you a “heads-up” of what problems may be encountered. Once you have decided on buying a property, you should discuss with a reputable title insurance company or real estate attorney on how you should go about clearing unwanted liens and encumbrances. Also you should ask your title company that you want an “owner’s policy” which protects you the homebuyer. A “lender’s policy” is less expensive, but covers the lending institution and not necessarily the owner.

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