What is Title Insurance?

Title Defect

Title insurance is a type of insurance that protects mortgage lenders and homeowners against claims questioning the legal ownership of a home or property. If disputes over title ownership arise after the purchase, the insurance policy pays for any legal fees to resolve them.

Unlike other types of insurance that help cover future mishaps, title insurance is designed to protect the policyholder from any past title discrepancies. For instance, when you buy car insurance, you are protected in case your car is in an accident. When you buy health insurance, you are protected against the cost of future medical care. Title insurance, on the other hand, protects an investment in real estate that might be at risk due to a past event, such as an undiscovered lien against the property.

Title insurance does not just protect you, as a purchaser of the property. Your mortgage lender will likely require you to have title insurance in order to protect their security interest in the property you are buying.

In any real estate transaction requiring a mortgage, the title company runs a public record search to ensure that the home being purchased is free and clear of any liens or ownership disputes. This process confirms the seller’s legal right to sell the home. If any defects in title, also known as “clouds”, are found during the title search, they are the responsibility of the seller. He or she may be able to cure the defects, or you can walk away during the sale. If defects in title are missed, however, you could be on the hook.

For example, a lien travels with the property, not the debtor. For example, let’s say a previous owner of your house had the kitchen remodeled. He failed to pay the contractor the $30,000 owed, and the contractor had a lien against the house for that amount.

If the title search failed to discover the lien, and you purchased the property, the lien would become your problem. Now that it is known, you will have to satisfy it, most likely out of the proceeds of the house if and when you sell it.

While this process usually goes smoothly, title insurance comes into play when disputes arise. Here are some of the more common title issues:

  • Title forgeries
  • Back taxes
  • Filing errors
  • Unknown heirs to the estate who claim ownership
  • Inconsistent or conflicting wills
  • Liens, commonly from unpaid home equity lines of credit (HELOCs) or contractor bills
  • Undocumented easements

There are two types of title policy; a Lender’s policy and an Owner’s policy.

A lender’s title policy is designed to protect the financial institution providing your mortgage from title claims that would put their stake in your home at risk. Lenders almost always require borrowers to purchase title insurance on the lender’s behalf as part of the loan-approval process. It’s considered a closing cost.

The owner’s title policy is designed to protect the homeowner in case of any claims against their ownership of the home. In most cases, owner’s title insurance is not required in a home purchase, but it is recommended. It can be paid for by the seller at closing, so you may want to negotiate for it when you are purchasing a home. Generally, in Michigan, the seller’s real estate agent will choose the Title Company that will provide the buyer’s owner’s policy and that Title Company will conduct the closing. The buyer may use the same Title Company for the Lenders policy, or the buyer can use a different Title Company.

If you are buying a home in cash or your lender doesn’t require title insurance, you can request that the seller provide a warranty of title, which states that they are the sole party with a right to sell the home.

How much does title insurance cost?

Title insurance policy costs often range between $500 and $3,500 for each policy but vary based on the purchase price, mortgage amount, the sales price of the home, and the extent of the coverage.

Your title insurance premium is a one-time charge that’s paid at closing. In addition to the insurance itself, you may be responsible for other related fees, like wire transfer fees, closing fees, and recording with the county (register of deeds).

You should watch out for unnecessary fees from title companies.  Anything outside of the title premium, title closing, recording, and wire transfer are unnecessary fees that you should NOT be paying.

In many states, you can compare the prices of different title insurance companies. But in Michigan all title companies are required to provide the same level of coverage at the same price, so shopping around isn’t required in terms of title premiums.

I hope you found this information informative and helpful. If you have any real estate related questions, I am always happy to talk with you, and I’m available via phone, text, email and social media.

To your health and happiness, Dani

Michigan Principal Residence Exemptions (PRE)

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Michigan Senate Moves Bill to Allow for Principal Residence Exemptions (PRE) Until June 30th

Over the past several weeks Michigan Realtors® has worked with the Legislature and the Department of Treasury to allow additional time for buyers to file their Principal Residence Exemption (PRE) for 2020. With the traditional deadline expiring this past Monday, June 1st, Michigan Realtors® is urging expedited movement on this important legislation to provide buyers with property tax relief and the greatest amount of certainty during the month of June.

Today, the Michigan Senate passed Senate Bill 940, sponsored by Senator Roger Victory (R- Hudsonville) extending the time frame to file a 2020 PRE until June 30th. With the overwhelming support of the Senate and work with the Department of Treasury, it is anticipated that the bill will see continued movement in the Michigan House next week.

While there are no certainties, Realtors® should advise their buyer closing in the month of June to file their PRE before June 30th in order to receive the PRE rate for their July property tax bill.

What is a Principal Residence Exemption (PRE)?

A PRE exempts a principal residence from the tax levied by a local school district for school operating purposes up to 18 mills. To qualify for a PRE on a parcel of land, a person must be a Michigan resident who owns and occupies the property as a principal residence. The PRE is a separate program from the Homestead Property Tax Credit, which is filed annually with your Michigan Individual Income Tax Return.

What this means to a homebuyer: If you close on a property in the month of June and file for the Michigan Principal Residence Exemption by June 30th, your summer tax bill will be lower due to the PRE.

Have questions about this subject, or any other real estate related topics, I’m always available to talk with you!

Dani

The Truth About Skipping Mortgage Payments (And The Consequences)

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Every professional in the housing/mortgage market understands the crushing economic changes for many households as a result of coronavirus.  It makes all the sense in the world for those households to pursue the forbearance option (skipping mortgage payments for 180-360 days) if needed.  But it may make considerably less sense for those who aren’t truly in need.  Either way, the decision should not be taken lightly and its consequences are already being felt.

The CARES Act requires that mortgage servicers grant forbearance without verifying need.  In other words, if you say you have a financial need, your mortgage company can’t ask you to document it.  This has resulted in a much bigger surge in mortgage non-payment than the industry expected.

When people don’t pay their mortgage, the fallout is a bit different than most other things in life.  For instance, if I loan you $100 and you don’t pay me back, I’m out $100!  If you gave me some collateral, I could sell that and try to recoup some of that $100 of course, but I’d still come up short–especially when factoring in time and energy.

The investors fronting money for mortgages don’t have to worry about getting repaid.  There are guarantees in place for that from housing agencies (Fannie Mae and Freddie Mac, primarily).  But those guarantees only mean the investor will get the principal and interest they otherwise would have received for the time the mortgage existed.  They DO NOT protect the investor from other expenses that can arise when a homeowner isn’t making payments.

That’s typically not too big of a concern because the risk of non-payment is low and stable enough that it can be easily managed.  With the risk now higher than ever and without knowing how long the situation will last, uncertainty reigns supreme among mortgage investors.  Uncertainty has a cost.

For instance, the housing agencies that guarantee a majority of mortgages are now charging 7% of the loan balance to lenders when new loans enter forbearance status too soon after closing.  The time window can be as long as 6-8 weeks in some cases.  In other words, the lender loses $21,000 on a $300,000 loan.  Such costs quickly add up to insolvency for some lenders.

The investors who buy mortgages are accounting for these new risks by charging higher rates and fees, or by simply ceasing to offer certain loan programs altogether.  The greater the number of forbearance risk factors, the higher you can expect the rate to be, EVEN IF you personally don’t agree that the risk factor applies in your case.

Moreover, the industry’s definition of “risk factors” might surprise you.  Case in point, housing agencies won’t buy/guarantee cash-out loans at all if there’s been early forbearance, even with the 7% penalty).  Rather than run the risk of getting stuck with a mortgage that can’t be sold to or guaranteed by the housing agencies, many investors simply aren’t doing cash-out mortgages right now.  Most of those who remain in the game are charging extra fees and/or higher rates.  That means that a borrower with an 800 credit score who wants a cash out loan for half of their home’s value (a stellar credit risk historically) would still pay a much higher rate.

To a large extent, this would be happening regardless of the people opting for forbearances who don’t really need them.  But those people are certainly making things worse for everyone else.  They’re also making it worse for themselves.

If we look beyond the impact on rates and program availability, there are other reasons a homeowner should think twice before requesting a forbearance they don’t need.  As the guidelines currently stand, there is no guarantee that they’d be able to refinance or get a new mortgage with forbearance on their credit report–especially if the forbearance is ongoing.

This is a head-scratcher for those who’ve followed the forbearance and CARES Act news reasonably closely, because the law states that there is to be no adverse credit reporting as a result of forbearance.  While it is true that forborne payments will not be reported as late, the forbearance itself is still reported, and that’s obviously a red flag for the mortgage industry as long as the CARES Act’s guidelines remain intact.

In terms of credit scores, it is true that forbearance will not DIRECTLY impact someone’s FICO, but there’s no way to prevent it from having an indirect impact in some cases.  For instance, certain creditors are lowering available revolving credit limits in the event forbearance shows up on a credit report.  This increases the ratio of debt to available credit, which is a key ingredient in determining FICO score.

In other words, even though the forbearance itself is not affecting FICO scores, it can lead other lenders to make changes that cause scores to drop, and it can absolutely hurt your ability to buy/refi in the future.  Could that be clarified to your advantage in the future?  Certainly, but it’s important to know that’s not the way it is right now.

Source: Level One Bank

Be sure to contact your lender to find out how forbearance will affect your future payments. If you have any real estate related questions or concerns, please contact me via phone, text, email, or social media.

Dani 

6 Bad Household Habits to Break

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Bad habits are so easy to fall into. But in the end, we know they only make us miserable. They’re the opposite of what makes you happy. They’re what make you miserable. Here are 6 bad household habits to break now for a happier you (and a fatter bank account):

#1 Taking Long, Steamy Showers (I’m guilty!)

Spending 20 minutes in the steam may be good for your pores, but it’s also great for mold and mildew. Run the exhaust fan while you’re singing in the shower, squeegee the walls afterward, and scrub that grout every few months.

#2 Keeping Out the Sun

Shutting your shades on winter days might seem smart. More insulation from the chilly weather, right? Your energy bill disagrees. A sunny window can warm your home and lower your heating costs. And as a bonus, you could see a decrease in seasonal depression.

#3 Compulsively Buying Bargains

Finding a deal feels so good, but cheaper isn’t always better. In fact, budget buys might cost you more in the long run. For instance, dollar paintbrushes will leave annoying streaks, requiring a costly re-do. And when it comes to appliances, permit a little splurge — especially if selling your home is on the horizon.

#4 Running a Half-Full Dishwasher

You get a gold star for always remembering to start your dishwasher before bed, right? Clean dishes every morning! Go you! Yeah, about that: Your dishwasher wastes water unless it’s completely full.

#5 Mega-Mulching

Your precious trees really are precious. Each one can add $2,000 or more to your home’s value while saving on energy costs. A “tree volcano” is actually damaging your foliage. Too much mulch suffocates your tree, causing root rot and welcoming invasive insects.  Protect your precious trees by packing mulch loosely, letting water filter properly toward the trunk.

#6 Going on a Remodeling Rampage

Don’t break out the sledgehammer for a demo three weeks after moving in unless your home needs serious, obvious work. Give yourself time to understand the home’s quirks before renovating. For instance, you could dump $15,000 into a kitchen remodel — only to realize the original layout would have worked better for holiday parties. Or you paint a room your favorite color, Wild Plum, only to realize the natural light in the room makes it look more like Rotten Plum. Whoops.

Breaking habits takes time, so it’s important to be kind to ourselves when we slip up. When we create new habits, we’re building new wiring, but it’s not like the old wiring disappears. Don’t turn slip-ups into give-ups.

Have any real estate related question? Send me message using the box to the right of this page.

Dani

NAR Survey; COVID-19 Effect on Real Estate

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The National Association of Realtors recently conducted an Economic Pulse Flash Survey on April 5-6th. The survey showed that 59% of its members feel buyers are delaying home purchases for a few months, while 57%, said sellers are doing the same with listings.

NAR Chief Economist Lawrence Yun commented, “Home sales will decline this spring season because of unique economic and social consequences resulting from the coronavirus outbreak, but much of the activity looks to reappear later in the year. Home prices will remain stable because of a pandemic-induced reduction in inventory coupled with less immediate concerns over foreclosures.”

The survey also asked members questions about how the pandemic has impacted the residential and commercial real estate markets. A large majority of respondents, 90%, said buyer interest has diminished during the crisis, while 80% said there had been a decline in homes out on the market.

Finally, respondents also mentioned the importance that technology is playing in the current environment. The most common ‘tools’ mentioned in the survey were that of e-signatures, social media, messaging apps, and virtual tours.

Source: National Association of REALTORS

If you have any real estate related questions, I’m available by phone, text, email and social media. 

To your health, Dani

Looking to the Future: What the Experts Are Saying

Looking to the Future: What the Experts Are Saying | MyKCM

As our lives, our businesses, and the world we live in change day by day, we’re all left wondering how long this will last. How long will we feel the effects of the coronavirus? How deep will the impact go? The human toll may forever change families, but the economic impact will rebound with a cycle of downturn followed by economic expansion like we’ve seen play out in the U.S. economy many times over.

Here’s a look at what leading experts and current research indicate about the economic impact we’ll likely see as a result of the coronavirus. It starts with a forecast of U.S. Gross Domestic Product (GDP).

According to Investopedia:

“Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country’s economic health.”

When looking at GDP (the measure of our country’s economic health), a survey of three leading financial institutions shows a projected sharp decline followed by a steep rebound in the second half of this year:Looking to the Future: What the Experts Are Saying | MyKCMA recent study from John Burns Consulting also notes that past pandemics have also created V-Shaped Economic Recoveries like the ones noted above, and they had minimal impact on housing prices. This certainly gives hope and optimism for what is to come as the crisis passes.

With this historical analysis in mind, many business owners are also optimistic for a bright economic return. A recent PricewaterhouseCoopers survey shows this confidence, noting 66% of surveyed business owners feel their companies will return to normal business rhythms within a month of the pandemic passing, and 90% feel they should be back to normal operation 1 to 3 months after:Looking to the Future: What the Experts Are Saying | MyKCMFrom expert financial institutions to business leaders across the country, we can clearly see that the anticipation of a quick return to normal once the current crisis subsides is not too far away. In essence, this won’t last forever, and we will get back to growth-mode. We’ve got this.

Bottom Line

Lives and businesses are being impacted by the coronavirus, but experts do see a light at the end of the tunnel. As the economy slows down due to the health crisis, we can take guidance and advice from experts that this too will pass.

To your health, Dani

COVID-19’s Effect on the Michigan Real Estate Market

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During these unprecedented times, I have received a lot of questions regarding the home buying/selling process and how it is being affected by the government order to “stay in place”.  Here are the major take-aways:

  • Real estate brokers and salespersons are not “critical infrastructure workers”and therefore may not leave their homes for work.  The only narrow exception to the order is the instance where work is absolutely necessary to assist those with a genuine and emergent need, such as an immediate lack of shelter.   Real estate services, like the showing of homes and other property, open houses, and other client contact should be considered to be non-critical and travel to do so is prohibited through April 13, 2020.
  • Mortgage Lenders and Title Companies fall under the “critical infrastructure workers” category and will continue working. Lenders are working remotely, so you can still get a pre-approval, apply for a mortgage, re-finance a mortgage, and receive funds to close on a home. Title companies are offering “drive up” closing; they overnight the closing package to the buyer & seller for signatures, then you drive to the office where an employee will collect the closing documents and payments. If the buyer/seller requests to close in the building, the real estate agent will not be allowed to attend. Real estate brokerages have the ability to participate in closings via conference calls or other video conferencing methods to comply with the Governor’s order.
  • Home inspectors do not fall into the “critical infrastructure workers” category. If you have an accepted offer during the “stay in place” order, have your real estate agent include an addendum for a delayed inspection.
  • Michigan Realtors® have provided real estate agents an “Addendum to Purchase Agreement COVID-19 Condition Extension”. This addendum states that if COVID-19 causes a shutdown or work stoppage of a governmental entity or settlement service provider makes it temporarily impossible for either party to perform as required under a Purchase Agreement, or in the event Purchaser or Seller becomes the subject of a medically required quarantine, then all outstanding contract deadlines may be extended for as long as these conditions continue, but in no event longer than thirty calendar days.

If you are planning to make a move this year, this is a good time to plan. Talk to a lender to find out how much you can afford to pay each month, what amount you will need for a down payment and how much you will need to save for closing cost. Use the links above to search homes for sale, this will give you an idea of what is available in your price range. If you have a home to sell, use the link above to get an idea of your current market value.

In closing, I am always available to answer questions and provide recommendations for local lenders and service providers. You can reach me via phone, text, email or visit me on social media.

Wishing you good health, Dani

 

Are We About to See a New Wave of Foreclosures?

Are We About to See a New Wave of Foreclosures? | MyKCM

With all of the havoc being caused by COVID-19, many are concerned we may see a new wave of foreclosures. Restaurants, airlines, hotels, and many other industries are furloughing workers or dramatically cutting their hours. Without a job, many homeowners are wondering how they’ll be able to afford their mortgage payments.

In spite of this, there are actually many reasons we won’t see a surge in the number of foreclosures like we did during the housing crash over ten years ago. Here are just a few of those reasons:

The Government Learned its Lesson the Last Time

During the previous housing crash, the government was slow to recognize the challenges homeowners were having and waited too long to grant relief. Today, action is being taken swiftly. Just this week:

  • The Federal Housing Administration indicated it is enacting an “immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages” for the next 60 days.
  • The Federal Housing Finance Agency announced it is directing Fannie Mae and Freddie Mac to suspend foreclosures and evictions for “at least 60 days.”

Homeowners Learned their Lesson the Last Time

When the housing market was going strong in the early 2000s, homeowners gained a tremendous amount of equity in their homes. Many began to tap into that equity. Some started to use their homes as ATM machines to purchase luxury items like cars, jet-skis, and lavish vacations. When prices dipped, many found themselves in a negative equity situation (where the mortgage was greater than the value of their homes). Some just walked away, leaving the banks with no other option but to foreclose on their properties.

Today, the home equity situation in America is vastly different. From 2005-2007, homeowners cashed out $824 billion worth of home equity by refinancing. In the last three years, they cashed out only $232 billion, less than one-third of that amount. That has led to:

  • 37% of homes in America having no mortgage at all
  • Of the remaining 63%, more than 1 in 4 having over 50% equity

Even if prices dip (and most experts are not predicting that they will), most homeowners will still have vast amounts of value in their homes and will not walk away from that money.

There Will Be Help Available to Individuals and Small Businesses

The government is aware of the financial pain this virus has caused and will continue to cause. Yesterday, the Associated Press reported:

“In a memorandum, Treasury proposed two $250 billion cash infusions to individuals: A first set of checks issued starting April 6, with a second wave in mid-May. The amounts would depend on income and family size.”

The plan also recommends $300 billion for small businesses.

Bottom Line

These are not going to be easy times. However, the lessons learned from the last crisis have Americans better prepared to weather the financial storm. For those who can’t, help is on the way.

If you have real estate related questions, please reach out to me anytime. I’m just a phone call away!  (734) 623-9442

Dani

The 2 Surprising Things Homebuyers Really Want

The 2 Surprising Things Homebuyers Really Want | MyKCM

In a market where current inventory is low, it’s normal to think buyers might be willing to give up a few desirable features in their home search in order to make finding a house a little easier. Don’t be fooled, though – there’s still an interest in the market for some key upgrades. Here’s a look at the two surprising things buyers seem to be searching for in today’s market, and how they’re impacting new home builds.

Homebuyers Are Not Giving Up Their Garages

The National Association of Home Builders (NAHB) recently released an article showing the percentage of new single-family homes completed in 2018. The data reveals,

  • 64% of new homes offer a 2-car garage
  • 21% have a garage large enough to hold 3 or more cars
  • 7% have a 1-car garage
  • 7% do not include a garage or carport
  • 1% have a carport

The following map represents this breakdown by region:The 2 Surprising Things Homebuyers Really Want | MyKCMEvidently, a garage is something homebuyers are looking for in their searches, but that’s not all.

Homebuyers Are Not Giving Up Their Patios

Patios are on the radar for buyers as well. Community areas are often common amenities in new neighborhoods, but as it turns out, private outdoor spaces are quite desirable too. NAHB also found that,

“Of the roughly 876,000 single-family homes started in 2018, 59.4% came with patios…This is the highest the number has been since NAHB began tracking the series in 2005.”

As shown in the graph below, the number of new homes built with patios has been increasing for the past 9 years. Clearly, they’re a desirable feature for new homeowners too.The 2 Surprising Things Homebuyers Really Want | MyKCM

Thinking about selling your home? Visit  https://www.nexthomevictors.com/cma/property-valuation/ to get an idea of what your home is worth in today’s market!

Dani

7 Reasons to List Your House This Holiday Season

7 Reasons to List Your House This Holiday Season | MyKCM

Around this time each year, many homeowners decide to wait until after the holidays to list their houses. Similarly, others who already have their homes on the market remove their listings until the spring. Let’s unpack the top reasons why listing your house now or keeping it on the market this winter may be the best choice you can make.

Here are seven great reasons not to wait:

  1. Relocation buyers are out there now. Many companies are still hiring throughout the holidays, and they need their new employees to start as soon as possible.
  2. Purchasers who are looking for homes during the holidays are serious buyers and are ready to buy now.
  3. You can restrict the showings on your home to days and times that are most convenient for you. You will remain in control.
  4. Homes show better when decorated for the holidays.
  5. There is minimal competition for you as a seller right now. Over the past few months we’ve seen the supply of homes for sale decreasing year-over-year, as shown in the graph below:7 Reasons to List Your House This Holiday Season | MyKCM
  6. The desire to own a home doesn’t stop during the holidays. Buyers who were unable to find their dream homes during the busy spring and summer months are still searching, and your home may be the answer.
  7. Late fall and early winter make up the “sweet spot” for sellers. The supply of listings increases substantially after the holidays. Also, in many parts of the country, new construction will continue to surge and reach new heights in 2020, which will lessen the demand for your house next year.

Bottom Line

It may make the most sense to list your home this holiday season. Let’s get together to determine if selling now is your best move.

Visit  https://www.nexthomevictors.com/cma/property-valuation/ to get an idea of what your home is worth in today’s market!

Dani