President’s Column, Texas Association of REALTORS®
Terms you can use
Buying your first home can be scary. Not only is the process complicated, but you’re bound to encounter new terminology. Understanding the language is the first step to taking the fear out of the homebuying process.
When you go to purchase a home, your lender will require a property appraisal, and they have a good reason for doing so. Lenders are not likely to loan you $300,000 for a home that is only worth $150,000. An appraisal assists the mortgage lender in assessing the actual value of the property. An appraisal looks at the condition of the house, its location and comparable sales in the same area. As a buyer, you’re usually responsible for covering the cost.
This appraisal – done prior to closing on a property – should not be confused with the annual appraisals that determine how much you will pay in property taxes. Those are done by the local appraisal districts at no cost to you … well, unless you look at the annual tax bill, but that’s a discussion for another day.
Don’t confuse a survey with an appraisal. They are two very different things, and it’s important to understand the functions of both. A survey essentially verifies the home’s boundaries … it is, after all, important to know where your land begins and ends. The surveyor determines whether the house is within the property borders, whether there are any neighbors encroaching upon the property and if any easements on the property may affect legal title. Easements include sewer manholes, drainage ditches, telephone and cable TV boxes. Knowing where the easements are located will also help you if you are considering future home improvements.
Today, government regulations are much stricter than they once were. If you have plans to build a deck or any other addition, you better know how far it is from the drainage ditch. There are stringent regulations that determine how far decks or even swimming pools can be from certain easements, or even the lot line.
Surveys have grown in popularity because many title insurers require one before issuing a title insurance policy. The survey acts as a map, determining precisely the property limits of each neighbor’s home. The last thing that the insurance company wants is a land dispute.
So what in the world is title insurance? It seems like you need insurance for everything these days – your home, your car, yourself. Add title insurance to that list.
If there are any problems associated with your property’s title, this insurance plan protects against loss. If you are purchasing an older home, the title is likely to have changed hands quite a bit and the land that it sits on, perhaps even more. What do you think would happen if Farmer Jones showed up at your door one day and demanded that you get off his land? You’d probably tell him to get lost, but he may really have a case. Maybe somewhere down the line a signature was forged or the seller failed to sign in the appropriate box. That could mean trouble for both you and the lender.
Title insurance covers the injured party, which in this case, would be the lender. The policy protects the lender up to the amount of the mortgage, but it doesn’t protect your equity in the property. To protect your equity, you would need a supplemental policy called an owner’s title policy, which covers the full value of the home.
Here in Texas, it won’t do you any good to shop around for an competitive title insurance policy. The state of Texas sets the prices for all its insurance carriers. But your Texas Realtor can help you find one that works for you.
Ask for help
These are just a few terms that you should know before diving in to the homebuying process. The real estate world is full of industry-specific language and tons of abbreviations – it can be overwhelming and intimidating.
Your Texas Realtor is here to guide you along the way. Don’t ever be afraid to ask questions. You will feel much more comfortable about buying that first home if you have a basic knowledge of the terminology and the process.
For more tips on buying or selling property in Texas, I invite you to visit TexasRealEstate.com.
<strong>Submitted by Amy DuBose
Association Executive – San Marcos Area Board of REALTORS®</strong>