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CHECKLIST:
What You Should Know
. . . Before Making Your Decision!
In the last issue of LAND RUSH,
we covered topic 8 of 11 suggested questions you should ask before
making your land purchase decision. In this issue, we'll cover the
ninth one - about closing costs - in depth.
9. What closing costs are involved
to complete a land purchase?
As the purchaser of a tract of land, certain closing
costs and other expenses will become your responsibility. The following
items cover most of them.
Title Search – Never, ever purchase a property
without a title search. This is a search of all public records,
performed by your attorney, to determine that you are receiving
clear, marketable “fee simple” title to the property.
The attorney will charge a fee for this title
examination. It is wise to ask for an estimate of this fee up front.
Title Insurance – This type of insurance
protects you against any claims against your ownership after the
property is purchased and the deed recorded. Title insurance will
pay for an attorney to defend your title at no cost to you. Furthermore,
if by some twist of fate someone else has an ownership claim to
your property, the title insurance will pay you up to its face value
for damages caused by the title defect.
If you have a survey on the land you are purchasing,
the title insurance will also defend you (or pay) against adjoining
landowners who may claim part of your land. Title insurance is cheap
protection against possible claims. Again, your attorney can advise
the cost.
Survey - In the North Carolina mountains, sellers
rarely agree to pay for a survey. Nevertheless, having a current
survey is vital to understanding what you have purchased. It is
also required in order to gain the title insurance protection mentioned
above.
Surveyors usually charge in one of three ways:
1) a contract price for a finished survey, 2) a price per foot for
each foot of perimeter boundary, or 3) a price per acre. The cost
of the survey is normally collected at closing. Before authorizing
a survey, confirm the cost.
Loan Origination Fee – This is a fee normally
charged by a commercial lender for making the loan. It is usually
about 1% of the amount being borrowed. When paying cash for a property
or financing it through the seller, there is no loan origination
fee.
Appraisal Fee - This fee covers the cost of appraising
the value of the property for a commercial loan. When paying cash
for a property or financing it through the seller, there is no appraisal
or appraisal fee.
Credit Report – When borrowing from a bank
or other commercial lender, they will run a credit report for which
you will be required to pay up front. When paying cash for a property
or financing it through the seller, a credit report is not required.
Property Tax Proration – Property taxes
are prorated to the date of closing. For example, say the property
taxes for 2003 are $720.00. Your land purchase takes place on July
31, 2003. The seller would be charged for the first 7 months of
taxes, or $420.00. As buyer, you would own the property for 5 months
in 2003 and owe for 5 months of taxes, or the remaining $300.00.
This amount is payable at closing.
Recording Fees – Documents to be recorded
at the buyer’s expense include the deed, and the deed of trust
if any. The Register of Deeds charges a per- page recording fee.
Although the attorney does the actual recording of all documents,
the buyer is charged this fee at closing.
PAST TOPICS INCLUDE:
(click on a topic to read about it)
INTRODUCTION
1.
Has the property been surveyed recently?
2.
What is the topography of the property?
3.
Is the property accessed by public road or right-of-way?
4.
How much are the property taxes each year?
5.
Are there any restrictive covenants or zoning on the property?
6.
Will sellers finance the property or do they expect cash?
7.
How much earnest money should you offer?
8.
What, if any, utilities are provided?
UPCOMING TOPICS WILL INCLUDE:
10.
Are there any hunting leases in effect on the property?
11. Are there easements or rights-of-way
for the benefit of others?
RETURN
TO CURRENT ISSUE OF LAND RUSH
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