Who Pays Agricultural Transfer Taxes

Ag taxes remain a confusing aspect of the real estate transaction for many. It is a 5% tax that can take buyers or sellers by surprise at the settlement table.
This tax occurs when a (usually) larger trac of farmland is divided into smaller lots. Because the property (in most cases) is being taken out of Ag to residential the Ag tax applies.
Please see the below link for a clearer understanding of the tax. Also see the State Ag website in your jurisdicition.

Truth is out about real estate sales

For weeks I have seen the real estate market in the Washington DC area slowing. During that time I have read many articles that tell us, it's business as usual and even that sales are continuing their increase.
When prices rise and rise and rise like they have in the past couple of years, something eventually has to give. Middle income americans are in a tough spot. Purchasing their first home is becomming the american nightmare, not the dream. I believe that we are going to see the income to mortgage payment ratio become much, much higher than the previous norm of 25-35%. This puts peoples finances to the test. With gas prices,static income increases and other rising costs, home ownership is going to be more elusive to the middle income american.
Take a moment and read the washington post article regarding home sales in the area.

http://www.washingtonpost.com/wp-dyn/content/article/2005/11/20/AR2005112000949.html

Home Prices Up or Down?

There are so many different reports regarding current prices in the market. Some are saying the market has died. "We need buyers" is something I often here. There are more open houses, prices being reduced and creative marketing being done by agents. Personally, I have seen inventories rise sharply in parts of Southern Maryland. Homes are staying on the market longer and many sellers are reducing their prices. Things are still moving. The market has not died. It has definately slowed. I say this because I hear this from many, many agents who are on the street everyday. I believe part of this is seasonal and will adjust some in the early spring. Some authoritative sources say that things are still very strong such as the below story.

Home-Price Appreciation Stays Hot in Most Metro Areas

WASHINGTON (November 15, 2005) – Strong annual increases in median existing-home prices were common in most metropolitan areas during the third quarter, according to the latest report by National Association of Realtors®.

The association’s third-quarter median existing single-family home price survey, covering changes in 147 metropolitan statistical areas,* shows 69 areas with double-digit annual price increases. Six metros had small price declines.

The national median existing single-family home price was $215,900 in the third quarter, up 14.7 percent from the third quarter of 2004 when the median price was $188,200. The median is a typical market price where half of the homes sold for more and half sold for less. Ninety-seven metros – two-thirds of the total – experienced increases greater than the U.S. historic average of 6.4 percent.

David Lereah, NAR’s chief economist, said the pace of price appreciation in the third quarter is far from being normal over time. “These historically high home price gains are the simple result of more buyers than sellers in the market,” he said. “The good news is that inventory levels are improving, and housing supply will come close to buyer demand in 2006. In other words, we expect a healthy and more balanced market next year.”

Since 1968, home prices generally have risen between 1 and 2 percentage points faster than the overall rate of inflation; the historic average price gain appears high relative to inflation because there was a period of rapid inflation in the U.S. during the 1970s and early 1980s.

NAR President Thomas M. Stevens explained what buyers and sellers generally can expect in the coming year. “Improvements in inventory in most areas should take pressure off of home buyers to make snap decisions, or find themselves in a competitive bidding situation,” said Stevens, senior vice president of NRT Inc. “This calmer real estate market will create a more level environment for buyers in weighing options to invest in the American dream of homeownership. Sellers will enjoy very healthy gains on the value of their home, but should expect annual increases to be much closer to historic levels going forward.”
Reprinted from www.realtor.org

Why pay loan discount points?

First, the difference between a discount point and loan origination fee. The loan origination fee is a fee charged by many lenders as there fee for making and preparing the loan. Some lenders hide this fee by charging a slightly higher interest rate. You are paying the mortgage company something, somehow, some way to put together a loan for you. Pay me now or pay me later is as true now as it always was.

Now points are another matter. Points, also known as discount points are charged for several reasons. You as the consumer can ask you lender, "what will it cost me to lower my interest rate"? You may be asked to pay one point to lower your interest rate 1/4 %. That will cost you 1% of the total loan amount. The next question is, does it pay to pay a point. The below example shows the break even point on a 200,000 loan for 30 years. If you buy the rate down 1/4% it would cost (in this example) .875% of the loan amount. The rest of the story is illustrated in the below example.

The other reasons points are charged are as follows; You may use a mortgage broker instead of a direct lender and the broker wants to make a profit for handling the loan. They may charge you a loan origination fee of 1% and a 1% discount point. If you have some credit issues sometimes lenders will charge several points to offset their risk.


Fixed 30 Years with Max Discount Points
Fixed 30 Years with Lowest Discount Points
Interest Rate
6.5%
6.75%
Discount Points
0.875
0
Discount Points($) Paid at Closing
$1,750.00
$0.00
Monthly Principal and Interest Payment
$1,264.14
$1,297.20
Effect on Closing Costs and Monthly P&I PaymentThe Fixed 30 Years with 0.875 discount points loan requires $1,750.00 additional funds to be paid at loan closing but reduces your monthly payment by $33.06.
Breakeven pointIn 4 Years, 4 Months the higher monthly cost ($33.06) of the Fixed 30 Years with 0 discount points loan equals the higher upfront cost ($1,750.00) of the Fixed 30 Years with 0.875 discount points loan.
The better loanThe Fixed 30 Years with 0.875 discount points loan, is better because you plan to stay in the house past the breakeven point.
Comparison of Cumulative Interest and Out-of-Pocket CostsOver a period of 6 years, choosing the loan with 0.875 discount points will save you $1,266.67 in monies paid toward interest and/or discount points. The loan with 0.875 discount points saves you $630.33 in out-of-pocket costs.

above example from Countrywide Mortgage

Please feel free to call me at 410-507-2909 with any of your real estate questions.

What is and who needs Owners Title Insurance?

Title insurance is an insurance policy protecting you, the buyer, from past and in some cases future conditions that could affect clear title of your home. See the link below on 70 ways to loose your property.

There are owner policies and lender policies. At settlement you will most likely be required to pay for the lender,s policy. This, as it implies protects the lender from defects and other clouds on the title of your home. If you were to loose your home due to a large cloud on the title the lender would be protected for the loan amount but you may not.

What types of things are we talking about? Standard policies cover things like forgery, deeds not properly on record, lack of access rights to a property, undisclosed but recorded prior mortgages and more. Many companies offer extended and upgraded coverage if requested. Upgraded coverage may cover things like post settlement forgery and more.

It’s best to do your research and make an informed decision regarding title insurance coverage. Click the link below to learn more about title coverages.

As always, please feel free to contact me with any of your real estate related questions.

http://www.firstam.com/fatic/html/cust/1150.html