| Q. What is a loan "lock
in?"
 A. Mortgage rates go up and down daily - they "float"
with the market. Many borrowers are concerned that during the period
between when they apply for a mortgage and when they close on a house
that mortgage rates will rise and that the house will less be
affordable (or maybe not affordable). So, to assure that they
get the rate available at the time of application, many borrowers
"lock-in" the rate. Some lenders provide lock-ins
without cost, others have a charge. The longer the lock-in, the
greater the risk to the lender, and so the more likely a fee.
The best lock-ins place a ceiling on both rates and points. A lock-in
that only caps rates and says nothing about points exposes a borrower
to very high fees should rates go up. Some lenders have lock-in
programs that allow borrowers to "float down" their rate
lock. This means that if rates fall prior to closing, the borrower can
re-lock at the lower rate. Speak with lenders for specific
programs and options.
1999 Peter G. Miller, All Rights Reserved.
Q. What is radon?
A. Radon is a naturally occurring radioactive element that exists
as a gas dissolved in some groundwater. It can be released to the air
when you run water inside your home. Well water usually contributes
only a small fraction of the total amount of radon in indoor air.
Radon is found in some homes that in sufficient concentrations can
cause health problems. As a prospective buyer, you may want to have
the home inspected if you suspect a health hazard.
Q. What is the value of a survey?
A. Surveys have great value because they show where the property
is, where improvements are located, if there are any encroachments, if
any improvement are on someone else's property, how much space is
available for possible expansions, etc.
1999 Peter G. Miller, All Rights Reserved.
Q. What is an "encroachment?"
 A. When we look at a property, we often assume that the property is
what we see - perhaps an area contained within a fence of backing up
to a neighbor's garage. But, what we see may not be correct. The fence
and the garage may both be "encroachments," protrusions onto
our land from a neighbor. This may not sound like a big problem
- except that we are buying a complete parcel of property and paying
taxes on it each year. A survey is generally necessary to
determine property boundaries and the existence of an
encroachment.
1999 Peter G. Miller, All Rights Reserved.
Q. We made an offer on a home and paid for a
structural inspection. The home did not pass. Shouldn't the owner pay
for the structural inspection?
A. No. Unless you have a provision in the sale agreement requiring
the owner to make such a payment, the cost of an inspection is your
obligation. The fact that the house did or did not
"pass" is not the issue. A service was performed and that
service helped you gain a better understanding of the property and its
condition.
1999 Peter G. Miller, All Rights Reserved.
Q. What is a "CMA?"
A. When owners offer a home for sale they logically want the best
possible price and terms for their property. A "comparative
market analysis" or "CMA" is an estimate of value
prepared by a real estate broker or salesperson that shows recent past
sales for like properties and suggests a possible asking price for the
owner's property.
1999 Peter G. Miller, All Rights Reserved.
Q. What stays with a home and what goes?
A. In general terms, items that are physically attached to and
intended to be part of a home are expected to stay. Example, if there
is a built-in dishwasher it should stay - if the sellers take it there
would be a large hole in the kitchen cabinets. Items that stay are
called "fixtures" but it is sometimes difficult to determine
what is or is not a fixture. Moreover, one can "create" a
fixture in the purchase offer by saying that as a condition of the
deal, the backyard swing set (or whatever) will stay. The best
approach to fixtures is to list what stays in the purchase offer. For
details, speak with a broker or attorney, as appropriate.
1999 Peter G. Miller, All Rights Reserved.
Q. How quickly must I apply for a loan?
A. Many sale agreements require buyers to apply for a mortgage
within a specific time period, say 7 days after the contract is
signed. This is a negotiable time, however, and can be any period
agreeable to both parties. This is an important matter because
if an application is not made, then a buyer may be in violation of the
sale agreement. A violation of the sale agreement, in turn, could be
grounds to forfeit the deposit. When you meet with a lender, be
certain to obtain a letter stating that you met and showing when.
Immediately provide this letter to the seller's broker in the manner
required by the sale agreement.
1999 Peter G. Miller, All Rights Reserved.
Q. What is title insurance?
 A. Every property has a history of ownership outlined among
local public records. When a property is sold, this history is
reviewed to assure that the current seller has title and the right to
sell the property. The catch is that property records may not
record all possible title claims. For instance, a prior owner may have
been a drunk, drug user, bigamist, or lacking the mental capacity to
sell a property interest. A lien against the property may have been
missed in the title search. Because of these and other problems,
lenders require that buyers purchase title insurance (except in
Iowa).
1999 Peter G. Miller, All Rights Reserved.
Q. We bought a home with 10% down using
private mortgage insurance (PMI). Over the years we have paid down the
mortgage and the value of our home has risen. Do we still need PMI?
A. IN the usual case, buyers who purchase with 20% down or more do
not need PMI. For those who have PMI, there are often monthly costs
for as long as the loan remains in place. New federal rules
concerning PMI provide that when a loan balance is paid down 22% from
the original amount, lenders must agree to cancel PMI. However, there
are several caveats. First, the rule does not apply to
"high risk" mortgages. With such loans PMI can be required
for 15 years - more time than most loans are outstanding.
Second, many lenders will allow you to cancel PMI when you have 20%
equity in a home. Such policies can save years of PMI payments. 1999
Peter G. Miller, All Rights Reserved.
Q. What is revolving liability?
A. A credit arrangement, such as a credit card, that allows a
customer to borrow against a pre-approved line of credit when
purchasing goods and services. The borrower is billed for the amount
that is actually borrowed plus any interest due.
Q. What is meant by right of first refusal?
A. The right of first refusal is a provision in an agreement that
requires the owner of a property to give another party the first
opportunity to purchase or lease the property before he or she offers
it for sale or lease to others.
Q. What is rent loss insurance?
A. Insurance that protects a landlord against loss of rent or
rental value due to fire or other casualty that renders the leased
premises unavailable for use and as a result of which the tenant is
excused from paying rent.
Q. What is rate-improvement mortgage?
A. A fixed-rate mortgage that includes a provision that gives the
borrower a one-time option to reduce the interest rate (without
refinancing) during the early years of the mortgage term.
Q. What is a REALTOR®?
A. A REALTOR® is a real estate broker or sales associate who holds
an active membership in a local real estate board that is affiliated
with the National Association of REALTORS®
Q. What is the benefit of working with a
REALTOR®?
A. REALTORS® must abide by a specific Code of Ethics and are bound
to fiduciary duties to clients. REALTORS® also have the option of
participating in the local association's multiple listing service
(MLS).
Q. What is an MLS?
A. An MLS is a compilation of properties by competitive brokers who
share listing information with one another to better serve their
buyers and sellers.
Q. What is meant by the term
"groundwater"?
 A.
As the name implies, groundwater is found beneath the land
surface - in cracks and crevices in bedrock, or in pore spaces, which
are the small spaces between soil or rock particles in sand and gravel
deposits. Surface water becomes groundwater when it seeps downward to
the saturated zone. The saturated zone begins at the point where the
pore spaces and cracks in the soil, sediment, or rock become
completely filled with water. The top of this zone is called the water
table. From the Well Management Section of the MN Dept of Health
Q. Why worry about water quality?
A. The quality of Minnesota groundwater as it relates to human
health is generally excellent. Bacteria, viruses, and many chemical
contaminants are removed or filtered from the water as it moves
downward through silt, sand, and gravel deposits. Observing minimum
isolation distances (also known as setback or separation distances)
from contamination sources and well construction standards required
under MN Rules Chapter 4725 (the "Well Code") - will help
ensure that the quality of the well water remains high. From the Well
Management Section of the MN Dept of Health
Q. Who may construct a well?
A. In Minnesota, contractors who construct, repair, or permanently
seal (removing a well from service and completely filling it with
grout) water wells must be licensed by the Minnesota Department of
Health (MDH). In addition to full-service well contractor licenses,
the MDH also issues limited licenses to persons who perform only
certain types of work, such as installing pumps or sealing wells. From
the Well Management Section of the MN Dept of Health
Q. Can I construct my own well?
A. You may construct your own well without a license if you own or
lease the property where it will be constructed - and the well will be
used 1) for farming or other agricultural purposes, or 2) to supply
water for your personal residence. The well must be constructed in
accordance with MN rules and the proper notification must be filed.
From the Well Management Section of the MN Dept of Health
Q. What is the well disclosure statement?
A. The seller provides a written Well Disclosure Statement to the
buyer before the purchase agreement is singed. This statement must
include the legal description of the property, a map showing the
location of each well on the property, and a listing of each well and
its current status (in use, not in use, or sealed by licensed well
contractor. From the Well Management Section of the MN Dept of Health
Q. When is a water test required?
A. When a new well is constructed, MN law requires that the water
be tested for coliform bacteria and nitrate. The person who constructs
the well is responsible for obtaining a sample and having it tested by
a certified laboratory. From the Well Management Section of the MN
Dept of Health
Q. How often should a well be tested?
A. A water test tells you only about the water quality at the time
the sample was taken. Quality of the water may vary during the year,
especially after heavy rainfall or melting snow. From the Well
Management Section of the MN Dept of Health
Q. What is a compliant septic system?
A. In 1996, the State of Minnesota adopted "Chapter
7080", the minimum technical standards for Individual Sewage
Treatment Systems (ISTS). To residents of Crow Wing County, this means
that an existing septic system shall require a compliance inspection
when any on the of the following condition occur: 1.) Upon application
for a Zoning Permit and the Certification of Compliance is more than 5
years old or the Compliance Inspection Form is more than 3 years old.
2.) Within 90 days of filing a Certificate of Real Estate Value or
Warranty Deed or Trust on property that does not meet the requirements
in 1) above. 3.) For necessary disclosures; or 4.) When the Planning
and Zoning Office may deem appropriate. From the MN Dept of Health |
