There it is – in black and white – right on the DC Homestead Application form: "Non-US citizens are generally not eligible to be considered a DC domiciliary unless they possess a valid Permanent Resident Alien Card."

That is, green card holders and U.S. citizens domiciled in the District of Columbia are eligible.

Recently, this office has received many questions from World Bank employees and other G-4 visa holders about whether they qualify for the Homestead Deduction.

According to the Homestead Deduction requirements a G-4 visa holder may be considered a DC domiciliary if he/she is eligible to convert his/her visa to permanent resident status by right.

As a G-4 visa holder, you can apply for permanent residence as a special immigrant if you are retiring and

1) have resided in the U.S. for at least 3.5 years before you adjust status; and
2) have served with your organization for at least 15 years.

Initially we looked at how title agents receive the majority of the title insurance premium as commission because take the hit should a title insurance claim arise down the road. In addition to title agents receiving a commission from the title insurance premiums, it is a little talked about fact that real estate brokers receive the bulk of title insurance premium commissions for the referral of business to a title company.

Such an arrangement is known as an "Affiliated Business Arrangements" or "ABA.

Through an ABA, a real estate agent refers her homebuyer to the affiliated title company. The title company, in exchange for the real estate agent referring the deal, shares upwards of 50 percent of the title insurance premium commission. On the average District of Columbia transaction, this means that the real estate broker is earning approximately $1,100 from the title insurance premium paid by its homebuyer.

On its face, the arrangement is nothing short of an old-fashioned kickback arrangement. However, thanks to a strong lobby by national real estate associations, federal regulations provide a specific exemption making it a "legal kickback" which allows real estate brokers to profit on the backs of their homebuyers (whom they often represent through buyer/broker agency agreements).

It is the homebuyer’s legal right to choose her own title company and, the ABA kickback arrangement, is yet another reason why it’s important for the homebuyer (the consumer) to shop for a title company.

By choosing an independent title company (i.e., a title company that does not kickback money to the real estate broker), the homebuyer is much more likely to pay less for settlement services. An independent title company tends to be more competitive on settlement fees simply because they don’t have to share their revenue with the referral source.

If a real estate agent refers you, the homebuyer, to a title company you should ask the agent the following questions: "Is this title company affiliated with your brokerage?" or "Does this title company share its profits with your brokerage?" If the answer to either question is "Yes," then I would strongly encourage the homebuyer to shop around and compare pricing against an independent (un-affiliated) title company.

A very quick Google search for a comparison quote will likely result in saving a lot of dough.

Looking for an independent title company? Federal Title & Escrow Company is independent of any affiliations and does not share its revenues with referral sources. Instead, we pass along substantial savings to the homebuyer.

Get a quote and compare our pricing with the title company referred by your real estate agent.

The previous installments of our series on deed transfers revolved around joint tenants and LLCs in the District of Columbia. Today we will switch gears by taking a look at deed transfers as they relate to spouses and domestic partners in Montgomery County, MD. 

Keep in mind that this is solely for Montgomery County – each county in Maryland has different rules.  All of the scenarios below are solely for changing the title of the property – these transactions are not part of a refinance or a modification.

Click beyond the jump to continue reading.

This past November my business partner, Joe Gentile, blogged about how household income factors into the DC Tax Abatement program. However, since I received two inquiries just this past week from real estate agents, I thought it would be useful to re-visit this subject.

Yes, it’s hard to believe but true — Bill Gates (worth $56B) could buy a DC house for his son and receive a closing cost credit from DC equal to 1.1% of the sales price AND not have to pay real estate taxes for five years after closing. Let’s chalk it up as an unintended consequence of a DC law. Ironically, the statute (or law) is entitled "Lower Income Homeownership Tax Abatement" and is intended to assist lower income citizens with the purchase of a home.

Under the law, if Bill Gates buys a DC property, with his son added to the title as a co-owner, for a purchase price of less than $367,200.00, and his son earns an income of less than $59,040.00, then the property will qualify for the program.

The benefits of the program provide an exemption from the 1.1% recordation tax; allow the seller to credit the Gates family with the 1.1% transfer tax (otherwise and typically paid by the seller to DC); and exempts the property from real property taxes for a five-year period.

Under the above scenario, Bill Gates would simply need to sign a "Non-Occupant Affidavit" to accompany the program application stating that while he is a co-owner (along with his son) of the property, he will not be occupying or living at the property.

Seem fair? You decide.

Editor's Note: This article was updated on 17 December 2012.

The cost of title insurance continues to increase. In just the last five years, due to a massive influx of title claims relating to the nation’s housing crisis, title insurance premiums have increased in Maryland, the District of Columbia and Virginia by an average of 15 percent.

The larger premiums, reflected on the HUD-1 Settlement Statement, have become more eye-popping to the homebuyer and, as a result, they have become the subject of much discussion of closing costs in the news.

Let’s talk about who is pocketing those premiums and why? It’s no secret that a title agent or settlement company keeps anywhere from 70 percent to 85 percent of the premium as a commission with the balance paid over to the underwriter (i.e., First American, Chicago Title, Stewart Title, Fidelity National, et. al.).

Critics, in the name of consumer protection, argue that the underwriter’s willingness to pay such high commission splits and retain so little is proof that the title insurance industry is over-priced.

The underwriter is willing to pay over the majority of the title insurance premium as a commission to the agent because it’s the agent who handles nearly all of the title underwriting duties in addition to taking on most of the liability. That is, the title agent is charged with the duties of ordering and reviewing title, certifying real property taxes and issuing the title commitments and policies to the respective homebuyers and lenders.

More importantly, the agency agreement between the title agent and the underwriter shifts the liability for errors and omissions to the title agent. In other words, except for governmental recording errors or matters adverse to title not appearing as a matter of public record, it is the title agent or settlement company that ultimately pays for the title insurance claim.

Looking at this from another perspective, if not for title insurance, the homebuyer would pay an amount comparable to the cost of the title insurance premium in the form an Attorney’s Opinion/Title Guaranty Letter and/or higher settlement fees in order to account for the liability resting with the title agent.

So, to those critics of title insurance, I would agree that title insurance is pricey but not "over-priced" compared to other alternatives. After all, if there are alternative products to title insurance that are superior in terms of both affordability and quality, then I believe such products will be borne out by the marketplace.

The Department of Veterans Affairs Loan Guaranty Program recently published county "limits" to be used for VA Loans effective January 1, 2012. Please note, these limits do not reflect a maximum amount that an eligible veteran is permitted to borrow, but rather, reflects the VA’s maximum guaranty amount for a particular county.

The maximum VA guaranty amount for loans over $144,000 is 25 percent of the 2012 VA limit. For example, an eligible veteran may borrow up to $625,500 to purchase a property in Washington, DC (2012 VA limit), with the VA guaranteeing 25 percent of the loan amount, or approximately $156,375.00.  

These amounts are down sharply from the 2011 VA limits.

The limits listed below are for some counties in Maryland and Virginia, as well as for the District of Columbia. Here's a complete list of the county limits for 2012. [Please note, if your county is not listed on the county limits chart on the VA website, the 2012 limit is $417,000.]

When someone says "no consideration" deed, what does it mean? Does it mean no transfer and recordation taxes?  No. It actually means that the property is being transferred via deed without money exchanging hands. 

Not all no consideration deeds are exempt from transfer and recordation taxes. There are a number of situations where a "no consideration" deed is appropriate and some of them are as follows:

1. Transfer between husband and wife;

2. Transfer between individual and a revocable trust;

3. Transfer between Personal Representative of an Estate and the beneficiaries of the Estate;

4. Transfer from individual(s) into an LLC;

5. Transfer from LLC into individuals;

6. Transfer from parents to children;

7. Transfer from children to parents;

8. Transfers pursuant to a divorce decree or settlement agreement;

9. Transfer pursuant to a termination of a domestic partnership;

10. Transfer between domestic partners;

11. Inter-familial transfers i.e. grandparents to grandchildren or sisters to brothers, etc; and

12. Transfer pursuant to a termination of a Partnership or Corporation.

This just gives an idea of situations when a "no consideration" deed may be used. It is very important to check your jurisdiction to see if there are any transfer and/or recordation taxes if you choose to do this type of transfer. 

In cases where transfer/recordation taxes are likely, the tax assessment for the property is typically used to determine the amount of taxes owed. 

It is really important to consider all of the factors and talk to a professional when you are deciding how your property is going to be transferred.

Each week this office receives several inquiries from homeowners seeking to transfer title to their property.

The scenarios include transferring title between spouses, between ex-spouses, between and among family members, transferring title to a revocable trust, transferring title to a LLC or corporation, and the list goes on. Their two main questions are:

1. Who do I hire to prepare and record the deed and transfer forms?
2. How much will it cost me?

The first question is simple since you should hire a licensed real estate attorney or a local title company to handle a title transfer.

The second question is not simple and, in fact, can be very complicated when determining such things as “no consideration” vs. “consideration” transfers.

In this series of blogs on title transfers, the attorneys here at Federal Title will attempt to address the most common – and some of the not-so-common – title transfer scenarios.

Scenario 1: Joint tenants, unmarried

Seemed like a match made in heaven – first semester property law class Sam had Sue at "Hello." Following three years of law school, the love birds both landed big law firm jobs in DC.

Now seemed like the perfect time to live together and why not just buy a condo together; after all, it would be cheaper than renting. They buy a condo together as joint tenants and lived happily until, two years later, a break up ensued.

Sue wants out of the relationship and simply wants to gift her ownership and whatever down payment she originally contributed to Sam. In other words, she wants to transfer her ownership interest to Sam, receiving no consideration.

This is one of the most common scenarios we encounter. In DC, such a transfer is subject to transfer and recordation tax. If Sue and Sam were married or otherwise related as siblings or parent/child, then this transaction would be, according to DC law, exempt from the transfer and recordation tax.

Because they are unrelated, the tax will be imposed as follows using an assessed value assumption of $500,000.00 for the condo unit:

In the next segment, we will take a look at deed transfers in Washington, D.C. as they relate to a Limited Liability Company, or LLC.

Refunds are always nice — even if it is just a refund of an overpayment, it still feels like new money.

Sometimes certain circumstances arise that can lead to a homeowner paying his property taxes to the county twice. Usually a double payment of taxes to the county is caused by one of the following three reasons.

This article will help you obtain a refund (unless you prefer to donate your money to the county tax fund).

1. The homeowner received a tax bill from the county in July, forgot that the lender was escrowing for taxes, and sent in a check for the tax bill. This scenario is most common in first time homeowners.
2. The homeowner sold the property, but the lender went ahead and paid the property tax bill before it received the loan payoff from closing. This scenario is most likely to occur if the closing of the sale took place in September or December (which is when the property taxes are due in Montgomery County for a principal residence).
3. The homeowner refinanced the property and paid the property tax bill at closing, only to have the payoff lender send in a check to the county at the same time before it received the loan payoff from closing. This scenario is also most likely to occur if the closing of the refinance took place in September or December.

If you fall into one of the above three categories, you should apply to the county for a property tax refund. To obtain a refund from the Department of Finance for Montgomery County, Maryland, you must submit a written refund claim.

Montgomery County provides a “Property Tax Refund Claim Form” on its website to assist with the process.

To obtain a refund, you will also need to provide copies of documentation with the claim form. These will differ depending on which of the three scenarios above apply. You will need to submit:

• Your cancelled checks front and back if paid by check; or your credit card statement if paid by credit card; or your bank statement if paid by an electronic transaction,
• The Mortgage/Lender escrow account analysis or Form 1098 (this can be obtained by contacting the lender who paid the taxes and asking him to send you an escrow analysis form),
• The Settlement Sheet (HUD-1) if the extra payment was part of a settlement transaction.

Once the form is completed, it should be either faxed to 240-777-8947 or mailed to Treasury Refund Claim, 255 Rockville Pike, Suite L-15, Rockville, Maryland 20850.

My suggestion would be to make sure to keep a fax confirmation or to send the letter in a format that will offer you proof that it was received (i.e. certified mail).

If there's one point we really like to drive home around here, it's that consumers should shop title companies in the same way they shop for a lender or real estate agent. The savings could be in the range of thousands of dollars.

When our attorneys aren't busy providing expert settlement services to our clients, they are spreading the Federal Title gospel to all who will listen. Here's a sample of some news stories we got to weigh in on this year:

New refinancing options for lower title fees
Washington Post
In the Washington area, Federal Title & Escrow provides as much as to $1,000 off total closing costs for home buyers who use its online “Real Credit” software platform for their transactions.

Shop for title insurance and closing services
Fox Business
If you have already been shopping for a real estate agent, a lender, a home and a moving company, you may be feeling shopped out. Before you put your feet up and relax, you should take the time to shop for title and closing services.

Shopping for title insurance can save you bundles
HSH.com
Whether you're buying a home or trying to refinance your mortgage, you should expect your title insurance to be among the more expensive items you'll have to pay for to get your new mortgage. However, you can save a bundle by shopping around for the most cost-effective policies that will protect you and your investment.

Buying a home? Shop around for title insurance
Washington Examiner
It may not seem like that much when you put that number next to the $400,000 you're going to owe the bank. But when you're paying those up-front closing costs, it can help ease that immediate burden.

New DC title insurance shortcomings
Washington Post
[T]he new law does not require settlement services providers to disclose their fees in writing or publish them on their Web site. The new law creates a huge disincentive to continue to publish settlement fees and costs since those disclosures could later be used by the District as evidence that those fees were not applied in all similarly situated settlements.

Get the refi that the lender promised
Bankrate.com
Section 1300 on the HUD-1 lists "additional settlement charges." It's a good idea to ask what these fees are for, and whether they are necessary. Ewing suggests that consumers go online to check for average closing cost fees at other local title companies to make a comparison.

Closing on your home: Are you walking in blind?
HSH.com
Homebuyers should stay in close touch with their real estate agent and lender in the days leading up to the closing to be certain all the necessary documents and financial arrangements for the mortgage are in place.

Who owns the foreclosure you bought?
Fox Business
Although most buyers have little to fear, the recent chaos surrounding sales of distressed properties highlights the importance of protecting yourself when purchasing a foreclosure.

Sponsored: 10 things you should know about closing costs
DC Urban Turf
Closing costs will inevitably take a large bite out of your wallet at the settlement table — anywhere from a few to several thousand dollars. The information in this article will help you better understand closing costs and teach you the right questions to ask your title or real estate agent.

Our blog is one of our best tools for communicating with our clients. We use this space to answer commonly asked questions and address industry changes that may impact you, the homebuyer (or the homeowner who wants to refinance). It's where we write about what we know best: the closing process.

The following is a list of the Top 10 most popular articles on our blog in 2011. Please feel free to leave suggestions for future blog posts in the comments below. 

Several times a month, attorneys at Federal Title are presented with the following scenario:

My buyer wants to add his wife/girlfriend/parent/child to the deed at closing. Can you just add him or her to the deed when we come in to sign?

The answer to this question is no, and there are multiple reasons why not. Click beyond the jump for three of them.

Recently, I stumbled upon a posting by a Washington DC-based real estate agent proclaiming that homebuyers need not shop for title insurance since title insurance rates are uniform.

While it’s mostly true that title insurance rates in DC, Maryland, and Virginia are the same, the settlement fees charged by title companies are not.

In fact, a recent study comparing the settlement fees charged by title companies in vary by as much as $1,180; disproving the notion that homebuyers shouldn’t bother shopping for title services.

With a simple Google search using “closing costs “ or “title insurance” in DC, Maryland, or Virginia, a homebuyer will find several title companies willing to provide an online guaranteed quote for title services.

Most of these title companies (a.k.a, settlement service providers) promoting transparency by offering an online guaranteed closing costs quote are independent title companies; meaning that they are not owned by or affiliated with a real estate brokerage.

In other words, the independent title company is often willing and able to offer better pricing to the homebuyer since they don’t share their revenue with a referral source.

My best advice to a prospective homebuyer: Shop for a title company just like you shop for your mortgage – It’s your right to choose a title company.

The DC Office of the Recorder of Deeds has taken steps to simplify its fee structure, which will make it much easier for title companies and homebuyers to estimate recording fees.

Effective January 1, 2012, the Office of the Recorder of Deeds has changed the fee structure for recording documents and obtaining copies of documents.

This is a welcomed change as it will remove the confusion and uncertainty of recording fees in the District of Columbia.

Currently, recording fees are based on the number of pages that are submitted for recording. For example, the cost of recording a Deed is as follows:

• First two (2) pages = $20.00
• Each additional page = $7.00
• Plus a $6.50 surcharge

Since a Deed is typically two pages, the typical cost for recording a deed in DC is $26.50. However, depending on who prepared the Deed and how it was prepared, a Deed could be significantly longer.

A great deal of uncertainty typically arose when recording a Deed of Trust. The cost of recording is calculated in the same manner:

• First two (2) pages = $20.00
• Each additional page = $7.00
• Plus a $6.50 surcharge

While a standard Deed of Trust is typically 15 pages, making the cost of recording $117.50, a Deed of Trust can be significantly longer depending on the riders and attachments.

For example, an adjustable mortgage for a condominium unit that is being rented could easily be 27 pages, making the Deed of Trust recording fee $201.50.

The problem is that until the final closing documents are issued by the lender, there is no way for the title company to know how many pages need to be recorded. Consequently, recording estimates from title companies often ranged considerably.

The DC office of Tax and Revenue lists Recorder of Deeds fee charges on its website.

The office of the Recorder of Deeds has made a positive move to resolve this ambiguity. As of January 1, 2012, the cost for the recording of a deed will be $31.50 ($25.00 for the Deed plus a $6.50 surcharge), while the cost for recordation of any and all deeds of trust, regardless of the number of pages, will be $156.50 ($150 for the Deed of Trust plus a $6.50 surcharge).

Consequently, for a purchase transaction taking place after January 1, 2012, the typical recording fee (Line 1201 on the HUD-1) for a purchaser obtaining a mortgage will be $188.00.

The DC office of Tax and Revenue has a complete breakdown of the fees on its website.