Joe Gentile

Joe Gentile

Joe Gentile is a real estate settlement attorney who received his Juris Doctor from The George Washington University Law School in 1999.

Joe received degrees in Economics and Italian Language and Literature from the University of Maryland and has practiced real estate law in the DC metro area since 2000. He is a member of the Maryland Bar and has title insurance licenses in DC, Maryland and Virginia.

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Your title insurance policy covers you more than you may realize

Even the most diligent of title searches cannot uncover 100 percent of title defects 100 percent of the time. Title insurance not only covers mistakes made during a title search, it covers many more issues that a title search may not reveal. 

Sometimes tardy record keeping at the government clerk's office is to blame. Other times, it may be a forged document. No matter what the issue may be, without title insurance the homeowner will be on the hook for any costs to defend title as well as any losses incurred.

While it's true that the title insurance claims rate is somewhere around 5 percent – relatively low in comparison to other forms of insurance – this number can be somewhat misleading. That's because a lot goes on behind the scenes at the title company to ensure a smooth, stress-free closing. The behind-the-scenes work doesn't always show up in the statistics.

When a title cloud is detected prior to a real estate closing, the title company-to-insure contacts the title company who handled the original settlement on behalf of the seller. In our experience, this occurs in about one out of every 10 transactions. When it does, we're usually able to resolve the issue without having to alert the seller or report a claim.

Keeping in mind that an owner's title policy ranges on average around $1,100 for a house in the District of Columbia, and the cost of legal fees to clear title could run into the tens of thousands of dollars, it just seems like good fiscal sense to purchase the added protection.

Timely recordings for DC properties thanks to e-recording

Once a deed is signed, sealed and delivered, the transfer from seller to the buyer has taken place. It is not legally necessary or required for the document to be recorded.  

However, in order to protect the buyer’s interest in the property, Federal Title & Escrow Company records the deed with the Land Records office, providing constructive notice that the property has transferred.  

By recording the deed, another party is prevented from recording a document (such as a lien, judgment or even another deed) that could cloud the chain of title. It also provides notice of who is the owner of the property. 

Back in 2011, Federal Title started using DC’s e-recording process. The results have been outstanding. Previously, a recording had to be physically delivered to the DC Recorder of Deeds.  These manual recordings were often met with recording delays, as the recording process required the coordination of efforts among the Recorder (i.e. the person standing in line for hours at the Recorder of Deeds to obtain the Clerk’s recording receipt) the courier/mailing service, the settlement company and the Recorder of Deed office.  

The manual recording process provided only a Recorder’s receipt at the time of recording, and the recorded Instrument was mailed to the settlement company within six months of the actual recording date.  

Now with electronic recording, the recording process in DC is completed within hours of the settlement, as the process involves only the settlement company and the Recorder of Deeds!  

The best part is, the client is provided not just with a Recorder’s receipt to evidence that the document has been recorded, but also with the fully recorded document upon the completion of the recording process.

What does this mean to clients?  

It means that a deed is on record the same day of your closing, typically within hours. This greatly reduces the risk of fraud, conflicting recordings or lost documents.  

The DC Recorder of Deeds office has been at the forefront of the industry and deserves considerable praise for establishing a method to record that has been easy to use and helps protect the interests of all parties.  

Not all title companies are using e-recording, but Federal Title recognized early on the benefits of adopting e-recordings and our clients are benefitting by knowing that their documents are recorded in the District of Columbia within hours of the closing – just another example of how Federal Title embraces technology to improve closings. 

Did you know? Tenant Opportunity to Purchase Act in Takoma Park, Maryland

If you have been involved in real estate in the DC metro area you have likely come across the DC Tenant Opportunity to Purchase Act. But did you know that Takoma Park, Maryland also has a Tenant Opportunity to Purchase Act ("TOPA")?

The intent of TOPA is to promote the conversion of rentals to owner-occupied housing. Not complying with TOPA does leave the possibility that a court of competent jurisdiction may declare the transfer of the property void.  

As with DC, there are exceptions to the tenant opportunity to purchase. Some transfers that are exempt include transfers to a family member, transfers under a court order, transfers to the State or a local government and transfers of a minority title interest.  For a complete list of exempt transfers, please visit Section 6.32.020 of the City of Takoma Park Municipal Code.   

As the title company, Federal Title will require proof that the seller delivered a written offer of sale at the same price and terms as the third party contract of sale to each tenant, any registered  tenant association, and the City of Takoma Park by first class mail or personal delivery and, except for single family homes, that the offer was posted in a common area.  

For single family homes, the tenant has seven days from the date of receipt of the written offer of sale to provide a written statement of interest, and the City of Takoma Park has 14 days. For properties with two to six units, a group of tenants acting jointly have 14 days, then seven additional days for any individual tenant, then seven more days for the City.  

For properties with seven or more units, a registered tenant association representing at least one-third of the occupied rental units in the rental facility and the City of Takoma Park each have 45 days. (Please note that properties involving four or more units in Takoma Park will also need to comply with Montgomery County’s Right of First Refusal laws).

Similar to DC’s TOPA laws, a tenant does have the right to waive the rights but only if supported by consideration. Also, the closing must take place within 6 months of the offer of sale being mailed or personally delivered. Federal Title will additionally require that both the purchaser and the seller sign a TOPA affidavit. 

This is just a summary of the City of Takoma Park TOPA laws, but the full text can be found at Chapter 6.32 Tenant Opportunity to Purchase.

CFPB cracks down on real estate brokerage to tune of $500,000

Real estate brokerages need to be aware of the risks of writing into the contract a title company with which they have either an Affiliated Business Agreement (ABA) or a Marketing Service Agreement (MSA).

In the past, we have issued warnings on this blog that the Consumer Financial Protection Bureau (CFPB) is looking closely at Marketing Service Agreements.

Well, last month the CFPB came down hard on a major real estate company in Alabama. I strongly recommend any broker that refers a title company with which it has either an ABA or an MSA to carefully read the details (Bureau Orders Alabama Realty Firm to Pay $500,000).

While having an ABA or an MSA is not per se a violation of RESPA, it does require that the real estate company provide a written disclosure that makes it clear to the client that: (1) use of the referred company is not required and (2) the client has the right to shop for services.  

In this scenario, RealtySouth was writing the title company name in the contract. They did provide a disclosure, but the required language was buried and the CFPB found that it "did not properly highlight consumers’ rights."

The key point here is that the consumer was not given the opportunity to choose. I’m sure that most agents reading this are thinking, "I always let my client choose their title company," and those of you who do this deserve to be commended.

But I assure you that the practice of filling in the title company without properly informing the client of their right to shop and choose occurs daily.

Often buyers call or email us for a quote, only to tell us later that, unbeknownst to them, the title company was already written into the contract by the agent.  

According to last month’s ruling, if said title company has an agreement with the real estate company, they may both be subject to a substantial fine. 

Split closings are (almost) never a good idea

The other day I handled a split closing – the buyer used Federal Title & Escrow Company and the seller used another title company – and things did not go so smoothly.

A closing already has many different parties involved: buyers, sellers, buyer’s agent, seller’s agent, loan officer.

But two title companies?

For a closing in the DC metro area, it just doesn’t make sense to complicate the transaction further by adding a superfluous second company.

Superfluous? Yes, that’s right, because the "seller’s title company" is going to perform the exact same tasks that the "buyer’s title company" would have performed, and almost certainly at a higher cost.

Since the "buyer’s title company" is responsible for sending out the payoff and issuing the title insurance, and consequently responsible for either releasing the mortgage lien on the property or following up to make sure it is released, most of the main functions will be handled by the buyer’s title company.

Really, all the seller’s title company will do is order a payoff (maybe), prepare the deed (maybe), and handle the closing for the seller, which is typically ten pages or less.

Despite having such a small role, the seller’s title company charges higher fees. They have to; they are handling virtually no major functions and are not issuing the title insurance and the only way to make it worth the title company’s time is to charge the seller a significant fee.

Here is a look at the closing fees from the last three closings in our office for which the seller chose to use another title company:

Closing Date Seller's Closing Fees if Seller Used FTE Seller's Closing Fees Since They Chose Another Title Company Additional Cost by Choosing to "Split" the Closing
March 2014 $435 $705 + $270
February 2014 $435 $675 + $240
January 2014 $435 $770 + $335

So if the seller is paying so much more, it must mean that the seller is being provided with better service, right? Wrong.

By adding a second title company you now have your classic "too many cooks in the kitchen" scenario.
Only one of the three closings above went smoothly, the other two had issues. Think about it, when has hiring more lawyers made for a smoother transaction?

So if it costs more to split the closing, and the service is not better (and often worse), why do people do it?

Well, most of the time, sellers don’t realize how much more it is costing them. That is why I strongly urge sellers to obtain quotes and make sure that it makes sense. 

We've posted a seller's fee schedule on our website. Unfortunately, since most title companies do not post their fees, you will have to call or email them – and shouldn’t the lack of transparency make you suspicious?

DC Council passes the Senior Citizen Real Property Tax Relief Act of 2013

Ten members of the Council of the District of Columbia voted for and passed the "Senior Citizen Real Property Tax Relief Act of 2013" earlier this week. The bill will now be submitted to DC Mayor Gray for his signature.

If it passes, it will provide a significant savings to seniors who own property and have lived in DC for a significant time by exempting seniors who qualify from having to pay any property taxes on their residence. In order to qualify the resident must:

  • Be at least 70 years of age,
  • Have maintained DC residency for at least 20 years,
  • Have a household adjusted gross income of less than $60,000, and
  • Maintain total assets of $250,000 or less, excluding the residence

We will have updated information once the bill has been either signed or vetoed by the mayor.

UPDATE: Mayor Vince Gray signed the "Senior Citizen Real Property Tax Relief Act of 2013" into law on March 25, 2014.

Property tax relief for seniors

Did you know that the District of Columbia provides a substantial discount on real estate property taxes for seniors?

If eligible, a senior can save 50% on his or her property tax bill. Further, the threshold for the income level was raised to its current level on October 1, 2013 (previously the threshold was $100,000), so some seniors who were unable to qualify previously might want to take another look at their eligibility.

To be eligible:

  • At least one owner of the property must be 65 of older;
  • The total household adjusted gross income must be less than $125,000; and
  • The senior must have at least 50% ownership of the property to qualify.
Keep in mind that if the senior no longer occupies the property, or if any of the above eligibility requirements are no longer met, a cancellation form must be submitted to the DC Office of Tax and Revenue within 30 days of the change in eligibility.

Failure to do so could result in the DC Office of Tax and Revenue applying penalties and interest.

The Senior Citizen Tax Relief application can be found the DC Office of Tax and Revenue website.

Loan payoff includes more than just principal balance

In about half of the settlements that I conduct a seller will stop me and comment, “The payoff is too high, I owe less than what’s listed.” This is because the seller is confusing the mortgage principal balance with the payoff amount.

The principal balance is the remaining principal due on the loan. This gets reported in monthly statements from the lender and is available if you call your lender or check online. With a fully amortizing loan, part of your monthly payment is going to paying down the principal every month. 

However, a payoff is the amount owed on the loan to pay it off on a specific day. Note that interest on a conventional mortgage accumulates daily*. Also keep in mind that a mortgage is paid in arrears – the monthly payment is for the prior month’s interest. 

So when you make the April 1 payment, you are paying the interest due on the loan from March 1 to March 31. Consequently, if you are closing on April 10 and have already made your April 1 payment, you still owe interest from April 1 to the date of payoff. 

Typically a cushion is selected so that there are sufficient funds to pay off the loan, so the amount submitted to the lender in the above scenario is likely: principal balance + per diem interest due from April 1 to April 13 equals the mortgage payoff. 

The reason for the cushion is not to cheat you out of some money, though I’m sure it feels that way. It is to make sure there is not a shortage when paying off the loan. In our scenario, assuming that everything was completed in a timely manner, the seller will receive back from the payoff lender two to three days of interest that were overpaid. 

So how do you determine your payoff amount?  

The title company is going to order a payoff letter from your mortgage lender to find out the precise payoff amount. 

What if you're trying to prepare an estimate and would like a figure?  

You can always call your lender and obtain a payoff from them over the phone. Some lenders will calculate a payoff amount for you online as well. Just remember to add a few days to the closing date so that you have allowed for a cushion. 

But for most estimates, using this trick will suffice: take your principal balance and add to it a monthly payment. Assuming that you are on time with your payments, this number should always be a bit higher than your actual payoff, but at least this way you will be overestimating instead of underestimating, which is typically the case when you use the principal balance as the payoff amount.

* Interest on an FHA mortgage accumulates monthly. Therefore, interest is always owed through the end of the month. However, to calculate an estimated payoff, the same concept applies: take the principal balance and add a monthly mortgage payment to obtain an estimated payoff. 

Q&A: Do I really need a land survey?

Q. What is a location survey?

A. A location survey is a sketch or drawing that shows the boundaries of a particular property. Also, the survey typically includes the dimensions of the house, patio or any additions as well as the locations of fences and any easements or rights of way. Mortgage lenders generally require a survey before lending on a purchase transaction. However, if you are paying cash and not obtaining a loan, you can choose whether or not to obtain a survey. 

Q. Why should I want to obtain a location survey?

A. A location survey defines exactly what it is that you are buying. Just because the back yard has a fence, doesn’t mean that you own everything inside the fence (or that you might not own something outside it). Over the years we have seen many buyers surprised to find out that: 

  • they did not own the driveway, 
  • their house was over the property line, 
  • the neighbor’s fence was inside their yard, 
  • their fence was outside the property lines, 
  • half of what they thought was their back yard belonged to a neighbor,  
  • and countless other complicated scenarios.

Q. Doesn’t the legal description on the deed list the property being conveyed?

A. Yes, but legal descriptions are sometimes wrong. We have seen legal descriptions that have included public alleys and incorrect property dimensions. The survey helps as a check to make sure that the correct legal description is listed. When it is incorrect, a new description is prepared, with the help of the surveyor. 

Q. When do I get to look at a survey?

A. Federal Title & Escrow Company sends out the location survey to the buyers and the buyer’s agent as soon as it becomes available. This way you will have a chance to review it and you can address any issues and/or concerns prior to settlement. The closing attorney will also review the location survey with you again at the closing. 

Tips for out-of-town buyers at settlement

Please keep in mind that attending settlement is always the best solution, but we understand that sometimes a situation might arise where you will be out of town on the closing date.

If you are the buyer and, you cannot attend settlement, here are some potential solutions. Click beyond the jump to continue reading.

MD homestead tax credit eligibility application deadline is Dec. 31

Instructions for principal residence homeowners who need to confirm eligibility for Maryland's homestead tax credit

For Maryland homeowners who wish to submit their one-time application to confirm eligibility for the homestead tax credit, the deadline is finally approaching. 

Every principal residence homeowner in Maryland should follow these steps to make sure that their property is registered and eligible for the homestead tax credit:

Step 1: Check your status

Visit the Maryland State Department of Assessments & Taxation (SDAT) Real Property Data Search page. Select the county and search either by Street Address, Map/Parcel, Property Account Identifier or Property Sales (typically Street Address is the easiest way to search). 

Once you have entered the information, the tax record for your property will appear. At the bottom of the record, a separate category appears called Homestead Application Information, and beneath that category is the Homestead Application Status. 

There are four status categories: Approved (with date of approval); Application received (but not yet processed); No application; or Application denied.

If your application is listed as approved, you previously filed the homestead and have nothing further to do. If it is "received," you should check back to make sure it is approved. If your status states "no application," continue to Step 2. If the application has been denied and you disagree with the denial, you should contact the Homestead Division to contest the denial: 

Homestead Division
Telephone: 410-767-2165

Fax: 410-225-9344

Step 2: File application

There are three ways to file the Homestead Eligibility Application:

  1. File electronically. To file electronically, you will first have to send an email request to  In your email, make sure to include the following information: the purpose of the email (to electronically file the Homestead Eligibility Application), your name, property address and county. 

    You will receive an email response with your real property account number and an access number with a link to file electronically and will need to enter both the account number and the access number in order to use the link. It could take up to a week to receive a response back after you submit your request. Immediately upon filing through the link, you will receive back an automated email confirmation, which you should keep for your records.

  2. File by mail. To file by mail, print and mail the completed application to:

    Department of Assessments and Taxation
    Homestead Tax Credit Division
    301 West Preston Street, 8th Floor
    Baltimore, MD 21201
  3. File by fax. You can also print out the application using the above link and fax in the application to 410-225-9344. Make sure you keep a fax confirmation.

Do not print out the application, complete it and email it to SDAT. The only way to file electronically is to follow the above directions – they will not accept a scanned and emailed application.

After submitting your application, keep checking your SDAT records by following Step 1 above to make sure that your application is approved. It can take several weeks from the application submission before the status shows up as approved, so make sure to keep copies of all correspondence. 

Click beyond the jump for background on Maryland's homestead tax credit. 

Homebuyers: Do you know what you are buying?

While this would seem to be obvious, purchasers should pay close attention to exactly what they are buying. I am not referring to inspection issues, I am referring to something that seems obvious, but does occasionally come up as a problem.

Here are some real scenarios where an individual bought something that was not exactly what they were expecting.

SCENARIO 1: I bought more land (and headaches) than I thought!

Upon review of the survey, the purchasers realized that the property line in the back of the property did not end at the fence, but continued back another 100 feet. While this sounds great (the buyers bought more property than they intended to purchase), the survey also revealed that the neighbor behind the property built an encroaching fence. The seller’s response was that he never said that the property ended at his fence, and in fact the listing did show the correct property square footage. The buyers were stuck having to deal with the neighbor’s fence.

SCENARIO 2: Where in the world is my parking space?

The sales contract called for limited common element parking space 27 to be conveyed. The buyer never looked at the space, thinking that it was a space just like any other in the building’s garage. After closing, the buyer couldn’t find the space in the garage, and discovered that the space was instead an outside space.

Other variations on this issue: the parking space was too narrow for my vehicle, the parking space was supposed to be near the elevator but was not, the parking space was on a different floor than expected, etc.

Always make sure to inspect the parking space. Limited common element parking spaces are not covered by title insurance, so pay extra attention when purchasing one. (Read more on limited common elements.)

SCENARIO 3: I thought I bought the parking area behind the house!

Just because it looks like you own it, doesn’t mean that you do own it. If there is any question about whether or not something conveys, ask the seller. Further, this is the reason why a location survey is typically obtained.

We have had some recent settlements where the purchaser saved a couple hundred dollars by waiving the location survey, only to later on discover an unexpected surprise and then try to file a title insurance claim. Keep in mind that if the location survey is waived, the title insurance policy will take exception to matters that would have been revealed by the survey, thereby eliminating the ability to file a claim related to a survey matter.

SCENARIO 4: The seller told me that I had an easement!

We hear this one a lot. The seller told me that there is an easement for me to … access the back of my property through the neighbor’s yard, use the neighbor’s driveway to get to my back yard, use the neighbor’s driveway to access the alley, etc.

But then, upon further investigation, no written document turns up. When the seller is asked to provide the easement, the response is, "that’s what the seller told us when we bought the house."

If anybody tells you that a property has an easement, right of way, etc., ask for them to provide you with a copy of the document. If they claim it has been recorded, the title company can provide you a copy of the recorded document.

Do not trust that one exists simply because somebody tells you that you have "an easement."

Escrow issues for sellers can arise when closing near property tax due date

Whenever a real estate settlement is close to a property tax due date, the potential for a post closing property tax issue increases. Simply, it is a matter of bad timing. Here are a couple escrow issues that can cause problems for home sellers who are planning to close near a property tax due date.

Taxes are double-paid

Let’s take Montgomery County, Maryland for example. Real estate property taxes are due by September 30 and December 31 (assuming a principal residence).

Now let’s say that you have scheduled a closing for the sale of your home on September 20. Your current lender is escrowing for property taxes, which means that they are planning to pay your property tax bill by September 30. So what could go wrong?

As of September 20, your payoff lender has not sent in the property taxes so the title company, collects the property tax bill from you at closing and pays it, since the deed cannot be recorded unless the taxes are paid.

The title company sends out your payoff, but it doesn’t get credited until September 21, and in the meantime the payoff lender has sent in your taxes to the county.

As of September 20, the county tax office has not credited your taxes as having been paid. So the title company collects and pays the taxes with the deed. When you receive your escrow refund from the payoff lender, it is less than you expected.

When you call the payoff lender, you find out that they paid the taxes as well, but the check was sent to the county a few days before the closing, so they were not credited until after September 20.

In both situations, the taxes have been double paid, and, because of bad timing, nobody is really at fault. Now you are stuck having to try and obtain a refund from the county for having overpaid the property tax bill. That will likely take some time and, depending on the size of the tax bill, could mean you are chasing thousands of dollars.

Taxes are delinquent

You were pro-active and called the payoff lender and found out that they sent a check to the county, but the county cannot yet confirm that the taxes were paid.

The title company, since it has to provide title insurance and one of the conditions to close is to make sure the taxes were paid, has agreed to escrow from you the taxes until they are credited by the county, but that means they are holding onto $3,000 to $5,000 of your funds in escrow.

Not much you can do here. You are at the mercy of the county tax office and how quickly they process your check and report the taxes as paid.

So, what can be done?

Probably the best solution is to contact your payoff lender and inform the bank that you are selling your home, give them the settlement date, and inform the bank that you do not want them to pay your property tax bill.

Most lenders will freeze or put a hold on your escrow account if you tell them to do so and they know that you are selling the property. The title company can then collect the taxes at closing and the payoff lender will not have paid the bill, and will therefore refund it to you as part of the escrow refund (which should arrive within 30 days of payoff).

Of course, there are risks with this solution as well, chiefly that if the settlement is delayed, you might be delinquent on your taxes.

Using the above example, let’s say that you called your payoff lender and informed the bank that you will be closing on September 20 and that they should freeze your escrow account. As long as settlement takes place on September 20, there will not be a problem, but what if the settlement is delayed?

If the settlement is pushed back after September 30, the taxes will be paid late, and a late fee will apply. Also, if the settlement falls through at the last minute – say for example there is a walk-through dispute that kills the deal – then the payoff lender will have frozen the account and your taxes will not be paid.

So if you do call the payoff lender and ask for the account to be frozen or put on hold, make sure that you also inform the payoff lender if there are any settlement delays. It would be unfortunate (and ironic) that being pro-active about the taxes might cause penalties, interest or, potentially, a tax lien.

3 reasons HELOCs create title headaches

Keeping good records can help avoid settlement delays

Home Equity Lines of Credit (HELOCs) may be difficult to obtain in today’s market, but not too long ago, everybody had one. Recently, a series of closings were delayed in our office due to issues with HELOCs, and I expect that dealing with HELOCs will only get worse.

There are several reasons why HELOCs often cause title nightmares, and keeping good records can help avoid settlement delays.

Click beyond the jump for 3 issues that can arise at settlement from a home equity line of credit.

What does 'ground rent' mean?

A ground rent refers to a scenario where an individual owns his house, but someone else owns the actual property (the “ground”). The homeowner pays the ground rent owner an annual fee, or a ground rent, as a rent on the land.

In Baltimore, this form of ownership dates back to the 18th century. The intent was to make homeownership affordable, by allowing purchasers to only have to buy the house, while paying an annual rent on the land.

Since many ground rent leases were established for 99 years, time and poor record-keeping made it difficult to know who owned the ground rent.

In response to this, since 2007 the Maryland State Department of Assessments and Taxation has maintained a ground rent registry to help homeowners determine who owns their ground rent.

Consequently, homeowners can now check for ground rent information and locate and determine their current ground rent owner by checking the Maryland State Department of Assessment and Taxation website.

When a property is listed, it is the listing agent’s responsibility to determine whether or not a listed property is subject to a ground rent (and, if so, how much). The property description on the MLS listing should note if the property is being conveyed in fee simple or as part of a ground rent.

Homeowners of properties subject to a ground rent that was created after April 8, 1884 have the right to purchase the ground rent, which would convert the property to a fee simple ownership. The purchase price is determined by a formula set by Maryland law that varies depending on the year of creation of the ground rent.

Further, if a property that is subject to a ground rent has not heard from the ground rent owner for at least three years, the homeowner can redeem the lease. For more information on this, please visit the Maryland SDAT website.

What is an earnest money deposit?

An Earnest Money Deposit, more commonly known as an EMD, is one of the first steps in the home buying process. Today I will discuss the EMD and how quickly should one be deposited.

An EMD is essentially a good faith deposit to demonstrate to the seller that the purchaser is serious about the transaction and is willing to part with some money in advance of closing to prove his or her willingness to buy.

This is not to be confused with a down payment, which is the remaining amount that the purchaser is going to pay out of pocket to buy the house, and is paid at closing in the form of a wire or a certified or cashier’s check.

The amount of an EMD can vary, depending on the purchase price, the location of the property and the purchaser’s ability to pay in advance. Typically, a larger EMD will make the offer to purchase stronger, since a larger EMD shows to the seller a higher level of seriousness on the purchaser’s part.

Each jurisdiction has a different requirement in regards to how quickly the EMD must be deposited.

Earnest Money Deposit

  • District of Columbia: Earnest money deposit must be deposited within 7 calendar days or 5 business days.

  • Maryland: Earnest money deposit must be deposited within 7 business days.

  • Virginia: Earnest money deposit must be deposited within 5 banking business days.

Keep in mind that in all three jurisdictions, this requirement can be altered by a written agreement between the purchaser and seller.

Consequently, either the number of days can be changed or the EMD can be deposited at an agreed upon date, for example, "upon the removal of all contingencies." However, once again, keep in mind that this must be in writing and agreed upon by the parties.

Editor's note: In Maryland, if the EMD is held by a real estate broker, the Maryland Real Estate Commission requires that the broker must deposit the check within 7 business days from when the contract is ratified.  If the EMD is to be held by the title company or any other party, the number of days can be altered. (Thanks to commenter Mike for helping to clarifying this.)


Post-closing tips for refinances

Here are some tips on what you should do after your refinance closing is over:

Save your closing documents

Remember when all everybody talked about was reducing paper and going green? Well, the mortgage and real estate industries never received that memo.

At closing, you will be provided with a set of copies of everything that you just signed, and that package could number up to 100 sheets of paper. Hold on to them; you might need a copy of your Closing Disclosure Form for tax purposes, and you never know when you might want to review the Note and loan terms.

If you prefer not to have to find room for another stack of documents, or if you really are concerned about doing something good for the environment, at Federal Title we can scan your closing package and email it to you.

By saving your closing documents on your computer, you won't have to worry about the wasted paper, finding a place to keep the stack of pages or losing confidential documents. We will always maintain an electronic copy of the file here at our offices as well.

Save your closing documents from the prior transaction(s)

This may sound disappointing, since most clients would likely enjoy burning their prior closing package, but even though the prior loan is being replaced by the new loan, you should hold on to the prior papers as well. One day, you, your estate or your heirs will end up selling that house. You might have to prove that a prior loan was paid off, or that you have a title insurance policy, or you might need to confirm the prior sales price, etc. Having your prior loan documents could save you a lot of time and some future headaches.

Cancel any automatic payments that are set up for the prior loan.

Even if your next auto payment is scheduled for April 1 and your closing is March 10, and your current mortgage will be paid off well before the next payment due date, it is a good idea to make sure that any automatic payments are cancelled. Of course the prior lender would owe the money back if they took another payment, but nobody wants to have to chase money from a bank.

If you signed up for automatic payments on the new loan, make sure that the first payment is made.

Double check to make sure that the new loan payment has been properly processed.

If your taxes are being escrowed, make sure the lender pays the bill

It is especially important to check the first tax bill after your refinance. Typically, you can view escrow payments on the mortgage lender’s website or you can call the mortgage lender’s automated number.

Post closing tips for homebuyers from a title perspective

As a home buyer, almost all interaction with the title company is prior to closing. But what about after the closing? Here are some tips on what you as a home buyer should look out for and do post settlement.

Keep copies of your closing documents.

It may sound obvious, and yet, buyers are constantly losing/misplacing/throwing out their closing documents. In most cases, you will need a copy of your HUD-1 Closing Disclosure Form when you file your taxes. Also, having the ability to check and review the loan information that you agreed to could come in handy.

Keep the Owner’s Title Insurance Policy (and remember where you put it)

At Federal Title, we provide you with your owner’s title insurance policy at the closing. So it is part of your closing packet and can be saved along with the HUD-1 Closing Disclosure Form and other closing documents. Unfortunately, this is not the standard practice. Most title companies mail you the Owner’s Title Insurance Policy months (sometimes even years!) after closing. Consequently, it is not part of the closing packet and it often gets misplaced. Remember that the Owner’s Policy is your protection and might prove fundamental when trying to sell or refinance your property. 

Look at your real estate property tax bills (if being escrowed or not)

Make sure that any discounts (Homestead, Senior Citizen, etc.) are reflected on the bill. Even if a Homestead is filed with the deed, the tax office may incorrectly fail to apply the proper credits or discounts.

If you have waived the escrow account and are responsible for paying your property taxes directly, make sure you know when the property tax bills are due. 

Just because you did not receive a bill does not excuse you from paying the taxes.  Almost all jurisdictions allow you to view and pay the bill online.

If your taxes are being escrowed, make sure the lender pays the bill.

This is especially important to check for the first tax bill after your purchase. Typically, you can view escrow payments on the mortgage lender’s website or you can call the mortgage lender’s automated number.

If you purchased multiple lots, ensure all real estate property tax bills being paid.

This typically applies to a condominium with a separately taxed parking space. Sometimes the lender will pay the property tax bill for the unit, but will neglect the smaller parking space bill.  Over the years this issue has come up many times.

Deed transfers in Montgomery County... explained


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.

Applying for a property tax refund in Montgomery County

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).

Adding a buyer to a purchase deed

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.

DC simplifies recordation fees

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.

Household income a factor on DC Tax Abatement application

"My wife and I are buying a property for our son in Washington, DC The purchase price is $405,000, so we heard that we might be eligible for the DC. Tax Abatement Program. Is this possible, and if so, what might we have to do to make sure we qualify?"

This is a question our attorneys hear pretty frequently. Income of all household members is used to determine eligibility, even if a household member that is living at the property is not on the title of the property.

Often when purchasers have adult children that still live with them, they fail to realize that the child’s income counts toward household income. After all, the parents are typically not factoring in the child’s income for the loan, so it is easy to neglect including it in the tax abatement application.

Any household member over the age of 18 must either submit pay stubs from their current employer or provide an affidavit stating that they are not working (or proof that they are a full-time student if that is the case).

The key component is household income. If the parents are not going to live at the property, they do not count as household members. Only the son’s income will count, since he will occupy the property as his principal residence.

Keep in mind that the son must be on title to the property, must be a party to the sales contract and must occupy the property as his principal residence. The parents will have to sign an affidavit at closing stating that the property is not going to be their principal residence and the sole purpose of their being on title was to assist their son in obtaining a loan.

With this affidavit, D.C. will not consider them as household members, and the son can enjoy the benefits of the DC Tax Abatement Program.

Visit our DC Tax Abatement program guide for the most up-to-date information.

Property tax assessments in Maryland

One of the most frequent requests at closing is how often does the state of Maryland assess property values for tax purposes.  In Maryland, properties are reassessed every three years.  The state of Maryland provides a detailed explanation of the workings of the tax process on its website.

Also available are reassessment maps for every county in Maryland, which allow you to view when reassessments will take place. Included here is the current map for Montgomery County, Maryland:Montgomery County, Maryland property tax assessment map

Area 1 Assessment Area 1 will be reassessed for January 1, 2013
Area 2 Assessment Area 2 will be reassessed for January 1, 2014
Area 3 Assessment Area 3 will be reassessed for January 1, 2012

Post occupancy a.k.a. rent back agreements

You just signed a contract to buy your dream home, the one with the white picket fence, the game room and the custom kitchen. The only issue is that the sale of your property is taking place on June 20, while this house will not be ready until June 25. Immediately you call the buyers of your property, and while they have no problem waiting to move into the property, the lock on their loan expires on June 20. Now what?

The solution is a simple one, and it is frequently used. The Post Settlement Occupancy Agreement, sometimes also called a Rent Back Agreement, is an agreement whereby the buyer of a property agrees to allow the seller of the property to stay on at the property past the settlement date.

Typically the seller agrees to pay the buyer a per diem fee in exchange for being permitted to stay in the property past the closing date. Usually the per diem charge is the equivalent of the buyers PITI (Principal, Interest, Taxes, Insurance) on the property and, if applicable, condo dues or homeowner’s association dues. This way it is not costing the buyer anything to allow the seller to stay on.

Also, typically a security deposit is withheld from the seller’s funds by the title company. This is a way for the buyer to be protected and make sure that the seller has not damaged the property during the rent back period. After a final inspection at the end of the rent back period, assuming that everything goes well, the buyer informs the title company to release the security deposit back to the sellers. If there is a problem during the final inspection, the buyers and sellers need to come to an agreement on how the security deposit is to be distributed.

The purpose of the security deposit is to make sure that there is no damage to the property during the rent back period. It is not to be withheld as an escrow for repairs that were discovered in the original home inspection. Often buyers will attempt to use the rent back security deposit to cover home inspection item repairs that were never completed, but this is an improper use.

Also, creation of a rent back agreement does not create a Landlord-Tenant relationship. The standard GCAAR form that most agents use in the DC metro area makes this point clear. The District of Columbia recognizes tenant rights such as the tenants first right of refusal, so the distinction is an important one.

Post Settlement Occupancy Agreements are quite common and they offer a great solution to the difficulties of timing the purchase settlement and the sale settlement in a manner that is convenient for all parties.

House tries to speed up short sales

Short sales. These two words strike fear in buyers, agents and title companies. Whenever we receive a contract for a short sale, there is an immediate push to get out the seller HUD-1 to the short sale lender, ASAP!

We get calls from everybody involved to drop everything and get that short sale HUD-1 out for review immediately. We’re told that any delay by us will delay the settlement.

The reality is that after we send out the short sale HUD-1, the short sale lender doesn’t even bother to review it and approve it for months. I’ve had plenty of frantic calls from listing agents insisting that the short sale HUD-1 needs to be sent out by the end of the day, only to not get an approval (and thus a closing) for six months. In some cases, the response has taken even longer.

Apparently Reps. Tom Rooney (R-Fla.) and Robert Andrews (D-NJ) have heard about these issues as well. They recently introduced a bill in the House of Representatives that would require mortgage servicers to respond within 45 days of receiving a short sale request.

As might be expected, the National Association of Realtors immediately backed the bill. The hope is that the bill will assist homeowners who are unable to avoid foreclosure, since the lengthy delays often correspond with the seller’s inability to make timely monthly payments.

Even if the bill is passed, it remains to be seen if it is practical. Often approvals are needed from multiple entities, and obtaining approvals from all the parties in 45 days may be difficult. Also, the bill requires that the servicer must send notification to the borrower within the deadline whether or not the request is approved, changed or if additional information is needed.

So this does leave a servicer the opportunity to ask for additional information, thereby extending the deadline.

Despite this, passage of the bill could be a significant step in improving the short sale process, and saving all of us in the real estate industry some stress when it comes to a short sale closing.

Short sale headaches

It’s bad enough that a short sale can take six months to close. It’s even worse when the short sale payoff lender decides at the last minute to change the terms of its agreement.

Can they do this? In short, yes.

After all, they are the ones who are agreeing to take less than what is owed in order to complete the transaction – they are under no legal obligation to agree to do this.

Click beyond the jump for some recent short sale nightmares that I have seen.

DC and Virginia reissue rates automatically apply

Here’s some good news we’d like to pass along to you and your clients regarding refinance costs for properties in the District of Columbia and Virginia: Reissue Rates Automatically Apply.

What does this mean for your borrower?

  • It means the borrower is no longer required to provide a copy of an existing owner’s title insurance policy to obtain the full reissue rate.

  • It means that a 40% discount is automatically applied against the lender’s title insurance premium.

  • It means that, previously, without an existing owner’s title insurance policy, a DC refinance for $500,000 would have cost $2,100 for the lender’s title insurance premium. As of April 1, 2011, the same transaction will cost only $1,260 in premium — a savings of $840!

All online quotes from Federal Title now reflect these new changes so please feel free to share the news with your colleagues.

In the meantime, if you have any questions about the new reissue rate policy, please feel free to contact the team at Federal Title.

DC title insurance rates decrease

It seems like prices never go down. Gas prices have gone up, taxes have gone up, the 5-cent bag tax has increased the cost of shopping, etc. And yet, sometimes, if you look closely enough, you can find prices that actually do drop. In this case, prices have dropped for refinancing borrowers by 40%.

First American Title Insurance Company, our title insurance underwriter, published their new title insurance rates effective April 1, 2011. The purchase title insurance rates remained unchanged, except for purchase prices in the highest brackets where the rate dropped considerably.

The big change is in the refinance category. First American has dropped their refinance loan policy rates by 40%! In essence, every refinance in Washington, DC will obtain a discount equal to what was previously the full reissue rate discount.

Previously a 40% discount on title insurance was available on a refinance, but the borrower had to jump through some hoops to be eligible. The full 40% discount was only available if the borrower had previously purchased a title insurance policy and if the policy was under 10 years old and if the prior policy was for an amount greater than the amount of the new loan.

Often clients either did not know where or how to find their title policy, and often clients who may have been eligible for the discount were not obtaining it. And frankly, often title companies kept the reissue discount a secret, not revealing it to a client unless the client asked for it.

Well, with this new change by First American, every refinance will obtain the equivalent of the old reissue rate discount, even if the refinance would not have been eligible under the prior guidelines. What does this mean for a borrower? It means that refinancing borrowers will save hundreds of dollars on their closing! For example, previously a refinance for $500,000 would have included a $2,100 for lender’s title insurance. As of April 1, 2011, a refinance for $500,000 will now include a charge of $1,260 for lender’s title insurance – a savings of $840.00!

We've updated the refinance rate chart is posted on our website. While you're there, check out our homebuyer videos for a better understanding of title insurance and what title insurance does for you.

Imitation: sincerest form of flattery

Recently, Todd Ewing, the founder & president of our company commented on how being copied is a form of flattery. While I do not wholly disagree, I do want to point out that it is a bit disappointing to see our competitors try so hard to copy our every move without even trying to pretend that it was their own original idea.

What am I referring to? Click beyond the jump for some of my favorite examples.

Maryland non-resident seller Withholding Tax: Update

* Editor's Note: As of 2016 the amount of tax required to be withheld is 7.5 percent of the "total payment" to a nonresident individual and 8.25 percent to a nonresident entity. For the most up-to-date information regarding Maryland withholding requirements, visit the Maryland comptroller website.

Believe it or not, sometimes tax rates actually go down! Effective January 1, 2011, the rate of withholding taxes to be withheld and paid to the Clerk of the Court on the sale of real estate by non-residents in the state of Maryland has been lowered from 7.5% to 6.75%.

The rate of withholding for non-Maryland entities has remained unchanged at 8.25%.

Maryland residents and Maryland entities (entities formed in Maryland and/or which have qualified or registered to do business in Maryland) are exempt from the withholding requirement.

Also exempt from the withholding requirement are non-resident sellers who used the property as their principal residence as defined in IRC 121 and had the property recorded as such with the State Department of Assessments and Taxation.

Here is a detailed guide on the Maryland non-resident seller withholding tax.

Editor's note: State legislators voted to raise the withholding for nonresident individual sellers from 6.75% to 7% effective June 1, 2012. The rate of 8.25% for nonresident entity sellers remains unchanged.

HOA and condo foreclosure in Washington DC and beyond

The focus in regards to the foreclosure crisis has been directed almost entirely at mortgage foreclosures. But did you know that your homeowner’s association or condominium association has the right to foreclose on your property as well?

HOA and condo fees have largely been ignored during the recent housing crisis. However, as HOAs and condos have seen more and more delinquencies, they are becoming more likely to enforce their right to foreclose.

HOAs and condo associations have the ability to run up several thousand dollars in late fees, interest, fines and attorney charges for a delinquency that may total only a few hundred dollars. They then can use the threat of foreclosure to collect that amount and/or foreclose if necessary.

The typical action taken by an HOA or condo association with a delinquent homeowner is to record an HOA or condo lien for unpaid dues. This lien provides the HOA or condo with protection that the property cannot be sold or refinanced without first paying off the lien – thereby ensuring that the HOA or condo will not only be paid the delinquent dues that are owed, but also penalties and attorney fees. This lien is subject to any underlying mortgages that have already been recorded against the property.

Then mortgage foreclosures were not as prevalent, this was typically not an issue. Recently however, the subordinate nature of an HOA or condo lien is a major cause for concern: When a mortgage lender forecloses on the property, the HOA or condo lien is often wiped out in the foreclosure, ending the HOA or condo association’s right to collect or enforce the lien.

One way to prevent this from happening is to go ahead and commence a foreclosure for unpaid dues.

One of the biggest concerns is that HOA and condo foreclosures do not face the same restrictions as mortgage foreclosures. In 33 states, an HOA or condo does not need to go before a judge to collect on the liens, so the level of scrutiny for an HOA or condo foreclosure is often considerably lower.

So while mortgage foreclosures have come under attack, HOA and condo foreclosures have come in under the radar, even though they can be just as devastating.

What can you do? Well, ideally, you should try and make your HOA or condo payments on time to avoid the possibility of delinquency. But if you are unable to do so, don’t just ignore the HOA or condo and assume that the problem will go away – this approach could leave you in the same mess as if you ignore your mortgage payments.

Deed transfers in Washington DC

We often receive calls asking to add or remove an individual from the deed or title to a property. People are often shocked to find out that, depending on the type of transfer, there may be a Recordation and Transfer Tax involved, even if there is no money changing hands.

Click beyond the jump for answers to some frequently asked questions that I have encountered over the years in regards to this type of transaction.

New FHA rules lower up-front costs of homebuying

FHA loans have become more popular than ever in recent years as purchasers have struggled to come up with the necessary 20 percent down payment required for a conventional loan.

Previously, a common solution to the 20 percent problem was to obtain an 80 percent first mortgage and a 10, 15 or 20 percent second. However, with decreasing home values, lenders have significantly tightened the ability of purchasers to obtain second loans.

Since an FHA loan allows a purchaser to borrow up to 96.5 percent of the home value, quite often it is the only solution for a purchaser without a 20 percent down payment. New FHA rules went into effect on October 4, 2010, which will now reduce the loan amount at the closing, but increase the cost monthly.

For FHA loans, the upfront Mortgage Insurance Premium has been reduced to 1 percent. This is the second recent change, since the premium was increased in April, 2010 to 2.25 percent.

Because the upfront Mortgage Insurance Premium is rolled back into the loan, purchasers will not need to borrow as much at closing.

While this sounds great, it is the second component to the new rule which has altered the landscape significantly. The monthly mortgage insurance amount was increased from 0.55 percent to 0.85 percent on loans with more than 5 percent down and from 0.55 percent to 0.90 percent on loans with less than 5 percent down.

Since the minimum down payment on an FHA loan is only 3.5 percent, most FHA purchasers will fall into the latter category. This means that the monthly payment will increase since the monthly premium has increased.

So, to summarize, for homeowners using an FHA insured mortgage, the upfront cost of the loan will drop by a lot, but the long-term costs of the loan will grow.

This makes it more difficult for a low income buyer to qualify for a loan, since the purchasers’ debt-to-income ratios will be higher with the higher monthly payment.

Developer fees a.k.a. capital recovery fees

Imagine this scenario: You have to move because of your job. You have lost all of the equity in your condo that you purchased two years ago, but thankfully, you are not underwater and will break even on the sell. You arrive at the closing and suddenly you discover that you owe a fee of 1% of the sales price to the developer from whom you bought the condo two years earlier.

Now, because of this “Developer Fee”, you have to bring cash to close on the sale of your condo.

Click beyond the jump for a quick Q and A on developer fees.

DC Homestead Application changes ... again!

We recently blogged about the changes in the District of Columbia’s Homestead Application process.

In that post, we commented on how the Office of Tax and Revenue had suddenly changed the requirements for applying for the DC Homestead credit. A new Homestead Application form was to be used, and the form required supporting documentation to be included with the application, specifically:

  1. Copy of the purchaser’s DC driver’s license with the purchaser’s new address
  2. Copy of the purchaser’s DC voter registration card with the purchaser’s new address,
  3. Copy of the purchaser’s DC motor vehicle registration with the purchaser’s new address,
  4. And copies of the purchaser’s 2009 DC tax returns.

Since it was impossible to obtain these items prior to closing, we were no longer able to file the DC Homestead Application on behalf of the borrower but instead just handed the application to the borrower to file later on.

Of course, a major concern for me as a settlement attorney was how many purchasers would actually file the application post-closing.

As anybody who has purchased a home can attest, the home buying process can be overwhelming, especially for a first-time buyer. There was no doubt in my mind that many first-time buyers would forget to file the Homestead Application and lose out on a significant savings.

But then the entire process changed … again! The DC Office of Tax and Revenue announced that the Homestead Application process will be simplified. A new, simpler application is being prepared and the supporting documentation will no longer be required.

Most importantly, because the supporting documentation is no longer necessary, the Homestead Application can now once again be completed at closing and submitted as part of the recording process, giving homebuyers one less thing to worry about and allowing them to concentrate on enjoying their new home.

Now let’s just hope that there will not be any more sudden changes…

Benefits to viewing closing documents in advance

Closing on a purchase can already be an emotional and exhausting event. The last thing anybody wants to do is have to rummage through a stack 60 to 80 pages at closing to decipher what is taking place.

How can a homebuyer be better prepared to make it through the closing package? At Federal Title & Escrow Company, the typical purchase closing takes no more than an hour, with the typical refinance closing taking less than 45 minutes. Closing is not the correct time to read every document.

Now I know that an all-knowing uncle or a law school professor told you to never sign anything without reading it first, and I am not in any way suggesting that you should not know what you are signing, but just that closing is not the right time to start the reading process.

Click beyond the jump for 2 suggestions that will make your closing will go smoothly.

The Maryland Homeowner's Property Tax Program

Most homeowners know about the Homestead Program; most homeowners do not know about the Maryland Homeowners’ Property Tax Credit Program. This article answers many of the common questions we hear from Maryland homeowners regarding property taxes.

What is the Maryland Homeowners’ Property Tax Credit Program?

The Homeowners’ Property Tax Credit Program allows credits against the homeowner's property tax bill if the property taxes exceed a fixed percentage of the person's gross income.

Does Maryland have a Senior Citizen Property Tax Credit as well?

Unlike the District of Columbia, Maryland does not have offer Senior Citizen Tax Credit, instead the Homeowners’ Property Tax Credit has no age requirements, just income requirements. 

What are the requirements for eligibility?

The four basic requirements include:

1.    In order to apply for the credit, you must own the property.
2.    The property must be your principal residence.
3.    Your net worth must be less than $200,000.00.
4.    Your combined gross household income cannot exceed $60,000.00.

How is “principal residence” defined?

For the purpose of the Homeowners’ Property Tax Credit, a principal residence is a property where you live at least six months of the year, including July 1. If you are a recent home purchaser, it must be your intention to live at the property as a principal residence. Exceptions are made for individuals unable to live at the property for health or need of special care. 

Does the value of the property count towards the "net worth"?

No, the value of the property on which you are seeking the credit does not count towards the net worth. Neither do any qualified retirement savings nor any Individual Retirement Accounts.

What counts toward my "income"?

Income is defined as all household income.  The only exceptions are for dependents or household members that are paying rent or room and board.

How much can be saved?

The tax credit is based upon the amount by which the property taxes exceed a percentage of your income according to the following formula: 0% of the first $8,000 of the combined household income; 4% of the next $4,000 of income; 6.5% of the next $4,000 of income; and 9% of all income above $16,000. 

:  If your combined household income is $32,000, your tax limit is $1,860.00. You would be entitled to receive a credit for any taxes above the $1,860.00.

When should you apply?

The Homeowners' Tax Credit is not automatically granted and you must apply every year by no later than September 1 on a standard application supplied by the Department of Assessments and Taxation. However, it is to your advantage to submit the application by May 1 so that any credit due you can be deducted beforehand from the initial July tax bill.

How do I get the application?

Just follow this link:

E-signatures valid on Maryland real estate contracts

Recently I've heard feedback from a few Maryland real estate agents who are concerned about the validity of e-signatures on Maryland real estate contracts.

As a company that prides itself on empowering real estate agents with knowledge to make their clients' closing experience as pleasant as possible, we took it upon ourselves to investigate this matter and address the concern.

After making a few phone calls, I was able to reach out to an account rep at DocuSign, one of the companies that spearheaded an industry-wide effort to move the FHA to formally recognize E-signed third-party documents.

An April 8, 2010-dated FHA mortgagee letter is the first in what is expected to be a series of responses to this initiative, and it essentially says (and DocuSign confirms) it’s now official: E-signed third-party documents, including real estate contracts, are now being accepted by the FHA.

I asked specifically about Maryland real estate contracts, and here is what their legal counsel sent back:

"MD is a UETA state and nothing in their version of UETA makes them different with respect to real estate contracts. Note that they have a consent provision that takes them closer to ESIGN, but it is not to be construed as requiring any additional steps to what DocuSign already does. Please see my blog post on consent, from March/April of this year."

Post closing: What happens after settlement?

Post-closing still works for you long after you've moved in

Closing is over, you have purchased your dream house and now you are done working with the title company. However, the title company is not done working for you. As much work goes into post-closing as pre-closing.

When the closing is completed, the file goes to the post closing department. The first step is to prepare the recording package and send it to the Land Records Office for recording. Most files are recorded without trouble, but occasionally recordings are rejected and need to be corrected and resubmitted. 

Eventually, after the recording process is complete, the original Deed and Deed of Trust are returned to post closing, which in turn forwards the original Deed to the new homeowner and the original Deed of Trust to the lending bank. Depending on the jurisdiction, this could take up to six months. 

Post-closing is also responsible for paying off the existing mortgages and/or judgments on the property, obtaining releases for the liens associated with those mortgages and/or judgments and recording said releases in the Land Records Office. 

Since the purchaser has obtained a title insurance policy, the purchase is protected whether or not those liens are properly released, but since the title company has issued the insurance and provided a commitment to the bank that those liens will be released, the title company is responsible for making sure that they are in fact released.

The post-closing team also handles obtaining and paying the final water bill. This is the title company’s responsibility since an unpaid water bill creates a lien on the property. 

Also, any home owner’s association or condominium dues collected at settlement are submitted to the home owner’s association or condominium association along with a copy of the HUD-1 Settlement Statement. 

Some other duties of post closing include: maintaining and disbursing repair escrows, maintaining and disbursing post settlement occupancy security deposits, returning signed original documents to the lender and answering and resolving all potential post closing issues or questions.

So, as you can see, post-closing is still working for you long after you are moved in and enjoying your new property. Our post-closing manager is Dedra Roberts, and she will be happy to assist you with any post-closing questions or issues.

DC First-time Homebuyer Tax Credit: the forgotten credit

With all of the focus on the $8,000 Federal First-time Homebuyer Tax Credit (“Federal Tax Credit”), many have forgotten that DC offers a First Time Homebuyer Tax Credit (“DC Tax Credit”) as well. Since the DC Tax Credit is smaller ($5,000) and cannot be taken simultaneously with the Federal Tax Credit, it has largely been ignored.

Since the Federal Tax Credit requires a ratified sales contract dated prior to April 30, 2010 and for settlement to take place by June 30, 2010, the DC Tax Credit will regain some of its appeal in the second half of the year. Here is information taken from the 2009 Tax form 8859, and so it applies to the 2009 taxes but can be used as a general guideline since it should be similar for the 2010 tax year.

Click beyond the jump to continue reading.

Releasing a mortgage lien

A lien is a legal claim against property that must be satisfied when the property is sold. The lien provides notice that the bank has a secured interest in the property and guarantees the bank that the property cannot be sold or transferred without either the loan being repaid or assumed.

Click beyond the jump to read commonly asked questions about mortgage lien releases.


A must-read for condo parking space owners

A condominium is governed by the Condominium Declaration. This document is recorded at the Land Records for the jurisdiction in which the condominium is located and sets the rights and obligations of the unit owners of the condominium association. 

It is in the Condominium Declaration that the ownership of a parking space is outlined. Parking spaces in condominiums are either separately taxed or are limited common elements.

Click beyond the jump to continue reading.

What is the Maryland homestead tax credit?

In Maryland, if you meet the requirements and file an application, you may receive a discount on your real property taxes.

In this article I will discuss the minimum requirements to qualify for the Maryland Homestead Tax Credit, how to fill out an application and why the Tax Credit is such a great deal for Maryland homeowners.

Click beyond the jump for answers to common questions about the program.

Buying a home in Maryland with a trust

[Editor's note: Fannie Mae recently issued new restrictions on use of Power of Attorney. Please read this article and contact our office with any questions.]

If you must use Power of Attorney, please contact our office.

One of the ways that many homeowners protect their real property is by drawing up a Revocable Trust Agreement. Here are some things to know about trust agreements in regards to property:

1. While it may be desirable to purchase in the name of a trust, the State of Maryland does not recognize a trust as a Maryland first-time homebuyer. Consequently, even if the trustee and/or the beneficiary are Maryland first-time homebuyers, since the state views the purchaser as a Trust, the purchasers will not obtain the Maryland first-time Homebuyer credit.

Learn more about the Maryland first-time homebuyer exemption.

2. A Power of Attorney cannot typically be used to buy, sell or refinance a property that is owned in a trust. The rare exception is if the trust states specifically that a Power of Attorney is authorized.  If the trustee of a trust is not able to sign on behalf of the trust, he or she needs to follow the guidelines spelled out in the trust agreement.

3. Keep in mind that when a Trust owns the property, the trustee is bound by the terms of the trust.  For example, if the trust states that all trustees must sign all documents in regards to a sale/refinance of a property, then all trustees must sign.

4. When in doubt, speak to an attorney. Jennifer Concino of Tobin, O’Connor & Ewing works in our office and is an attorney who specializes in Trusts and Estates and can help answer questions.

Debunking common excuses for waiving title insurance

With the growing concerns over foreclosures, unpaid taxes, bankruptcies and clouds on title, the need for title insurance is at an all time high. And yet every year a handful of purchasers waive their opportunity to purchase an Owner’s Title Insurance Policy.

While the number that waives title insurance is small – probably less than 1% of all of our purchase transactions – the excuses for waiving are often similar.

Our website provides an explanation of title insurance, but here are a few of the most common excuses used for waiving coverage, followed by the reasons why those excuses are unsound.

Click beyond the jump to debunk 5 common excuses.

How to take advantage of property tax appeal process

The decrease in home prices does have some advantages, one of which is the opportunity to challenge property tax assessments. Often I find myself seated at closing with a homebuyer who has purchased a property for far less than the county or city assessed value.

While challenging a tax assessment after closing may not be the most exciting way to spend your time, it does have the potential to save you thousands of dollars.

Property tax appeal in Maryland

In Maryland, if a property is purchased between January 1 and June 30, the new homeowner has 60 days from the settlement date to file an appeal. If the homeowner misses this 60 day window, there are two more options: an appeal within 45 days of receiving an assessment notice (typically every three years) or a "Petition for Review" by January 1 of any year.

The initial review will take place at the Supervisor’s level, which is typically an informal, 15-minute meeting. If the homeowner disagrees with the decision, an appeal can be made to the Property Tax Assessment Appeal Board. If still dissatisfied, a further appeal can be made to the Maryland Tax Court. Here is the link to the Maryland Department of Assessments and Taxation.

Property tax appeal in the District of Columbia

In the District of Columbia, an appeal must be filed within 30 days of the date of the assessment notice (taxes are assessed annually) and it must be received no later than April 1. A new owner may file a petition for administrative review.

The initial appeal can be conducted in person, in writing, or by telephone. If the disputed assessment can not be resolved, the homeowner can appeal for a Board level review, and if the homeowner is still not satisfied, a final appeal can be made to the Superior Court of the District of Columbia. Here is the link to the DC Office of Tax and Revenue appeals page.

More tips for property tax appeal

You should be prepared to provide comparables or other data to prove that the property assessmenst is too high. When appealing after a purchase transaction, a Closing Disclosure Formor an appraisal may be helpful.

Every property owner is entitled to obtain, free of charge, their property worksheet and a sales list for the area where the property is located. Most importantly, during the appeal, focus on the points that specifically affect the property value – do not argue about percentage increases, past values, or values of properties in other jurisdictions

Don’t be intimidated by the tax appeal process; typically at the first appeal level you will meet one-on-one with an appraiser in a non-adversarial setting. Also, most appeals are resolved at the first appeal, especially if you have done your research, therefore appealing to a review board or the tax court is not generally needed. So use your right to Tax Appeal, it’s not as difficult as it seems and the reward will be worth it.

Don't let your vacant real estate listing go third class

Selling a property that the owner has already vacated? If the property is located in the District of Columbia, you will want to register the property as vacant with the city so that it can be exempt from paying additional property taxes.

The Real Property Classification Clarification Emergency Act of 2002 created a Class 3 property tax rate for vacant commercial and residential properties in the District of Columbia. Vacant property is taxed at $10.00 per $100 of assessed value – by comparison, a Class 1 residential property is taxed at $0.85 per $100 of assessed value!

Click beyond the jump to continue reading.

Maryland First-time Homebuyers: True/False

If you're a first-time homebuyer in Maryland, you may have heard conflicting information about tax credits and other incentives offered in Maryland, so we've dispelled a few common myths.

As long as you have not owned a principal residence in Maryland in three years, you qualify as a Maryland first-time homebuyer.

FALSE: The code does not provide a reset clause – if you have ever previously owned a principal residence in Maryland, no matter when, you are not eligible for the exemption.

If you have previously owned a property in Maryland, but have never lived in that property, you qualify for the exemption.

TRUE: The requirement is that you must not have previously owned a principal residence in Maryland. Previously owning a non-principal residence does not disqualify you, as long as the property that you are purchasing will be your principal residence.

It does not matter how you title the property, you will receive the exemption as long as you are a Maryland first-time homebuyer.

FALSE: If the purchaser is a Trust, a Partnership, an LLC, or a Corporation, it can not qualify as a Maryland first-time homebuyer.

If two people are buying a principal residence, as long as one of the buyers has never previously owned a principal residence in Maryland, they can receive the exemption. 

FALSE: Every purchaser who intends to live at the property as a principal residence must have never previously owned a principal residence in Maryland.

While I qualify for the exemption, my parents who will be on title only to help me get the loan disqualify me since they already own a principal residence in Maryland.

FALSE: The Maryland Code will still allow the exemption as long as the parents sign an affidavit stating that they are a co-maker or guarantor of a purchase money deed of trust and that they will not occupy the residence as their principal residence.

  • Ways to save at closing

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  • What are closing costs?

    The real estate closing process involves loan steps, legal steps and title steps.

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  • What's title insurance?

    Insure your legal ownership just like you'd insure the building, but for lots cheaper.

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Our blog contains general information only, not intended to be relied upon as, nor a substitute for, specific professional advice. Rate tables and figures that appear on our blog are deemed reliable but not guaranteed. For current rates & policies, refer to our Quick Quote and Consumer Guide. We accept no responsibility for loss occasioned to any purpose acting on or refraining from action as a result of any material on our blog.