Homebuyer's Guide 2014 md dc by Nakia Evans

Homebuyerâ&#x20AC;&#x2122;s Guide S p e c i al E di ti o n f o r t he f State od & n Ma r y l a g to n , Washin . D. C

www.RGSTITLE.com

The Mid-Atlanticâ&#x20AC;&#x2122;s most trusted name in residential real estate settlements for over 31 years.

hen making a decision as important as purchasing a home, why not choose a settlement company that is the established leader in the industry?

• RGS TITLE has received more awards for providing outstanding customer service than any Washington, D.C. Metropolitan area title company. • RGS TITLE has settled over 300,000 residential resale transactions. • RGS TITLE has convenient locations throughout Virginia, Maryland, and the District of Columbia—you choose where you want your settlement conducted. • RGS TITLE attorneys offer your Realtor® continuing education to help ensure their knowledge is always “cutting edge”. • RGS TITLE was the first settlement firm to offer area Realtors a 24-hour “hotline”—offering them professional support around the clock. • RGS TITLE was the first settlement firm to produce a free, comprehensive Homebuyer’s Guide to assist purchasers through the unique real estate settlement process. • RGS TITLE was one of the first settlement companies to offer our services in Spanish. Our multilingual services now include: Spanish, Korean, Italian and Chinese. Please ask your local branch for more details. • RGS TITLE was the first local settlement company to offer Realtors and clients on-line fee quotes 24 hours a day, seven days a week. Visit our unique Web site at www.RGSTITLE.com for comprehensive explanations of settlement procedures and the company, educational updates and much more! • RGS TITLE has set the standard in our industry for over 31 years. Our award-winning customer service, multiple locations and genuine dedication to our clients is unequaled. Contact the nearest branch office to experience the proven professionalism of RGS TITLE LLC.

This booklet was designed to provide a no-nonsense approach to understanding the complications of the home-buying process. We hope it is helpful and urge you to call us with any questions.

A Home Buyer’s Guide Purchasing a Home—Summary for the Buyer …………………………………………………2 The Home Buying Process (chart) …………………………………………………………4 Resale Contract for Single Family Homes ………………………………………………………5 GCAAR Sample Contract ……………………………………………………………………12 MAR Sample Contract ………………………………………………………………………20 Settlement …………………………………………………………………………………………30

Visit us on the web at www.RGSTITLE.com

Truth in Lending………………………………………………………………………………32 Sample Settlement Statement (HUD-1) …………………………………………………33

for office directions, explanations of

Buyer’s Estimate of Settlement Charges …………………………………………………36 Maryland Transfer and Recordation Taxes ………………………………………………37

procedures,

Buyer’s Settlement Costs Worksheet ………………………………………………………38

our exclusive on-line

Seller’s Settlement Costs Worksheet ………………………………………………………39

Realtor® hotline

Owner’s Title Insurance …………………………………………………………………………40

and draft settlement

Glossary ……………………………………………………………………………………………42

statements!

Important Telephone Numbers …………………………………………………………………44

MARYLAND & WASHINGTON, D.C. OFFICES BETHESDA 7101 Wisconsin Avenue Suite 112 Bethesda, MD 20814 301-654-9800 301-654-8598 FAX

BOWIE 4201 Northview Drive Suite 407 Bowie, MD 20716 301-809-0011 301-809-6860 FAX

ROCKVILLE 11333 Woodglen Drive Suite 202 Rockville, MD 20852 301-230-0070 301-230-2536 FAX

SILVER SPRING* 12520 Prosperity Drive Suite 100 Silver Spring, MD 20904 301-680-0200 301-680-2043 FAX

WASHINGTON, D.C. 5335 Wisconsin Ave., NW Suite 440 Washington, DC 20015 202-966-0550 202-966-5250 FAX

ALEXANDRIA 515 King Street Suite 502 Alexandria, VA 22314 (703) 519-7600 (703) 519-9471 FAX

BURKE 6045-D Burke Centre Parkway Burke, VA 22015 (703) 239-9600 (703) 239-0605 FAX

GAINESVILLE 7512 Iron Bar Lane Gainesville, VA 20155 (571) 248-8777 (571) 248-8788 FAX

MANASSAS 7702 Donegan Drive Manassas, VA 20109 (703) 396-8838 (703) 396-8809 FAX

SPRINGFIELD* 7202-B Old Keene Mill Rd. Springfield, VA 22150 (703) 451-6600 (703) 451-1181 FAX

WARRENTON (540) 341-7700 (540) 341-8574 FAX

ANNANDALE* 7010 Little River Turnpike Suite 110 Annandale, VA 22003 (703) 642-6100 (703) 642-6142 FAX

CENTREVILLE* 6101 Redwood Sq. Circle Suite 117 Centreville, VA 20121 (703) 818-8600 (703) 803-2867 FAX

LAKE RIDGE 2220 Tacketts Mill Drive Lake Ridge, VA 22192 (703) 491-9600 (703) 492-7494 FAX

MCLEAN 1355 Beverly Road Suite 100 McLean, VA 22101 (703) 903-9600 (703) 903-9606 FAX

STAFFORD 45 Doc Stone Road Suite 103 Stafford VA 22556 (540) 288-1747 (540) 288-1797 FAX

ARLINGTON* 3319 Lee Highway Arlington, VA 22207 (703) 528-1122 (703) 528-9587 FAX

FAIR OAKS (703) 502-3255 (703) 242-0725 FAX

OAKTON 2911 Hunter Mill Road Suite 202 Oakton, VA 22124 (703) 242-9600 (703) 242-0725 FAX

STERLING 46175 Westlake Drive Suite 250 Sterling, VA 20165 (703) 421-3300 (703) 421-6353 FAX

RESTON 1801 Old Reston Avenue Suite 100 Reston, VA 20190 (703) 742-9600 (703) 742-9698 FAX

TYSON’S CORNER 8227 Old Courthouse Road Vienna, VA 22182 (703) 506-2986 (703) 506-2981 FAX

VIRGINIA OFFICES

ASHBURN (703) 726-9222 (703) 726-9368 FAX

FREDERICKSBURG 2015 Plank Road Fredericksburg, VA 22401 (540) 372-4100 (540) 372-4114 FAX

LEESBURG 109 N. King Street Leesburg, VA 20176 (703) 777-1286 (703) 777-1625 FAX (703) 777-2197 DATA (703) 777-2190 DATA LORTON 8971 Ox Road, Suite 190 Lorton, VA 22079 (703) 495-9600 (703) 493-9302 FAX

WINCHESTER 500 West Jubal Early Dr. Suite 100 Winchester, VA 22601 (540) 723-0662 (540) 723-0664 FAX REALTOR® HOTLINE (877) 660-5150

*English & Spanish

A Homebuyer’s Guide from RGS TITLE

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PURCHASING A HOME— SUMMARY FOR THE BUYER

GETTING STARTED

he initial step in your purchase of a home is your selection of a real estate agent. The real estate professional that you select will help you focus your search for the home that fits your needs and desires as well as the realities of your budget. Your Realtor® will introduce you to the entire home buying process from identifying areas, features and types of homes in which you are interested, to assisting you in determining your qualifications for the financing of your purchase. Typically the Buyer will be working with a Realtor® who is referred to as the Selling Agent. The legal and ethical responsibilities of your agent are established by local statute and by the appropriate Board of Realtors Regulations. Disclosure of the brokerage relationship will be provided to you by your agent. The Realtor® you work with may discuss the possibility of representing you as a “Buyer Broker”. If you and your Realtor® agree to establish such a relationship, the real estate agent’s obligation and fiduciary duty will be to you rather than to the Seller. Regardless of which type of relationship you establish, the real estate professional will perform countless services for you, all with the goal of making the home buying and settlement process as simple and enjoyable as possible. Your Realtor® has available the tools and professionalism needed to help you achieve this goal.

FINDING YOUR HOME In order to find you the perfect home, you and your real estate agent will need to consider many different factors. Your agent will help you focus your thoughts by asking questions, and ultimately create a list of neighborhoods and houses that meet your needs. However, prior to meeting with your agent, it is helpful to have considered the following items: purchase price; size and style of home; commuting times; children’s needs–schools and after school activities; and community services.

After a set of criteria has been established, your real estate agent will create a list of available houses for you to consider. Your real estate agent generates this list by checking listints on the Metropolitan Regional Information System (listing all homes for sale registered with the local Board of Realtors®), other listing services and even word of mouth.

SELLER DISCLOSURE/ DISCLAIMER Once you have selected the house you would like to purchase, your Buyer’s Agent will help you write a purchase contract (an explanation of the contract is in the next section). However, before the contract is considered “ratified” (fully signed and in effect), you are entitled to receive from the seller a property disclosure statement or a property disclaimer statement. In Maryland, the Buyer and Seller will typically execute two (2) forms. The first is the Notice Of Buyer’s Right To Property Condition Disclosure Statement. This informs the Buyer that he/she has the right to receive a disclosure statement, completed and provided by the Seller. Alternatively, the Seller may complete a disclaimer in which the Seller makes no representations about the condition of the house. Regardless of whether the seller elects to provide a disclosure or a disclaimer, under Maryland Law the seller must disclose any know “latent defects.” Note, there are certain properties that are exempt from this disclosure requirement.

A Homebuyer’s Guide from RGS TITLE

CONTRACTING FOR YOUR PURCHASE Once you have identified the home that you wish to purchase, you will need to prepare a contract specifying the details of your purchase of the property. Your Realtor® will help you to prepare the purchase contract utilizing your local Board of Realtors® recommended forms. These standardized forms are used in order to address all important issues and to assure that both you and the Seller comply with the various laws and regulations that govern the home sale and purchase transaction. If there are specific issues you wish identified in the contract that are not provided for in the standardized forms, your Realtor® or an attorney with Shreves Schudel Saunders Jackson & Parello, PLLC, (General Counsel to RGS TITLE) can recommend language tailored to meet those concerns. Once your contract has been completed and signed by you, your Realtor® will present it to the Seller’s agent (often referred to as the “Listing Agent”) for presentation to the Seller. At this time your contract is an OFFER TO PURCHASE, and the Seller may proceed in one of three ways. First the Seller may ACCEPT your offer in the form presented. If the Seller accepts your offer and signs the contract you now have a RATIFIED contract. Second, the Seller, although interested in your offer, may make a COUNTER OFFER, by modifying one or more of the terms of your offer to purchase. At this point you have the option of: a) accepting the Seller’s counteroffer and thus ratifying the contract; b) countering the Seller’s counter offer; or c) rejecting the Seller’s counteroffer thus nullifying the contract. The third option is that, the Seller, when presented with your initial purchase offer, rejects that offer.

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Once your contract has been signed by all parties and ratified it is important that you contact RGS TITLE. In order to assure a smooth and timely settlement it is imperative that the contract be forwarded to the RGS TITLE office most convenient to you so that we may begin the process of gathering all of the information necessary to conduct the settlement. It is not necessary to await approval of your loan before forwarding the contract to our office; in fact, to do so may delay the date of settlement.

OBTAINING YOUR LOAN Shortly after ratification of your Purchase Contract it will be necessary to make application for the financing of your purchase. Selecting your lender and the loan officer who will oversee the approval of your application for financing is crucial to the smooth completion of the purchase. Your loan officer will be responsible for taking your loan application and for overseeing the processing of that application as you move toward loan approval. Working with the loan officer is the loan processor. The loan processor is responsible for gathering the information and documentation necessary to document your application. The loan processor will be responsible for ordering your credit report, appraisal, employment verification and several other documents. Once this information has been received it must be organized by the processor for submission for loan approval. It is imperative that your lender, loan officer and loan processor be capable and qualified. Your Realtor ® will be able to provide you with the names of loan officers with whom they have worked in the past and had successful transactions.

A Homebuyer’s Guide from RGS TITLE

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SETTLEMENT Settlement is the culmination of your hard work and time when the purchase of your home is completed. RGS TITLE’s role is to coordinate all of the parties involved in this transaction, to conduct the settlement and to complete the vast post-settlement work. The legal

aspects of your transaction will be overseen by the attorneys of Shreves Schudel Saunders Jackson & Parello, PLLC, (General Counsel to RGS TITLE). On page 30, you will find a more detailed discussion of the settlement process and the services performed by RGS TITLE.

THE HOME BUYING PROCESS Home Buyer

Select Agent

Move

Settlement

Select Lender

Final Walk-through Inspection

Agent Determines Purchasing Power

Contact Utility Companies

Select Home

Designated Party Obtains Termite Inspection

Make Offer

Contingencies Determined • Home Inspection • Financing • Other

Seller provides Buyer with Disclaimer/ Disclosure of Property Condition

Contract Acceptance

Mortgage Approval

Mortgage Application Lender orders Credit Report and Appraisal CALL

Obtain Hazard Insurance

A Homebuyer’s Guide from RGS TITLE

he standard contract used in the Washington Metro Area is the Regional Sales Contract (“Regional Contract”). The Regional Contract is used in Maryland, Virginia and the District of Columbia. (The Regional Contract is reproduced on page 12.) In Maryland there is an alternative contract form created by the Maryland Association of Realtors (MAR). (The MAR Contract is reproduced on page 20.)

The Regional Contract and the MAR Contract are designed to memorialize the parties agreement to buy and sell a piece of property. However, neither the Regional Contract nor the MAR Contract can cover all the possible choices the parties wish to include in the contract or certain local legal issues. So, in addition to the contract, there will be several attachments called “Addenda.” Importantly, both Montgomery County and Washington, DC have their own Jurisdictional Addenda that must be used in each jurisdiction to bring the contract within their laws. Once signed by the Seller and the Buyer, the Addenda are part of the contract. AS THE COMPLETED CONTRACT IS A BINDING LEGAL DOCUMENT, IT IS IMPORTANT TO FULLY UNDERSTAND THE TERMS AND CONDITIONS BEFORE SIGNING. RGS Title strongly recommends that you read the entire contract prior to signing and, should you have any questions or concerns, discuss them with your Realtor and/or consult an attorney. Our discussion begins with the preamble to the Contract. This first section contains blank spaces for the date that the Contract offer is written by the Purchaser, and a space for the Purchaser’s name, Seller’s name, and the names of the listing and selling real estate companies. You will notice that this section also provides for the parties to specify whom the real estate companies represent. The real estate companies’ (agents’) duties to the Purchaser and Seller are now established by Maryland Statute or Washington, D.C. law. Many Purchasers hire Realtors® who represent just the Purchaser’s interest. Such a Realtor® is known as a “buyer agent.” If you are interested in a buyer agent arrangement you should contact your Realtor® for more details. In the sample contract, our Purchaser has chosen a buyer agent relationship. 1. REAL PROPERTY. The property to be conveyed is described in this paragraph. This is done by way of the tax map #, lot, block, and section number and the subdivision or condominium name. There are also spaces for the condominium unit and parking space numbers, street address, Deed Book/Liber, Page/Folio and county or municipality.

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2. JURISDICTIONAL ADDENDUM. Indicate here which local Jurisdictional Addendum is attached as part of the contract. 3. PRICE AND FINANCING. The financial terms of the transaction are itemized in this paragraph. Subparagraph A is where the Purchaser specifies the amount of the down payment. The down payment is to be paid by the Purchaser at settlement by a certified or cashier’s check, or by bank wired funds. The earnest money deposit specified in Paragraph 4 is part of the down payment. Please note that the down payment is in addition to any closing costs that the Purchaser might pay at settlement. The financing which the Purchaser will need in order to purchase the property is set forth in Subparagraph B. The term “Trust” used in this paragraph refers to the deed of trust (or mortgage) that the lender will require the Purchaser to sign at settlement. The deed of trust is the document whereby the Purchaser pledges the property as collateral for the loan. The down payment plus the total of the financing sought equals the total sales price of the property. The Purchasers state whether they are obtaining a new loan or assuming the Seller’s existing loan. The type of loan is also specified. If the Purchaser is assuming the existing loan, the parties will use the check boxes to specify whether there will be a release of liability (FHA) or a substitution of the Seller’s eligibility under a VA loan. 4. DEPOSIT. The amount of the deposit or earnest money paid by the Purchaser is entered here along with the form of payment, such as a check or money order, etc. This deposit is to be held in an escrow account by the named Escrow Agent and applied to the purchase price of the property at settlement. Except for matters constituting gross negligence or willful misconduct, the Escrow Agent is released from any and all liability. 5. DOWN PAYMENT. This is a reminder that the balance of the down payment (the total down payment minus the earnest money deposit) is to be paid on or before settlement by certified or cashier’s check or by bank-wired funds. It also prohibits the use of an assignment of funds unless prior written consent of the Seller has been obtained. 6. SETTLEMENT. The date chosen for settlement is inserted here. The Purchaser has the right to choose the Settlement Agent. We recommend that you select our firm by writing RGS Title in the blank for Settlement Agent in this Paragraph 6. 7. PROPERTY MAINTENANCE AND CONDITION. Here the Purchaser and Seller agree that the Purchaser will accept the property “AS IS”, i.e., in its condition as of date to be specified by box check-off, except as otherwise agreed in the contract by the parties. Also the parties indicate if the Contract is contingent on

RESALE CONTRACT FOR SINGLE FAMILY HOMES

A Homebuyer’s Guide from RGS TITLE

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a home inspection. The property is to be delivered to the Purchaser in broom clean condition, free of trash and debris and the Seller is required to have all utilities in service until settlement. 8. ACCESS TO PROPERTY. The Purchaser, inspectors, appraisers, and Realtor are allowed reasonable access to the property, including the right to make a final inspection within 5 days prior to settlement. 9. UTILITIES—WATER, SEWAGE, HEATING AND CENTRAL AIR CONDITIONING. Here is a checklist to identify the type of water supply, sewage disposal system and the type of hot water, heating and air conditioning system for the property. 10. PERSONAL PROPERTY AND FIXTURES. The contract here specifies certain items that are included and others that are not included in the conveyance to the Purchaser. It also provides a checklist itemizing specific personal property and fixtures to identify whether the items convey to the Purchaser, and space to list others. Leased items, which do not convey, are listed in this paragraph as well. 11. FINANCING APPLICATION. The Purchaser agrees to make application for specified financing and for any lender required property insurance no later than seven days after the date of ratification of the contract, if contingent on financing. The Purchaser also gives permission for the selling company and lender to disclose information to the listing company regarding the status of the Purchaser’s loan. 12. ALTERNATE FINANCING. The Purchaser may choose a different loan and/or lender for what is identified in Paragraph 3, provided the conditions in this paragraph are met, including no delay in settlement. 13. PURCHASER’S REPRESENTATIONS. Here the Purchaser represents whether or not the property will be occupied as principal residence. The Purchaser also represents that the ability to obtain the specified financing is not contingent upon the sale or lease of other real property. In addition, there are boxes to check indicating whether or not the Selling Company may disclose the Purchaser’s financial information to the Listing Company and Seller. 14. TERMITE INSPECTION. Check boxes are provided to indicate who will procure and pay for a report from a pest control firm establishing that the dwellings or structures are free from termites and other wood destroying insects. Any required extermination and/or repairs shall be made at Seller’s expense. 15. DAMAGE OR LOSS. The risk of loss by fire or other casualty remains with the Seller until execution and delivery of the deed of conveyance to the Purchaser at settlement. 16. TITLE. The Seller must comply with any notices of violation from county or local authorities or condominium or homeowner’s associations. For example if the Seller had been cited by the homeowner’s association

for a fence built in violation of the association rules, the Seller may have to remove the fence prior to settlement. Further, the Seller is required to give “good and marketable and insurable” title to the Purchaser. In other words, the title to the property must be free of all liens and encumbrances except those expressly assumed by the Purchaser. This also means that the title must be insurable with no additional risk premiums. If defects exist in the title and the Seller cannot cure them within 30 days the Purchaser may void the Contract. 17. POSSESSION DATE. The Purchaser has the right to take possession of the property at the time of settlement unless otherwise agreed by the parties. If the Purchaser has to take legal action to obtain possession, Seller shall be responsible for any and all damages and losses so incurred by Purchaser. 18. FEES. The division of settlement fees between Purchaser and Seller is discussed here. 19. BROKER’S FEE. The settlement agent is given irrevocable instructions to disburse the listing and selling real estate brokers’ commission as agreed. 20. ADJUSTMENTS. This provision allows for all the expenses incurred on the property to be charged to the appropriate parties as of the settlement date. 21. ATTORNEY’S FEES. Any attorney’s fees and legal expenses incurred as a result of a dispute arising under the Contract shall be paid by the non-prevailing party. 22. PERFORMANCE. This paragraph sets out what would constitute sufficient tender of performance by the parties of their obligations under the Contract. It also states that funds from the transaction may be used to pay off existing liens and encumbrances affecting the property. 23. DEFAULT. If the Purchaser is in default under the Contract, the Seller has the option to either sue to enforce the Contract or to seek monetary damages. Remember, the earnest money deposit may not be the extent of the Purchaser’s liability. If the Seller defaults, the Purchaser may sue for specific performance of the Contract or to seek monetary damages. If either party wrongfully fails to sign a release, they shall pay all court costs and expenses of the party seeking the release. Except for matters constituting gross negligence or willful misconduct, the Escrow Agent is released from any and all liability. 24. OTHER DISCLOSURES. The Seller and Purchaser are reminded that they should seek advice from appropriate professionals, if desired. Subparagraph A is designed to alert the Purchaser to certain items that might not otherwise be apparent. The provision suggests that the Purchaser may wish to avail themselves of a home inspection service and home warranty programs, and investigate such things as soil conditions, possible property use restrictions due to zoning, and other issues related to the property. The purpose is to let the

A Homebuyer’s Guide from RGS TITLE

Purchaser know that the property is sold without warranty or guarantee as to certain items and conditions, and it is left to the Purchaser to ask the right people the right questions to find out what “as is” includes or does not include. Subparagraph B puts the parties on notice that all contracts and addenda must be in writing to be enforceable. The parties also acknowledge that they have the right to seek legal counsel. In Subparagraph C, the Purchaser acknowledges responsibility for negotiating financing terms and that the future availability of mortgage money is speculative. Subparagraph D is a disclosure of the real estate broker’s possible other real estate related activities. Subparagraph E directs the Purchaser to the local tax authority for information on property tax. Subparagraph F reminds both parties of the importance of securing and maintaining property insurance with assistance from an insurance professional. 25. ASSIGNABILITY. The Contract is not assignable unless both the Seller and Purchaser so agree in writing. Further, even if the Seller and/or Purchaser agree to assign their interest to a third party or parties, the original parties to the Contract remain liable until settlement. 26. DEFINITIONS. This provision defines certain words used in the Contract, i.e., what these words mean in the context of the Contract. 27. MISCELLANEOUS. Among other things, the parties to the Contract are informed that any typed or handwritten provisions of the Contract will supersede any conflicting preprinted provisions. 28. VOID CONTRACT. In the event that the contract becomes void under any of its provisions, then the parties to the contract agree to sign a release document. 29. HOME WARRANTY. If a home warranty program is being purchased, the cost and name of the provider, as well as who pays for it, are inserted here. 30. TIME IS OF THE ESSENCE AS TO ALL TERMS OF THIS CONTRACT. Time is of the essence means that the parties to the transaction must complete their obligations in a diligent and timely manner, by the date and time specified. 31. ENTIRE AGREEMENT. This provision states that the Contract will survive the deed, meaning that even after settlement the agreements contained in the Contract which have not been satisfied are still binding. Further, this provision states that all agreements must be in writing and contained in the Contract or made a part of it (i.e., addenda). 32. ELECTRONIC SIGNATURES. The parties agree that in accordance with local, state and federal laws, the Contract may be executed by electronic signatures and/or a digital signature service.

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MARYLAND ASSOCIATION OF REALTORS CONTRACT “Time is of the essence” is a legal term which requires that all timeframes included in the Contract be strictly held. If a timeframe is not met, that can be construed as a default of the Contract. 1. DATE OF OFFER. Enter the date the Buyer(s) will submit their offer to the Seller. 2. and 3. SELLER AND BUYER. The Buyer and Seller should be identified here with their full legal names. Names should be legible. Paragraph 52 prohibits unilateral transfer of Contract rights to a third party. All Buyers and Sellers should be included. 4. PROPERTY. The property to be sold and purchased is identified here by address and by the county where the property is located. 5. ESTATE. The type of ownership interest to be conveyed by the Seller to the Buyer is identified here. Most property is sold as fee simple, which means absolute ownership of the land and improvements. If subject to ground rent, the property is held as a leasehold interest and semi-annual rent must be paid to the leaseholder. Rental amount(s) should be inserted. 6. PURCHASE PRICE. This is the amount the buyer will pay and the Seller will accept for the purchase and sale of the property. The specific manner of payment is set forth in paragraphs 7 and 9. 7. PAYMENT TERMS. The amount and manner of the Buyer’s good faith deposit or earnest money is set forth here. Additionally, the party who will hold this deposit is identified. Sub-paragraph (d) indicates the balance due at closing must be paid in “good” funds: cash or wired funds. 8. SETTLEMENT. This paragraph states the date the settlement will take place. Neither party can unilaterally change this date. 9. FINANCING. This paragraph states that the Contract is automatically contingent on the Buyer’s ability to obtain financing–in the manner specified here by the Buyer. The Buyer will state the amount of the loan, its term, the interest rate for the loan and the loan program, if applicable. The parties also state the amount of any points (loan origination/discount fees) to be paid by either party. 10. FINANCING APPLICATION AND COMMITMENT. The parties agree to the timeframes by which the Buyer must (1) make application for financing, and (b) obtain the commitment from the lender for the financing. If not obtained within this time period, the Contract is voidable by either the Buyer or Seller. If voided, the Buyer is entitled to a full refund of the deposit, provided the Buyer has fully complied with the terms of this Contract.

A Homebuyer’s Guide from RGS TITLE

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11. ALTERNATE FINANCING. Permits the Buyer to apply for financing different from that specified in the contract. However, the alternate financing may not increase costs to the Seller, delay the time for settlement or the time for obtaining the loan approval. 12. HOME AND/OR ENVIRONMENTAL INSPECTION. Advises the Buyer that they may condition their Contract offer on the results of a home inspection. In the event the Buyer elects to incorporate this inspection contingency, it must be attached as an addendum to the Contract. They Buyer must initial indicating whether they will or will not require an inspection. 13. INCLUSIONS/EXCLUSIONS. This paragraph indicates that sale of the property includes all permanently attached fixtures. Check boxes are included for a list of personal property items that can be negotiated to convey; A careful review of this list by the client and the Realtor to confirm accuracy is imperative. 14. AGRICULTURALLY ASSESSED PROPERTY. Agriculturally assessed properties are assessed at a lower rate. When transferred, special taxes and transfer fees may be assessed. The parties indicate who will pay the charges if applicable. 15. FOREST CONSERVATION AND MANAGEMENT PROGRAM. Similar to Paragraph 14, if the property has been subject to the Forest Conservation and Management Program, special taxes and transfer fees may be due at sale of the property. The parties negotiate who will pay those fees. 16. LEAD-BASED PAINT. This paragraph, if applicable, discusses both the Maryland and Federal lead paint laws and the disclosures required thereunder. These laws apply to properties constructed prior to 1978. Your Real Estate Broker will provide you with documents pertaining to these laws and the rights and obligations they create. 17. ADDENDUM. This paragraph lists certain standard contract provisions that may be attached to the body of the Contract as addendums. These attachments are necessary to comply with local requirements, disclosure obligations and other required provisions that are not reflected in the main Contract body. These addenda are often necessary for a full, complete, enforceable Contract. 18. TERMITE INSPECTION. States that the Buyer will retain a Maryland-licensed pest control company to conduct an inspection of the property to determine if there is infestations or damage from termites and wood-boring insects. If damage or infestation is observed, the Seller must pay for necessary treatment or repairs. If those costs

exceed 2 percent of the sales prices, the Seller may elect to cancel the Contract, unless the Buyer agrees to pay the amount above 2 percent. 19. DEPOSIT. The Buyer may choose to place the deposit called for in the Contract in an interest-bearing or non-interest-bearing account. However, the deposit will not be negotiated until both the Buyer and Seller have agreed to all terms of the Contract. When settlement occurs, the deposit will be credited towards the Buyer’s closing costs and/or downpayment. In the event settlement does not occur, the parties will execute an “Agreement of Release” that directs the disposition of the deposit. This paragraph discusses the Broker/Escrow Agent’s options if one or both parties refuse to sign the “Agreement of Release.” 20. DEED AND TITLE. The Contract requires the Seller to convey “Marketable Title” or “Insurable Title” to the Buyer; which means that title will be free and clear of mortgages, liens, judgments or any other encumbrances that would impact the Buyer’s use and enjoyment of the property. Additionally, title to the property must be insurable at standard rates with no additional risk premium. The Buyer does agree to accept the property subject to use and occupancy restrictions and easements which are public record. If defects are discovered that affect the marketability and/or insurability of title, the Seller is entitled to an automatic 14-day extension in order to resolve those defects. 21. CONDITION OF PROPERTY AND POSSESSION. Unless otherwise negotiated, this paragraph sets forth the physical condition the property should be in when delivered to the Buyer. The Buyer is entitled, within five days of settlement, to conduct a final “walk-through” inspection to determine that the property is in substantially the same condition as it was at the time of Contract and that the major systems and appliances are in “working order.” NOTE: Using the required Montgomery County Jurisdictional Addendum converts the MAR to an “As Is” contract. In other words, major systems and appliances do not need to be conveyed in ‘working order. Possession is to be delivered at settlement, unless otherwise agreed. 22. ADJUSTMENTS. This provision allows for the allocation and proration of charges incurred incident to ownership of the property. These charges will include: rent, taxes, homeowner’s and/or condo association fees, utilities, taxes and any other charges or assessments on the property which are paid on a periodic basis. Any cooking or heating fuels remaining at settlement become the property of the Buyer without payment.

A Homebuyer’s Guide from RGS TITLE

23. SETTLEMENT COSTS. The division of settlement fees and charges between the Buyer and Seller are discussed here. 24. TRANSFER CHARGES. This paragraph discusses transfer and recordation taxes and the presumption by law that these fees are split equally between the Buyer and Seller, unless otherwise negotiated. If the Buyer is a first-time Maryland homebuyer, an addendum must be attached indicating the seller will pay all of the reduced state transfer tax (.25%) and also stating how the local transfer tax and state recordation tax will be allocated. 25. and 26. BROKER LIABILITY AND BROKER’S FEE. These paragraphs discuss that the Brokers are not responsible for the condition of the property and for the parties’ performance of the Contract. Also, the parties agree that the settlement company is to pay the negotiated commission(s) from settlement proceeds. 27. SELLER RESPONSIBILITY. Discusses the obligations of the Seller during the period prior to settlement. These include: the Seller must keep their mortgage payments current and if any violations or requirements are noted or imposed by any governmental authority, then they must be addressed and satisfied by the Seller. Also, the Seller is responsible for the condition of the property until the deed has been recorded or the Buyer takes possession. If the property is substantially or completely damaged, then the Buyer may elect to cancel the Contract. 28. BUYER RESPONSIBILITY. The Buyer’s statements and representations regarding their financial status must be accurate. Additionally, the Buyer must diligently pursue that financing. Failing to do so can be construed as default by the Buyer. 29. HOMEOWNER’S ASSOCIATION. States that the property is not subject to a mandatory dues-paying association. If it is, the Contract must be amended by the attachment of the appropriate Homeowner’s Association disclosures and addendum. 30. GROUND RENT. Ground rent is paid when the land on which the house sits is owned by a third party. The improvements are sold, but the lease for the land on which they sit is transferred. If not paid, the owner of the land may file an action for ejectment. 31. SALE/SETTLEMENT OR LEASE OF OTHER REAL ESTATE. If the Buyer must sell or lease an existing home in order to purchase this property or to obtain the financing for the purchase, then this fact must be disclosed to the Seller. In this case, the Buyer must attach an addendum making this Contract contingent upon the sale or lease. 32. LEASES. The Seller is prohibited from extending any existing leases or negotiating new ones once the Contract to sell has been agreed to.

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33. DEFAULT. This paragraph discusses what constitutes a default by either party and the possible remedies available in the event that default. These remedies include: suits for damages incurred, suits to enforce the Contract and forfeiture of deposit, among others. 34. MEDIATION OF DISPUTES. As an alternative to legal action, the Contract requires that parties to mediate any disputes arising from the Contract or settlement. Mediation involves a review of the dispute by a designated third party who recommends a resolution. Mediation is not binding. If either party files suit prior to attempting mediation, then they will be obligated to pay the other party’s legal fees and costs 35. ATTORNEY’S FEES. In any legal action arising out of the Contract, the losing party will be required to pay the legal fees and costs of the prevailing party. If the Real Estate Brokers are made party to the legal action and are found not liable, then the Buyer and/or Seller may be obligated to pay the Brokers’ legal fees and costs. 36. NOTICE OF BUYER’S RIGHT TO SELECT SETTLEMENT SERVICE PROVIDERS. The Buyer is authorized to select the companies that will provided financing and will conduct settlement. It is our hope that you will select RGS TITLE, LLC to oversee the process and conduct your settlement. 37. LIMITED WARRANTY. If a “Home Warranty” is to be purchased or provided as part of the home purchase, the Buyer is advised to closely review the terms, conditions and limitations of the warranty. There may be exclusions from coverage. 38. PROPERTY INSURANCE BROCHURE. The Maryland Association of Realtors publishes, and your Agent or Broker can provide you with, a brochure that discusses issues associated with obtaining property insurance. 39. GUARANTY FUND. If a party to a Contract incurs losses or damages as a result of the conduct of their Realtor, they may seek recovery from this fund–up to $25,000.00. 40. SINGLE-FAMILY RESIDENTIAL REAL PROPERTY DISCLOSURE NOTICE. With certain exceptions, Sellers in Maryland must provide potential Buyers with either a disclosure of property conditions or a disclaimer. In either case, the Seller must disclose “hidden” defects that could cause physical injury–these are referred to as “material latent defects.” 41. MARYLAND NON-RESIDENT SELLER. A withholding tax may be required to be deducted from the proceeds of sale if the property is not the Seller’s principal residence or the Seller is not a Maryland resident. If otherwise subject to

A Homebuyer’s Guide from RGS TITLE

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the tax, a Seller may obtain and present a written exemption from the State of Maryland. 42. IRS FILING. This paragraph advises the parties of the settlement agent’s obligation to report the transaction to the IRS. Additionally, the Buyer and Seller agree to cooperate and assist in completing any forms required for this reporting. 43. NOTICE TO THE BUYER CONCERNING THE CHESAPEAKE AND ATLANTIC COASTAL BAYS CRITICAL AREA. Certain properties in Maryland are located in areas designated as “Critical Areas.” These properties will be subject to additional restrictions on land use, zoning and resource protection. A potential Buyer can determine if a property is in a Critical Area by contacting the local Department of Planning and Zoning. 44. WETLANDS NOTICE. If all or a portion of a Property is designated as wetlands, that property may be subject to use restrictions or require additional action in order to obtain building permits. The paragraph also discusses how a buyer can determine if a specific property is wetlands. 45. FOREST CONSERVATION ACT NOTICE. Seller states that the property is not subject to the restrictions and requirements of the Forest Conservation Act unless an appropriate disclosure addendum is attached to the Contract. 46. NOTICE CONCERNING CONSERVATION EASEMENTS. Seller must disclose, via an addendum, if the property is encumbered by a Conservation Easement. 47. FOREIGN INVESTMENT TAXES FIRPTA. Under certain circumstances, Sellers who are “Foreign Persons” for purposes of U.S. income taxation will be subject to a withholding tax as required by the IRS. It is strongly suggested that any Seller that suspects these regulations may apply to them should consult an accountant or tax attorney. 48. CRIMINAL ACTIVITY AND SEXUAL OFFENDERS. The Buyer is provided methods of determining criminal activity or the presence of registered sex offenders that may be in the vicinity of the property. The Buyer is advised that the Contract is not contingent on this determination, nor is it voidable as a result. 49. MILITARY INSTALLATIONS. Buyers are advised that homes located near military installations may be subject to high noise levels.

50. NOTICE TO THE PARTIES. The Buyers and Sellers are put on notice that the Realtors make no representations as to water, sewer, utilities, lot size and location, zoning issues, covenants, restrictions, hazardous material, etc. The parties can engage experts to evaluate these matters if they are of concern. 51. PROPERTY TAX NOTICE 60 DAY APPEAL. Advises the Buyer that he/she may be able to appeal the value of the property for property tax purposes within 60 days of the purchase if it occurred between January 1 and the start of the next taxable year. 52. NON-ASSIGNABILITY. Neither party may transfer its rights and obligations in and to the Contract to a third party without first obtaining the written approval of the other party. If assignment is agreed to, the original parties remain responsible for performance under the Contract. 53. PARAGRAPH HEADINGS. Simply notes that the headings in no way limit or define the scope of the paragraph, they are merely for reference purposes. 54. COMPUTATION OF DAYS. For clarity, “days” are defined as calendar days. A definition is provided for calculating the number of days. 55. ENTIRE AGREEMENT. The parties agree that the entire Contract is contained in the written document signed by them. Oral agreements or written documents not incorporated in the Contract are not enforceable. The Contract is binding on the successors, assigns and heirs of the original signing parties. 56. ELECTRONIC DELIVERY. Although the Contract must be fully signed in order to be enforceable, original signature are not required. Faxed, scanned or other electronic copies of the signed Contract are valid and enforceable.

FINANCING CONTINGENCY ADDENDA Financing terms are specified in a separate addendum in the event financing is to be obtained. Conventional, FHA and VA loan programs have distinct requirements, so the appropriate addendum must be signed and attached in order to incorporate those required provisions, indicate the loans terms and specify the “Financing Deadline,” determining the length of time for the financing contingency. The APPRAISAL CONTINGENCY is also included in these addenda.

A Homebuyer’s Guide from RGS TITLE

LENDER REQUIRED REPAIRS, if required as a condition of obtaining the loan, will be made by the Seller, unless after Notice the Seller refuses or declines to do so, in which case the Purchaser may make the repairs and bear the expense or the Contract becomes void. Under either a VA or FHA loan program, the Purchaser will not be obligated to complete the purchase of the property or be made to forfeit the earnest money deposit if the lender’s appraisal is lower than the sales price as set out in Paragraph C of each addendum. It should be noted that even if there is no such agreement, the Seller agrees to pay any lender charges that by law or regulation cannot be charged to a Purchaser.

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OTHER ADDENDUM FORMS Your Realtor® may also prepare other addenda to add critical terms to the Contract. One commonly used addendum is the ADDENDUM OF CLAUSES which becomes a part of the Contract if attached with all parties signing. This addendum allows the parties to make the Contract contingent on the happening of certain named events, for example, the sale of the Purchaser’s current home, as well as to modify some of the terms of the Contract, such as providing for a pre- or post-settlement occupancy agreement. A HOME INSPECTION AND RADON TESTING CONTINGENCY is frequently used to provide a contingency to allow the Purchaser to obtain a satisfactory inspection of the home to determine its general condition and for the presence of radon. NOTE: The Washington DC Jurisdictional Addendum or The Montgomery County, MD Jurisdictional Addendum must be attached, when appropriate and applicable, to address local issues and concerns not reflected in the body of the Contract.

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fter the contract has been ratified and the loan has been approved, you and the Seller will attend settlement to complete the sale. At settlement you will sign your loan documents and pay the Seller and the Seller in turn, will deed the property to you.

BEFORE SETTLEMENT When RGS TITLE receives your contract from your real estate agent, we do the following (as required by your contract or lender): (1) Order title abstract and survey (2) Review title abstract and survey to determine marketability and insurability (3) Contact your lender to schedule settlement and prepare any required documents (4) Contact the Seller’s lender to obtain the amount needed to pay off the Seller’s existing loan(s)

SETTLEMENT

(5) Prepare title insurance commitment pursuant to Lender requirements (6) Contact the local taxing authority to verify the amount of property taxes and determine prorations between Buyer and Seller (7) Contact Homeowner’s Association to verify the amount of homeowner’s dues and determine prorations between Buyer and Seller (8) Obtain the lender’s loan documents and proceeds check (9) Prepare the settlement sheet and any other required documents. On the day prior to settlement, you should contact us to determine the amount of money you will need. Your contract requires that funds be in the form of a cashier’s or certified check or by bank-wired funds which MUST be received by our office PRIOR to settlement in order to comply with state law and your loan conditions. The check should be made payable to RGS TITLE. Also, your lender will require you to provide evidence of homeowners’ insurance prior to settlement. Please also check with your loan processor prior to settlement to

see if you are required to bring any documents to settlement.

DURING SETTLEMENT A settlement at RGS TITLE will be conducted by an attorney or licensed settlement agent. We will go through the settlement documents as you sign them, explaining the purpose of each. Since many of the documents you will be signing at settlement need to be notarized, you will need to bring to settlement a current form of identification containing your picture. Examples of acceptable forms of identification include driver’s licenses or passports. This process usually takes 45 minutes to an hour. If any problems arise during settlement, we will assist the parties in reaching an agreement. An attorney with Shreves Schudel Saunders Jackson & Parello, PLLC, General Counsel to RGS TITLE, will be available to conduct the settlement or to assist in the resolution of disputes that may arise during settlement. Unless you are assuming an existing loan or paying cash, you will be signing quite a few documents at settlement. The following are examples and explanations of the documents you will typically see.

HUD-1 SETTLEMENT STATEMENT The first document you will review and sign is the HUD-1 Settlement Statement. This form details all the charges and credits to the Buyer and Seller. The Buyer’s figures are on the left-hand side of the page, the Seller’s on the right. There is also a page comparing the charge estimates from the GFE to the actual charges from page 2 of the HUD-1 statement, so the borrower/buyer can easily see if the lender is within allowed tolerances. We have provided a sample of this document for your review on the following pages. After signing the settlement sheet, you will review and sign numerous other documents. Here are some of the forms seen in most settlements.

HOUSE LOCATION SURVEY If the home you are purchasing is a single family detached home or a townhouse,

A Homebuyerâ&#x20AC;&#x2122;s Guide from RGS TITLE

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LOAN APPLICATION

your lender may require that you obtain a House Location Survey. This document is prepared by a licensed surveyor for the purpose of showing the location of the improvements (structures within the boundaries of the property). RGS TITLE will arrange for this document to be prepared on your behalf and will submit it to your lender. You will receive copies of the survey at settlement.

You may be asked to sign a printed copy of the loan application. This typed form is a confirmation of the form the loan officer filled out when you applied for the loan. The lender is asking you to verify that the information is substantially correct, and that there have been no material changes in your employment, marital or financial status.

NOTE

FLOOD INSURANCE

The Note is your agreement to repay the borrowed funds to your lender. This document will detail terms and conditions of your loan and the manner and form of repayment of the borrowed funds.

This document will inform you whether your home is located in a flood zone. If it is, the lender will require you to carry flood insurance on the property. If it is not, as is usually the case, the form will inform you that if the Federal Government ever deems your property to be within a flood zone, the lender will require you to obtain flood insurance.

DEED OF TRUST This document is a standardized security instrument filed at the courthouse to establish the lenderâ&#x20AC;&#x2122;s lien on the property for the original principal amount of the loan. The deed of trust secures the home as the collateral for the repayment of the loan. This document provides that in the event of default or non-payment, the lender may direct the trustees to foreclose on the property in order to recoup the loan proceeds.

FIRST PAYMENT LETTER This document gives a breakdown of the total amount of your monthly payment. The total monthly payment will typically include principal and interest as well as any escrow for taxes, hazard insurance or mortgage insurance.

LOAN APPROVAL LETTER OR LOAN COMMITMENT LETTER This is a letter from the lender which explains that your loan has been approved on certain terms and subject to certain requirements. The letter will state the terms of the loan, i.e., loan amount, interest rate, length of the loan. The lender will also list any additional requirements, such as a hazard insurance policy naming the lender as mortgagee, a survey or a termite report.

NAME AFFIDAVIT By signing this document you certify to the lender that you are known by all the variations of your name that the Lender has found on the credit report or other documents used in processing your loan.

SIGNATURE AFFIDAVIT Your lender may require you to sign a statement that your signature on the loan documents is your legal signature, and that you agree to be bound by documents with this signature.

TAX AUTHORIZATION Some lenders have you sign written instructions to the local real estate taxing authority authorizing it to send the tax bill directly to the lender who is holding money in escrow for payment of that bill.

TERMITE INSPECTION You will be asked to acknowledge receipt of a copy of the termite inspection report. This report is prepared by a licensed exterminator and indicates whether any evidence of infestation has been discovered.

A Homebuyer’s Guide from RGS TITLE

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TRUTH-IN-LENDING STATEMENT

AFTER SETTLEMENT

The Truth-in-Lending disclosure is required by Federal law to be provided to each borrower. The purpose of this document is to disclose to the borrower an estimate of the annual cost as well as the total cost of the loan over the full term of that loan, factoring in all costs and fees incurred in placing the loan. Below is a detailed explanation of this form.

In order to complete the process of settlement, we do the following, as required: (1) record the deed, deed of trust or assumption documents in the land records at the county courthouse, (2) audit the disbursement sheet, (3) disburse all proceeds, (4) issue the title insurance policy, (5) send the lender the packet of all signed documents, (6) pay off the Seller’s lender, if any, and obtain and record a release of the Seller’s deeds of trust, and (7) disburse any funds required to be escrowed at closing.

W-9 This is an IRS form giving your social security number and new mailing address. You fill this out so that at tax time you can deduct the interest you pay to the lender.

TRUTH-IN-LENDING ANNUAL PERCENTAGE RATE The cost of your credit at a yearly rate.

FINANCE CHARGE The dollar amount the credit will cost you.

Amount Financed

Total of Payments

The amount of credit provided to you or on your behalf.

The amount you will have paid after you have made all payments as scheduled.

Q. What is a Truth-in-Lending Disclosure and why do I receive it? A. The Disclosure is designed to give you information about the costs of your loan so that you may compare these costs with those of other loan programs or lenders.

and a fixed interest rate of 12%, the payments would be $514.31 (principal and interest). Since the A.P.R. is based on the Amount Financed ($48,000), while the payment is based on the actual loan amount given ($50,000), the A.P.R. (12.553%) is higher than the interest rate.

Q. What is the Annual Percentage Rate? (Box A above.) A. The Annual Percentage Rate (A.P.R.) is the cost of your credit expressed as an annual rate. Because you may be paying loan discount “points” and other “prepaid” finance charges at closing, the A.P.R. disclosed is often higher than the interest rate of your loan. This A.P.R. can be compared to the A.P.R. on other loan programs to give you a consistent means of comparing rates and programs.

Q. What is the finance charge? (Box B.) A. The Finance Charge is the cost of credit expressed in dollars. It is the total amount of interest calculated at the interest rate over the life of the loan, plus Prepaid Finance Charges and the total amount of any required mortgage insurance charged over the life of the loan.

Q. Why is the Annual Percentage Rate different from the interest rate for which I applied? A. The A.P.R. is computed from the Amount Financed and based on what your proposed payments will be on the actual loan amount credited to you at settlement. In a $50,000 loan with $2,000 Prepaid Finance Charges, a 30-year term,

Q. What is the Amount Financed? (Box C.) A. The Amount Financed is the loan amount applied for, minus the Prepaid Finance Charges. Prepaid Finance Charges include items paid at or before settlement, such as loan origination, commitment or discount fees (“points”), adjusted interest, and initial mortgage insurance premium. The Amount Financed is lower than the amount you applied for because it represents a NET figure. If you applied for $50,000 and the Prepaid Financed Charges total $2,000, the Amount Financed would be $48,000.

A Homebuyer’s Guide from RGS TITLE

Page 33 OMB No. 2502-0265

A. Settlement Statement (HUD-1) B. Type of Loan 1. ® FHA 2. ® RHS 4. ® VA 5. ® Conv Ins. 7. ® Cash Sale.

3. ® Conv Unins 6. ® Seller Fin

6. File Number Q31438ROC

7. Loan Number

8. Mortgage Ins Case Number

C. Note: This form is furnished to give you a statement of actual settlement costs. Amounts paid to and by the settlement agent are shown. Items marked "(p.o.c.)" were paid outside the closing; they are shown here for informational purposes and are not included in the totals. D. Name & Address of Borrower E. Name & Address of Seller F. Name & Address of Lender Paul PURCHASER Sue SELLER Mortgage Lender 123 Happy Trails 548 Forwarding Lane Bethesda , MD 20814 Potomac, MD 20854 , G. Property Location

H. Settlement Agent Name RGS Title/Maryland, LLC Underwritten By: Commonwealth-MD/DC-RGS Title/MD, LLC Place of Settlement RGS Title/Maryland, LLC 11333 Woodglen Drive, Suite 202 Rockville, MD 20852

Montgomery, MD 123 Happy Trails Bethesda , MD 20814

Sales price per contract

J. Summary of Borrower's Transaction

These charges are itemized on the second sheet.

Gross amount due (before credits)

K. Summary of Seller's Transaction

100. Gross Amount Due from Borrower 102. Personal property

Credit for your costs as agreed to be paid by Seller in your contract.

404.

105. Adjustments for items paid by seller in advance 106. City property taxes

405. Adjustments for items paid by seller in advance 406. City property taxes

107. County property taxes

407. County property taxes

108. Assessment Taxes

408. Assessment Taxes

109. School property taxes

409. School property taxes

110. Ground Rent Taxes

410. Ground Rent Taxes

112.

411. Front Foot Benefit Taxes 412.

113.

413.

Gross amount due to seller.

These charges are itemized on the second sheet.

414.

114.

415.

115. 116. 120. Gross Amount Due From Borrower 200. Amounts Paid By Or in Behalf Of Borrower

416. $209,393.20 $5,000.00

201. Deposit or earnest money

$160,000.00

420. Gross Amount Due to Seller 500. Reductions in Amount Due to Seller 502. Settlement charges to seller (line 1400) 503. Existing loan(s) taken subject to

204.

504. Payoff of first mortgage loan

205.

505. Payoff of second mortgage loan

206.

$14,720.00 $86,000.00

This is the principal balance of the loan plus all accrued, unpaid interest.

506. $2,000.00

207. Closing Cost Credit 208. 209.

$2,000.00

507. Closing Cost Credit 508. 509. Water Escrow Adjustments for items unpaid by seller

Adjustments for items unpaid by seller 211. County property taxes

$200,000.00

501. Excess deposit (see instructions)

203. Existing loan(s) taken subject to

210. City property taxes

You or your lender will pay the tax bill when it is due. Here the seller is giving you a credit for the time he/she owned the house.

403.

104.

202. Principal amount of new loan(s)

Your loan amount

$200,000.00

401. Contract sales price 402. Personal property

$9,393.20

103. Settlement charges to borrower

111. Front Foot Benefit Taxes

The amount of the deposit you submitted with your original contract offer

Contract sales price

400. Gross Amount Due to Seller $200,000.00

101. Contract sales price

I. Settlement Date 1/21/2010 Fund:

$300.00

510. City property taxes $76.71

01/01/10 to 01/21/10

511. County property taxes

212. Assessment Taxes

512. Assessment Taxes

213. School property taxes

513. School property taxes

214. Ground Rent Taxes

216.

514. Ground Rent Taxes 515. Front Foot Benefit Taxes 516.

217.

517.

218.

518.

215. Front Foot Benefit Taxes

219.

$76.71

01/01/10 to 01/21/10

519.

220. Total Paid By/For Borrower 300. Cash At Settlement From/To Borrower

$167,076.71

520. Total Reduction Amount Due Seller 600. Cash At Settlement To/From Seller

$103,096.71

301. Gross Amount due from borrower (line 120)

$209,393.20

601. Gross Amount due to seller (line 420)

$200,000.00

302. Less amounts paid by/for borrower (line 220)

$167,076.71

602. Less reductions in amt. due seller (line 520)

$103,096.71

303. Cash From Borrower

$42,316.49

603. Cash To Seller

This amount will be due at settlement. Please bring a certified or cashier’s check or initiate a bank wire prior to settlement.

$96,903.29

Cash amount to seller Page 1 of 3

HUD-1

Credit for your costs as agreed to be paid by Seller in your contract.

Credit to the purchaser for real estate taxes accrued during that portion of the year when the seller owned the property.

A Homebuyer’s Guide from RGS TITLE

Page 34 Total real estate commission paid. Total lender/mortgage broker fees for processing and underwriting to originate your loan. May be a credit or a charge for “Points” and any mortgage broker credits—each point is 1% of the loan amount* and may appear here or as part of line 801.* Net adjusted Loan Origination Charge (sum of Lines 801 and 802). Fees charged for other services required to prepare your loan.

L. Settlement Charges 700. Total Real Estate Broker Fees Division of Commission (line 700) as follows:

Includes all charges required to issue title insurance (e.g., title search and examination, binder fee, courier fees for documents to and from your lender and for recording), cost of the lender’s title insurance, and fee for preparing closing documents and conducting settlement.

$12,000.00

Borrower's

to Listing Agent Company

Funds at

702. $6,000.00 703. Commission Paid at Settlement

to Selling Agent Company

Settlement

800. 801. 802. 803.

$0.00

Items Payable in Connection with Loan Our origination charge Your credit or charge (points) for the specific interest rate chosen Your adjusted origination charges to Mortgage Lender

804. Appraisal Fee

805. Credit report

806. Tax service 807. Flood certification

to to

$3,200.00 $0.00

Mortgage Lender

(from GFE #1) (from GFE #2) (from GFE A)

$3,200.00

(from GFE #3)

$300.00

First American FDSI

(from GFE #3)

$78.00 $14.00

901. Daily interest charges from 1/21/2010 to 2/1/2010 @ $17.54/day

(from GFE #10)

$192.94

902. Mortgage Insurance Premium for months 903. Homeowner's insurance for years

(from GFE #3) (from GFE #11)

(from GFE #3)

Real estate commission disbursed by settlement agent.

$12,000.00

Prepaid interest—in this case the first mortgage payment will be due 3/1/12. The 3/1/12 payment pays for February interest. January’s interest is paid at closing.*

(from GFE #3)

900. Items Required by Lender To Be Paid in Advance

to to

Initial deposit to escrow—total of all section 1000 escrow items, including any aggregate adjustment credit, line 1011.

1000. Reserves Deposited With Lender 1001. Initial Deposit for your escrow account

(from GFE #9)

3 months @

$46.67 per month

$140.01

1003. Mortgage insurance

months @

per month

$0.00

1004. City property taxes

months @

per month

$0.00

1002. Homeowner's insurance

5 months @

$256.58 per month

$1,282.90

1006. Assessment Taxes

months @

per month

$0.00

1007. School property taxes

months @

per month

$0.00

1008. Ground Rent Taxes 1009. Front Foot Benefit Taxes

per month

$0.00

months @ months @

months @

1010. Other taxes 1011. Aggregate Adjustment

$1,279.66

Seller charge for preparing closing documents and conducting settlement+.

$-143.25

1100. Title Charges 1101. Title services and lender's title insurance

1102. Settlement or closing fee

1103. Owner's title insurance

1104. Lender's title insurance 1105. Lender's title policy limit

RGS Title/Maryland, LLC RGS Title/Maryland, LLC RGS Title/Maryland, LLC

(from GFE #4)

$1,279.80

(from GFE #5)

$538.80

to RGS Title/Maryland, LLC $160,000.00/$444.80 .

$444.80

$530.00

$200,000.00/$538.80 MD - Enh Owner/Basic Loan 1106. Owner's title policy limit 1107. Agent's portion of the total title insurance premium to RGS Title/Maryland, LLC $855.73 Commonwealth Land Title 1108. Underwriter's portion of the total title insurance premium to $127.87 1109. Accomodation Fee

to J & M Abstracts, Inc.

1110. Document Preparation

to RGS Title/Maryland, LLC

1111. Additional Release Service Fee

to RGS Title/Maryland, LLC

$0.00

$35.00 (from GFE #4)

1200. Government Recording and Transfer Charges 1201. Government recording charges 1202. Deed $60.00 ; Mortgage $60.00 , Release $0.00

1204. City/County tax/stamps

Deed $1,380.00 ; Mortgage

1205. State tax/stamps

Deed $1,000.00 ; Mortgage

$120.00

(from GFE #8)

$2,190.00

to Montgomery County to Clerk of the Court

to Montgomery County

1206. MD Cty Transfer Tax

(from GFE #7)

$500.00 $2,000.00 (from GFE

$1,000.00

#8)

(from GFE #6)

1302. Survey Fee

to Snider & Associates

1303. Pest Inspection 1304. Transfer Fee

to To Be Determined to

1400. Total Settlement Charges (enter on lines 103, Section J and 502, Section K)

County and state recording fees and tax stamps.

Total county and state recording taxes.

A survey is recommended and may be required by the lender or title insurance company. RGS Title will order the survey for you. Page 2 of 3

Fee for obtaining the release of any note secured by the property+. (Not illustrated here).

$690.00

1300. Additional Settlement Charges 1301. Required services you can shop for

You may use the attorneys at Shreves Schudel Saunders Jackson & Parello PLLC or you may choose your own attorney. This is the fee to prepare the legal documents required for closing+.

This amount is $1.00 per every thousand dollars of the sales price.

to Clerk of the Court

1203. Transfer taxes

Cost of Owner’s coverage title insurance premium. Unlike most insurance, you only pay for title insurance once.*

Paid From Seller's

701. $6,000.00

1005. County property taxes

In addition to your principal and interest payment, each month you will pay these amounts into your lender’s escrow account.

Paid From

$200.00

$9,393.20

This amount is shown on Line 103 of Page 1.

$14,720.00

This amount is shown on Line 502 of Page 1. HUD-1

+These fees are estimates only and are subject to change. Please call RGS TITLE for our current fees. *These items may be tax deductible. Check with your accountant or tax attorney.

Fee for having the property inspected for termites. (Not illustrated here).

A Homebuyer’s Guide from RGS TITLE

Page 35

Comparison of Good Faith Estimate (GFE) and HUD-1 Charges Charges That Cannot Increase HUD-1 Line Number Our origination charge # 801 Your credit or charge (points) for the specific interest rate chosen # 802 Your adjusted origination charges # 803 Transfer taxes # 1203

Good Faith Estimate $0.00 $0.00 $0.00 $0.00

$3,200.00 $0.00 $3,200.00 $2,190.00

Charges That in Total Cannot Increase More Than 10% Government recording charges

Good Faith Estimate $0.00

HUD-1 $80.00

# 1201

Total Increase between GFE and HUD-1 Charges Charges That Can Change Initial deposit for your escrow account Daily interest charges Homeowner's insurance

# 1001 # 901 $17.54/day # 903

$0.00 $80.00

HUD-1

$80.00 100%

Good Faith Estimate $0.00 $0.00 $0.00

HUD-1 $1,279.66 $192.94 $0.00

Loan Terms Your initial loan amount is

$160,000.00

Your loan term is

30 years

Your initial interest rate is

5.5%

Your initial monthly amount owed for principal, interest, and any mortgage insurance is

$908.46 includes ⌧ Principal ⌧ Interest o Mortgage Insurance ⌧ No. ® Yes, it can rise to a maximum of 0%. The first change will be on and can change again every after . Every change date, your interest rate can increase or decrease by 0%. Over the life of the loan, your interest rate is guaranteed to never be lower than 0% or higher than 0%.

Can your interest rate rise?

Even if you make payments on time, can your loan balance rise?

⌧ No. ® Yes, it can rise to a maximum of $0.00

Even if you make payments on time, can your monthly amount owed for principal, interest, and mortgage insurance rise?

⌧ No. ® Yes, the first increase can be on and the monthly amount owed

Does your loan have a prepayment penalty?

⌧ No. ® Yes, your maximum prepayment penalty is $0.00

Does your loan have a balloon payment?

⌧ No. ® Yes, you have a balloon payment of $0.00 due in 0 years on

Total monthly amount owed including escrow account payments

® You do not have a monthly escrow payment for items, such as property

can rise to $0.00 The maximum it can ever rise to is $0.00

taxes and homeowner’s insurance. You must pay these items directly yourself. ⌧ You have an additional monthly escrow payment of $303.25 that results in a total initial monthly amount owed of $1,211.71. This includes principal, interest, any mortgage insurance and any items checked below: ⌧ Property taxes o Flood insurance o

⌧ Homeowner's Insurance o o

Note: If you have any questions about the Settlement Charges and Loan Terms listed on this form, please contact your lender.

INFORMATION ON THIS PAGE IS PROVIDED BY YOUR LENDER. It allows you to compare actual HUD-1 settlement charges to the GFE provided by your lender and verify that they did not exceed allowed tolerances. In addition it provides a summary of the basic terms of your loan and monthly payment.

Page 3 of 3

HUD-1

A Homebuyer’s Guide from RGS TITLE

Page 36

t settlement, you will be required to have a certified or cashier’s check or bank-wired funds for your settlement costs. These costs will include the balance of your down payment, charges from your lender, the title company and government recording fees. Every mortgage lender structures charges to the borrower differently, and the allocation of specific charges between the Buyer and Seller will depend upon the type of loan and the allocation agreed to in your sales contract. When you apply for your loan, your lender will give you a good faith estimate of closing costs (GFE), on a standardized form, which will include both the lender’s and title company’s charges as well as recording fees and other charges for services required to close your transaction. Keep in mind this is just an estimate, and, while the lender is required to disclose these charges and to be accurate within certain tolerances, it may not reflect the total amount of money you need to bring to closing. Please call RGS TITLE immediately prior to settlement to verify this amount. We have provided a worksheet on the next page to help you calculate the amount of your settlement costs. We will be happy to help you with any of these calculations—just call us. Below is an explanation of some of the more common charges.

BUYER’S ESTIMATE OF SETTLEMENT CHARGES

LENDER’S FEES Points—each point is one percent of the loan amount. For an FHA loan, the origination fee is a percentage of the base loan amount and the discount points are based on the base loan amount plus the mortgage insurance premium. Document Preparation Fee—the fee the lender charges to prepare the documents that you will sign at settlement. Tax Service Fee—the fee charged by the lender for setting up a computerized tax paying service. PMI (Private Mortgage Insurance)— generally charged by lenders on conventional loans when you are making a down payment of less than 20% of the purchase price of the property. MIP (Mortgage Insurance Premium)— for FHA loans. This is paid in a one-time premium up front, plus monthly payments for the term of the loan. Origination Charge—this term includes all lender and mortgage broker fees for

application, processing, underwriting, document preparation, and other fees required to originate the loan. PLEASE NOTE—not all lenders charge all these fees on every loan and some lenders have other fees in certain cases. YOU WILL WANT TO CONTACT YOUR LENDER FOR THEIR FEES.

ESCROWS An escrow is money that the lender will hold until bills are received. Usually the lender holds funds in escrow to pay the hazard insurance and property taxes. To determine the monthly amount, take the annual amount of each bill and divide by twelve. The estimate sheet tells you how many months of each kind of escrow the lender is likely to require at settlement.

TITLE CHARGES AND SETTLEMENT FEES The following services are included under the term “Title Charges”: Settlement—one of the many services RGS TITLE provides. We have documents prepared, conduct the settlement, coordinate with the lender and all other parties, disburse funds, record documents, procure and record releases of existing liens, issue title insurance policies and more. Title Search and Examination—a search and review of the public land records to verify ownership of property. This also establishes the loans and other liens that must be satisfied from the Seller’s proceeds at settlement. Title Binder—a binder or commitment to issue title insurance is required by your lender to be provided to them prior to closing. Title Insurance Premium—The amount paid for title insurance coverage based upon loan amount and purchase price. HUD requires that the premium for the lender coverage be included with the Title Charges. The premium for your coverage as owner is shown separately. Delivery—Lender and scheduling deadlines require documents that are part of the process to be hand-carried to and from the lender and to the courthouse.

A Homebuyer’s Guide from RGS TITLE

GOVERNMENT RECORDING CHARGES County and State Tax Stamps—The various counties and the State of Virginia each charge a transfer tax on the recording of documents for the purchase of a home. The District of Columbia and the various counties in Maryland charge varying fees for each transfer of real property. In the District of Columbia, the transfer and

Page 37

recordation taxes total 2.9% of the sales price with 1.45% being charged to each party.* In Montgomery County, Maryland, there is a transfer tax calculated at $6.90/$1,000 of the purchase price up to $500,000, after which it is $10.00 per $1,000. The state of Maryland charges 1/2 of 1% for state stamps. These charges are almost always split evenly by the parties. *If the sales price is $400,000 or less and the purchaser will make the property his/her primary residence, then the total tax is 2.2%.

MARYLAND TRANSFER AND RECORDATION TAXES BY COUNTY (AS OF 4/28/10) COUNTY Allegheny Anne Arundel Baltimore Baltimore City Calvert Caroline Carroll Cecil Charles Dorchester Frederick Garrett Harford Howard Kent Montgomery Prince George’s Queen Anne’s St. Mary’s Somerset Talbot Washington Wicomico Worcester

COUNTY TRANSFER TAX 0.500% 1.000% 1.500% 1.500% none 0.50% none none none 0.75% none 1.00% 1.00% 1.00% 0.50% 1.00% 1.40% 0.50% 1.00% none 1.00% 0.50% none 0.50%

COUNTY RECORDATION TAX $6.50 per $1,000 $7.00 per $1,000 $5.00 per $1,000 $10.00 per $1,000 $10.00 per $1,000 $10.00 per $1,000 $10.00 per $1,000 $8.20 per $1,000 $10.00 per $1,000 $10.00 per $1,000 $12.00 per $1,000 $7.00 per $1,000 $6.60 per $1,000 $5.00 per $1,000 $6.60 per $1,000 $12.00 per $1,000** $5.00 per $1,000 $9.90 per $1,000 $8.00 per $1,000 $6.60 per $1,000 $6.60 per $1,000 $7.60 per $1,000 $7.00 per $1,000 $6.60 per $1,000

STATE TRANSFER TAX* 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500% 0.500%

*Reduced to 0.25% for First Time MD Homebuyers. (Seller will pay) **Montgomery County; if over $500,000: $10.00 per $1,000.00. PLEASE NOTE: Individual Counties and the City of Baltimore may have various Credits and Exemptions that reduce the amounts reflected herein. Contact your local RGS Office for an explanation of those Credit and Exemptions.

A Homebuyer’s Guide from RGS TITLE

Page 38

OTHER COSTS Survey—the fee for a house location survey showing the location of the improvements within the boundaries of the property.

Homeowners’ Association or Condominium Fees—if applicable, this fee will usually be the next month’s fee; in addition you will reimburse the Seller for the portion of the month which follows settlement.

BUYER’S SETTLEMENT COSTS WORKSHEET 1. Balance of Down Payment (Purchase price less loan amount less earnest money deposit) 2. Lender’s Fees (Call your lender for an estimate) 1) Origination Fee and Discount Points to be paid by Buyer (One point is one percentage point of the loan amount) 2) Document Preparation Fee 3) Tax Service Fee 4) First-year PMI Premium or FHA MIP, if any 5) Other Fees 3. Escrows (Annual Rate divided by 12 equals the monthly escrow) 1) Homeowner’s Insurance (2 months) 2) PMI (2 months) 3) Real Estate Tax (Includes reimbursement to Seller of prepaid taxes, up to 8 months in counties that require payment of taxes twice a year, up to 14 months in counties that require payment of taxes once a year) 4. Settlement Fees (Call RGS TITLE for an estimate) 1) Settlement Services 2) Title Examination 3) Title Insurance Premium 4) Miscellaneous Fees (messenger, copies) 5. Governmental Recording Charges A) Virginia Recording Fees 1) Recordation of Deed and Deed of Trust (Estimated at $79.00) 2) County Transfer Tax (.08333% of the Sales Price plus loan amount) 3) State Transfer Tax (.25% of the Sales Price plus loan amount) B) Montgomery County, MD Recording Fees (Payment allocation for these taxes is negotiable and will be determined by Contract Terms) 1) Recordation of Deed and Deed of Trust (Estimated at $120.00) 2) County Recordation Tax (_____ per $1,000 of the Sales Price)

_______________

_______________ _______________ _______________ _______________ _______________ _______________ _______________

_______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________ _______________

________________ ________________

(See chart on page 60.)

3) State Transfer Tax (_____ of 1% of the Sales Price)

________________

(See chart on page 60.)

4) County Transfer Tax (_____ of 1% of Sales Price)

________________

(See chart on page 60.)

C) Washington, DC Recording Fees 1) Recordation of Deed and Deed of Trust ($188.00) 2) DC Transfer & Recordation Taxes (1.45% of purchase price if over $400,000; if under: 1%) 6. Other Costs 1) Survey 2) Homeowners’ or Condo Fees 3) Miscellaneous

TOTAL ESTIMATED CHARGES

________________ ________________ ________________

_______________ _______________ _______________

_______________

This is simply an estimate. Please call us to verify this amount and then bring to settle-

A Homebuyer’s Guide from RGS TITLE

SELLER’S SETTLEMENT COSTS WORKSHEET AMOUNTS DUE TO SELLER: Contract Sales Price ……………………………………………………………………$_________ Property tax and other escrow funds held by your mortgage lender (usually refunded by the Lender one month after settlement) ……………………………$_________ Prorated portion of paid-up property taxes…………………………………………$_________ Prorated portion of paid-up homeowner’s dues ……………………………………$_________ Other ……………………………………………………………………………………$_________

GROSS AMOUNT DUE TO SELLER …………………………………………$ ________ AMOUNTS DUE FROM SELLER: Brokerage commission (Generally 6% of the sales price) ………………………$_________ Fee to Title Company …………………………………………………………………$_________ Attorney’s Fees (For document preparation) ………………………………………$_________ Recording Fees (Usually $31.00 to release each existing lien) …………………$_________ State Grantor’s Tax (Indicates $1.00 per thousand of sales price for all Virginia jurisdictions) ………………………………………………………$_________ Maryland

County Recordation Tax (______ per $1,000 of the Sales Price)………………$_________ See chart on page 60. State Transfer Tax (______ of 1% of the Sales Price)……………………………$_________ See chart on page 60. County Transfer Tax (______ of 1% of the Sales Price)…………………………$_________ See chart on page 60. (•Contract terms will stipulate what portion/percentage of these fees/taxes seller will pay.) Washington, DC

DC Transfer Tax (1.45% of Sales Price over $400,000; if under: 1.1%)………$_________ Special inspections you’ve agreed to pay for ………………………………………$_________ Closing Cost Credit if you’ve agreed to pay them in the contract ………………$_________ Balance of any indebtedness secured by the property ……………………………$_________ Other charges……………………………………………………………………………$_________

TOTAL PAID BY SELLER ………………………………………………………$ ________ Net Amount Due to Seller: Gross Amount Due (from above) ………………………$_________ Less: Total Paid (from above) ……………………………$_________ Net Amount Due …………………………………………$ ________

Under Virginia Law, the Seller cannot receive any proceeds from the sale of the property until the Deed and Security Instruments have been recorded. This will be done within fortyeight hours after settlement. If you wish to have your funds wired to you, be sure to bring to settlement a voided check from the account to which you would like your proceeds wired. If

Page 39

A Homebuyer’s Guide from RGS TITLE

Page 40

WHAT IS TITLE INSURANCE?

efore answering “what is title insurance” it might be best to first answer “what is title?” “Title” is the ownership in real property. Among other things, it means that you have the legal right to possess, occupy, peacefully enjoy and sell your property without interference from others, subject only to restrictions imposed by governmental authorities or previous owners. In most cases, title is transferred by deed which is recorded in the land records of the county in which the property is located. Generally, when property is sold, an attorney for the Buyer or title examiner goes to the record room and searches the land records for any title defects. A title defect is anything in the entire history of ownership of a piece of real estate which may encumber the owner’s rights under the title. A title defect may cause the owner of real property to lose all or part of his land to a superior ownership interest or claim of another. This is the type of loss which title insurance protects against. In short, if you own a title insurance policy, the title insurance company will defend you, without cost, against an attack or claim upon your ownership interest in your property as insured and you will be protected against financial loss caused by a title defect.

OWNER’S TITLE INSURANCE

If my title has been examined, why isn’t that enough? There are many defects which even the most meticulous search of the land records will not uncover. For instance, it is impossible for an examiner to know whether the marital rights of all previous owners have been relinquished; whether all deeds, mortgages and judgments affecting the property have been properly indexed in the land records; whether all signatures are valid; or whether an unknown heir of a previous owner has a valid claim against the property. Without owner’s title insurance you may have no avenue of recovery for these types of problems. If I am required to purchase lender’s insurance, why do I need owner’s coverage as well? In almost every instance, a lender will require you to purchase lender’s title insurance protecting it up to the value of

its loan on the property. This coverage only protects the lender, not you, and the coverage diminishes as the loan is paid off. As you build more equity in the property, you expose yourself to a higher risk of loss occasioned by a title defect. In this situation the protected lender will suffer no loss while you bear the substantial risk of the damage. Owner’s title insurance will protect you against any covered loss from failure of title up to the full amount of the policy.

IMPORTANT REASONS WHY YOU SHOULD HAVE IT Owner’s Title Insurance will protect you against those hidden risks which would not be disclosed by even the most meticulous search of public records. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21.

Forgery. Fraud in connection with execution of documents. Undue influence on a grantor or executor. False personation by those purporting to be owners of property. Incorrect representation of marital status of grantors. Undisclosed or missing heirs. Wills not properly probated. Mistaken interpretation of wills and trusts. Mental incompetence of grantors. Conveyance by a minor. Birth of heirs subsequent to date of will. Inadequate surveys. Incorrect legal descriptions. Non-delivery of deeds. Unsatisfied claims not shown on record. Deeds executed under expired or false powers of attorney. Confusion due to similar or identical names. Dower or curtesy rights of ex-spouses of former owners. Incorrect indexing. Clerical errors in recording legal documents. Delivery of deeds after death of grantor.

A Homebuyer’s Guide from RGS TITLE

uying a new home could be the single most important investment you will make. It is critical that you understand the process and your options so that you can make an informed and well reasoned decision on every aspect of the home buying process. That is why we have provided you with this Guide. Your choice of real estate agent, loan officer and title company is as important as your choice of which home to buy. Finding the right professionals who understand your needs, preferences and resources can make the difference in whether your experience is smooth and efficient or lengthy and plagued with problems. Do your research—it will be worth the effort. Talk to your friends and business associates for referrals. Your real estate agent can also make you aware of a lender and title company who have done a “good job” for them in the past and who will meet your needs and give you the excellent service you deserve. At RGS TITLE, we welcome your questions. Not only are we happy to answer questions regarding our fees, or the services we perform, but we can also help you understand or solve most of the problems which can occur during the home buying process.

YOUR SEARCH FOR A SETTLEMENT COMPANY When choosing a title/settlement company, don’t just compare prices—compare services. Most title companies will offer a basic range of services. These “basics” include preparation and recordation of the closing documents and disbursement of funds. Title companies who only offer these basic services may be cheaper—or they may not be—but you need to ask yourself whether your best interest will be served by cutting corners. So ask questions: Will the title company work with your lender to avoid scheduling problems, to make sure all title and survey requirements are met, and to resolve any unexpected loan charges at settlement? Will the title company work with your real estate agent to ensure compliance with the sales contract and to alert them to

Page 41

any potential title or survey problems? Will the title company work with you to answer questions you have about the closing documents or the settlement process and provide you with your final settlement charges as soon as possible before settlement? How experienced is the company? Will they be available in the future long after your settlement has taken place? Finally, you should ask, is the title company represented by legal counsel who is available to you and your real estate agent to help avoid or resolve the many legal problems which occur during the home buying process? The attorneys who conduct settlements at RGS TITLE are employed by RGS TITLE and by the law firm of Shreves Schudel Saunders Jackson & Parello, PLLC, our general counsel. They are experienced in real estate law and have dealt with the issues that arise in the home buying process. For that reason, many of the areas top real estate agents have come to rely on RGS TITLE and our general counsel. At RGS TITLE, we draw on the experience of our professional staff to make sure we offer you the services you need to ensure a smooth and efficient settlement. In each and every aspect of the closing process, we are committed to excellent service. We believe that is essential for an investment as important as your new home.

IN CLOSING. . .

A Homebuyer’s Guide from RGS TITLE

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GLOSSARY

Adjustable Rate Mortgage (ARM)— interest rates on this type of mortgage are periodically adjusted up or down, depending on a specified financial index. Agent—acts on behalf of another, representing that person’s interests and serving as an intermediary. Amortization—a method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, principal repayment is very small and interest repayment very high; at the end of the loan, that relationship is reversed. Annual Percentage Rate (APR)—the actual finance charge for a loan, including points and loan fees in addition to the stated interest rate. Appraisal—an expert judgment of the value or worth of a property. ARM—see “Adjustable Rate Mortgage” Assessed Value—the value placed on property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value. Assignment of Funds—a direction to a third party to transfer funds from the sale or mortgage of one property directly to the Settlement Agent for the specified contract property. Assumption of Mortgage—Buyer assumes liability for an existing mortgage note held by the Seller. This is subject to approval by the lender, who must be willing to approve the Buyer and release the Seller. Balloon Payment—a large principal payment due all at once at the end of some loan terms. Broker—a real estate professional who has a higher level of training than an agent. Generally, this is one who is the legal representative or proprietor of the office. Cap—limit on how much the interest rate can change in an ARM. Closing—see “Settlement.” Commission—fee (usually a percentage of total transaction) paid to an agent or broker for services performed. Condominium (Condo)—type of real estate ownership where the owner has title to a specific unit and shared interest in common areas. Contingency—a condition in a contract that must be met for the contract to be binding.

Contract—binding legal agreement between two or more parties that delineates the conditions for the exchange of value (for example: money exchanged for title to property). Conversion Clause—a provision that allows converting an ARM to a fixed-rate loan after a specified interval. Deed—legal document that formally conveys ownership of property from Seller to Buyer. Down Payment—percentage of the purchase price that the Buyer must pay in cash and may not borrow from the lender. Earnest Money—a large deposit paid when the sales contract is signed before the closing. Equity—the value of the property actually owned by the homeowner: purchase price plus appreciation plus improvements, less mortgages and liens. Escrow—a fund or account held by a third-party custodian until conditions of a contract are met. Fannie Mae—see Federal National Mortgage Association. Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (FNMA, called “Fannie Mae”)—privately owned corporations created by Congress that buy mortgage notes from local lenders and are responsible for the guidelines a majority of lenders use to qualify borrowers. Finance Charge—the total cost, including all fees, points and interest payments a borrower pays to obtain credit. Fixed Rate Mortgage—interest rates on this type of mortgage remain the same over the life of the loan term. Compare to “Adjustable Rate Mortgage.” Fixture—a recognizable entity (such as a toilet bowl, kitchen cabinet, or light unit) that is permanently attached to property and belongs to the property when it is sold. GFE—Good Faith Estimate provided by the lender on a federally mandated form to disclose to borrower the estimated charges for closing. Hazard Insurance—compensates for property damage from specified hazards such as fire and wind. More complete coverage is given by all-risk homeowner’s insurance.

A Homebuyer’s Guide from RGS TITLE

Home Inspection Report—prepared by a qualified inspector, it evaluates a property’s structure and mechanical systems. HUD-1—A precise breakdown of closing costs for both Sellers and Buyers (Also known as HUD-1 Settlement Statement) required by the Real Estate Settlement Procedures Act. Impounds—Another term sometimes used for “Escrows” collected and held by a lender to pay taxes and insurance on the mortgaged property. Interest—The cost of borrowing money, usually expressed as a percentage over time. Lien—a security claim on property until a debt is satisfied. Listing Contract—agreement whereby an owner engages a real estate agent for a specified period to sell property, for which sale the agent receives a commission. Market Value—the price that is established by present economic conditions, locations, and general trends. Market Price—the actual price at which a property sold. Mortgage—security claim by a lender against property until the debt is paid. Metropolitan Regional Information System (MRIS)—a system that provides to its members detailed information about properties for sale. Negative Amortization—A method of calculating fixed monthly payments in combination with a variable interest rate. When monthly payments are not enough to cover interest costs, unpaid interest is added to the principal balance. Origination Fee—application fee(s) for processing a proposed mortgage loan. PITI—principal, interest, taxes, and insurance, forming the basis for monthly mortgage payments. Point—one percent of the loan principal. It’s charged in addition to interest and fees. Prepayment Penalty—a fee paid by a borrower who pays off the loan before it is due. Prequalification—informal estimate of how much financing a potential borrower might expect to obtain, done before paying substantial loan application fees. Principal—one of the parties to a contract; or the amount of money borrowed, for which interest is charged.

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Prorate—divide or assess proportionately. Realtor®—a member of the National Association of Realtors®. RESPA Statement (see HUD-1)—Real Estate Settlement Procedures Act, a precise breakdown of closing costs for both Sellers and buyers. (Also known as HUD-1 Settlement Statement.) RGS TITLE—The Washington, D.C. Metropolitan area’s leading residential settlement company for over 20 years. Settlement—all financial transactions required to complete contract performance/obligations. Title—document that indicates ownership of a specific property. Title Insurance—protects against loss from defects in the title. Title Search—detailed examination of the entire document history of a property title to make sure there are no encumbrances. Types of Ownership—There are four types of ownership: They are: a. Sole Ownership—Only one person owns the property. b. Tenants in Common—Two or more persons have an undivided ownership in the property. The percentage of ownership need not be equal; each party has a right to sell his interest, and upon the death of any of the owners that owner’s interest in the property goes to the deceased’s heirs. c. Joint Tenants—Ownership taken by two or more persons at the same time in equal percentages with an undivided right to possession. If one owner dies, his or her interest automatically goes to the remaining owner(s). d. Tenants by the Entireties—Owners are husband and wife and together they hold title to the property with a right of survivorship. Upon the death of either, the survivor takes sole ownership to the exclusion of the deceased spouse’s heirs. Unreleased Trust—A mortgage or lien recorded in the Court records that appears to be outstanding (where no Certificate of Satisfaction/release has been recorded).

A Homebuyer’s Guide from RGS TITLE

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Maryland & DC Utilities WSSC ...........................................301-206-4001 Washington Gas..........................800-752-7520 PEPCO .........................................202-833-7500 DC Water .....................................202-354-3600 Rockville Water...........................301-309-3370 Frederick Gas Company............301-662-2151 Frederick Water ..........................301-694-1179 Comcast..............................www.comcast.com Direct TV..............................www.directtv.com District of Columbia .....................www.dc.gov Montgomery County.........www.montgomery countymd.gov