Maryland Real Estate

What are common real estate restrictions I should be aware of?

Before making a final offer on a Maryland property for sale, take time to make sure you have completely researched any restrictions impacting the parcel. Maryland real estate may be subject to covenants, easements and other restrictions that limit or affect the way you use the home or land. Here are some common real estate restrictions to be aware of when visiting Maryland real estate listings.

Easements. An easement is a contractual right to use a specific area of your land or property for a specific reason. In most cases the easement comes with the property and can be difficult to eliminate once established. The most common types of easements involve utility companies such as water, cable, phone lines or electricity which may restrict your ability to install fencing, trees or limit access...you will however, be required to maintain the property. Other types of easements include granting a "right of way" for driveways if a parcel is land-locked or subdivisions often grant an easement in order to allow homeowners to access a lake or ocean front property.

Covenants and Restrictions. Homeowners Associations frequently impose various covenants and restrictions ranging from very moderate requirements for safety and sanitation to extremely stringent covenants covering everything from the color of your home to the type and height of shrubbery allowed in the yard. Before purchasing Maryland new homes, always request a copy of the HOA covenants in advance.

More Real Estate Tips.

What are liens?

One of the primary reasons for obtaining Title insurance is to make sure the property is free and clear of all liens. But many people are not fully aware of the different types of liens or other problems associated with a lien when purchasing Maryland real estate. Use these quick tips and helpful information to learn about liens when buying Maryland new homes or pre-existing real estate.

1. New Homes Can Have Liens! Many Maryland new home buyers falsely assume that because they are purchasing a brand new home there won't be a problem with liens. Unfortunately, that isn't always the case. If the builder experienced financial difficulties and failed to pay contractors or sub-contractors then a "mechanics lien" may be placed against the property.

2. Always obtain title insurance that covers the mortgage (required to obtain a mortgage) and the buyer or homeowner title policy to cover your interests.

3. Quickly Conduct a Review: Many times a "for sale by owner", "tax sale", "foreclosure sale" or other deeply discounted property sells for a very low price because there are existing liens which will need to be satisfied. Most liens will be recorded at the Clerk of the Court office. Here are common types of liens to look for when evaluating whether a property is actually a "good price" or not.

• Equitable Lien. Basically the property itself is being used as collateral to secure a debt or other loan. This type of lien should be paid in full at the time of closing should you decide to purchase the property.
• General Lien. These are typically court ordered judgments that place a lien against all assets owned by the person for things like back taxes.
• Involuntary Lien. Most often the result of unpaid property taxes these will be assumed by the new buyer and can add thousands of dollars to the cost of the property.
• Specific or Mechanics Lien. Repairs and improvements to the home must be paid in full or the contractor can file a mechanics lien against the property which must be satisfied to clear the title. HOA's may also place a lien against a property for failure to pay the HOA fees.

More Real Estate Tips.

What do I need to know about deeds?

When visiting Maryland real estate listings or contemplating creative financing options, it is a good idea to understand the different type of deeds. This is one area that can lead to a lot of trouble especially for the novice so it is always a good idea to work closely with a real estate agent and attorney before agreeing to enter into a contract. Properly implemented, each type of deed has a valuable use for specific situations but understanding the limitations of each is critical. Every deed must contain:

• The seller must own or have a right to the property in order to transfer or convey that right.
• An identified buyer or person to take possession of the property.
• A statement indicating the seller or grantor is transferring or conveying the property to the buyer or grantee.
• A legal description of the property.
• Funds paid or other consideration (something of value) given in exchange for the property.
• Signatures
• Acceptance by the buyer.

Quit Claim Deed . This type of deed simply transfers the interest in a property from one party to the other. It is frequently used in a family situation or to assign the property rights to another person. However, a quit claim deed offers very little protection to the buyer.

Special Warranty Deed . This deed provides some protection to the buyer since the seller obtains title and the seller agrees they did not encumber or do anything that placed a lien or lowered the value of the property during the time they owned the property.

General Warranty Deed . This provides the buyer with the greatest level of protection and is the most common type obtained when purchasing a home.

More Real Estate Tips.

What is LTV?

When purchasing a Maryland new home or investment property, the lender will use what is called a Loan to Value ratio or LTV to determine how much they will loan for the mortgage on the home. If you are working with a real estate agent, they can help assist in determining the LTV or you can do it yourself to get a good working idea on how much the bank is likely to lend.

Here is how to calculate the LTV.

1. Determine the selling price of the home: For this example, let's use $200,000 with a 10% down payment of $20,000 so you will want a mortgage loan of $180,000.

2. Divide the desired mortgage amount by the selling price and convert to a percentage: So, $180,000 divided by $200,000 = 90 % LTV.

3. If you are purchasing a Maryland new home for personal use, most lenders will require PMI or Private Mortgage Insurance on a mortgage with greater than 80% LTV, so be sure to include the cost of PMI or consider putting a larger down payment on the home.

4. If you are purchasing Maryland real estate for an investment, most lenders require 75% LTV or better.

More Real Estate Tips.

How do I properly use leverage?

Used properly, leverage can be the first step on the road to building wealth. Unfortunately, far too many people believe the late night infomercials and instead of building the road to wealth, are on a short path to financial ruin. Before purchasing Maryland real estate or investing in houses for sale in Maryland, take time to spot the biggest mistakes made by others. Not only will it help you identify potentially profitable properties from a motivated seller but more importantly, it can help you avoid making the same mistakes.

1. Appreciation isn't Steady: One of the biggest mistakes made by novice real estate buyers is thinking the rate of appreciation is steady. It isn't. Maryland new homes and existing property sales fluctuate with the economy, inflation rate, interest rates and other factors. Historically the price of real estate typically appreciates at roughly 3% annually although it rarely does it in a steady fashion. For example, from 2001 to 2006, the rate of appreciation in many states reached double digits while it has actually fallen in some areas since 2007. Don't count on high levels of appreciation - instead, take the long term outlook and build in a conservative estimate for years following a major increase in appreciation.

2. Affordability Matters: Leverage works great in a rapidly appreciating market but when prices of homes stagnate or even decline, it is easy to find yourself upside down on a property. Not only may the loan exceed the value of the home itself, but increased taxes and insurance may quickly change leverage into a losing proposition.

3. Cash is King: Liquidity is important particularly in a volatile market. Always have an emergency cash reserve established to make it through a tough time. Unlike many investments, real estate isn't always easy to sell. On average it takes six months to sell a property and if the Maryland property for sale happens to be your primary residence, you will need someplace else to live. Cash reserves are vital especially for highly leveraged property.

More Real Estate Tips.

Should I buy a home warranty?

New homes in Maryland come with a warranty, but it is also increasingly possible to obtain a home warranty to cover pre-existing Maryland homes for sale. Are they a wise investment or not? Use our quick checklist to see if a home warranty is a good idea and other helpful home warranty tips.

1. Negotiate: Sellers are increasingly likely to use a home warranty as a way to attract buyers but if the seller hasn’t brought it up, it never hurts to ask. Tell your real estate agent you are interested in obtaining a warranty on the home and use it as part of the negotiation process. Depending upon the size and coverage, a home warranty typically runs from $350 to $1,000 annually.

2. Co-Pay and Other Considerations: Most home warranty programs require a standard service charge ranging from $50 to $75 which is similar to the cost of calling a repair person to the home for an estimate. Most also require you to use only pre-approved contractors for services so be sure to check the reputation of the local providers in your area before making a final decision on the value of the warranty package.

3. Access: One of the nice things about a home warranty program is the 24/7 access to request service along with the built-in guarantee for 90 days parts and 30 days labor. It can help control costs especially on those hard to locate problems.

4. Fine Print: Be sure to read the exclusions on the policy. Often what isn't covered is as important as what is covered. It is also a good time to mention than many pre-existing problems will not be covered so take time to have a proper inspection performed to demonstrate that everything was in good working order prior to the purchase of your new Maryland home.

More Real Estate Tips.