Legal insights and tips from the veteren Attorney of 40 years.
HOME MORTGAGES, APPRAISALS & TITLES
Banks are not your friend. They exist to make money, and they will sue you if your economic situation hits a pothole.
Your home will be the largest purchase for most people. When you apply for a mortgage loan, find out the costs you will have to pay and the interest rate. You will most likely want a “locked in” rate, not a variable rate.
Also, learn if you will be required to pay points on the loan as this is prepaying interest that will raise your effective interest rate and make up front money for the bank.
The bank will require an appraisal of the property. You may be able to choose your own appraiser. You will have to pay for this cost and you should ask for quotes.
There are many well known appraisers in the area. The bank may want to use an appraiser from a company affiliated with or owned by the bank or its owners, which means the bank or its owners are going to make more money off you. You don’t have to do this.
You are entitled to a competent appraiser at the lowest price. Also, you are paying for the appraisal, but the bank may tell you it is for their use. However, you are entitled to a copy several days before the closing, and if you have questions on it, call the appraiser.
The bank will tell you that they have to have counsel do a title search on the property. You will pay for this. The bank may let you choose the attorney. Usually, the bank wants its attorney to perform the title search.
After this is done, the bank may charge you for a separate attorney to review the title and documents. This is a rip off. You should not have to pay for this.
Most importantly, you are entitled to a copy of the title search opinion several days before the closing. You will want to read the document carefully, as you will find that the bank’s attorney has prepared the title opinion to protect the bank, not you.
Unless you ask, you will never see the title opinion. You
will just be told it was okay, and you get to pay the bank’s
attorney for it.
The title opinion will have statements similar to these in it:
- Search has been made for loan purposes only, and not for a sale. Title defects may have been disregarded for loan purposes, which would cause a sale not to be approved.
- The attorney believes the lender will have a valid first mortgage. The attorney says nothing about your having a clear title.
Recently, a bank title opinion recommended a survey. The customer was not given a copy of the opinion nor told this. He closed on the land and was quickly sued on a boundary dispute. The bank advised that he was “on his own.”
You will also find language in a title opinion that the attorney is specifically not warranting title for the amount of the fair market value of the property, or the purchase price, but only for the loan.
The title opinion may also state that no search was made for leases, mineral rights, easements, or right of ways. These are all very important to you.
The borrower is not getting much protection. The protection is for the bank.
If the bank says you have to use its attorney, look for another lender.
Remember, the bank is not your friend no matter how friendly and nice the loan officer is. The loan officer has no power to really assist you after the loan is made.
Be careful - David O.
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Please Note: David Smith, Marcia Smith are independent attorneys with individual areas of practice.