Real Estate Primer
Welcome to Tennessee! This is a brief explanation of the home purchase process in our area of East Tennessee.
Tennessee is a “Deed of Trust” state. In general, this means when the buyer of real estate secures a mortgage to purchase that real estate, legal title to the property is transferred to a third party trustee in order to secure the loan. The purchaser (borrower) retains equitable title to the property. Unlike many states that are “mortgage states”, Tennessee’s structure allows non-judicial foreclosure.
Locally, most real estate closings are handled by Title Companies, as opposed to establishing escrow or being required to close using the services or offices of an Attorney. Of course, Title Attorneys are generally present behind the scenes to generate an abstract of title to the property and warrant clear title via the issuance of title insurance. Generally, your lender will require you to secure title insurance for the face value of the debt with title insurance for the owner’s equity portion remaining optional. The particular Title Company is most often chosen by the buyer, but in some cases is selected by the party paying for the title insurance. Fees that you can expect to pay as a buyer (at or before closing) are as follows:
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Closing Fee
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$125-$175
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Document Preparation
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$100-$150
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Courier and Wire fees
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$25-$50
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Owner’s Title Insurance
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Depends on equity
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Recording Fees
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$100
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State Transfer Tax
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Approx..5% of loan
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Termite Inspection
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$55
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Home Inspection
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$350
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Your lender will also charge a number of fees that may include loan discount, loan origination, processing fee, underwriting fee, appraisal, credit monitoring, credit reporting, lenders title insurance, flood determination, and a few other nominal fees.
We utilize a number of standardized, generally accepted real estate forms in the large majority of real estate purchases in East Tennessee that are authored by the Tennessee Association of Realtors. These include forms to meet statutory property disclosure requirements, federal lead based paint reporting, various agency relationships, and, of course, terms of the purchase and sale. Most residential real estate purchase agreements are contingent on a number of negotiable factors, as follows:
· Condition of title – The seller must be able to provide clear title to the property at closing. This contingency survives until closing
· Buyer’s ability to secure financing (loan contingency) – with a few requirements of the buyer, this contingency survives until closing
· Appraised value – Along with being a lender’s condition for loan approval, the Purchase and Sale Agreement is contingent on the property appraising at a value equal to or greater than the purchase price. This contingency is satisfied when the appraised value exceed the purchase price, notwithstanding any “subject to” conditions of repair stipulated by the appraiser.
· Condition of the property (inspection contingency) – this contingency is generally negotiated for a finite amount of time, usually 10-14 days, in order for the buyer to conduct inspections. Within this negotiated timeframe, the buyer may cancel the contract based on unsatisfactory inspection results and expect the return of their earnest money. The buyer may also negotiate specific repairs under this contingency.
Typically, real estate closings take 25-45 days from contract to closing, depending primarily on the lender’s volume and response time. The first two weeks of contract execution are spent conducting inspections, negotiating repairs, and providing required documentation to the lender. Possession and occupancy to the property is given at the time of closing, with early or delayed occupancy being very rare. At closing, you should receive keys and/or garage door openers to your new house, and it should be broom clean and free of any seller possessions except those that are conveyed in the Purchase and Sale Agreement. It is usual and customary for items that are permanently fastened to a home to convey with the property, including window treatments,bath fixtures and mirrors, wall TV mounts, and built-in cabinetry/bookshelves. In keeping with HUD cooking source minimum property requirements, stoves, ovens, dishwashers are considered part of the home and convey with the house. Items like washers and dryers are considered the seller’s personal property and do no convey and are usually required to be omitted from the purchase by the lender. Refrigerators are sometimes negotiable in the purchase.
Once the lender has compiled the necessary documents, the buyer has been preliminarily approved, and the house has passed appraisal requirements, a title order is sent to Title Company instructing them to perform a title search for the property. At this point in the execution, most of the progress is behind the scenes and culminates with the buyer’s final inspection of the home, approval of the closing balance sheet, and successful closing of the transaction. These final weeks of execution are ideal times to secure home owner’s insurance, make utility arrangements, and plan for any post closing repairs or improvements.
Knox County property taxes are based on a 25% assessment of appraised value. Tax rates for Knox County are $2.32 per hundred dollars of assessed value (2.32%). The corresponding tax rate for the City of Knoxville is 2.7257%, based on the same assessed value.
