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FAQ
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General
FAQs
What is a closing?
What is a settlement company?
What is Title Insurance?
Do I need an attorney?
Where did the hand money go?
What is transfer tax?
Is my transaction transfer tax-exempt?
What is a pro-ration?
What is "fiscal" versus "calendar?"
How should the school taxes be pro-rated?
What is a closing?
At closing, the parties to an Agreement of Sale perform their essential
roles required by the agreement: Buyer pays Seller in exchange for Seller
transferring real estate to Buyer. The term "closing" is also referred to
as "settlement."
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What is a settlement company?
Settlement companies provide closing services to Buyers and Sellers. Primarily,
our job is to provide Title Insurance to Buyers and their Lenders. We act
as an escrow agent. We explain all the loan paperwork to the Buyer. We organize
the settlement statement, which shows Buyers how much money they need to
bring to closing. From our escrow account, we pay all the bills listed on
the settlement statement. "Settlement Companies" are also known as "Closing
Companies" and "Title Companies."
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What is Title Insurance?
Title Insurance protects Buyers in the event a claim is ever made that a
previous property owner had an unpaid financial obligation. Examples include
unpaid property taxes, judgments, liens, and Mortgages. Legally, without
Title Insurance, Buyers would be responsible for a previous owner's unpaid
obligation. For a first Mortgage, every Lender requires that you purchase
Title Insurance not only for yourself, but for them as well. The Pennsylvania
Title Insurance Ratings Bureau regulates title Insurance rates. No matter
what settlement company you work with, the rates are the same. Your rate
depends upon the amount of your purchase price - the more expensive the
price, the higher your rate will become.
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Do I need an attorney?
Yes, we encourage you to hire an attorney. There are many things that can
go wrong during the home-buying process and your lawyer can help you avoid
them. A couple hundred bucks to an attorney can save you thousands later.
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Where did the hand money go?
If you are purchasing with the assistance real estate broker, the typical
scenario is that the broker for the selling agent (the Buyer's real estate
agent) is holding the hand money. At the closing, this appears as a credit
toward the purchase price.
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What is transfer tax?
Transfer tax is like a sales tax. Whenever Pennsylvanians transfer property,
a 1% tax is paid to the state. There is an additional tax for the municipality
and the school district. This amount of this additional tax varies from
one municipality to the next. Typically, the transfer taxes are paid in
equal halves by the Buyer and Seller.
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Is my transaction transfer tax-exempt?
Here is a link to the Pennsylvania Department of Revenue that explains when
properties transfers are exempt from transfer tax: http://www.revenue.state.pa.us/revenue/cwp/view.asp?A=15&Q=50683
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What is a pro-ration?
In the interest of fairness, the property taxes for the current year are
pro-rated at closing. In other words, if your Seller has paid the property
taxes through the end of the year, you reimburse them at closing a pro-rated
amount calculated from the closing date through the end of the year. Conversely,
if the Seller has not yet paid their property tax, we collect their share
of the tax from the beginning of the year until the closing date and give
it to you as a reimbursement.
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What is "fiscal" versus "calendar?"
These terms apply to the pro-ration of school taxes. Generally, "fiscal"
means budgetary. In Southwestern Pennsylvania real estate circles, "fiscal"
refers to the period of time starting July 1st and ending June 30th of the
following year. Typically, school taxes are pro-rated on a "fiscal" basis,
except for the Pittsburgh City Schools, which are pro-rated on a "calendar"
basis. Get it?
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How should the school taxes be pro-rated?
Outside the City of Pittsburgh, the school taxes should be pro-rated on
a "fiscal basis," i.e. July 1 through June 30. The Realtors Association
of Metropolitan Pittsburgh supports this method. It may be the law in Pennsylvania.
It has become the custom in the closing business. This point is negotiable,
however, we recommend that if you're negotiating figures, then you should
re-negotiate your purchase price. In the City of Pittsburgh, school taxes
are pro-rated on a calendar basis.
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