FORMS:

This is the form to change the name on a tax bill in Cook Co.

This is a list of town that have local transfer taxes and require that a transfer stamp be purchased (usually by the seller) prior to closing

Real Estate Contract

This is a sample real estate contract. Please, please do not use without consulting your attorney

Property Disclosure

This is the real property disclosure form required for sales in Illinois.

Lead Paint Disclosure

This is the lead paint disclosure form also required.

Hot topics: 100% Financing. Did you know that many Buyers (I would estimate at least 40%) now finance 100% of the purchase price? The days of 20% down are long gone. It is very important to get a pre-approval letter from the Buyer at the time of contract to be sure that they will qualify. Underwriting of these no down payment loans is stringent and there can be delays in getting the loan approved.

How to Safely Rent Back After Closing--

Use a Possession Agreement

Most of the time possession of the house is delivered at closing. This means the keys are turned over at closing and all of your stuff is out of the house. When possession is not delivered at closing, the Buyer and Seller sign a possession agreement. It’s like a mini-lease. The following are common terms in a possession agreement:

The seller pays rent, usually based on the Buyers mortgage payment. The seller must say in the possession agreement what happens if the seller leaves before the end of rental period, does the seller still pay or not? This is one of the biggest sources of conflict with rent-backs.

The seller is responsible if anything breaks. It’s the Buyer’s house, but the Seller has to fix it.

The Seller has to keep his insurance in effect (renter’s insurance).

The seller’s attorney or realtor holds 1% of the purchase price as a “security deposit” until the seller moves out. This is to guarantee possession and the condition of the property. The Seller can’t use this money to do his Purchase closing.

If the Seller doesn’t leave when he says the Seller pays a big penalty, about $250 per day.

The Buyer has the right to a second inspection after closing to check the condition of the property and must get back to the Seller immediately with any problems.

If the parties sign a decent possession agreement (that is agreed on at the time of the contract) there are very few possession problems. In my experience, it all works out fine 98% of the time. If you fail to negotiate and document possession with an agreement, get ready for trouble.

Real Estate Sales

One of the most complicated transactions that you will ever be involved in, both financially and emotionally, is the sale or buy of real estate. My office handles residential and commercial real estate on a regular basis. Since 1984, we have handled thousands of closings. In some states, attorneys are not involved in real estate transactions, but in Illinois and especially the Chicago area, it is the rule, not the exception, to have an attorney representing each party. One goal in any closing is to make a stressful situation as easy as possible for the client. This means planning ahead and knowing the pitfalls.

Sales Through a Real Estate Agent

What We Need to Get Started? A copy of the real estate contract is usually faxed to us (Fax 847-359-1581) to review. I also need the following information by fax, e-mail or in person to get started on a home sale:

Copy of old title insurance policy (not homeowners insurance) or if that is not available a copy of the deed to the house.
Name, phone number and loan number for mortgage co. This is needed to order a mortgage pay-off statement. Please include information for home equity loans as well.
Copy of Old Survey. A new survey will be ordered, but it’s helpful to have the old one.
Forwarding Address and Social Security Number.
Is the Property on Well and Septic. We will need to order a well and septic test right away if it is on well and septic.
Name and Phone of Association Management Co. We will need to get a letter from your association showing all of the dues are paid.
FHA Mortgage, Land Trust or Living Trust. If you are paying off an FHA mortgage we need to know and if your property is in a land trust or living trust we need a copy of the agreement.
Local Transfer Taxes. Many towns have local transfer taxes. This means you must get a final water reading, pay the water bill, fill out a transfer tax form and pay for the transfer stamps (usually between $1 and $3 per thousand). Check with us to see if your town does. Palatine, Barrington and Arlington Heights do not have a local tax. Hoffman Estates, Schaumburg, Buffalo Grove, Mt. Prospect and many other towns do have a tax. We provide the forms needed for you to obtain the stamp prior to closing. For more information on transfer taxes click here.
Your email and Cell Phone Number. My office handles documents and faxes in the PDF format and can quickly send copies to your email address. This is a timesaver for all involved.

When a realtor is involved, the attorney typically reviews the real estate contract AFTER it is signed. The contract has an attorney approval clause that allows the attorney to make changes, except for prices and dates, within a few days after the contract is signed. During this time, any changes to the contract are made between the attorneys by separate letter. This gives the client a chance to confer with the attorney after the contract is signed. Common changes are changes to the possession date or tax proration clauses.

Home Inspection Endured by Seller. All contracts have a home inspection clause for the benefit of the Buyer. The Buyer hires a professional inspector (not his or her cousin or friend) to inspect the property. The inspection takes about two hours. The Buyer’s attorney then sends a letter to the seller asking to repair certain items or give a cash credit. Sellers absolutely hate home inspections because some Buyers get too picky. The inspection is supposed to cover major systems only, but Buyers ask for all kinds of repairs.

Unfortunately for the Seller, if the inspection is not resolved the Buyer’s satisfaction, the Buyer can cancel the contract. The home inspection is a little painful for the Seller in the beginning, but it cuts down on post-closing problems because the Buyer knows the condition of the property before closing. Most inspections are resolved by the Seller agreeing to repair some items and give a credit of $300 or less.

Common items that Buyers ask to repair are the heat exchanger in the furnace, GFCI electrical outlets, “blown” window seals and, sometimes, the Buyer’s inspector finds that the roof is “at the end of its useful life” and requests a large credit to cover replacement. The Seller has to grin and bear it and be reasonable in responding to the inspection in order to get the deal closed.

Closing for Seller. The closing is scheduled after the Buyer is approved for financing. Most sellers (90 per cent or more) do not attend closing, but Buyers must attend. Sellers commonly complain that they get $2500.00 less at closing than they expected. That is because they don’t take into account the transfer taxes, title insurance, survey, attorneys fees and, most of all, the tax credit that they owe to the Buyer. Taxes are one year in arrears in Illinois (in 2006, you pay the 2005 tax bill), so the Seller must catch up on the taxes as closing. The sale closing must be coordinated with the Buy closing. Some people choose to rent back their current home for a day or so after closing. Other, more vigorous types, choose to give possession at closing. That means that you must close in the morning, have all of your stuff out at closing, close on the buy and then move in, all in the same day. It can be done, but it’s not easy. You really cannot do this, and remain sane, without a professional mover, unless you pack up and put everything on the truck the night before the closing and sleep on the floor.

By Owner Sales

All of the points mentioned above for Home Sales through a Realtor apply to By Owner sales. In a By Owner sale, there is no realtor to fill in the contract, check the value of the property and accomplish the other details needed to close. In a for sale by owner transaction, we suggest that the seller do the following:

Obtain a Market Analysis from a Realtor. This will help the Seller set the value of the house. Also if you don’t sell by owner you can have the realtor list the property for you. If you really don't want to obtain a market analysis you can check the value of your home in the internet at http://realestate.yahoo.com/realestate/homevalues This information tends to be a little behind, like 6 to 8 months, in terms of sales data. The newest property valuation site www.zillow.com has attracted a lot of press recently and is helpful too
Make up a Feature Sheet, Advertise and Have Open House. You will get all the neighbors dropping by to scope out your decorating, but they might tell a friend about your house.
Make a Verbal Agreement on Price. Once you have someone who wants to buy, I suggest making a verbal agreement on the price and closing date. Of course, you will need to talk about whether the offer will be contingent on their sale of their existing home and what personal property is included. A verbal agreement is not an enforceable contract. Real estate contracts must be in writing. I do not suggest using a blank contract, because the Buyer will almost never sign it. (See below for more on contracts.)
Get the Buyer’s Attorney’s Name and Phone. Call my office with the price, property address and Buyer’s attorneys name and I will coordinate putting together the contract. Usually the Buyer’s attorney prepares it and faxes to the Seller’s attorney. The Buyer then signs it and brings it over to the Seller’s house. Although I provide a a sample contract from the Illinois Real Estate Lawyers Association www.irela.com on this web site, I do not suggest that you fill out the contract yourself. The contract is just for discussion purposes between you and your attorney. The 8-page real estate contract most commonly used in this are can be obtained by clicking here. Please do not use this form without consulting at attorney!
Be Careful of Contingent Offers. If you accept a contract that is contingent on the sale of the Buyers home you can leave your home on the market (leave the sign up) and accept other offers. In my experience, most Sellers quit marketing the home once an offer is signed. If the Buyers house does not sell, you are stuck. Also if you decide to list the property with a realtor, most will not accept it with the contingent contract in effect.
Require Pre-Approval. In By Owner sale contracts, we request a pre-approval letter from the Buyers lender. This does not absolutely assure that they qualify but it’s better than nothing and it at least forces the Buyers to talk with a mortgage lender.

There is no need to collect earnest money when you verbally agree on the purchase price. Earnest money is usually $5,000.00-$7,000.00 dollars and is deposited by the seller’s attorney after the contract is signed.

Too many clients want to jot down a few notes on a piece of paper and have the parties sign it. Resist the temptation to do this. If it has the price, closing date and address it can be a binding contract.

In both realtor-assisted sales and by owner sales, the seller must fill out the Residential Real Property Disclosure Report. Click here to download the form. In addition the seller needs to complete a lead paint disclosure form.

Attorneys Fees for Real Estate By Owner Closings. I charge a flat fee of $500.00 for By-Owner closings.

Resources. There are many by owner web sites. One of the better ones is http://www.owners.com/

(Note: The IRS changed the way that gain is calculated on a sale of your primary residence. Upon the sale of a primary residence $250,000.00 in gain is not taxed for a single person and $500,000.00 for a married couple See 2000 Publ 523 Selling Your Home for the complete rules.

Real Estate Purchases

Purchases Through a Real Estate Agent

How Much to Pay. Your realtor should give you a list of comparable sales or “comps” for you to decide how much to pay for the house. Some information is available on the internet (as described in the By Owner Purchase Section of this site). Very few sellers will allow the contract to be contingent on an appraisal. So you must be sure that you are not overpaying for the house before you put in an offer.

Home Inspection Right Away. All Buyers should do home inspections. The inspection must be done within 5 business days of signing the contract AND the notice of any problems must be sent within that time. (Inspections are rarely resolved in the 5 day period.) The Buyer should consult a qualified inspector and schedule a time immediately with the inspector. In the summer it can be hard to get inspectors. The Buyer should try to be reasonable in asking for repairs. If there were 4 offers on a house and it was on the market for 24 hours, the Seller will not be hugely motivated to make repairs. On the other hand, if undisclosed problems are found, the Buyer can cancel the deal and get all his money back. I suggest a cash credit from the Seller for most items. Buyers tend to be dissatisfied with the repairs done by the Seller (especially if done by the Seller himself).

I hesitate to recommend home inspectors because some Buyers discover the inevitable defects in a home after closing and want to sue the inspector (and me for recommending the inspector). But in the interests of simplifying the closing process and making it less stressful for you, I can suggest the following:

Broyce Home Inspections, 847-540-5400
Michael Allan and Assoc., 847-382-6065

For a listing of home inspectors by zip code try the American Society of Home Inspectors web site at http://www.ashi.com/

Mortgage Company Selection is Key. The single biggest influence on the ease of closing from a Buyer’s perspective is the choice of the Buyer’s mortgage company. Generally, selecting an out-of- state mortgage broker, a mortgage company out of the newspaper based on a low rate quoted, or a mortgage company over the internet, for their low rate, is not a good idea. It works best to select a local lender with a local office. Almost all lenders are mortgage brokers now, meaning they process the file but the funds come from an underlying lender. A reliable local mortgage broker or a good national lender like Wells Fargo or Countrywide is the way to go. Dealing with a 1-800 number and a changing cast of people when you are trying to close is not a good thing.

You should obtain a good faith estimate of closing costs from the lender when you apply. This is a list of what the mortgage company will charge. Common fees are $75 for a tax service fee, $300 application fee, $50 flood certification and a document preparation fee of $150.00. Fees called “funding fee,” or “administrative fee” are junk fees and you should not pay them. The mortgage business is too competitive to overpay such fees. I suggest locking in one’s mortgage rate at the time of application, as long as the closing is within 60 days. Trying to “time” the rate is just to hard and adds too much stress. It is often a good idea to ask your mortgage company to waive your tax and insurance escrow so you can pay them on your own. They generally charge 1/4% of the loan amount but some charge nothing. I will be happy to give you referrals to good local lenders if you need a referral.

Contingent on Sale or Not? For most people, it’s best to have a contingency on the closing of your current home, although in the past few years very few people use them. For years, all Buyers who had a property to sell would sign a contract on their purchase with a contingency on them selling and closing on their sale. Now there are many programs that allow Buyers to close on a purchase without closing on the sale, so contingencies are less popular. There is a trade-off to having a home-sale contingency: The Seller keeps the property on the market and can accept other offers. When the real estate market is active, Buyers try to freeze out other Buyers, so they make non-contingent offers. This works fine in an active real estate market. But, things can change quickly. Right after September 11, 2001, for example, Buyers returned to using sale contingencies because many sellers' homes did not sell and quite a few Buyers defaulted (lost their earnest money).

By Owner Home Purchases

Be Careful What You Pay. You should be very careful when buying a home direct from the seller without a realtor. If you know the market and the neighborhood in which you are buying you should be okay. Many buyers just guess on the price of the house. Realtors control the information on recent home sales so it’s hard to obtain this without their help. One source of home values is http://realestate.yahoo.com/realestate/homevalues Here you type in the address of the property you want to buy (or sell) and comparable sales in the neighborhood pop up on screen, going back to 1996. These services do not include by owner sales, just realtor sales and purchases. All of the points mentioned above in buying through a realtor apply to By Owner purchases too. Once you know how much to pay for the house, I suggest the following:

Make a Verbal Agreement on the Price. Some sellers won’t do this, but the majority will. It’s not binding on either of you. Then get the name and phone number of the seller’s attorney. Call me and I will put together a real estate contract. Usually this is faxed to the other attorney, who looks it over. We make any changes then the buyer signs it and brings it or mails it to the seller. This process usually takes anywhere from 1 day to 5 days.

Make the Contract Contingent on Appraisal. Because you are buying by owner it is wise to make the contract contingent on an appraisal. Your mortgage lender will require this anyway, so we will just use theirs. If the property appraises for less than the purchase price you can cancel the contract, or better, negotiate a reduction of the purchase price.

Do Home Inspection. It’s important to do a complete professional home inspection and to have the attorney notify the seller in the 5 day period of any problems.

Don’t Forget to Do a Walk-Through. For some reason, By Owner buyers always forget to do a walk-through the day before closing. A home inspection is done when you first sign the contract, and a walk-through is done the day before closing. The purpose of each is different: the home inspection is to find defects that you want fixed, the walk-through is to be sure that the house is in the same condition as when you signed the contract.

Get a Cashier’s Check/Insurance for Closing. The Buyer brings in a cashier’s check (no personal checks) to closing payable to him or herself to pay for the house at closing. Cash or personal checks aren’t accepted. The Buyer also brings in a homeowners insurance policy in at least the amount of the mortgage.

Attorneys Fees for Real Estate By Owner Closings. I charge a flat fee of $500.00 for By Owner closings.

Note: This site is for informational purposes only.

Please discuss your situation with the lawyer of your choice.