Lawsam.com Estate Planning, Real Estate, Elder Law

Selling Real Estate

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 Chicagoland 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.

Home Sale through a Realtor

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 a home sale going:

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 have a messenger obtain the stamp prior to closing. For more information on transfer taxes click here.

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 2003, you pay the 2002 tax bill), so the Seller must catch up on the taxes as closing.

To calculate your sale proceeds, you can use our on-line calculator to calculate your sale proceeds.

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.

Attorneys Fees for Real Estate Closings. I charge a flat fee of $350.00 for most closings through a realtor.

By Owner Home Sales

All of the points mentioned above for Home Sales through a Realtor apply to By Owner sales. In By Owner sales 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 either http://realestate.yahoo.com/realestate/homevalues or http://marketplaces.chicagotribune.com/marketplaces/homes/transactions/search/form. This information tends to be a little behind, like 6 to 8 months, in terms of sales data.
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 and what personal property is included. This 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 Par. 4 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 real estate contract 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 Microsoft Word format) In addition the seller needs to complete a lead paint disclosure form. Click here for the lead paint disclosure form (in Microsoft Word format).

Attorneys Fees for Real Estate By Owner Closings. I charge a flat fee of $450.00 for By Owner closings.

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

For a good article on selling by owner see: http://www.aarp.org/mmaturity/jan_feb01/money.html This article recommends getting a full appraisal to set the purchase price.

(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.

Note: This site is for informational purposes only. Please discuss your situation with the lawyer of your choice.