Buying or selling a home is one of the most important decisions you will ever make. It affects your lifestyle, friends, family and psychological well-being. For many it represents the fulfillment of the American dream. For most, it is the largest single financial transaction of a lifetime. It is usually accompanied by financial sacrifice at the time of purchase as well as a monetary commitment extended long into the future. Obviously, it is a decision that should be carefully planned.
Buying a home simply cannot be compared to buying a car. Real estate is different. Whether we like it or not, many complexities affect the title to real estate. These complexities can have a profound impact on the buyer or seller. The complexities include mortgages, trust deeds, real estate taxes, transfer taxes, special assessments, taxing districts, zoning, environmental obligations, protective covenants, restrictions, future interests, recording acts, insurance, surveys, utilities, property descriptions, easements, access consideration, warranties (or lack of warranties), leaseholds, joint ownership and mechanic’s liens, to name a few.
Each parcel of real estate is unique. For this reason there are pitfalls to be avoided and protections to be sought. You are at a tremendous disadvantage if you don’t have a real estate lawyer representing you. The stakes are too high not to seek help from a professional.
Too often prospective homeowners believe their interests are being protected by a broker, a lender, a commercial title insurance company or someone else involved in the process. These parties however may have interests that differ from those of the buyer or seller. Often times they offer well-meaning advice, but they may not be aware of important legal concepts. The only person who is trained in knowing and understanding your legal rights and who is there solely to look after and protect your interests is your real estate attorney. He or she will orchestrate the process and tailor the transaction to meet your best interests.
You should see your attorney before signing any paper in connection with a real estate transaction. If you are selling a home, see your attorney before you sign a “listing agreement” with a real estate broker. If you are interested in buying a home, see your attorney before you sign an “offer to purchase” or “real estate contract”. That document will become the blueprint for the transaction. Once signed by the seller and buyer, it is a legally binding contract that your attorney may not be able to change it unless the document contains an attorney approval provision.
The Real Estate section in this site will give you a real estate contract overview, and point out and explain some important points to note and consider when buying and selling real estate. It is not, however designed to provide legal advice. Only an attorney you employ can give you legal advice and protect your interests. Your lawyer’s advice and assistance at every step will safeguard your interests, whether you are selling or buying, and enable you to enjoy the benefits of real estate ownership. Selecting a law firm with experienced attorneys concentrating in real estate law and real estate transactions is a must.
Joseph A. La Zara & Associates Attorneys have the legal experience that can help you through the home buying or selling process by preparing and/or reviewing the real estate contract, addressing home inspection issues, advising you about financing, title insurance, answering your legal and tax questions, and preparing and reviewing the documents necessary to complete the transaction. You should consult a lawyer before you sign a contract. In the alternative, before you sign a contract make sure that the real estate contract you sign contains an attorney approval provision which allows the attorney to approve of the contract or make changes to the contract. This clause should allow for sufficient time for attorney review. Usually five business days is sufficient, so long as the contract is timely given to the attorney. The attorney approval clause should not be too narrowly drafted as to limit the attorney’s ability to cancel the deal if the buyer and seller cannot agree on important contract terms. Each property, and each buyer and seller are unique. Even though a standard form contract may be used, many times it requires modifications to clarify and protect each party’s interest.
When interviewing a prospective attorney or law firm, do not hesitate to ask about fees. If an attorney is not interested in discussing fees, consider seeking the services of another attorney. At Joseph A. La Zara & Associates we always discuss fees with you in advance. Keep in mind the fee you are quoted should be only one of the factors in your decision to hire a particular attorney or law firm. The quality of a lawyer’s service is equally important. An experienced lawyer concentrating in real estate law and closing real estate transactions can save you many times the amount of the fee by reducing your costs and negotiating advantageous terms in a listing agreement, purchase agreement or financing agreement. Remember that a real estate transaction is complicated. Joseph A. La Zara and Associates Attorneys concentrate in real estate law and real estate closings. They can provide you with experienced legal advice, at a reasonable fee to ensure that your interests are protected.
There are variations in form real estate contracts, but most current form contracts reflect one common trend, they have become more detailed. Form real estate contracts have expanded to cover changing laws. They also have common clauses-language which tries to cover areas that cause the most problems for both seller and buyer. The following is an overview of the most commonly found provisions in real estate contracts. Because each form real estate contract varies, the following is not an all-inclusive list. It does, however cover key clauses that should be in all real estate contracts:
The mortgage contingency clause, when properly drafted and included in the real estate contract, makes the contract contingent upon both the buyer and property qualifying for a mortgage. This clause is necessary so the buyer doesn’t lose their good faith earnest money deposit if they can’t obtain the mortgage money they need to buy the home.Before a seller accepts a purchase offer with a mortgage contingency clause, it is wise to question the buyer’s ability to obtain the mortgage financing listed in the offer. The seller should ask the buyer for a pre-qualification or pre-approval letter from buyer’s prospective mortgage company.
Home buyers should know how much mortgage they can afford before they shop for a home. Mortgage calculators (which may be found on the internet) can help you determine the approximate mortgage you can afford. In order to obtain a pre-qualification letter however, you should discuss mortgage financing qualifications with your mortgage loan officer in advance of any home purchase.
The inspection provision in the real estate contract allows buyers the ability to employ a qualified home inspector to carefully inspect the property for physical defects. The inspection contingency period is usually a short time frame beginning and ending after the buyers’ offer is accepted by the seller. The buyer should employ a reputable inspection firm and accompany the inspector during the home inspection. If the buyers consider the inspection unsatisfactory, the buyers may request repairs, price reduction, or contract cancellation.Wise home sellers should anticipate this probability and consider having a professional inspection made at the time the home is listed for sale. This will avoid major unexpected issues being found by the buyers’ home inspector which could lead to the buyers cancelling the real estate contract, or wanting a significant price reduction.
Illinois law provides that all persons become of legal age on their 18th birthday and thereafter may make and be held legally liable for contracts. Contracts entered into by minors in Illinois are voidable until they reach majority and for a reasonable time thereafter. There is no statutory period within which a person may void a contract after reaching majority. What is considered “reasonable” depends on circumstances, but courts tend to allow a maximum of six months.
The Residential Real Property Disclosure Act requires residential property sellers to give prospective buyers a written disclosure document regarding the physical condition of the property before any contract for sale is signed. The Act encompasses transfers by sale, installment contract, assignment of beneficial interest, or lease with option to purchase. It does not apply to transfers of new (residential) construction that has not been occupied, or to transfers by deed in lieu of foreclosure, by inheritance, pursuant to certain court orders, or between spouses, descendants, and co-owners.
The Act benefits buyers, sellers, and real estate agents by reducing the number of oral representations made about the property and promoting faster settlement of claims. The law provides a standardized form for the required disclosures. The form, Residential Real Property Disclosure Report, contains twenty-some questions about the property, including questions about material defects, structural defects, and the presence of lead-based paint and radon gas.
Using the form as a guide, sellers are required to disclose “material defects” of which they have actual knowledge. Material defects are conditions that adversely affect the property’s value or the health and safety of the occupants. Sellers are not required to investigate for defects or to amend the disclosure document after it has been delivered to the prospective buyer unless it contains errors, inaccuracies, or omissions they had knowledge of at the time the document was signed.
Sellers are not liable for a defect they had no knowledge of or reasonably believed was corrected, nor are sellers liable for errors, inaccuracies, or omissions in information provided by contractors (such as a structural engineer or pest control inspector) or about matters within the scope of the contractor’s expertise.
Full compliance with the Act will not fully insulate the seller from all risks of nondisclosure. The required disclosure does not do any of the following:
- provide a warranty of the condition of the property
- act as a substitute for any warranties the buyer might wish to negotiate with the seller.
- prevent the buyer from doing a property inspection, or limit or modify any disclosure obligation created by other statutes or the common law in order to avoid fraud, misrepresentation, or deceit in the transaction.
Seller’s must complete and deliver the disclosure document to the buyer. A seller who violates the Act will be liable for actual damages and court costs. The court may also award reasonable attorney’s fees to the prevailing party.
Although the sale of lead-based paint has been banned nationwide since 1978, lead poisoning is still said to be the number one threat to the health of children in the United States. Dust and tiny pieces from peeling or chipping lead -based paint can be dangerous if ingested by children or pregnant women. The long-term effects of elevated levels of lead in a child may include learning disabilities, decreased growth, hyperactivity, impaired hearing and even brain damage.
Regulations to implement the Federal Residential Lead-Based Paint Hazard Reduction Act were issued by the U.S. Environmental Protection Agency (EPA) and the Department of Housing and Urban Development in March of 1996. The purpose of these regulations is to ensure that families are aware of the hazards of exposure to lead-based paint and to inform them of ways to avoid such exposure before becoming obligated to purchase or lease housing that may contain lead-based paint.
Under the regulations, sellers and lessors of most residential housing built before 1978 must attach a standard disclosure and acknowledgment form to all sales contracts and leases stating whether they are aware of any lead-based paint hazards. Sellers and lessors must also provide purchasers and lessees with the EPA pamphlet, Protect Your Family from Lead in Your Home, before completing the contract or lease.
Purchasers and lessees will have ten days to conduct an inspection or risk assessment for the presence of lead-based paint before they will be obligated under a contract or lease.
A seller or lessor found to be in violation of the regulations will be subject to federal criminal penalties of up to one year in prison, civil penalties of up to $10,000 per violation and triple damages to a purchaser or tenant who brings a successful private suite for damages from lead-based paint in the residence.
In Illinois the Seller must provide evidence that Seller can convey marketable title as defined in the real estate contract. In the Chicago metropolitan area this is done through a title commitment issued by a title insurance company which would bind the title insurance company issue a title insurance policy at closing. For a set monetary premium paid at closing, the title insurance company guarantees and protects the Purchaser against financial loss if the title examination provided is incorrect or incomplete. The title insurance company does not guarantee that the title is “good”. Rather, it guarantees that its examination is accurate. Only an attorney representing your interests can determine whether the title you are receiving is good and that your interests are protected.
In my years in practice, Joseph La Zara have seen many accurate title examinations which contained title defects. If these title defects were not corrected before closing, the Buyer would have incurred unnecessary financial liability and loss.
Some real life examples are as follows:
- The real estate property tax index number attributable to the property also covered other properties not owned by the Seller. Thus the Seller was paying real estate property taxes on his property and parts of his neighbor’s property. This error was not the title company’s fault, rather the error existed with the County tax collector. If this error was not discovered and corrected before closing, the Buyer would have continued to pay his neighbor’s taxes for as long as he owned the property. He would never have detected the error because he was only paying a portion of the neighbor’s taxes and his neighbor continued to receive their real estate bills. The error amounted to several hundred dollars a year, and correcting this error before closing has saved the Buyer thousands of dollars since he purchased the property.
- Another example involved a client who contracted to purchase five contiguous parcels of land. When the Seller ordered the title commitment, he inadvertently requested that the title company examine four of the five parcels. Since the title company was not asked to examine all the parcels, the title company returned an accurate title examination on four of the five parcels. However, by looking at the examination provided, it was easy to mistake the legal description on the four parcels for all five parcels. Only after a careful examination of the legal description and comparing the same to a previous survey was I able to determine the inaccuracy. This inaccuracy would have meant that the Purchaser paid for five land parcels but only received four, costing him tens of thousands of dollars.
- Another example involved a situation where a Purchaser was unrepresented by an attorney at a closing, mistakenly believing that his mortgage lender would protect his best interests. The Purchaser bought a three flat apartment building for $200,000.00, putting $75,000.00 down and borrowing $125,000.00 from his mortgage lender. At closing, an accurate title examination disclosed a restriction which prevented the building from being used as a three flat. The mortgage lender did not care about this restriction since it had a valid first mortgage against the property and it was under no duty to disclose this restriction to the Purchaser. In fact, no one brought this issue to the Purchaser’s attention. The Purchaser was given a copy of the title examination at the closing, but not knowing what he was looking for, he did not realize the restriction existed. After he closed and he determined that the restriction existed, he stopped making payments to his lender because he blamed them for not informing him of the restriction. The mortgage lender foreclosed and the Purchaser ended up selling his property at a loss. The Purchaser was out his down payment and other equity in the property which he accumulated, and he still owed the remaining balance on the promissory note to the mortgage lender.
Beware of Fraud in Real Estate Transactions
In Illinois, state law requires that in all real estate transactions, with few exceptions, where you a required to bring $50,000.00 or more to closing, funds must be wire transferred to the title company. It is imperative that you contact our office to verify the accuracy of said instructions. Online banking fraud is real and growing. Hackers are sending fraudulent emails and making fraudulent phone calls. Should you receive a call from someone purporting to be from our office, your lender, or title company verbally instructing you to wire transfer funds, it is imperative that you do not follow those instructions. OUR FIRM ONLY SENDS ENCRYPTED WIRING INSTRUCTIONS.”