Illinois Purchaser Real Estate Closings
Real Estate Purchase Primer
The purchase of a home is often the largest transaction a person will undertake in a lifetime. As a result, a prospective home buyer should take all precautions possible to make sure that the deal concludes smoothly and correctly.
Real Estate Purchase Primer
The real estate purchasing process begins simply enough. A Buyer spends what may seem like a thousand weekends searching for the right home to buy. Once the buyer finds that property, the selling real estate agent usually helps the buyer prepare and execute a contract which is sent to the seller, usually accompanied by an earnest money check. At this point, the signed contract is known as an “offer”. No offer should be submitted without careful consideration of the attorney’s role in the transaction. Just about all “standard” real estate contracts contain “attorney approval” or “attorney modification” clauses. Significant differences exist among the approval and modification clauses in the many “standard” form real estate contracts commonly used in Northern Illinois. Some allow a buyer to easily “escape” a deal, while others can make the process much more difficult. It is an urban myth that Illinois law provides a “five day recission period” for real estate contracts. Each buyer’s contract will govern the ability of the buyer to terminate the contract. While an attorney would prefer to examine a contract prior to the submission of the offer, no offer should be submitted unless the contract at least contains an attorney approval or modification provision and the buyer understands theterms, rights, and limitations of such a clause.
The selling broker will usually point out that the contract has an attorney modification clause and changes can be made later. The broker is only half right! In most cases, the buyer’s attorney can iron out many problems in a contract during the contractual period provided for attorney review, however careful review and modification before the offer is submitted can ease the transaction for the buyer.
Modification clauses do the job most of the time, however, recent case law from the courts of Illinois indicate that a “modification letter” actually constitutes a counter offer and thus, a party could back out of a contract when presented with such a letter. For example, on Monday, “Buyer One” offers $100000 to Seller who accepts. The contract is forwarded to Buyer One’s attorney who reviews it and makes various minor changes and sends a modification letter to Seller. On Tuesday, “Buyer Two” offers $125000 for the same property. Seller then receives the modification letter from the attorney for “Buyer One”. His lawyer, being current with Illinois law, tells Seller that he may cancel the original contract with “Buyer One” and enter into a contract with “Buyer Two.” Legal?? Yes! How can buyer’s avoid this problem? Allow your attorney to look at the contract before it is signed and handle all modifications at the time the offer is made.
The buyer’s attorney will routinely review the various terms of a contract to determine that the contract does not take advantage of the buyer. The attorney typically focuses on the purchase price and personal property included in the sale, the mortgage contingency clause, the inspection clause, and the clause that governs penalties for default. In addition, the lawyer will make sure that the various prorations (taxes, rents, association dues, etc.) are fair to the buyer, and that the seller has provided the required disclosures (as to the condition of the property, radon hazards, and in some cases as to the status of lead paint in the home) and warranties.
Normally, a contract will also contain an inspection provision providing the buyer with the right to obtain a professional inspector to check the property for defects. Inspection clause provisions vary from contract to contract. Some allow the buyer to request repairs be made to the property, some require that repairs exceeds a certain dollar amount and others merely allow the buyer to cancel the deal because the condition of the property is found to be unsatisfactory. The buyer’s attorney will assist the buyer in negotiating with the seller’s attorney regarding repairs.
Keep in mind that the inspection and attorney review periods usually last for a short and limited period of time. The terms of the contract will dictate this time. Once the periods expire, no additional changes may be made. It is important for a buyer to get a copy of the signed offer or accepted contract to his or her attorney as soon as possible.
Once the modification and inspection periods are passed, the buyer’s attorney will help the buyer manage the mortgage contincy. Most contracts contain a “mortgage contingency” clause, a provision which allows the buyer to lawfully cancel a transaction if the buyer cannot obtain a loan that satisfies the terms of the mortgage called for by the contract. The attorney will make sure that the lender’s loan commitment complies, within commercially reasonable limits, with the contract terms and that the proper notices as to whether or not the loan is approved are forwarded to the Seller.
The final tasks of a buyer’s attorney before the closing are to make sure that any problems that arise during the final inspection are dealt with by the buyer and to work with the lender, title company and the buyer to be sure that all items needed to close are brought to the closing.
At the closing, the lender will deliver a “package” of documents to the title company. This package is comprised of many documents, including the note and mortgage and maybe as many as thirty to sixty pages of documents disclosures and agreements. It is the buyer’s attorney’s job to walk the buyer through these documents, pointing out important terms and protecting the buyer’s rights against the bank.
The Seller will also come to the closing with a package of documents, including, most importantly, the deed to the property. The buyer’s attorney will scrutinize these documents to make sure that the buyer is purchasing and the seller is conveying the correct property, that all taxes and liens are paid, and that title is cleared and insured by the title company. This usually involves a review of the documents and a survey provided by the Seller. If a mistake is made in the process, someone else may end up owning legal title to the home just purchased by the buyer.
The services of a real estate attorney greatly reduce the likelihood of problems, provide an experienced guide to this very long and complex process and provide peace of mind to the buyers.
Services and Fees
We provide full service to real estate buyers for residential real property closings. Among those services are contract Review (pre or post contract execution); the negotiation of Inspection contingency issues, if any; the negotion of attorney modification issues, if any; the tracking of the buyer’s contingencies (appraisal, mortgage, home sale, if any); attendance at the closing to review the Seller’s closing documents and explain the voluminous mortgage and seller documents in clear, easy to understand terms, and ensure that the deed is proper and the title is issued.
Fees vary depending on the transaction. We provide services in FSBO (for sale by owner) purchases, existing residential real estate closings, new construction or developer conversion and rehab transactions, short sales, and REO (real estate owned) or foreclosure transactions.
How to Get Started
The first step to beginning the residential real estate closing process is to give us a call and arrange for a review of the real estate purchase contract. We are generally willing to have a short (5 to 15 minutes) initial discussion over the telephone to determine if we can assist in your situation and to determine if we might be an appropriate match to work with you. Face to face Initial consultations are by appointment only and a consultation fee is generally charged. To get this process started, please feel free to contact Richard Magnone via email or by phone at 773-399-1122.