FAQs

The real estate purchasing process begins simply enough. After long hours of searching for the right home to buy; your real estate agent will write a contract that you will sign. This constitutes the “offer” to the Sellers. Hopefully, the Sellers accept the offer by signing the contract and inserting a date of acceptance.

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 recession 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 the terms, rights, and limitations of such a clause.

The buyer’s attorney will review the contract to insure that the contract does not take advantage of the buyer as well as resolve any potential ambiguities. 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 the right to conduct a professional home inspection within five (5) business days of the date of acceptance. 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.

Once the modification and inspection periods pass, the buyer’s attorney will help the buyer manage the mortgage/financing contingency. 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 stay in contact with the lender to determine the conditions necessary to be satisfied to obtain the loan commitment. The attorney will also request an extension of the financing contingency if necessary.

The final tasks of a buyer’s attorney before the closing include negotiating any problems that arise during the final inspection/walkthrough, reviewing title company figures and insuring that the buyer knows everything necessary to bring to closing.

At the closing, the lender will generally email or deliver a “package” containing the loan documents to the title company. This package is comprised of many documents, including the note and mortgage and as many as sixty to one hundred pages of documents disclosures and agreements. The buyer’s attorney will review these document, point out important terms and protect the buyer’s rights against the lender.

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. Mistakes made in this process may cause somebody else to end up owning legal title to the home just purchased by the buyer.

The services of an experienced real estate attorney greatly reduce the likelihood of problems, issues and delays and provide an experienced guide to this very long and complex process.

Most contracts used by the various real estate boards in the greater Northern Illinois area carry a five day attorney modification and approval clause. Once the attorney for the Seller receives the contract that has been signed by all parties, the attorney will conduct a thorough review. In reviewing a contract, a seller’s attorney will determine that the buyer’s earnest money is sufficient, the buyer’s mortgage terms and time frame to acquire a mortgage are realistic to ensure that the home is not off the market for too long. Additionally, the seller’s attorney will review the requested property tax prorations to confirm that the credit that the seller must give to the buyer at closing is calculated fairly.

Assuming all modifications are agreed to by the parties, the buyer will most likely conduct an inspection. The seller’s attorney will negotiate the inspection issues with the buyer’s agent or attorney keeping in mind that most contracts carry set parameters regarding inspection requests.

The next step in the process is confirming that the property is free of liens. This is accomplished by the seller’s attorney ordering a title search. The search will state if there are any liens on the property that must be cleared in order to close. An example of this could be a credit card judgment which would prevent a seller from closing unless it was paid. Other examples are requirements from municipalities such as transfer taxes and inspections and requirements of homeowner’s associations.

If required by the contract, the seller’s attorney will order a survey. The survey will disclose if there are any potential boundary issues or encroachments that need to be addressed in order to close. A common example of this is a storage shed that may be over a building line or on an easement. In most instances, the attorney for the seller can resolve this problem by working with the title underwriter so that the issue is “insured over” by the title company at closing.

The seller’s attorney will also monitor the buyer’s financing. This includes speaking to the buyer’s lender regarding any remaining conditions regarding the loan.

Once the buyer’s financing is in place and the title is clear, the attorney will prepare the various documents required to transfer title at the closing. This includes a deed, bill of sale, affidavit of title, ALTA statement, closing statement and any other various documents required. This list could include substantially more documents depending upon the nature of the transaction! It is not necessary for the seller to be present at the closing as seller’s attorney can arrange for a power of attorney and/or for all documents to be pre-signed in advance of closing.

The transaction will then be scheduled to close. At closing, the buyer’s attorney will make sure that all documents are properly executed by the seller, answer any questions or concerns of the buyer, and settle any contractual disputes or problems that arise. The buyer’s attorney will be checking the seller’s attorney’s work to determine if it accurately conveys title to the buyer.

Using an experienced real estate attorney greatly increases the likelihood of a smooth and issue free closing.

Most lenders will request a BPO (Broker’s price opinion) or full appraisal of property. In some cases they will use a drive by value or a fair market analysis, which is a comparison of three homes in a similar neighborhood that have sold in the past three months.

The bad news is that some short sales don’t come with a full forgiveness of the balance owed to the lender. If your short sale was “lien release only” the lender reserved the right to sue you for the balance of the mortgage. They merely allowed you to sell the house by releasing their lien. When they released their lien, they didn’t release the balance of the mortgage. Also, some short sales required you to sign a “promissory note” to the lender for some or all of the mortgage/loan balance.

Worse yet, if you were foreclosed upon, the lender can take a “deficiency judgment” against you for the difference between your mortgage balance at the time of the foreclosure and the amount they netted after they sold the property as bank owned/REO property.

The good news is that an experienced short sale attorney can help you to negotiate these types of debts with the lenders. Since these debts are unsecured, we have had great success in reducing and resolving these matters for much lesser amounts.

In real estate, the words “closing” and “signing” are considered synonymous. Expect there to be plenty of reviewing and signing of documents since the closing of a home is a very detailed and complex transaction. Your attorney will be there to assist you and take the lead by explaining to you all of the documents you need to sign. Here is what generally happens at a closing:

• The ownership and property title are transferred over to the buyer’s name

• The title company will send the new deed to the county to be recorded, and the buyer will be

registered as the new official homeowner

• The buyer will be expected to bring a cashier’s check or certified check for any of the remaining

closing costs

• Your attorney and real estate agent will collect his or her commission of the transaction through the settlement statement issued by the title company

• The seller will collect the proceeds of the sale after his or her mortgage and closing fees are settled

While it’s not always clear why the seller rejects an offer, here are a few common reasons why offers on homes are declined:

• The seller may have a grandiose idea about the value of his or her home

• Your offer is lower than other interested buyers

• You may not meet the seller’s preferred financing requirements

• The desired closing time frames may not align between you and the seller

• The seller may consider your repair requests unreasonable

• The seller may have an underlying motivation that’s difficult to discern

Maybe. Not all short sales are handled the same. Every short sale is unique as DNA. While we try to negotiate a “full forgiveness” short sale where there is no further owner liability, sometimes this is not possible. Sometimes the lender will only allow a lien release, meaning they will allow the owner to do the short sale but hold the owner responsible for the deficiency amount. The good news is that most lenders really work with the owner if there is a lien release, and this amount can be negotiated downward considerably in most instances. Also, occasionally, the lender may require the owner to sign an unsecured, interest-free, promissory note for some of the deficiencies. Again, this note can normally be negotiated even further after the closing.

Maybe. All closing costs/expenses are subject to the approval of the short sale lender. Occasionally, the lender will not cover necessary closing costs. If this occurs, the owner will have to pay this amount at closing. Generally speaking, these amounts are quite small and may (but not always), represent an unpaid water bill or unpaid homeowner’s association dues and/or liens and fees.

These fees are approved and paid by the short sale lender. The short sale lender may not approve all fees and commissions requested.