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Beware: The Illinois Rent-to-Own Law Has Changed

Web Admin - Friday, May 18, 2018
Schaumburg real estate attorney rent-to-own contractsWhen purchasing real estate property, most homeowners obtain a mortgage, which provides them with certain legal protections, including in the case of foreclosure. However, following the financial crash of 2008, many potential homeowners have purchased homes through installment contracts (also known as rent-to-own agreements), allowing them to live in their home and pay down the purchase price over time.

These types of agreements provide low-income homeowners or those who are unable to qualify for a mortgage with the ability to purchase their own home. However, since the seller retains the title of the home until all payments have been made, some predatory sellers may use rent-to-own agreements to take advantage of buyers, especially if they fail to disclose issues related to property maintenance or building code compliance.

Changes to Illinois Law Regarding Installment Contracts

On January 1, 2018, a new state law went into effect that is intended to provide buyers with protections in an installment sales contract (often referred to as an Installment Contract for Sale of Real Estate, Articles of Agreement for Deed, or Installment Agreement for Deed). The Illinois Installment Sales Contract Act applies to sellers who sell three or more residential real estate properties in a single year, and it does not apply to agricultural property that is larger than four acres. The law contains the following new provisions:

- A seller must record a contract with the county recorder of deeds within 10 days of the sale of the property. If the contract is not recorded, the buyer can rescind the contract, and the seller must provide them with a refund of all payments made.

- A contract must contain a statement in large, bold type that informs the buyer of their right to obtain a home inspection and/or appraisal from a third party before signing the contract.

- If a building on the property has been condemned, the contract must contain a statement in large, bold type informing the seller of this fact.

- A contract must include a statement of what repairs the buyer is responsible for making to the property. The seller is responsible for making any repairs not included in this statement.

- If a buyer defaults on any payments, they have 90 days to make payments and cure the default before the seller can bring any action against them. If a buyer cannot cure the default, the seller must refund them any money they spent to perform repairs on the property.

- If a buyer defaults after paying at least 20% of the property’s purchase price, the seller must follow foreclosure procedures in order to evict the buyer from the property.


Contact an Inverness Real Estate Attorney

If you are planning to use an installment contract to buy or sell a home, an experienced attorney can review your contract to ensure that your rights are protected and that the correct legal procedures are followed. To schedule a personalized consultation, contact a Mount Prospect real estate lawyer at 847-934-6000.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Sources:
http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=3813&ChapterID=62
http://www.ilga.gov/legislation/publicacts/100/PDF/100-0416.pdf
https://www.isba.org/ibj/2017/10/lawpulse/newlawprotectsrealestatepurchaserswhobuy

Zoning of Real Estate

Web Admin - Tuesday, January 19, 2016

zoning of real estate, Illinois Real Estate AttorneyIf you are a business owner searching the market for commercial real estate, it is critical to be aware of, and understand, the various zoning laws. These laws will impact what you are allowed to do on the property. Therefore, determining the types of activities your business will engage in is also important when looking for commercial property. 

What Do Zoning Laws Do? 

Under Illinois law, local municipalities can utilize zoning laws (also referred to as zoning ordinances or land use regulations) in order to protect communities and regulate their growth. These laws establish zones of property that can only be used for specific purposes. There are numerous types of zones, including: 

1. Residential;

2. Commercial, such as retail stores, office buildings, and hotels;Industrial, which involves manufacturing facilities;

3. Agricultural, which are areas designated for farming activities; and

4. Recreational. 

Hence, for example, an individual would be prohibited from opening a manufacturing plant in an area zoned for residential use. However, most real estate, with the exception of single-family homes and lots, can be commercial real estate, as you have probably seen an old building once used for manufacturing changed into office or retail space. 

Zoning laws regulate various activities of businesses for numerous reasons, such as ensuring areas receive adequate light, to protect against the risk of fires and to minimize congestion on public streets. Some of the common laws enacted regulate: 

1. Noise level;

2. Appearance of the building (such as its height and proximity to other buildings);

3. Whether parking must be provided; and

4. Size, placement, and appearance of signs.

Depending on the type of business, the more or less relevant certain restrictions may be. For instance, the limits on the amount of noise that can be produced likely does not affect a grocery store, but may greatly impact a nightclub. Other regulations, such as those related to the appearance of signs attached to the building, will likely affect any type of commercial use of the property. 

The zoning laws make it important for business owners to check their local ordinances to ensure that they will be allowed to perform the types of activities necessary to operate the business. It is important to not simply rely on the activities that the previous tenant or owner conducted because past use is not an indicator that the same future use is permissible. For example, generally speaking, when a new law is passed that prohibits activity, the current occupant is allowed to continue to conduct the activity that is now prohibited (called non-conforming use). However, when a new occupant enters the property, he or she must conform to the law (it is impermissible to continue the nonconforming use).

Real Estate Help 

The success of your business can be significantly impacted by leasing or purchasing real property that does not fit with the activities your business needs to conduct. For more information about commercial property, contact a skilled Illinois real estate attorney today. Our firm provides legal representation for individuals in the communities of Inverness, Palatine, Schaumburg, Arlington Heights, Long Grove, Kenilworth, Riverwoods, Barrington, South Barrington, and Mount Prospect.

About the Author: Founding partner of Drost, Gilbert, Andrew & Apicella, LLC, Colin Gilbert, received his J.D. from Chicago-Kent College of law in 2005. Colin argues cases across many practice areas including criminal defense, collections, civil litigation, real estate law, and corporate law. Colin is an active member of the Board of Governors of the Northwest Suburban Bar Association and the Illinois Creditors Bar Association. He is currently Vice President of the Arlington Heights Chamber of Commerce, and is a Commissioner for the Village of Arlington Heights. Colin has a 10.0 Attorney rating on Avvo, and was named one of the 2014 “Top 40 Under 40” Trial Lawyers in Illinois by the National Trial Lawyers Association.



Source: 

http://ilga.gov/legislation/ilcs/fulltext.asp?DocName=006500050K11-13-1


Forcible Entry and Detainer Actions

Web Admin - Friday, October 09, 2015

Illinois real estate attorney, forcible entry, eviction noticeIn some disputes involving a rental of property, it is possible for a landlord to evict a tenant. In order to successfully evict a tenant, the landlord must comply with the laws governing eviction proceedings. These laws are intended to provide for a means of obtaining evictions, while simultaneously protecting tenants from unjustified eviction attempts. 

Eviction Process 

Pursuant to Illinois law, under certain circumstances, it is possible for a landlord to file a claim, known as a forcible entry and detainer lawsuit, to evict a tenant. Some of the reasons a landlord may be justified in seeking eviction include, but are not limited to, the following: 

1. Failure to pay rent;

2. Violation of the lease terms; or

3. Remaining in the property after the agreed upon lease term has passed. 

In some cases when issues arise, the tenant may voluntarily leave the property. However, if the tenant refuses to relinquish the property, the landlord may be forced to file a forcible entry and detainer lawsuit to initiate eviction proceedings. The first step in the process is to serve notice on the tenant of the intention to terminate the lease. The best way to satisfy the service requirement is to personally hand the tenant the notice. Alternatively, it can be left with someone that lives in the property who is at least 13 years of age. The notice requirement is not satisfied if the notice is left with a guest or visitor to the property. 

If personal notice is not possible, constructive notice is also sufficient. Constructive notice can be accomplished by mailing it by certified or registered mail, return receipt requested. If there is no one in actual possession of the property, the notice can be attached to the property. After notice has been properly served and the issue has not been corrected or the tenant has not moved out, the lawsuit to evict can be filed.

A forcible entry and detainer claim seeks to obtain an “Order for Possession” from the court, which grants the landlord the right to take possession of the property. If the Order for Possession is granted, in most cases, the court will also grant a “stay of enforcement” in order to give the tenant time to find a new place to live. After the stay expires, the Sheriff’s Department will assist the landlord in removing the tenant from the property. 

In addition to the claim for the property, the landlord can join a claim to obtain rent due. However, if constructive notice was used to satisfy the service requirement and the tenant does not appear, the court can only rule on the possession claim and not whether any rent should be paid to the landlord. If the possession claim is decided, it is final, enforceable, and appealable. If the landlord wishes to continue with the rent claim, it remains pending. 

Real Estate Attorneys

Unfortunately, disputes between landlords and tenants do arise. When those issues are significant enough, eviction of the tenant may be sought. If you have questions about the rental of property, contact an experienced Illinois real estate attorney today. Our firm provides representation for individuals located throughout the northwest suburbs, including the communities of Long Grove, Arlington Heights, Schaumburg, Palatine, Inverness, Kenilworth, Riverwoods, Barrington, South Barrington, and Mount Prospect. 

About the Author: Founding partner of Drost, Gilbert, Andrew & Apicella, LLC, Colin Gilbert, received his J.D. from Chicago-Kent College of law in 2005. Colin argues cases across many practice areas including criminal defense, collections, civil litigation, real estate law, and corporate law. Colin is an active member of the Board of Governors of the Northwest Suburban Bar Association and the Illinois Creditors Bar Association. He is currently Vice President of the Arlington Heights Chamber of Commerce, and is a Commissioner for the Village of Arlington Heights. Colin has a 10.0 Attorney rating on Avvo, and was named one of the 2014 “Top 40 Under 40” Trial Lawyers in Illinois by the National Trial Lawyers Association.

Source:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=073500050HArt%2E+IX&ActID=2017&ChapterID=56&SeqStart=66600000&SeqEnd=74400000


Considerations for Owning a Vacation Home

Web Admin - Monday, August 31, 2015

Illinois real estate lawyerWhen owning a vacation home, there are several issues that need to be considered, including estate planning, how the property will be owned, and potential tax implications. If you plan on purchasing a vacation home with a friend or a family member, deciding how the property will be owned is important. Ordinarily, this type of ownership is what is known as tenancy in common. Under a tenancy in common ownership, each owner is named on the deed, along with each owner’s respective ownership percentage.

An alternative is for all of the prospective owners to form a limited liability company (LLC) and have it purchase and own the home. While this does create the additional task of forming the LLC, the individual assets of each member of the LLC are protected. A disadvantage is that the individuals of the LLC cannot claim property tax or mortgage interest deductions.

Tax Issues

The capital gains tax applies to the portion of the proceeds (upon the sale of a home) that exceeds the purchase price of the property plus the cost of any improvements made. For most taxpayers, the tax rate for long-term capital gains is 15 percent. An important provision of the tax code is the primary residence exclusion to the capital gains tax. This exclusion allows for married couples to exclude up to $500,000 ($250,000 for single owners) in capital gains for the sale of a principal residence.

Critically, the home must have been the principal residence (where you and your spouse live) for two of the last five years. This period does not need to be consecutively; rather, the home must have been the principal residence for a total of 24 months out of the last five years. The primary residence exclusion can be used multiple times, but cannot be used more than once every two years.

In relation to vacation homes, ordinarily the primary residence exclusion cannot be used (as a vacation home is normally not the principal residence). However, if the vacation home is established as the principal residence (by satisfying the two out of the past five year rule), the exclusion can be used. This may be very beneficial if a vacation home significantly increased in value.  

Passing Home to Heirs

Often, owners of vacation homes desire to keep those homes within the family. As a result, this requires planning for how the home will be passed down. There are numerous different methods of leaving property to a beneficiary. Each of those methods has different advantages and disadvantages. It is important to keep in mind that the following only briefly describes just three of the methods for passing on property. For more detailed information about estate planning, you should speak with an attorney.

For example, property can be passed to children or other heirs upon the owner’s death. This creates a step-up in basis for the beneficiary, which is a large advantage should the beneficiary sell the property. It also allows for the owner to retain complete control until death. However, it is not a tax-friendly option for the owner.

Alternatively, an owner can give the property as an outright gift. Under this method, the owner transfers the property by deed to the beneficiary. This accomplishes an immediate transfer of ownership. However, the federal gift tax limits the amount that can be transferred. Additionally, the step-up in basis is lost.

Finally, one option that is becoming more popular is to place the property into a trust for named beneficiaries. Under this plan, the owner reserves the right to use the property for a specified period of time. After the trust term expires, the beneficiaries take ownership of the property, with significantly reduced, or eliminated, federal and state taxes. Critically, for this method to work, the person who formed the trust must out-live the trust term.

For more information about the ownership of a vacation home, reach out to an experienced Illinois real estate attorney today. Our firm proudly represents individuals throughout the northwest suburbs, including the communities of Inverness, South Barrington, Arlington Heights, Long Grove, Mount Prospect, Riverwoods, Schaumburg, and Kenilworth.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

Issues in Commercial Leases

Web Admin - Tuesday, April 07, 2015

commercial leases in Illinois, Inverness commercial real estate lawyerA key to the development of a successful business is finding the best possible location in which to set up your company. This is especially true when the nature of the company necessitates that the customer visit the business space. In order to obtain space, it is common for a company to enter into a commercial lease. Business owners should be aware of issues related to commercial leases when it comes time to negotiate and agree to the lease agreement.

What to Look for in Commercial Leases

A commercial lease is a contract between a business and a landlord for the rental of space in a building. Importantly, property is zoned for specific purposes, which may differ from what the landlord is advertising the space for or what the previous tenant used the space for. A property can be zoned for different types of uses, such as residential, commercial, or industrial. What the property is zoned for will determine the type of activities that can be conducted in the rental space. For example, the Schaumburg zoning ordinance divides the village into zones or districts and places restrictions on permitted uses within those designated areas. Therefore, a property owner should check with the local zoning authority to determine what the space is zoned for.

The length of a commercial lease is an important issue to resolve. For a business in its initial stages, the risk of failure is high. As a result, entering into a lengthy lease term is usually not advisable, particularly if the agreement contains an acceleration clause. An acceleration clause gives the landlord the ability to request the entire unpaid rental amount for the remainder of the lease term. A long lease term puts the company at the risk of being obligated to pay a substantial amount of money for space that it is no longer using.

For new businesses, negotiating for shorter lease terms with several renewal options can help address the possibility of the business failing. Another great option is to negotiate for an escape clause that frees the business from the rental agreement in the event the business fails. Alternatively, longer lease terms may be perfectly suitable for more established businesses. Longer lease terms can be helpful because the location of the rental space can provide value, particularly if customers frequently visit, as, for example, in the case of a restaurant or retail store.

Other Issues

Some other issues that should be addressed in the lease agreement include:

  1. 1. The right to place signs in and/or on the rental space;
  2. 2. Whether common areas or facilities (like restrooms) can be accessed by employees and customers; and
  3. 3. Whether parking areas can be used by employees and customers.

If these issues are not specifically addressed in the agreement, it is likely they will require the consent of the landlord, which may not be granted. Therefore, it is important to resolve these issues before entering the agreement.

It is important to keep in mind that these are only a few of the considerations when negotiating a commercial lease. If you are in the process of searching for commercial space, contact an experienced Illinois commercial real estate attorney today. Drost, Gilbert, Andrew & Apicella, LLC represents clients in locations such as Inverness, Palatine, and Schaumburg.

About the Author: Founding partner of Drost, Gilbert, Andrew & Apicella, LLC, Colin Gilbert, received his J.D. from Chicago-Kent College of law in 2005. Colin argues cases across many practice areas including criminal defense, collections, civil litigation, real estate law, and corporate law. Colin is an active member of the Board of Governors of the Northwest Suburban Bar Association and the Illinois Creditors Bar Association. He is currently Vice President of the Arlington Heights Chamber of Commerce, and is a Commissioner for the Village of Arlington Heights. Colin has a 10.0 Attorney rating on Avvo, and was named one of the 2014 “Top 40 Under 40” Trial Lawyers in Illinois by the National Trial Lawyers Association.

Consumer Financial Protection Bureau Makes Major Changes to Real Estate Closings

Web Admin - Thursday, March 26, 2015

Illinois real estate closing, Arlington Heights real estate attorneyA new rule goes into effect on August 1st that will make major changes in the way that real estate closings occur. The new rule was promulgated by the Consumer Financial Protection Bureau (CFPB) and is known as the TILA RESPA Integrated Disclosure Rule (TRID). The TRID Rule alters the way that financial disclosures work in the context of mortgages. Previously, lenders had to use four separate disclosure forms. They had to provide Good Faith Estimate and Truth in Lending Act (TILA) disclosure forms to loan applicants within three days of receiving the person's application. They also had to provide a Housing and Urban Development disclosure form and another TILA disclosure form three days prior to closing. The new rule combines these four documents into two: a loan estimate and a closing disclosure.

The Loan Estimate

The loan estimate acts as a combination of the Good Faith Estimate and the first TILA disclosure. Like the old documents, it still must be given to the loan application within three days of receiving the application. The loan estimate is a three-page document that includes a variety of information about the potential costs of the loan to the consumer. The first page includes general information such as the loan amount, the interest rate, and the payment schedule. The second page includes a detailed layout of the costs that the loan recipient will be responsible for at closing. The final page contains more miscellaneous information about the loan. This page includes things like metrics for comparing the loan with other offers, as well as other information such as late payment fees and appraisal rules.

The Closing Disclosure

The other new document created by the TRID rule is the closing disclosure, which combines the Housing and Urban Development settlement statement, along with the other TILA disclosure. Like its predecessor documents, the lender must still deliver the closing disclosure at least three days before the closing. The closing disclosure form is longer than the loan estimate form and contains more information. The first page of the disclosure is similar to the loan estimate form, and contains general information about the loan. The next page details the specific loan costs that the borrower is paying. The third page is an update to the closing costs from the loan estimate, highlighting any changes. The final two pages include other miscellaneous information about the loan, similar to what is on the final page of the loan estimate, but more expansive.

If you are looking to buy a house and want to make sure this high stakes transaction goes off like you are expecting, contact an experienced Illinois real estate attorney today. Our firm serves clients in northwest suburban towns like Arlington Heights, Long Grove, Rolling Meadows, and Barrington.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

New Realtor Form Contract Comes into Use

Web Admin - Thursday, August 14, 2014

IRELA new real estate formThe Illinois Real Estate Lawyers Association (“IRELA”), along with a variety of other real estate organizations, maintains a form contract for realtors and their clients to use when selling a home. The IRELA recently released their new version of this, known as the Multi-Board Residential Real Estate Contract version 6.0, and this new contract is now in use. The new version makes a variety of changes to the old 5.0 version, many of which are technical or procedurally based. However, the contract does have some new language of which buyers and sellers should be aware.

The contract now allows for more options when dealing with escrow during the closing. It also changes how professional inspections work, requiring sellers to request portions of inspection reports. The new contract also alters how the timeline for mortgage financing affects the seller’s ability to back out of the deal. Finally, the contract changes the seller's responsibilities as far as disclosing potential issues with the home. Importantly, these are just some of the changes made during the board's updating of the contract. It is important that you consult with a real estate attorney during any real estate transaction to make sure you understand the scope of the new contract.

Version 6.0 Changes

The new 6.0 version of the Multi-Board contract contains a variety of changes from the earlier 5.0 document. First, the 6.0 document contains a new paragraph regarding who holds on to the buyer's earnest money until the closing goes through. In the prior contract, options were only available for the buyer's broker or the seller's broker to manage that. Now, the contract allows for third parties, like title companies, to hold the money in escrow.

The new contract also modifies how buyers can void the contract after a failed inspection. The contract allows buyers to hire professional inspectors to check the house for problems like radon or insect infestations. If the inspectors discover such an issue, then the buyer has the option of voiding the sale contract. However, the new 6.0 version allows the seller to request the portion of the report that the buyer is using as grounds for cancellation.

The updated document also alters the timeline for the buyer to obtain mortgage financing. The old contract used to require a “firm written commitment” from the bank that financing would be forthcoming. However, banks seldom issue such statements quickly, so the new version merely requires the buyer to prove that they have submitted the loan for underwriting by a certain date, and that the bank has given them clearance to close by another date.

The contract also requires the seller to make a variety of representations to the buyer, such as stating that the home is not currently subject to a boundary line dispute. The new 6.0 version of the contract adds extra notification duties to the seller, forcing them to make all the same representations again at closing, which means that any changed circumstances would require an update.

Contact Our Real Estate Lawyers Today

If you are currently looking to buy a new house or another piece of property, contact an experienced Illinois real estate attorney today. At Drost, Gilbert, Andrew & Apicella, LLC, our team of skilled professionals counsels clients in towns all over the northwest suburbs, including in Arlington Heights, Long Grove, and South Barrington.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

Commercial Leasing in the Chicago Suburbs

Web Admin - Thursday, May 22, 2014

The suburban Chicago commercial leasing market has seen a slight recovery as compared to the depths of the recession, but the revival appears to be sluggish. According to Crain’s Chicago Business, the market currently has an overall vacancy of approximately 24.4 percent. That number is an improvement over the low point of the recession, 25.4 percent in 2010, but it is still a long way off from 2006, during which it fell below 20 percent.

Despite this merely modest improvement, there has actually been a noticeable increase in asking rents, up 12 percent to an average of $21.94. Some experts believe that this rise in asking price relates to the fact that most owners who were in danger of losing their properties have either recovered or gotten out of the market by now. This means that current landholders are more apt to sit and wait than they are to engage in a race to the bottom over prices as they had done in the past. Consequently, hiring an attorney to help negotiate the lease can be even more beneficial.

The Benefits of Involving an Attorney

Both first time lessees and experienced business owners can benefit from investing in a savvy real estate attorney during lease negotiations. Leases are legal documents just like any other contract, and just like many other contracts, they can be filled with dense legalese. Lawyers specialize in dissecting such complex provisions, so that the business owner can be sure they understand exactly what they are agreeing to.

Yet the attorney can add more value than simply translating the lease. Experienced real estate attorneys understand the sorts of provisions likely to appear in a lease. This means that getting an attorney involved early can help negotiations move along more smoothly. Often, business owners, especially those new to commercial leasing, sketch out broad strokes of the lease in negotiations, focusing on key points like price and size of the space. Then, once they feel they have reached a final agreement, the landlord provides the full lease, and the lessee discovers other provisions like janitorial services that the initial negotiations did not cover.

This necessitates reopening negotiations after it appeared that everything had been finalized. Involving a lawyer earlier in the process can prevent such problems from arising. Lawyers with experience negotiating commercial leases can help business owners see the full field of lease terms and allow them to negotiate with confidence.         

Whether you are just beginning to think about buying space or you already have a potential lease ready for review, reach out to an Illinois commercial real estate attorney today. Our experienced team can help analyze your lease and aid you in negotiating the most advantageous deal possible. We serve clients across the northwest suburbs, including in Arlington Heights, Long Grove, and Mount Prospect.

About the Author: Founding partner of Drost, Gilbert, Andrew & Apicella, LLC, Colin Gilbert, received his J.D. from Chicago-Kent College of law in 2005. Colin argues cases across many practice areas including criminal defense, collections, civil litigation, real estate law, and corporate law. Colin is an active member of the Board of Governors of the Northwest Suburban Bar Association and the Illinois Creditors Bar Association. He is currently Vice President of the Arlington Heights Chamber of Commerce, and is a Commissioner for the Village of Arlington Heights. Colin has a 10.0 Attorney rating on Avvo, and was named one of the 2014 “Top 40 Under 40” Trial Lawyers in Illinois by the National Trial Lawyers Association.

Home Sale Contingencies in Real Estate Contracts

Web Admin - Thursday, April 10, 2014

illinois real estate contingencies lawyerBuying a new home is a complicated task that requires a lot of pieces to fall into place in just the right way. For many people, one of these pieces is the ability to sell their current home. Often, people need to sell their old home first to make sure they have enough cash on hand to afford the new one. Of course, sometimes that is not feasible, and people will want to put an offer down on a new house before they have managed to sell their old one. When this happens, people can use a “home sale contingency” clause in their contract to purchase the new home. In short, a home sale contingency clause voids the contract for the sale of the new house in the event that the buyer is unable to sell their old one.

Types of Home Sale Contingencies

There are two broad types of home sale contingencies that lawyers can build into a contract: a “sale and closing contingency” and a “closing contingency.” The sale and closing contingency is used in the event that the buyer has yet to find a prospective buyer for their own home. Conversely, buyers use closing contingencies when they have a prospective buyer who has made an offer for their home, but the sale has not yet closed. In this instance, the contingency acts as an insurance policy against the sale of the buyer’s home falling through at the last minute. While these two types of clauses function in largely the same way, both of them voiding the sale of the new house if the old one does not sell, the sale and closing contingencies are more likely to include a “kick out” clause.

Kick out clauses are a right of first refusal. They allow the seller to keep searching for other buyers for the house. In the event that one of these other buyers makes an offer, then the seller must notify the first buyer. The first buyer then has some period of time to sell their house or else the seller is allowed to make the sale to the new buyer instead.

Factors to Consider When Using a Home Sale Contingency

Buyers should consider two things when deciding whether to ask for a home sale contingency: the effect it will have on the new home’s price and the other costs of purchasing a house. For the first point, home sale contingency clauses will likely drive the price of the new home up. The buyer is asking the seller to take the risk that the buyer’s old home will not sell, and the seller will likely want compensation for bearing that risk.

For the second point, buyers can still end up sinking other costs into the attempted purchase of the new home. They can end up paying for things like home inspections, appraisal fees, and the like, even before they have sold their old house. In the event that the buyer fails to sell their home, then they have wasted any money spent on such things.

If you are in the market for a new house, find an Illinois real estate attorney to help ensure that you receive strong, fair contracts. We serve towns all across northwest Chicago including Palatine, South Barrington, and Mount Prospect.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

A Beginner’s Guide to Applying for a Mortgage Loan

Web Admin - Thursday, February 20, 2014

illinois mortgage loan lawyerFor many first-time home buyers, the process of applying for a mortgage can seem complex. This guide will explain the basics of the process, such as the timeline for applying for a mortgage, the documents that applicants should procure and bring, and the credit score and down payment that applicants should expect.

The Mortgage Timeline

The mortgage process begins with a pre-approval application. The purpose of the preapproval process is to let the bank or lender look into the applicant’s finances, in order to make sure that they can afford a loan. This is when banks ask for most of the documentation. Often they want things such as:

- a list of addresses and landlords;
- a list of previous employers;
- pay-stubs from the previous one or two months, with a person’s year-to-date earnings included as well;
- the last two year’s W-2 forms;
- two months of bank statements for all accounts;
- a list of all debts not on the applicant’s credit report; and
- a list of all other real estate that the applicant already owns.

If the applicant has already found a house that they like, and their offer has been accepted, then the bank will also want the seller’s contact information and a copy of the contract. Being ready to provide these documents can help speed up the mortgage process.

Once a person goes through the pre-approval process and has made an offer on a house, the bank will order an appraisal on it. The appraiser will go through the house and determine the value, and then the bank will take their assessment into account when calculating how large a loan they can offer. Generally speaking, the bank will base their offer on either the appraisal value or the purchase price, depending on which is lower.

After the appraisal, the loan underwriter will look at all the documentation to make sure the loan is a good investment for the bank. From start to finish, the whole process usually takes about four to six weeks on the bank’s end, but timelines may vary, and asking the lender in the beginning may be a good idea.

Credit Scores and Down Payments

In addition to the array of documentation, lenders will also expect borrowers to have good credit scores and money available to make a down payment on the house. The rule of thumb for a conventional loan, according to U.S. News, is that a borrower would need a credit score of at least 650. Conventional loans also require, on average, a down payment of around 20 percent. Borrowers may have an alternative in the Fair Housing Act loan, which is a loan insured by the federal government. These loans offer a 3.5 percent down payment with a 580 credit score, and a 10 percent down payment with a 500 credit score.

If you are going through the process of buying a home, contact an Illinois real estate attorney today. Our team serves people in many northwest suburban areas including Inverness, Barrington and Long Grove.

About the Author: Attorney Jay Andrew is founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


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