What questions should I ask when looking at homes?
Many of your questions will focus on potential
problems and maintenance issues. Illinois law requires
residential sellers to submit a disclosure report to
provide prospective buyers with information about
material defects in the home that may not be discernable
in a normal inspection. Review this carefully and fully
investigate any items that the seller checks “yes” to.
You may also want to ask the seller whether anything
need to be replaced. Does anything require ongoing
maintenance (e.g., HVAC, appliances)? Ask about the
neighborhood, focusing on quality of life issues. Your
real estate agent can help you find out about local
schools, community events, and other developments in the
area. Ask questions until you understand all of the
information the seller or real estate agent has given.
Organize your thoughts by making a list of questions
ahead of time to compare all of the information you
receive.
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I found a home, and my agent is preparing an
offer. What should I be looking for before signing?
The offer to purchase is the first step in
negotiating the terms under which you will be buying
your new home. Once the Seller accepts your offer, a
binding contract is formed that may be modified only
under certain conditions. As with any legal document,
you should read the offer carefully. Make sure there is
an attorney review contingency, which allows you to
review the contract with your real estate lawyer who may
change certain terms if necessary. This review period
should be for no less than five business days. Under a
typical offer to purchase, the attorney can request
modifications to any term of the contract except: a) the
purchase price, and b) the closing date. It is
important, therefore, that these terms are acceptable to
you before signing.
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What can I expect to find in an offer to purchase?
Besides the offering price and closing date, an offer
to purchase should cover both the basic terms of the
sale as well as conditions that may be applicable to
your specific needs. Besides the purchase price, closing
date and attorney review contingency, the following are
examples of basic terms that every contract should
contain:
1. An accurate description of the land, buildings and
furnishings that are included in your offer. For
instance, are items such as the microwave, the outdoor
swing set, the living room drapes, the storage shed in
the garage, and the like included?
2. The date that you can take possession (which may
or may not be the closing date).
3. The Seller’s obligation to provide good,
marketable title, backed by a title insurance policy.
4. The need to provide a recent survey of the
property and at whose expense.
5. How the property taxes will be allocated between
the parties.
6. A reasonable period of time to have the property
professionally inspected.
7. The consequences and recourse if the buyer or
seller defaults.
The contract should also provide for conditions that
address your particular concerns. These may include the
following:
1. Assurances that there are no restrictions on how
you intend to use property.
2. Contingencies on matters such as the availability
of financing on acceptable terms or the sale of the
house that you presently own.
3. Whether special financing sources such as VA or
FHA will be used.
4. Whether the seller will be obligated to contribute
to your closing costs.
The above are only examples of the many issues that
can arise in the negotiation of the purchase of your new
home. Make sure your attorney reviews them with you
until you have a good understand of the contract.
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Does the purchase of a condominium present any
additional concerns?
A condominium is a form of property ownership in
which each owner holds title to his or her individual
unit, plus a fractional interest in the common areas of
the multi-unit project. You may share the common areas
with as few as one or two other owners, or as many as a
hundred or more. When buying a condominium, therefore,
it is important to understand not only what you are
buying, but also what you are buying into. Illinois law
requires a condo association to provide a potential
buyer with information on items such as the rules and
regulations of the association, its financial condition
and operating budget, insurance coverage, how many units
are owner-occupied, liens and judgments against the
property, and so on. However, this information must be
specifically asked for, so make sure your contract is
contingent upon a satisfactory review of the documents
you will be provided.
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What happens to my earnest money if the sale does
not go through?
Earnest money is the deposit that you give to the
seller or his agent upon the signing of the offer to
purchase to show that you are serious about buying the
house. If the sale goes through, the earnest money is
applied against the purchase price. If the sale does not
go through, the earnest money will be forfeited or lost
unless the offer to purchase expressly provides that it
is refundable.
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What is a title examination?
A title examination is a study of the records related
to the ownership history and any other matters of record
that affect the property. Liens, mortgages, judgments,
easements, restrictions of use, are all examples of
matters that a purchaser needs to be aware of before
taking title to the property. When a commitment for
title is ordered, a title examiner (a title company
employee who often is a lawyer) examines the title
history to determine who is the actual owner of the
lane, whether there are any defects in or claims against
the ownership, and whether any action is needed to make
sure the purchaser obtains good record title to the
property at closing.
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What is title insurance and do I need it?
“Title Insurance” is just that: a policy that insures
the status of title in your name as the new owner of the
property. Title insurance policies are issued by title
insurance companies. The policy protects you against
financial loss as a result of “defects” in the title, as
well as the cost of defending the title in court. Before
issuing a policy, the title company searches and
examines documents related to the ownership of and any
items affecting the property. It provides a source of
indemnification to the named insured if he or she is
damaged by a negligent or bad title search or
examination and also from hidden defects that would not
be discovered in a title search. For instance, a title
defect resulting from a forgery would not be revealed in
a search or examination of the public records but would
be covered by the title insurance policy. Prior to
issuance of the title insurance policy a title
commitment will be prepared. It contains a list of items
that either must be satisfied in order for the title
company to issue a “clear title,” or they will be
excluded from coverage. Items such as the seller’s
mortgage will be “waived” by the title company closing
agent when the former mortgage is paid at the closing
and will not appear when the policy is issued.
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Should I work with a real estate agent? A real
estate lawyer? Others?
A home purchase is one of the single largest
financial transactions most consumers make in a
lifetime. You should approach the temptation to “do it
yourself” with the same caution as if you were
considering repairing your own transmission or removing
your own appendix. The right professionals will not only
help you with the purchase of a home and offer direction
on what you should consider, but can potentially save
you many times their fees by avoiding costly mistakes
and providing the information you need to make an
informed decision.
• A real estate agent can advise you on the
marketplace and what is available in your price range,
as well as help you to consider aspects of a home which
may be important to you (such as nearby schools,
shopping, and commuting options). However, under
Illinois law, a real estate agent cannot render legal
advice on your purchase. For that you will nee a real
estate attorney.
• A real estate attorney owes an undivided duty of
loyalty to you, and provides objective advice. Buying a
house involves significant legal rights and obligations,
and your attorney can explain the terms and help you
understand what you are signing. An attorney will also
make sure you get what you believe you are getting, be
it the terms of your loan, what’s included with the sale
price, or the seller’s representations on the condition
of the house. The attorney will help guide you at
closing through the stack of documents that you will be
asked to sign, and check to be sure that the conveyance
documents have been properly prepared and actually
convey good title to the property to you.
• A professional home inspector is engaged during the
“home inspection contingency” period of the contract.
The inspector will go through the home inside and out,
and provide a written report on the condition of the
home’s structural components, its mechanical systems and
appliances. Knowledge of potential maintenance issues,
defective conditions and life expectancies of major
components will enable you to evaluate the home’s true
worth and can provide a basis of further negotiation
with the seller.
• A mortgage loan officer can help you determine what
kind and amount of mortgage payment you can afford and
alert you to financing options that can make a home more
affordable. A loan officer can also help you pre-qualify
for a real estate loan which may enhance your bargaining
position with the seller.
• A homeowner’s insurance agent can provide
information on the amount, type and cost of coverage
you'll likely need. You will be required to provide
proof of insurance before your lender will allow you to
close on the property.
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How should I take title to the property?
If you are purchasing the property alone, title is
typically taken in the name of only one individual
grantee (you), and is freely transferable. If more than
one individual is purchasing the property, there are
several ways title can be held.
Tenants in Common. Ownerships held as tenants in
common are freely transferable by each owner (“tenant”).
There is no right of survivorship in the surviving
tenants upon one tenant’s death. Equal percentage
ownership is presumed unless the deed specifically
states otherwise (for example, unless the deed states
otherwise, if there are three grantees, each grantee
will own a one-third interest).
Joint Tenancy. Title can be taken in multiple names
under this approach. A joint tenant owns an undivided
equal share of the property, with right of survivorship.
Upon the death of a joint tenant, that person’s interest
passes equally to the survivors. Unlike tenancy in
common, a joint tenant cannot will his interest to
another party. If a joint tenant sells his interest, the
joint tenancy is broken and the property is
automatically owned as tenants in common.
Tenancy by the Entireties. Title can be taken as
tenants by the entireties only by a validly married
husband and wife in a property used as their primary
residence. Like joint tenancy, there is a right of
survivorship with a tenancy by the entireties: upon
death of one spouse, the property automatically becomes
the sole property of the survivor. Unlike joint tenancy,
however, under Illinois law a judgment creditor cannot
force the sale of the home to satisfy a judgment against
only one spouse. For a married couple considering taking
title in joint tenancy, tenancy by the entireties is
typically the way to go.
Title can also be taken In Trust. Under this
approach, legal title is transferred to a trustee who
holds it under the direction and for the benefit of the
purchaser. An attorney should be consulted to see
whether this form of ownership is appropriate for your
circumstances.
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