When purchasing a condominium, buyers must be extra-careful. Condominiums are a form of common ownership, and come with their own set of challenges. Condominium Declarations/Bylaws and Rules and Regulations govern condo living, and must be followed to avoid fines, liens, and friction with the neighbors. Before purchasing a condominium, buyers should be diligent to make sure that they are comfortable with their purchase.
Pursuant to Section 22.1 of the Illinois Condominium Property Act, the seller of a condominium is required to provide certain documents to a prospective purchaser. By reviewing these documents thoroughly, buyers can avoid surprises at or after closing. For example, the Condominium Declaration/Bylaws and Rules and Regulations typically explain condominium governance, management, and items that will affect the condominium owner daily, such as rules concerning pets, noise, renting units, parking, etc. The condominium budget will lay out how much money the association collects and spends every year, and how much debt the association has. Buyers may not be interested in purchasing property that carries substantial debt for which they will have to pay special (translate: extra) assessments on a monthly or annual basis. Sellers also must provide past meeting minutes for the buyer’s review. Meeting minutes may reveal financial or maintenance issues that the association currently has or may have in the near future.
Additionally, a Section 22.1 Disclosure form is typically completed by the condominium board or the management company of a resale condominium. The form confirms the assessment, notifies prospective purchasers of any pending special assessments, states whether or not the association has any liens or lawsuits against it, and provides insurance information for the association. In most circumstances, immediately after a contract is signed, the buyer’s attorney will request a copy of the Section 22.1 Disclosure and related documents. Buyers will usually have a few days after receipt of these documents to determine whether or not they want to proceed.
If a condominium is being sold for the first time, i.e. it is either new construction or a condo conversion, the rules are slightly different. In addition to the Condominium Declaration/Bylaws, Rules and Regulations, and budget, developers must provide a drawing of the unit being purchased. If the building is large enough, the seller may also need to provide a Property Report highlighting the pros and cons of the building’s construction.
A thorough review of the documents required under Illinois law is necessary to assist buyers in making informed decisions regarding their purchase and to determine whether a particular condominium community is right for them.
Monday, April 28, 2008
Monday, April 21, 2008
Developer / Builder Contracts – Pitfalls for Buyers
When buying a property from a developer, buyers are typically asked to sign a special contract, prepared by the developer in advance. The vast majority of developers will not accept any of the realtor-prepared forms that are widely used throughout Illinois. Developers are subject to certain Illinois laws and want to use their own contracts to avoid various liabilities.
Prior to signing a developer’s contract, you should look through the contract and familiarize yourself with it. Developers’ contracts are notoriously one-sided, especially with respect to tax credits, property inspections, mortgage contingencies, resale provisions, warranty restrictions, and closing dates. Traditionally developers have been unwilling to negotiate. Because of the changing market conditions, however, more and more developers are working with potential buyers to make the sale.
If the legal jargon in the contract seems like mumbo-jumbo, the buyer shouldn’t fret unnecessarily. Instead, he should make sure that there is at least a five-day attorney review provision in the contract. While most Illinois developers do include an attorney review provision, many do not. Usually, however, they will add an attorney review provision upon your request. As long as that provision exists, the buyer’s attorney can review and negotiate some of the one-sided elements in the contract. This also affords the buyer a few days to make sure he is not experiencing “buyer’s remorse”. If the buyer is uncomfortable with the contract after his attorney explains it to him, the buyer’s attorney can terminate it within the attorney review period.
Don’t be scared to sign a developer’s contract! Just make sure you are taking steps to protect yourself and that you understand the contract and what your risks are.
Prior to signing a developer’s contract, you should look through the contract and familiarize yourself with it. Developers’ contracts are notoriously one-sided, especially with respect to tax credits, property inspections, mortgage contingencies, resale provisions, warranty restrictions, and closing dates. Traditionally developers have been unwilling to negotiate. Because of the changing market conditions, however, more and more developers are working with potential buyers to make the sale.
If the legal jargon in the contract seems like mumbo-jumbo, the buyer shouldn’t fret unnecessarily. Instead, he should make sure that there is at least a five-day attorney review provision in the contract. While most Illinois developers do include an attorney review provision, many do not. Usually, however, they will add an attorney review provision upon your request. As long as that provision exists, the buyer’s attorney can review and negotiate some of the one-sided elements in the contract. This also affords the buyer a few days to make sure he is not experiencing “buyer’s remorse”. If the buyer is uncomfortable with the contract after his attorney explains it to him, the buyer’s attorney can terminate it within the attorney review period.
Don’t be scared to sign a developer’s contract! Just make sure you are taking steps to protect yourself and that you understand the contract and what your risks are.
Monday, April 14, 2008
Building Noah's Ark Today
I thought I would post a bit of "law humor" this week. I don't know who originally wrote this piece, but it was sent to me some time ago:
In the year 2008, the Lord came unto Noah, who was now living in the United States, and said, "Once again, the earth has become wicked and over-populated, and I see the end of all flesh before me. Build another Ark and save 2 of every living thing along with a few good humans."
He gave Noah the blueprints, saying, "You have 6 months to build the Ark before I will start the unending rain for 40 days and 40 nights."
Six months later, the Lord looked down and saw Noah weeping in his yard - but no Ark.
"Noah!" He roared, "I'm about to start the rain! Where is the Ark?"
"Forgive me, Lord," begged Noah, "but things have changed. I needed a building permit. I've been arguing with the inspector about the need for a sprinkler system. My neighbors claim that I've violated the neighborhood zoning laws by building the Ark in my yard and exceeding the height limitations. We had to go to the Development Appeal Board for a decision.
Then the Department of Transportation demanded a bond be posted for the future costs of moving power lines and other overhead obstructions, to clear the passage for the Ark's move to the sea. I told them that the sea would be coming to us, but they would hear nothing of it.
Getting the wood was another problem. There's a ban on cutting local trees in order to save the spotted owl. I tried to convince the environmentalists that I needed the wood to save the owls - but no go!
When I started gathering the animals, an animal rights group sued me. They insisted that I was confining wild animals against their will. They argued the accommodation was too restrictive, and it was cruel and inhumane to put so many animals in a confined space.
Then the EPA ruled that I couldn't build the Ark until they'd conducted an environmental impact study on your proposed flood.
I'm still trying to resolve a complaint with the Human Rights Commission on how many minorities I'm supposed to hire for my building crew.
Immigration and Naturalization is checking the green-card status of most of the people who want to work.
The trades unions say I can't use my sons. They insist I have to hire only union workers with Ark-building experience.
To make matters worse, the IRS seized all my assets, claiming I'm trying to leave the country illegally with endangered species.
So, forgive me, Lord, but it would take at least 10 years for me to finish this Ark."
Suddenly the skies cleared, the sun began to shine, and a rainbow stretched across the sky. Noah looked up in wonder and asked, "You mean you're not going to destroy the world?"
"No," said the Lord. "The government beat me to it."
In the year 2008, the Lord came unto Noah, who was now living in the United States, and said, "Once again, the earth has become wicked and over-populated, and I see the end of all flesh before me. Build another Ark and save 2 of every living thing along with a few good humans."
He gave Noah the blueprints, saying, "You have 6 months to build the Ark before I will start the unending rain for 40 days and 40 nights."
Six months later, the Lord looked down and saw Noah weeping in his yard - but no Ark.
"Noah!" He roared, "I'm about to start the rain! Where is the Ark?"
"Forgive me, Lord," begged Noah, "but things have changed. I needed a building permit. I've been arguing with the inspector about the need for a sprinkler system. My neighbors claim that I've violated the neighborhood zoning laws by building the Ark in my yard and exceeding the height limitations. We had to go to the Development Appeal Board for a decision.
Then the Department of Transportation demanded a bond be posted for the future costs of moving power lines and other overhead obstructions, to clear the passage for the Ark's move to the sea. I told them that the sea would be coming to us, but they would hear nothing of it.
Getting the wood was another problem. There's a ban on cutting local trees in order to save the spotted owl. I tried to convince the environmentalists that I needed the wood to save the owls - but no go!
When I started gathering the animals, an animal rights group sued me. They insisted that I was confining wild animals against their will. They argued the accommodation was too restrictive, and it was cruel and inhumane to put so many animals in a confined space.
Then the EPA ruled that I couldn't build the Ark until they'd conducted an environmental impact study on your proposed flood.
I'm still trying to resolve a complaint with the Human Rights Commission on how many minorities I'm supposed to hire for my building crew.
Immigration and Naturalization is checking the green-card status of most of the people who want to work.
The trades unions say I can't use my sons. They insist I have to hire only union workers with Ark-building experience.
To make matters worse, the IRS seized all my assets, claiming I'm trying to leave the country illegally with endangered species.
So, forgive me, Lord, but it would take at least 10 years for me to finish this Ark."
Suddenly the skies cleared, the sun began to shine, and a rainbow stretched across the sky. Noah looked up in wonder and asked, "You mean you're not going to destroy the world?"
"No," said the Lord. "The government beat me to it."
Monday, April 7, 2008
Short Sale Basics -- A Primer
Short sales are becoming more and more common these days. Every week I seem to have another client who has become involved in a short sale, whether on the sale side or the purchase side, and is completely bewildered by the process. So what is a short sale? How does it work?
A short sale comes into play when you have someone who is trying to sell real estate, but cannot get an offer that is sufficient to cover the mortgage owed on the property. For example, Seller A might own a property with an outstanding mortgage of $175,000, but Seller A is unable to sell the property for at least that amount. Not only that, Seller A can no longer afford the mortgage, taxes and other costs associated with keeping the property. Seller A is not making loan payments and knows that he is on the road to foreclosure. Instead of going that route, Seller A can call up his bank and ask them to consider a short sale. If the bank agrees, the bank may eventually accept a reasonable offer that is less than the outstanding loan balance.
Banks are overwhelmed by short sale applications these days. In order for a bank to consider a property for short sale, they require a great deal of financial documentation from the seller, as well as a bona fide offer to purchase the property. Even after submitting all of the required paperwork, banks typically take from 1-6 months to make a decision on the file. During that time, the responsible party needs to constantly follow up with the bank and make sure the process is on track. Banks these days are notorious for losing their client's short sales' files.
Some banks will eventually respond with a counter-offer; other banks prefer to see your best offer up front and don't negotiate much. If a buyer is in a hurry to move, short sales are not the way to go. There is no guarantee that a bank will ever agree to the price, even if the seller has. And often times, after months of going back and forth, the bank will turn down the buyer's best offer. In fact, if the seller has two loans from two different banks, the secondary bank with the junior lien is often unwilling to negotiate, despite the fact that if the property is foreclosed, the junior lienholder will not receive anything. This is becoming a greater problem these days, and is an additional factor in the increasing foreclosure rate.
Short sales are often an attractive deal for buyers regardless of the time it takes to close. Buyers have an opportunity to obtain property that they could not afford otherwise, often at just 75-85% of the original price. Banks are not in the business of managing property, and they are often willing to sell the property at a loss in order to avoid the hassles of property ownership. Savvy buyers are on the lookout for short sales in the neighborhoods they are considering. So if you're a buyer and you're interested, meet with a real estate agent who can help you find a short sale bargain!
A short sale comes into play when you have someone who is trying to sell real estate, but cannot get an offer that is sufficient to cover the mortgage owed on the property. For example, Seller A might own a property with an outstanding mortgage of $175,000, but Seller A is unable to sell the property for at least that amount. Not only that, Seller A can no longer afford the mortgage, taxes and other costs associated with keeping the property. Seller A is not making loan payments and knows that he is on the road to foreclosure. Instead of going that route, Seller A can call up his bank and ask them to consider a short sale. If the bank agrees, the bank may eventually accept a reasonable offer that is less than the outstanding loan balance.
Banks are overwhelmed by short sale applications these days. In order for a bank to consider a property for short sale, they require a great deal of financial documentation from the seller, as well as a bona fide offer to purchase the property. Even after submitting all of the required paperwork, banks typically take from 1-6 months to make a decision on the file. During that time, the responsible party needs to constantly follow up with the bank and make sure the process is on track. Banks these days are notorious for losing their client's short sales' files.
Some banks will eventually respond with a counter-offer; other banks prefer to see your best offer up front and don't negotiate much. If a buyer is in a hurry to move, short sales are not the way to go. There is no guarantee that a bank will ever agree to the price, even if the seller has. And often times, after months of going back and forth, the bank will turn down the buyer's best offer. In fact, if the seller has two loans from two different banks, the secondary bank with the junior lien is often unwilling to negotiate, despite the fact that if the property is foreclosed, the junior lienholder will not receive anything. This is becoming a greater problem these days, and is an additional factor in the increasing foreclosure rate.
Short sales are often an attractive deal for buyers regardless of the time it takes to close. Buyers have an opportunity to obtain property that they could not afford otherwise, often at just 75-85% of the original price. Banks are not in the business of managing property, and they are often willing to sell the property at a loss in order to avoid the hassles of property ownership. Savvy buyers are on the lookout for short sales in the neighborhoods they are considering. So if you're a buyer and you're interested, meet with a real estate agent who can help you find a short sale bargain!
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