Short Sales, Foreclosures, and Property Disclosures

In a typical Illinois real estate sales transaction where no short sale or foreclosure is involved, seller provide three disclosures to purchasers: 1) the Illinois Residential Real Property Disclosure; 2) the Illinois Radon Disclosure; and 3) the Federal Lead-Based Paint Disclosure. But what happens in a situation where there is a short sale or a foreclosure? Which disclosures are required?

Well, although the bank is involved in a short sale, the bank does not own the property; the seller is still the property owner, and all deeds, affidavits of title, and other documentation at closing is signed by the seller. TTherefore the Illinois Residential Real Property Disclosure Act and the Illinois Radon Awareness Act both apply. The federal statute regarding lead-based paint disclosures also applies. Bottom line -- a seller in a short sale transaction must provide all three customary disclosures to the buyer, and the seller will be bound by the laws governing these disclosures. Failure to provide the Illinois Residential Real Property Disclosure can have disastrous consequences; click here for more information.

Foreclosures, on the other hand, are a different scenario. Once a property has been foreclosed, it is owned by the bank, and the bank most likely has little or no knowledge of the physical condition of the property. Therefore the bank will not be required to provide an Illinois Residential Real Property Disclosure or an Illinois Radon Disclosure. However, the bank should still provide a lead-based paint disclosure, especially if the property was built prior to 1978.

Vacant Property Ordinances on the Rise

Because of the recent economic downturn, many towns and cities have found that there is now a surplus of vacant homes within their city limits. As a result, vandalism, crime, break-ins and theft have all increased in many towns. Additionally, vacant properties are sometimes unsightly -- the grass needs to be mowed, the yard might need maintenance, there could be some safety hazards, etc.

To combat these problems, an increasing number of towns are enforcing or instituting vacant property ordinances. As an owner of vacant property, you should check if your town has a vacant property ordinance. You should also do everything you need to to keep the property in good repair, and to keep from running afoul of any municipal ordinance.

Municipalities throughout Illinois have been working up a fairly strict set of rules to deal with vacant property owners. Some towns require a code inspection of all vacant properties. Other towns require registration of all vacant properties, sometimes with a hefty, or not-so-hefty, registration fee. Some towns charge daily fines for failure to bring a property up to code, or for failure to mow the grass or maintain the property externally in some other way. Many towns use a combination of such rules to force the owners to keep the property in good repair.

Proper maintenance of a vacant property is in everybody's best interest. It prevents vandalism and theft, and also helps keep the neighborhood safe. Additionally, if a vacant property is in a state of disrepair, the value of the property, and neighboring properties, can be affected. If you own a vacant home, you should take the necessary steps to protect it.