Last week, the Attorney General announced that nearly 200,000 homeowners of African American or Latino descent would be entitled to partake in a $335,000 settlement from Countrywide Home Loans. Countrywide was sued for discriminatory lending practices, and the Attorney General stated that between 2004 and 2008, Countrywide was charging African-American and Latino homebuyers more fees and higher interest rates than similarly situated white applicants. In other words, if a white applicant and a black or Latino applicant had identical income and credit scores, the black or Latino applicant paid a higher interest rate and incurred greater closing costs than the white applicant.
Countrywide was the largest mortgage lender in Illinois between 2004 and 2007. Once the settlement is approved by a judge, almost 15,000 Illinois homebuyers of African-American and Latino heritgage will be entitled to compensation from Countywide.
How much compensation can they expect? According to the Illinois Attorney General, that depends on their individual situation. If Countrywide charged the buyer higher fees than a similarly situated white applicant, the buyer could receive anywhere from several hundred dollars to more than $1,000. If, however, the Buyer was steered into purchasing a subprime loan even though he qualified for a prime loan, the Buyer could receive nearly $10,000.
Bank of America, which now owns Countrywide, denies any discriminatory practices and has stated that they have agreed to the settlement to resolve the allegations against Countrywide.
Friday, December 30, 2011
Thursday, November 17, 2011
Tax Sale Redemptions Can Occur at the Last Minute!
A recent case, A.P. Properties v. Rattner , 2011 IL App (2d) 110061 (October 27, 2011) Lake Co. demonstrates how cutthroat the tax deed business can be. On the one hand, you have companies that buy taxes at real estate tax sales, with the hope that they will end up owning the property for a fraction of its actual value. On the other hand, you have homeowners and lenders, trying to redeem the taxes to save the property before the redemption period expires. And then occasionally, you have companies that reap their profits from buying properties just before the redemption period expires, when homeowners are desparate to salvage some of the value of their home. The defendants in this case fall in the latter category.
The plaintiff, A. P. Properties, was in the business of buying taxes at tax sales, and they sued the defendants because in two instances, the defendants bought real estate A.P. Properties was hoping to acquire shortly before the expiration of the redemption period. The plantiff had already petitioned for a tax deed in both cases. In the first case, in fact, the defendant purchased the property less than 48 hours before the redemption period expired, and then immediately redeemed the taxes.
The court, however, found in favor of the defendant. The plaintiffs appealed on various technicalities, but at the end of the day, they still lost. The court stated that the owner or an interested party may absolutely redeem the property during the redemption period. Since the defendant bought the property, albeit at a bargain price, they had the right to redeem the taxes. Sure, the defendants profited from their actions, but their actions were allowed, and not legislatively banned. Moreover, in this way, the people who owned the property were able to sell the property to the defendants for something, even if it was a small sum. The tax sale buyer, on the other hand, would not have paid the homeowners anything. The court concluded that public policy supports the sale of properties prior to the expiration of the tax sale redemption period.
So if you are about to lose your home to a tax deed, consider selling it. And if you are close to obtaining a tax deed, remember, someone can swoop in and buy the property from under your nose!
The plaintiff, A. P. Properties, was in the business of buying taxes at tax sales, and they sued the defendants because in two instances, the defendants bought real estate A.P. Properties was hoping to acquire shortly before the expiration of the redemption period. The plantiff had already petitioned for a tax deed in both cases. In the first case, in fact, the defendant purchased the property less than 48 hours before the redemption period expired, and then immediately redeemed the taxes.
The court, however, found in favor of the defendant. The plaintiffs appealed on various technicalities, but at the end of the day, they still lost. The court stated that the owner or an interested party may absolutely redeem the property during the redemption period. Since the defendant bought the property, albeit at a bargain price, they had the right to redeem the taxes. Sure, the defendants profited from their actions, but their actions were allowed, and not legislatively banned. Moreover, in this way, the people who owned the property were able to sell the property to the defendants for something, even if it was a small sum. The tax sale buyer, on the other hand, would not have paid the homeowners anything. The court concluded that public policy supports the sale of properties prior to the expiration of the tax sale redemption period.
So if you are about to lose your home to a tax deed, consider selling it. And if you are close to obtaining a tax deed, remember, someone can swoop in and buy the property from under your nose!
Friday, November 11, 2011
Condominium Owners Can't Take Common Areas!
A recent case, Picerno v. 1400 Museum Park Condominium Association, 2011 IL App (1st) 103505 (October 28, 2011) Cook Co., 5th Div., caught by interest: In 2008, related family members purchased neighboring units at the end of the hall in a condominium building. Their doors faced each other, and they shared a common wall. They decided that they would like to install a new door in the hallway, separating off their two units from all of the other units. The association objected.
Eventually, the association set forth a proposal which delineated the requirements that the unit owners must agree to in order to install the door and separate their portion of the hallway. Because of the costs involved, the unit owners did not agree, and the matter ended up in court.
While the trial court agreed with the plaintiff unit owners, the appellate court sided with the condominium association, stating that 1) the hallway that the plaintiffs sought to incorporate into their unit was a common element; 2) the association had sought payment for allowing the plaintiffs to use the space privately, but the plaintiffs appeared unwilling to pay it; 3) the vast majority of the conditions the association imposed were reasonable, especially in light of the fact that the plaintiffs would be receiving additional space for private usage -- thereby taking that space away from the association; and 4) the court felt that the plaintiff's interpretation of the Illinois Condominium Property Act was incorrect.
The appellate court decided that if the unit owners followed the rules set forth by the association, they could install their new door. It remains to see what happens!
Eventually, the association set forth a proposal which delineated the requirements that the unit owners must agree to in order to install the door and separate their portion of the hallway. Because of the costs involved, the unit owners did not agree, and the matter ended up in court.
While the trial court agreed with the plaintiff unit owners, the appellate court sided with the condominium association, stating that 1) the hallway that the plaintiffs sought to incorporate into their unit was a common element; 2) the association had sought payment for allowing the plaintiffs to use the space privately, but the plaintiffs appeared unwilling to pay it; 3) the vast majority of the conditions the association imposed were reasonable, especially in light of the fact that the plaintiffs would be receiving additional space for private usage -- thereby taking that space away from the association; and 4) the court felt that the plaintiff's interpretation of the Illinois Condominium Property Act was incorrect.
The appellate court decided that if the unit owners followed the rules set forth by the association, they could install their new door. It remains to see what happens!
Thursday, November 3, 2011
Did You Claim Your Senior Exemption?
If you live in Cook County, your second installment 2010 property taxes were due earlier this week (on Tuesday, November 1). Hopefully you've already paid the bill. As a senior, you might have assumed that your senior exemption showed up automatically on your tax bill, as it has in the past. But beware -- the legislation made some changes last year, and senior exemptions are no longer automatic! If you are over 65, you should make sure you get the benefit of the senior exemption if you're a homeowner!
The Cook County Assessor's office states that 55,000 seniors did not apply for their exemption this year. That's a windfall for the county, but a lot of extra money out of each senior citizen's pocket! If you are eligible for a senior exemption or a senior freeze exemption, you can still apply! You will have to complete a Certificate of Error and wait for the county to refund you, but it may be well worth your time!
If you qualify for a senior exemption, you automatically receive the homeowner's exemption, so you don't have to apply for it separately. You should also check to see if you are eligible for any other exemptions, such as the senior freeze, longtime homeowner, veteran, or disability-related exemptions. Wouldn't it be nice to keep more of your money in your pocket?
The Cook County Assessor's office states that 55,000 seniors did not apply for their exemption this year. That's a windfall for the county, but a lot of extra money out of each senior citizen's pocket! If you are eligible for a senior exemption or a senior freeze exemption, you can still apply! You will have to complete a Certificate of Error and wait for the county to refund you, but it may be well worth your time!
If you qualify for a senior exemption, you automatically receive the homeowner's exemption, so you don't have to apply for it separately. You should also check to see if you are eligible for any other exemptions, such as the senior freeze, longtime homeowner, veteran, or disability-related exemptions. Wouldn't it be nice to keep more of your money in your pocket?
Monday, October 31, 2011
Landlords Must Itemize Damages
A recent case, Nadhir v. Solomon, 2011 IL App (1st) 110851 (September 20, 2011) Cook Co., 2d Div., came down hard on Evanston landlords.
In that case, the three plaintiffs had rented an apartment in Evanston from the defendant landlords. The landlord claimed the property had been heavily damaged when they walked through it with the tenants at the end of the lease. The tenants stated that the unit was in good condition and that the landlord had not raised any complaints at the walk-through. After the lease ended, the landlord did not return the security deposit. Evanston City Ordinance requires the landlord to provide a a written list of damages to the tenant, showing the cost of repair of each item separately, and stating what amount is being deducted from the tenant's security deposit. This notice must be provided within 21 days after the lease ends. In this case, the landlord simply wrote "TBD" in lieu of providing an actual amount for each damaged item.
The trial court found for the defendant landlords, stating that it was okay for the landlord to state "TBD" in lieu of the amounts due. The appellate court, however, disagreed. The ordinance clearly states that all damages must be itemized with the amount due. The court relied on the plain language of the ordinance and ruled in favor of the tenants. The landlord was ordered to return the security deposit, minus the one item the landlord had itemized in his notice, to the tenants.
In that case, the three plaintiffs had rented an apartment in Evanston from the defendant landlords. The landlord claimed the property had been heavily damaged when they walked through it with the tenants at the end of the lease. The tenants stated that the unit was in good condition and that the landlord had not raised any complaints at the walk-through. After the lease ended, the landlord did not return the security deposit. Evanston City Ordinance requires the landlord to provide a a written list of damages to the tenant, showing the cost of repair of each item separately, and stating what amount is being deducted from the tenant's security deposit. This notice must be provided within 21 days after the lease ends. In this case, the landlord simply wrote "TBD" in lieu of providing an actual amount for each damaged item.
The trial court found for the defendant landlords, stating that it was okay for the landlord to state "TBD" in lieu of the amounts due. The appellate court, however, disagreed. The ordinance clearly states that all damages must be itemized with the amount due. The court relied on the plain language of the ordinance and ruled in favor of the tenants. The landlord was ordered to return the security deposit, minus the one item the landlord had itemized in his notice, to the tenants.
Friday, October 21, 2011
Cities Must Hold Up Their End of Agreement with Landowners!
A recent case, The Reserve at Woodstock v. The City of Woodstock, 2011 IL App (2d) 100676 (September 28,2011) makes it clear that if cities have an agreement with landowners, they must honor it and not try to subvert it.
Reserve (the developer) owned property in Woodstock which was subject to an Annexation Agreement. Pursuant to that agreement, the developer submitted a plan to develop the property into multiple single-family residential lots. Not only did the the City of Woodstock deny the proposed subdivision, but it further rezoned the land and disconnected it from the City of Woodstock. The developer sued.
The court found that the developer had a vested right in having its plat approved under the prior zoning rules. Furthermore, the court found that the City of Woodstock was unfair and failed to act in good faith by not honoring the Annexation Agreement. Furthermore, Woodstock delayed the process so the term of the Annexation Agreement would expire, and then re-zoned and disconnected the land from Woodstock entirely.
While the court found in favor of the developer, did the developer really win? Unfortunately, the developer initiated this process in 2003, before the real estate market reached its peak. However, because Woodstock did not process the subdivision expeditiously, and because the matter eventually reached the courts, a decision was not rendered until September of 2011. The housing boom is long over. It seems that any profits the developer must have hoped to gain from the subdivision are lost, at least for now.
Reserve (the developer) owned property in Woodstock which was subject to an Annexation Agreement. Pursuant to that agreement, the developer submitted a plan to develop the property into multiple single-family residential lots. Not only did the the City of Woodstock deny the proposed subdivision, but it further rezoned the land and disconnected it from the City of Woodstock. The developer sued.
The court found that the developer had a vested right in having its plat approved under the prior zoning rules. Furthermore, the court found that the City of Woodstock was unfair and failed to act in good faith by not honoring the Annexation Agreement. Furthermore, Woodstock delayed the process so the term of the Annexation Agreement would expire, and then re-zoned and disconnected the land from Woodstock entirely.
While the court found in favor of the developer, did the developer really win? Unfortunately, the developer initiated this process in 2003, before the real estate market reached its peak. However, because Woodstock did not process the subdivision expeditiously, and because the matter eventually reached the courts, a decision was not rendered until September of 2011. The housing boom is long over. It seems that any profits the developer must have hoped to gain from the subdivision are lost, at least for now.
Thursday, October 13, 2011
Real Estate Taxes -- How a Certificate of Error Can Help You
So you own real estate in Cook County, and you missed the deadline for filing an appeal on your real estate taxes with the Assessor's office. You thought you didn't have to worry, because you could always file with the Board of Review. Oops -- you missed that too. Or maybe you filed your appeal on time, and it was based on a clear factual error, and for some reason your appeal was denied anyway. What could you do? You didn't want to take a chance that your taxes would be sold by the county, so you even went ahead and paid the tax bill.
Not to worry -- you still may be able to get your money back, but now you will have to file a Certificate of Error. This is a mechanism available to Cook County property owners whereby a property owner can ask Cook County to correct an incorrect tax bill retroactively, and receive a refund if the bill is already paid. However, typically the assessor actually has to have made a mistake in order for a property owner to receive a Certificate of Error. Typos, mistakes in the calculation of a property's value, or assessing improvements that don't exist (i.e. you own vacant land but they assessed you for a house), are all examples of errors that may qualify for a Certificate of Error.
If you are in a situation where you feel you could benefit from a Certificate of Error, do not hesitate. You could very well get your money back!
Not to worry -- you still may be able to get your money back, but now you will have to file a Certificate of Error. This is a mechanism available to Cook County property owners whereby a property owner can ask Cook County to correct an incorrect tax bill retroactively, and receive a refund if the bill is already paid. However, typically the assessor actually has to have made a mistake in order for a property owner to receive a Certificate of Error. Typos, mistakes in the calculation of a property's value, or assessing improvements that don't exist (i.e. you own vacant land but they assessed you for a house), are all examples of errors that may qualify for a Certificate of Error.
If you are in a situation where you feel you could benefit from a Certificate of Error, do not hesitate. You could very well get your money back!
Friday, September 23, 2011
Illinois Hardest Hit Program Could Help You!
There is yet another program to assist Illinois homeowners facing foreclosure. Just announced this week, the new program is known as the Illinois Hardest Hit program. It aims to help about 15,000 Illinois families. The federal goverment is funding the program with $345 million.
In order for your family to qualify, you must meet the following criteria:
1) You must have had at least a 25% drop in your household income, either due to unemployment or reduced employment (i.e. not being able to work as many hours as you are available), through no fault of your own.
2) Regardless, your family income can be slightly higher than the average income in your area, but no greater than 120% of the median income in your area.
3) The subject property must be in Illinois.
4) The property must be your primary and only residence. Additionally, if there are other people named on the mortgage, the property must be their primary and only residence.
5) Your current cash and other liquid assets cannot be greater than three months worth of mortgage payments.
6) The principal balance of your loan cannot be greater than $500,000.
7) The subject property must be a house, townhome, or condominium. If the property is a multi-unit apartment building, it can still qualify, so long as there are four units or less, and your entire household lives in only one of the units.
8) Your loan must NOT be an interest-only loan or a negative amortization loan.
9) You must not have been convicted of a mortgage-related felony in the last ten years.
10) Your lender must agree to accept payment from the Illinois Hardest Hit program.
If you qualify for the program, you can get up to $25,000 in assistance (depending on where you're located) spread over an eighteen-month period. This $25,000 will be used entirely towards payment of your monthly mortgage. While the money is technically a loan, the entire loan can be forgiven after five years if you follow all of the program's requirements and maintain eligibility. In lieu of receiving monthly mortgage payment assistance, you may qualify for a one-time payment to bring your mortgage current.
If you live in Illinois and are facing foreclosure, consider applying to the Illinois Hardest Hit program for assistance!
In order for your family to qualify, you must meet the following criteria:
1) You must have had at least a 25% drop in your household income, either due to unemployment or reduced employment (i.e. not being able to work as many hours as you are available), through no fault of your own.
2) Regardless, your family income can be slightly higher than the average income in your area, but no greater than 120% of the median income in your area.
3) The subject property must be in Illinois.
4) The property must be your primary and only residence. Additionally, if there are other people named on the mortgage, the property must be their primary and only residence.
5) Your current cash and other liquid assets cannot be greater than three months worth of mortgage payments.
6) The principal balance of your loan cannot be greater than $500,000.
7) The subject property must be a house, townhome, or condominium. If the property is a multi-unit apartment building, it can still qualify, so long as there are four units or less, and your entire household lives in only one of the units.
8) Your loan must NOT be an interest-only loan or a negative amortization loan.
9) You must not have been convicted of a mortgage-related felony in the last ten years.
10) Your lender must agree to accept payment from the Illinois Hardest Hit program.
If you qualify for the program, you can get up to $25,000 in assistance (depending on where you're located) spread over an eighteen-month period. This $25,000 will be used entirely towards payment of your monthly mortgage. While the money is technically a loan, the entire loan can be forgiven after five years if you follow all of the program's requirements and maintain eligibility. In lieu of receiving monthly mortgage payment assistance, you may qualify for a one-time payment to bring your mortgage current.
If you live in Illinois and are facing foreclosure, consider applying to the Illinois Hardest Hit program for assistance!
Friday, September 16, 2011
Tax Deeds Require Attention to Detail!
If you purchased a property at a tax sale, make sure you give all required notices, or you could be denied your tax deed when the time comes! That's exactly what happened in In re Application of the County Treasurer and Ex Officio County Collector of Cook County, Illinois v. OneWest Bank, 2011 IL App (1st) 101966 (August 25, 2011) Cook Co., 4th Div.
In that case, a homeowner owned a two-flat in the southwest side of Chicago. She failed to pay $1383 in real estate taxes. Ridge TP, LLC purchased the homeowner's taxes at public auction. However, when it came time to petition for the tax deed, the court denied Ridge TP, LLC. The court determined that the proposed tax deed purchaser had not sent the notice of redemption period properly, nor had they exercised proper due diligence in serving notices. Specifically, the proposed tax deed purchaser had not notified the servicer for the lender who had loaned money for purchase of the property. Since all parties having any interest in the property must receive notice, the proposed purchaser's tax deed was denied.
Tax sales are very technical. When you obtain a tax deed, you are essentially taking over a property from the owner, the lender, and possibly an association. If the letter of the law is not followed, courts will deny a tax deed in order to protect other parties' interests in the property!
In that case, a homeowner owned a two-flat in the southwest side of Chicago. She failed to pay $1383 in real estate taxes. Ridge TP, LLC purchased the homeowner's taxes at public auction. However, when it came time to petition for the tax deed, the court denied Ridge TP, LLC. The court determined that the proposed tax deed purchaser had not sent the notice of redemption period properly, nor had they exercised proper due diligence in serving notices. Specifically, the proposed tax deed purchaser had not notified the servicer for the lender who had loaned money for purchase of the property. Since all parties having any interest in the property must receive notice, the proposed purchaser's tax deed was denied.
Tax sales are very technical. When you obtain a tax deed, you are essentially taking over a property from the owner, the lender, and possibly an association. If the letter of the law is not followed, courts will deny a tax deed in order to protect other parties' interests in the property!
Thursday, September 8, 2011
Earnest Money Forfeited Pursuant to a Liquidated Damages Provision
A recent case, Karimi v. 401 North Wabash Venture, 2011 IL App (1st) 102670 (July 26, 2011) Cook Co., 2d Div. demonstrates that earnest money, no matter how much, can be forfeited when a liquidated damages provision is properly enforced.
In Karimi, the buyer contracted to purchase a $2.188 million condominium at Trump Tower in 2003. When the unit was almost ready, as per contract, the seller identified a closing date for October of 2008. At that time, the buyer was unable to obtain financing. The parties agreed to extend the closing date to May of 2009. The buyer was still unable to obtain financing and the condominium did not close. Subsequently, the seller terminated the contract and kept the earnest money (well over $300,000) as liquidated damages pursuant to the contract. The seller later sold the unit for $2.5 million.
The buyer sued for the return of his earnest money. The court found that per the terms of the contract, the buyer was not entitled to his earnest money. The parties had agreed to a liquidated damages whereby buyer would forfeit his earnest money if he did perform his end of the contract. Both parties had taken a risk when they signed the contract. The buyer failed to close as per contract, and the court held that the seller properly kept the earnest money.
When the buyer signed the contract in 2003, he could not have anticipated that the real estate market would plummet by the time his condominium was ready. Unfortunately, when it came time to close, the economy had changed drastically. Regardless, the buyer's contract was still valid and enforceable, and the court felt that the buyer should honor his end of the bargain!
In Karimi, the buyer contracted to purchase a $2.188 million condominium at Trump Tower in 2003. When the unit was almost ready, as per contract, the seller identified a closing date for October of 2008. At that time, the buyer was unable to obtain financing. The parties agreed to extend the closing date to May of 2009. The buyer was still unable to obtain financing and the condominium did not close. Subsequently, the seller terminated the contract and kept the earnest money (well over $300,000) as liquidated damages pursuant to the contract. The seller later sold the unit for $2.5 million.
The buyer sued for the return of his earnest money. The court found that per the terms of the contract, the buyer was not entitled to his earnest money. The parties had agreed to a liquidated damages whereby buyer would forfeit his earnest money if he did perform his end of the contract. Both parties had taken a risk when they signed the contract. The buyer failed to close as per contract, and the court held that the seller properly kept the earnest money.
When the buyer signed the contract in 2003, he could not have anticipated that the real estate market would plummet by the time his condominium was ready. Unfortunately, when it came time to close, the economy had changed drastically. Regardless, the buyer's contract was still valid and enforceable, and the court felt that the buyer should honor his end of the bargain!
Thursday, September 1, 2011
SmartMove Loan Program Offers Assistance to Illinois Buyers
Last month, the Illinois Housing Development Authority (IHDA) announced that $200 million dollars had been committed to the SmartMove loan program, a program designed by IHDA to assist first-time homebuyers and veterans. Where is all this money coming from? Well, to fund the $200 million necessary for this program, the IHDA is selling tax-exempt mortgage revenue bonds to private investors.
If you qualify for the SmartMove program, you could obtain either a 30-year fixed-rate loan, or FHA, VA, or USDA financing. You could also receive up to $6,000 towards your down payment and closing costs. This $6,000 (or lesser amount, depending on how much you qualify for) would be in the form of a 10-year, zero-percent forgivable loan. If your loan requires mortgage insurance, your mortgage insurance rates would be about 1/3 less than the rates offered by conventional sources of mortgage financing.
Of course, you have to meet the requirements. You must be either a first-time homebuyer or a veteran. If you are applying for an FHA, VA or USDA loan, your credit score must be at least 620. If you are applying for conventional financing, your credit score must be at least 660. You must contribute at least 1% of the purchase price, or $1,000, whichever is more, towards your down payment. You will be required to attend homeownership counseling. Income limits apply as well.
SmartMove loans are expected to assist approximately 1,300 families in Illinois buy a home. Let's hope it happens!
If you qualify for the SmartMove program, you could obtain either a 30-year fixed-rate loan, or FHA, VA, or USDA financing. You could also receive up to $6,000 towards your down payment and closing costs. This $6,000 (or lesser amount, depending on how much you qualify for) would be in the form of a 10-year, zero-percent forgivable loan. If your loan requires mortgage insurance, your mortgage insurance rates would be about 1/3 less than the rates offered by conventional sources of mortgage financing.
Of course, you have to meet the requirements. You must be either a first-time homebuyer or a veteran. If you are applying for an FHA, VA or USDA loan, your credit score must be at least 620. If you are applying for conventional financing, your credit score must be at least 660. You must contribute at least 1% of the purchase price, or $1,000, whichever is more, towards your down payment. You will be required to attend homeownership counseling. Income limits apply as well.
SmartMove loans are expected to assist approximately 1,300 families in Illinois buy a home. Let's hope it happens!
Thursday, August 25, 2011
More Home Repair and Remodeling Act Revisions
The Home Repair and Remodeling Act, Public Act 97-235, has been revised once again! The new changes will kick in on January 1, 2012. Here is what you need to know:
1) Roofing contractors must put their licensing number and the licensee's name on their commercial vehicles. Failure to do this will result in a $250 penalty. However, a hearing will be scheduled, and if the problem is corrected before the hearing, no penalty will be imposed.
2) Contractors may not accept any compensation (monetary or otherwise) for allowing out-of-area contractors to use their name or license.
3) Contractors may not advertise, or promise, that they will pay an insurance deductible on behalf of their customers. They may also not advertise or promise that they will rebate or reimburse an insurance deductible to their customers.
4) A customer may cancel his contract with his contractors if the contractor is supposed to be paid from proceeds of an insurance policy. Specifically, a customer may cancel his contract up to the thirtieth (30th) business day after he receives an executed proof of loss, OR, if earlier, by the fifth (5th) business day after the customer receives written notice that all or any part of the loss will not be covered by insurance.
1) Roofing contractors must put their licensing number and the licensee's name on their commercial vehicles. Failure to do this will result in a $250 penalty. However, a hearing will be scheduled, and if the problem is corrected before the hearing, no penalty will be imposed.
2) Contractors may not accept any compensation (monetary or otherwise) for allowing out-of-area contractors to use their name or license.
3) Contractors may not advertise, or promise, that they will pay an insurance deductible on behalf of their customers. They may also not advertise or promise that they will rebate or reimburse an insurance deductible to their customers.
4) A customer may cancel his contract with his contractors if the contractor is supposed to be paid from proceeds of an insurance policy. Specifically, a customer may cancel his contract up to the thirtieth (30th) business day after he receives an executed proof of loss, OR, if earlier, by the fifth (5th) business day after the customer receives written notice that all or any part of the loss will not be covered by insurance.
Wednesday, August 17, 2011
When does your lease guaranty expire?
A recent case in New Jersey, Montpen SC, L.L.C. v. Mathews Art, Inc., Superior Ct. New Jersey, No. A 5036 09T3 (March 30, 2011), highlights the importance of negotiating, and knowing, the terms of your lease.
In Montpen, the principal owner of a commercial lessee signed a lease with a guaranty, in which he guaranteed up to one year's rent for any default during the initial term of the lease, or during an extension or renewal of the lease. The lease specifically stated that if the tenant were simply to "holdover" after the expiration of the lease, without an "extension" or "renewal" of the lease, then the lease was neither extended nor renewed.
The lease was extended multiple times, but at one point, when it came time to renew or extend, the parties could not agree on the rent. The tenant stayed in the space for a year, making monthly payments to the landlord. Eventually the tenant stopped making payments. By the time the tenant vacated the premises, he owed nine months of rent.
As a result, the landlord sued based on the guaranty. However, the court held that the terms of the lease were clear and did not leave room for interpretation. The guaranty only applied during the term of the lease, or during an extension or renewal of the lease. The "holdover" period, without a written extension or renewal, did not constitute a renewal or extension, and was therefore not covered by the guaranty.
Whether you are the landlord or the tenant, if your lease has a guaranty, it is important to understand its terms and how and when it can come into play!
In Montpen, the principal owner of a commercial lessee signed a lease with a guaranty, in which he guaranteed up to one year's rent for any default during the initial term of the lease, or during an extension or renewal of the lease. The lease specifically stated that if the tenant were simply to "holdover" after the expiration of the lease, without an "extension" or "renewal" of the lease, then the lease was neither extended nor renewed.
The lease was extended multiple times, but at one point, when it came time to renew or extend, the parties could not agree on the rent. The tenant stayed in the space for a year, making monthly payments to the landlord. Eventually the tenant stopped making payments. By the time the tenant vacated the premises, he owed nine months of rent.
As a result, the landlord sued based on the guaranty. However, the court held that the terms of the lease were clear and did not leave room for interpretation. The guaranty only applied during the term of the lease, or during an extension or renewal of the lease. The "holdover" period, without a written extension or renewal, did not constitute a renewal or extension, and was therefore not covered by the guaranty.
Whether you are the landlord or the tenant, if your lease has a guaranty, it is important to understand its terms and how and when it can come into play!
Wednesday, August 10, 2011
Updated FHA Rules for Condominiums
The Federal Housing Administration (FHA) has updated its lending guidelines regarding condominiums. Here are the most significant changes:
1) Previously, FHA approval was available to condominium associations if no more than 15% of units had fallen behind on their assessment payments. Moreover, since many lenders are notorious for not paying assessments on bank-owned properties, the FHA exempted bank-owned units from this 15% guideline. Now, however, the FHA will look at all units in the association, even if they are bank-owned, to make sure that no more than 15% of units are past due.
2) If a condominium association is new construction (not a gut rehab or remodel), only 30% of the units must be owner-occupied. Previously, the requirement was 50%.
3) At least 30% of the units must be sold before the FHA wil provide any FHA loans at the association.
If you are buying a condominium and trying to get FHA financing, or if you are part of an association trying to get FHA approval, be on the lookout for these new requirements!
1) Previously, FHA approval was available to condominium associations if no more than 15% of units had fallen behind on their assessment payments. Moreover, since many lenders are notorious for not paying assessments on bank-owned properties, the FHA exempted bank-owned units from this 15% guideline. Now, however, the FHA will look at all units in the association, even if they are bank-owned, to make sure that no more than 15% of units are past due.
2) If a condominium association is new construction (not a gut rehab or remodel), only 30% of the units must be owner-occupied. Previously, the requirement was 50%.
3) At least 30% of the units must be sold before the FHA wil provide any FHA loans at the association.
If you are buying a condominium and trying to get FHA financing, or if you are part of an association trying to get FHA approval, be on the lookout for these new requirements!
Monday, August 1, 2011
The new Tenants Radon Protection Act
The Illinois legislature recently passed the Tenants Radon Protection Act. Under this new Act, landlords are not required to conduct any radon testing. However, if the landlord is leasing a unit that is on or below the third floor of a building, and if the landlord does in fact have a radon test disclosing hazardous radon conditions, then the landlord must disclose the results of that test to the tenant or prospective tenant. If the landlord mitigates the radon hazard and obtains a radon test showing that the hazard is no longer present, the landlord need not disclose the past radon hazard to prospective tenants.
If the tenant tests for radon, finds it, and presents the results of the test to the landlord, the landlord then has 30 days to obtain another radon test. Moreover, the landlord must then disclose the radon hazard to subsequent lessees, until a radon test proves that the radon hazard is no longer present.
Lastly, before signing any lease with the prospective tenant, the landlord must also provide a state-issued radon guide for tenants (known as the Illinois Emergency Management Agency Radon Guide), along with the standard radon disclosures.
While these requirements may seem onerous for landlords, keep in mind that landlords are not required to conduct radon testing. They must, however, provide the radon guide and the radon disclosures to prospective tenants regardless.
The Tenants Radon Protection Act takes effect on January 1, 2012!
If the tenant tests for radon, finds it, and presents the results of the test to the landlord, the landlord then has 30 days to obtain another radon test. Moreover, the landlord must then disclose the radon hazard to subsequent lessees, until a radon test proves that the radon hazard is no longer present.
Lastly, before signing any lease with the prospective tenant, the landlord must also provide a state-issued radon guide for tenants (known as the Illinois Emergency Management Agency Radon Guide), along with the standard radon disclosures.
While these requirements may seem onerous for landlords, keep in mind that landlords are not required to conduct radon testing. They must, however, provide the radon guide and the radon disclosures to prospective tenants regardless.
The Tenants Radon Protection Act takes effect on January 1, 2012!
Thursday, July 28, 2011
Are you trying to get your condominium association FHA approved?
Since FHA mortgages can require a down payment as low as 3.5% of the purchase price, more and more buyers are applying. If you are putting your condominium on the market, or if you are on the board of a condominium association where it has been difficult to sell condominium units, you may want to consider getting the association FHA approved. This will make it easier for potential buyers to purchase in your association.
Unfortunately, not all condominium associations will qualify for FHA approval, but if your association meets the following criteria, you have a good shot:
1. No one investor can own more than 10% of all units.
2. Only up to 15% of units can be past due on assessment payments.
3. Only up to 25% of the association can be used for commercial purposes.
4. At least 50% of the units must be owner-occupied.
If your association meets all of these criteria, and if your association applies for FHA approval and is approved, FHA will still only fund up to 30% of the total units in the condominium association. Regardless, your pool of potential buyers will expand, making it more likely that units in the association will sell!
Unfortunately, not all condominium associations will qualify for FHA approval, but if your association meets the following criteria, you have a good shot:
1. No one investor can own more than 10% of all units.
2. Only up to 15% of units can be past due on assessment payments.
3. Only up to 25% of the association can be used for commercial purposes.
4. At least 50% of the units must be owner-occupied.
If your association meets all of these criteria, and if your association applies for FHA approval and is approved, FHA will still only fund up to 30% of the total units in the condominium association. Regardless, your pool of potential buyers will expand, making it more likely that units in the association will sell!
Wednesday, July 20, 2011
Should you get a Radon Test for your new home?
When you're buying a house, you should have it professionally inspected. Sure, everyone knows that. And in this day and age, with so many foreclosures on the market, mold testing has become quite common. But what about radon testing? Should you do it?
Radon is not tested as often as it should be, even though over a third of all homes tested for radon do actually contain high levels of radon. After smoking, radon is the number 2 cause of lung cancer in the United States. And it's everywhere, because it starts in the soil.
Then why don't more people test their homes for radon? Well, you can't see it, and you can't smell it. It has no color and no odor. People tend to be less concerned about things that they cannot sense in any way. However, radon is even more dangerous because of its invisibility. People tend to assume they do not have a radon problem, when they very well might.
You are not required to perform a radon test on your home. But if you do complete a radon test and find that radon is in fact present in your home, all is not lost. Radon can be mitigated, and people do it all the time!
Radon is not tested as often as it should be, even though over a third of all homes tested for radon do actually contain high levels of radon. After smoking, radon is the number 2 cause of lung cancer in the United States. And it's everywhere, because it starts in the soil.
Then why don't more people test their homes for radon? Well, you can't see it, and you can't smell it. It has no color and no odor. People tend to be less concerned about things that they cannot sense in any way. However, radon is even more dangerous because of its invisibility. People tend to assume they do not have a radon problem, when they very well might.
You are not required to perform a radon test on your home. But if you do complete a radon test and find that radon is in fact present in your home, all is not lost. Radon can be mitigated, and people do it all the time!
Monday, July 11, 2011
Trim Your Trees -- Avoid Liability!
In a recent case, Ortiz v. Jesus People, USA, 210 Ill. App. LEXIS 1221 (1st Dist. 2010), the court found the defendant corporation liable for damage caused by a tree on defendant's property. Specfically, the tree had a large tree limb that extended over a public sidewalk. The plaintiff was riding her bicycle on a windy day, stopped on the sidewalk under the tree, and was severely injured when the limb suddenly broke and fell on her.
The plaintiff sued the the corporate defendant, as well as the city. The court determined that the city was not responsible for the tree or its limbs, since the tree was located on private property. However, the jury found the corporate defendant at fault. The jury felt that because of the type of the tree (a particularly brittle variety) and the general condition of the tree, the defendant could have reasonably foreseen that a limb would break off. The jury found that the corporate defendant was negligent, and ordered the defendant to pay $686,000 to the plaintiff.
What's the bottom line? You need to maintain the trees on your property and make sure they do not damage anyone or anything else! Otherwise, you could be liable!
The plaintiff sued the the corporate defendant, as well as the city. The court determined that the city was not responsible for the tree or its limbs, since the tree was located on private property. However, the jury found the corporate defendant at fault. The jury felt that because of the type of the tree (a particularly brittle variety) and the general condition of the tree, the defendant could have reasonably foreseen that a limb would break off. The jury found that the corporate defendant was negligent, and ordered the defendant to pay $686,000 to the plaintiff.
What's the bottom line? You need to maintain the trees on your property and make sure they do not damage anyone or anything else! Otherwise, you could be liable!
Wednesday, July 6, 2011
A Second Inspection Could Protect You From Surprises, and Failed Lawsuits
Earlier this year, in In re: Kellie Cooper, 2011 Bankr. LEXIS 562 (2011), a buyer of residential property in Des Plaines, Illinois sued the seller for misrepresentation and fraud. In this case, the Buyer and Seller entered into a contract for the purchase/sale of the property. During the Buyer's professional inspection, however, a number of serious problems were noted by the inspector. As a result, the Buyer canceled the Contract.
Some time thereafter, the Seller contacted one of the real estate agents involved via electronic mail, and stated that a number of the repairs were completed. The Seller also provided a number of repair bills to the Buyer. The Buyer and the Seller signed a new contract in the summer of 2006, and closed before the end of the summer. The Buyer walked through the Property, but did not conduct another professional inspection. The Buyer stated that the Seller made specific verbal statements that certain repairs had been completed.
Regardless, many of the same issues that were in the original inspection report surfaced again after closing. Because the home suffered extensive damage, the Buyer eventually sued the Seller. The court, however, took the Seller's side, stating that the Buyer should not have relied on Seller's statements and should have conducted another professional inspection, since the Buyer was already on notice that there were many problems with the house. In this situation, a second inspection could have saved the Buyer a lot of time, money and grief!
Some time thereafter, the Seller contacted one of the real estate agents involved via electronic mail, and stated that a number of the repairs were completed. The Seller also provided a number of repair bills to the Buyer. The Buyer and the Seller signed a new contract in the summer of 2006, and closed before the end of the summer. The Buyer walked through the Property, but did not conduct another professional inspection. The Buyer stated that the Seller made specific verbal statements that certain repairs had been completed.
Regardless, many of the same issues that were in the original inspection report surfaced again after closing. Because the home suffered extensive damage, the Buyer eventually sued the Seller. The court, however, took the Seller's side, stating that the Buyer should not have relied on Seller's statements and should have conducted another professional inspection, since the Buyer was already on notice that there were many problems with the house. In this situation, a second inspection could have saved the Buyer a lot of time, money and grief!
Monday, June 27, 2011
Recovery of Damages from Home Inspector Limited to the Cost of the Inspection
Most home inspection contracts state that the inspector's liability is limited to the cost of the inspection. But if you have an issue with your inspector, will this hold up in court? In Zerjal v. Daech & Brauer Construction, Inc., 210 Ill.App.LEXIS 1269 (5th Dist.2010) , the Court says yes, it will.
In 2006, the plaintiff hired the defendant to inspect a home he had under contract. A few weeks later, he closed on the home. After closing, the plaintiff found many structural defects that he was not informed about during the inspection or in the inspection report. According to the plaintiff, the foundation could not support the house, the walls could not support the loads they were carrying, there was water leakage into the home, the electrical system was not safe, the HVAC was damaging the home's wood, and the home was generally structurally unstable.
The trial court found that under the terms of the inspection agreement, the inspector could not be liable for latent or concealed defects, and that the inspector had not guaranteed the structure of the home. Furthermore, the court stated that the contract limited the inspector's liability to the cost of the inspection, which was $175. The inspection contract even stated that any suits must be filed within two years. The plaintiffs filed late, and the court agreed with the inspector that they should have filed within the two-year term as defined in the Contract. The appellate court later affirmed these points.
So moral of the story? Read your inspection contract, and understand your rights and responsibilties. If you're not satisfied with your home after you had it inspected, don't expect your home inspector to be liable to you!
In 2006, the plaintiff hired the defendant to inspect a home he had under contract. A few weeks later, he closed on the home. After closing, the plaintiff found many structural defects that he was not informed about during the inspection or in the inspection report. According to the plaintiff, the foundation could not support the house, the walls could not support the loads they were carrying, there was water leakage into the home, the electrical system was not safe, the HVAC was damaging the home's wood, and the home was generally structurally unstable.
The trial court found that under the terms of the inspection agreement, the inspector could not be liable for latent or concealed defects, and that the inspector had not guaranteed the structure of the home. Furthermore, the court stated that the contract limited the inspector's liability to the cost of the inspection, which was $175. The inspection contract even stated that any suits must be filed within two years. The plaintiffs filed late, and the court agreed with the inspector that they should have filed within the two-year term as defined in the Contract. The appellate court later affirmed these points.
So moral of the story? Read your inspection contract, and understand your rights and responsibilties. If you're not satisfied with your home after you had it inspected, don't expect your home inspector to be liable to you!
Wednesday, June 22, 2011
As-Is Sale is Not a Defense for Seller when Seller Commits Fraud
Last year, in Mapcor Corporation v. J.P. Morgan Chase Bank, N.A., 938 N.E.2d 1181 (2d Dist. 2010), J.P. Morgan Chase Bank lost on appeal after it claimed that it should not have to pay the amount the jury awarded to the plaintiff at trial because the plaintiff had purchased the property from J.P. Morgan Chase AS-IS.
The court, however, disagreed, based on the following background: The bank was aware that the roof of the property needed to be torn off and completely replaced. However, because the cost to do this was high, the bank hired a contractor to put a new roof over the original roof -- against the broker's and the contractor's advice. The bank fired the original broker and hired a new broker, and then falsely represented that the roof was torn off and replaced with a new roof.
Relying in part on this representation, plaintiff purchased the property in 1996. Over the next decade, the plaintiff had constant problems with the roof and eventually discvered that the original roof had not been torn off. The plaintiff sued on grounds of fraud and won. At that point, the bank appealed, arguing that the plaintiff had purchased the property AS-IS and was therefore not entitled to relief.
The appellate court stated that the jury and the trail court were correct in stating that the bank had intentionally, knowingly, or with reckless disregard for the truth made a false statement of material fact. Furthermore, the court stated that had the plaintiff known the truth about the roof, the plaintiff may have offered far less money for the property.
Moral of the story -- Just because a Buyer purchases something AS-IS, the Seller should not attempt to commit fraud against him!
The court, however, disagreed, based on the following background: The bank was aware that the roof of the property needed to be torn off and completely replaced. However, because the cost to do this was high, the bank hired a contractor to put a new roof over the original roof -- against the broker's and the contractor's advice. The bank fired the original broker and hired a new broker, and then falsely represented that the roof was torn off and replaced with a new roof.
Relying in part on this representation, plaintiff purchased the property in 1996. Over the next decade, the plaintiff had constant problems with the roof and eventually discvered that the original roof had not been torn off. The plaintiff sued on grounds of fraud and won. At that point, the bank appealed, arguing that the plaintiff had purchased the property AS-IS and was therefore not entitled to relief.
The appellate court stated that the jury and the trail court were correct in stating that the bank had intentionally, knowingly, or with reckless disregard for the truth made a false statement of material fact. Furthermore, the court stated that had the plaintiff known the truth about the roof, the plaintiff may have offered far less money for the property.
Moral of the story -- Just because a Buyer purchases something AS-IS, the Seller should not attempt to commit fraud against him!
Wednesday, June 15, 2011
What is a Common Interest Community?
Most people know what a condominium is. You may even know what a co-op is. But do you know what a common interest community association is?
Last year, the Illinois legislature passed the Common Interest Community Association Act. The act defines a "common interest community” as follows: Real estate other than a condominium or cooperative with respect to which any person by virtue of his or her ownership of a partial interest or a unit therein is obligated to pay for the maintenance, improvement, insurance premiums or real estate taxes of common areas described in a declaration which is administered by an association. "Common interest community" may include, but not be limited to, an attached or detached townhome, villa, or single-family home, or master association.
What does this mean in plain English? It means that if you live in a subdivision or neighborood where there is some common area managed or administered by a common group, such as an association, then you are in a common interest community. Usually this means that you are paying some sort of fee (whether monthly, quarterly, or annually) for the maintenance of the common area. Some large neighborhoods have only a common retention pond, for example, and every homeowner pays just a few bucks every year to maintain it. Regardless, that makes the neighborhood part of a common interest community association.
If you are buying or selling a home in such a neighborhood, make sure you review the Common Interest Community Association Act to learn what obligations and rights you have, and what disclosure requirements are applicable. If you are buying a foreclosed home in a common interest community association, you should be particularly careful, as you could end up liable for past due assessments and other fees.
Last year, the Illinois legislature passed the Common Interest Community Association Act. The act defines a "common interest community” as follows: Real estate other than a condominium or cooperative with respect to which any person by virtue of his or her ownership of a partial interest or a unit therein is obligated to pay for the maintenance, improvement, insurance premiums or real estate taxes of common areas described in a declaration which is administered by an association. "Common interest community" may include, but not be limited to, an attached or detached townhome, villa, or single-family home, or master association.
What does this mean in plain English? It means that if you live in a subdivision or neighborood where there is some common area managed or administered by a common group, such as an association, then you are in a common interest community. Usually this means that you are paying some sort of fee (whether monthly, quarterly, or annually) for the maintenance of the common area. Some large neighborhoods have only a common retention pond, for example, and every homeowner pays just a few bucks every year to maintain it. Regardless, that makes the neighborhood part of a common interest community association.
If you are buying or selling a home in such a neighborhood, make sure you review the Common Interest Community Association Act to learn what obligations and rights you have, and what disclosure requirements are applicable. If you are buying a foreclosed home in a common interest community association, you should be particularly careful, as you could end up liable for past due assessments and other fees.
Thursday, June 9, 2011
How is the Cook County Foreclosure Mediation Program Doing?
It has been a little more than a year since Cook County announced its new Foreclosure Mediation Program in April of 2010. The purpose of the program was to help homeowners with free legal advice, and also to assist then in reaching a resolution with their lenders.
As of April of 2011, more than 27,000 homeowners had asked for advice. Of those 27,000 homeowners, 1,820 were referred to mediation. Of those 1,820 referrals, 627 homeowners had completed their mediations. Of those 627 completed mediation, 216 homeowners received loan modification and will continue to stay in their homes. The remaining 411 homeowners have either left their homes already or are still in the foreclosure process.
The Foreclosure Mediation Program started with a budget of $3.5 million, and has received another $3 million to keep it running until November 2011. While mediation can be slow, the program has helped many homeowners. With any luck, the program will continue to assist Cook County homeowners facing foreclosure!
As of April of 2011, more than 27,000 homeowners had asked for advice. Of those 27,000 homeowners, 1,820 were referred to mediation. Of those 1,820 referrals, 627 homeowners had completed their mediations. Of those 627 completed mediation, 216 homeowners received loan modification and will continue to stay in their homes. The remaining 411 homeowners have either left their homes already or are still in the foreclosure process.
The Foreclosure Mediation Program started with a budget of $3.5 million, and has received another $3 million to keep it running until November 2011. While mediation can be slow, the program has helped many homeowners. With any luck, the program will continue to assist Cook County homeowners facing foreclosure!
Monday, May 23, 2011
Beware Fraudulent Liens on Foreclosed Properties!
As you probably know, an empty home can be a target for all sorts of crime. Every once in a while you might read a news story about an empty home that was broken into, damaged, or used by a gang for criminal activity. However, empty homes are targets for less violent forms of crime also. Specifically, it is easy to commit fraud when no one is checking up.
Foreclosed homes, in particular, are a target. No one is looking out for them. The banks are too far away and much too busy to know what is going on with each of their properties. As a result, some individuals and/or companies have developed a new scam -- they will claim that they have completed repairs on a property and file a mechanic's lien, even if they have not actually done any work at all. When the property is ready to close, the bank will be forced to pay the lien if they do not want to delay the closing or risk losing the buyer.
Recently, after allowing a transaction to close when a lien popped up at the last minute, the Federal National Mortgage Association (FNMA) found such a scam. Upon investigation, it was determined that the lien was fraudulent; moreover, the same person had filed a similar lien on a number of other FNMA properties.
Moral of the story -- If a mechanic's lien appears on the title report of a foreclosed property, make sure you investigate to see if the work was actually performed before paying it!
Foreclosed homes, in particular, are a target. No one is looking out for them. The banks are too far away and much too busy to know what is going on with each of their properties. As a result, some individuals and/or companies have developed a new scam -- they will claim that they have completed repairs on a property and file a mechanic's lien, even if they have not actually done any work at all. When the property is ready to close, the bank will be forced to pay the lien if they do not want to delay the closing or risk losing the buyer.
Recently, after allowing a transaction to close when a lien popped up at the last minute, the Federal National Mortgage Association (FNMA) found such a scam. Upon investigation, it was determined that the lien was fraudulent; moreover, the same person had filed a similar lien on a number of other FNMA properties.
Moral of the story -- If a mechanic's lien appears on the title report of a foreclosed property, make sure you investigate to see if the work was actually performed before paying it!
Monday, May 16, 2011
Second Lien Modification Program -- Get Your Home Equity Line Modified
Many homeowners are in a situation where they have two mortgages on their primary residence -- a first mortgage and a home equity line (or another type of second mortgage). In these tough times it can be hard to make either or both payments. There are many federal programs in place to assist with your first loan, such as HAMP, HAFA, or HARP.
The good news is, there is also a program to assist with your home equity line or second mortgage. This is called the Second Lien Modification Program (2MP). If, and only if, your first loan is modified under HAMP, you may qualify for a home equity modification under 2MP.
What are the criteria for determining whether or not you are eligible for a 2MP modification? First and foremost, you must be eligible under HAMP, and your loan must have been modified under HAMP. Additionally, you must meet the following requirements:
1. You must have a balance of $5,000 or more on your second mortgage.
2. Your monthly second mortgage payment must be at least $100.
3. You cannot have missed three consecutive payments on the loan you modified under HAMP, after the modification.
4. In the last ten years, you have not been convicted of a crime such as fraud, forgery, felony larceny, theft, tax evasion or money laundering with respect to any mortgage or real estate transaction.
Not all banks are participating in 2MP, but if your bank is participating, you should check to see if you qualify. If you do qualify, your secondary lender will be offered incentives to reduce your obligation under the second mortgage.
The good news is, there is also a program to assist with your home equity line or second mortgage. This is called the Second Lien Modification Program (2MP). If, and only if, your first loan is modified under HAMP, you may qualify for a home equity modification under 2MP.
What are the criteria for determining whether or not you are eligible for a 2MP modification? First and foremost, you must be eligible under HAMP, and your loan must have been modified under HAMP. Additionally, you must meet the following requirements:
1. You must have a balance of $5,000 or more on your second mortgage.
2. Your monthly second mortgage payment must be at least $100.
3. You cannot have missed three consecutive payments on the loan you modified under HAMP, after the modification.
4. In the last ten years, you have not been convicted of a crime such as fraud, forgery, felony larceny, theft, tax evasion or money laundering with respect to any mortgage or real estate transaction.
Not all banks are participating in 2MP, but if your bank is participating, you should check to see if you qualify. If you do qualify, your secondary lender will be offered incentives to reduce your obligation under the second mortgage.
Monday, May 9, 2011
Congress Repeals Reporting Requirement for Small Landlords
Last year, Congress buried a small provision in two lenghty pieces of legislation (the Patient Protection and Affordable Care Act of 2010 and the Small Business Jobs Act) that suddenly imposed "business-like" restrictions on people who were renting out so much as one small condominium. Owners of such property were suddenly required to track all work done on their property that cost more than $600. Moreover, owners then had to obtain particulars from the contractors who had performed such work, prepare 1099 forms for them, and then distribute the 1099 forms.
Given that many landlords simply own one unit or rent out their own residences, second homes, or homes they've inherited, the requirement to prepare and distribute 1099 forms seemed particularly onerous. Most likely, many landlords would not even know about the new requirement and could later face penalties as a result.
Apparently, Congress now realizes this. Last month Congress passed legislation to repeal the provisions requiring landlords to prepare and distribute 1099 forms. While this is a victory for the many small landlords out there, most of them do not even know about it!
Given that many landlords simply own one unit or rent out their own residences, second homes, or homes they've inherited, the requirement to prepare and distribute 1099 forms seemed particularly onerous. Most likely, many landlords would not even know about the new requirement and could later face penalties as a result.
Apparently, Congress now realizes this. Last month Congress passed legislation to repeal the provisions requiring landlords to prepare and distribute 1099 forms. While this is a victory for the many small landlords out there, most of them do not even know about it!
Monday, May 2, 2011
Americans with Disabilities Act Will Now Apply to Timeshares and Hotel Condominiums
Effective December 2011, the Americans with Disabilities Act (the ADA) will apply to new or renovated timeshares and hotel condominium units (i.e. hotel condominiums that are rented out like typical hotel units)units). The ADA previously did not cover these types of properties.
Any remodeling completed to these properties after December 2011 will have to take into account ADA standards, such as wheelchair accessibility through doors and corridors, grab bars in bathrooms, carpeting that is not too plush (i.e. a wheelchair or motorized device should be able to traverse the floor comfortably), accessibility to towel racks and paper towels in bathrooms, etc.
Any remodeling completed to these properties after December 2011 will have to take into account ADA standards, such as wheelchair accessibility through doors and corridors, grab bars in bathrooms, carpeting that is not too plush (i.e. a wheelchair or motorized device should be able to traverse the floor comfortably), accessibility to towel racks and paper towels in bathrooms, etc.
Monday, April 25, 2011
Can Your Bank Foreclose You While You're Processing a Loan Modification?
Many homeowners are having trouble keeping up with their mortgage payments. As a result, they are turning to their lenders, seeking loan modifications to find a way to reduce their monthly debt obligation. Oftentimes, those homeowners have already stopped making mortgage payments. Instead they are working with the lender in good faith to reduce their monthly expense.
Unfortunately, the banks take a long time to process loan modifications. They are notorious for losing paperwork, asking for the same documents repeatedly, and not giving clear time frames for resolution. In the meantime, homeowners are waiting with baited breath to see if they will catch a break.
However, many homeowners have found that they wait and wait and wait, only to find that the loan modification process essentially went nowhere. Instead, while the loan modification application is still pending, the bank foreclosed on the home. Since these homeowners were working with the bank in good faith, they are shocked when the home is suddenly foreclosed.
Can banks do this? Sadly, the answer is yes. If your loan doesn't fall within the purview of the Home Affordable Modification Program (HAMP), then the banks can certainly "dual track" your loan. In other words, while they are working with you to modify, they can also work towards foreclosure, assuming that there are no other state laws that prevent this. On the other hand, if your loan modification does fall within HAMP's requirements, dual tracking is not allowed.
The good news is that many state attorney generals and other agencies are working to fix this; they don't want banks to "dual track". After all, homeowners are often blindsided when they lose their home to foreclosure, thinking that they were safe while the loan modification was processed. So far, banks have agreed that they will halt foreclosure proceedings once a temporary modification is approved, but many regulators don't feel that this is good enough. Instead, they want foreclosure proceedings to cease during the modification process altogether.
It remains to be seen whether state attorney generals and regulators are able to stop dual tracking. In the meantime, if you have applied for a loan modification, do not ignore any foreclosure notices you receive!
Unfortunately, the banks take a long time to process loan modifications. They are notorious for losing paperwork, asking for the same documents repeatedly, and not giving clear time frames for resolution. In the meantime, homeowners are waiting with baited breath to see if they will catch a break.
However, many homeowners have found that they wait and wait and wait, only to find that the loan modification process essentially went nowhere. Instead, while the loan modification application is still pending, the bank foreclosed on the home. Since these homeowners were working with the bank in good faith, they are shocked when the home is suddenly foreclosed.
Can banks do this? Sadly, the answer is yes. If your loan doesn't fall within the purview of the Home Affordable Modification Program (HAMP), then the banks can certainly "dual track" your loan. In other words, while they are working with you to modify, they can also work towards foreclosure, assuming that there are no other state laws that prevent this. On the other hand, if your loan modification does fall within HAMP's requirements, dual tracking is not allowed.
The good news is that many state attorney generals and other agencies are working to fix this; they don't want banks to "dual track". After all, homeowners are often blindsided when they lose their home to foreclosure, thinking that they were safe while the loan modification was processed. So far, banks have agreed that they will halt foreclosure proceedings once a temporary modification is approved, but many regulators don't feel that this is good enough. Instead, they want foreclosure proceedings to cease during the modification process altogether.
It remains to be seen whether state attorney generals and regulators are able to stop dual tracking. In the meantime, if you have applied for a loan modification, do not ignore any foreclosure notices you receive!
Monday, April 18, 2011
New Committee Formed to Investigate the Fairness of Foreclosures!
Last week, the Illinois Supreme Court formed a committee to look into the mortgage foreclosure process in Illinois. This new 14 person committee will include a representative from the attorney general's office, bankers, attorneys, and judges.
The committee will be charged with investigating foreclosures in Illinois -- specifically, the committee will look into how various counties handle foreclosures differently, and what legislative proposals affecting foreclosures are making their way through the Illinois General Assembly.
The Illinois Supreme Court hopes that the new committee will provide recommendations on improving the foreclosure process overall. As it stands now, many homeowners are confused about the court process that accompanies foreclosure. Additionally there is a great deal of variation in the process between counties. While the court is not trying to standardize the process throughout Illinois, it may be beneficial to have certain rules that are the same across the board. Hopefully the committee will be able to propose such rules to help streamline the foreclosure process.
Once the committee does its job and new standards are implemented, however, foreclosures will not go away. All we can hope for is that the process becomes easier to understand for homeowners!
The committee will be charged with investigating foreclosures in Illinois -- specifically, the committee will look into how various counties handle foreclosures differently, and what legislative proposals affecting foreclosures are making their way through the Illinois General Assembly.
The Illinois Supreme Court hopes that the new committee will provide recommendations on improving the foreclosure process overall. As it stands now, many homeowners are confused about the court process that accompanies foreclosure. Additionally there is a great deal of variation in the process between counties. While the court is not trying to standardize the process throughout Illinois, it may be beneficial to have certain rules that are the same across the board. Hopefully the committee will be able to propose such rules to help streamline the foreclosure process.
Once the committee does its job and new standards are implemented, however, foreclosures will not go away. All we can hope for is that the process becomes easier to understand for homeowners!
Tuesday, April 12, 2011
Proposed Law Would Allow Automatic Cook County Senior Citizen Property Tax Exemption
As you may or may not know, last year the Illinois legislature passed a law which required senior homeowners in Cook County to start re-applying for the senior citizen property tax exemption for their homes on an annual basis, effective in the fall of 2011. Many people, particularly seniors, were not happy about this. After all, if a senior citizen fails to apply for any reason, his or her property tax liability could increase substantially.
The legislature has been working on a fix, however, and while it may or may not make it through the House, the Senate recently approved legislation allowing senior exemptions for Cook County senior homeowners to renew automatically, as they did prior to last year's law. The bill has been passed on the House, and as of yet there is no word on whether or not the House will approve it.
In the meantime, seniors should exercise diligence and apply for the senior exemption or risk losing it!
The legislature has been working on a fix, however, and while it may or may not make it through the House, the Senate recently approved legislation allowing senior exemptions for Cook County senior homeowners to renew automatically, as they did prior to last year's law. The bill has been passed on the House, and as of yet there is no word on whether or not the House will approve it.
In the meantime, seniors should exercise diligence and apply for the senior exemption or risk losing it!
Monday, April 4, 2011
Can the Home Affordable Refinance Program (HARP) help bring your payments down?
Many homeowners are trying to refinance but are unable to for a variety of reasons. If you have been denied a traditional refinance because the value of your home has declined or you owe more than your home is worth, the Home Affordable Refinance Program (HARP) may be of assistance.
In order to qualify for the HARP program, your mortgage must either be owned or guaranteed by Fannie Mae or Freddie Mac. Additionally, you must meet the following criteria:
1. You are current on your mortgage payments.
2. In the last year, you have never been more than 30 days late when making a mortgage payment.
3. You do not have an FHA, VA, or USDA loan.
4. Your mortgage is for more than your home is currently worth. However, the outstanding amount of your mortgage is not more than 125% of the current value of your home.
5. You can demonstrate that you will be able to afford the new payments.
Note that if you do qualify for a refinance under HARP, you will still need to submit a loan application and a refinance fee, just as if you were obtaining a refinance through normal channels. The loan will be underwritten to see if you are qualified to obtain a loan in general. Just because you meet the criteria listed above, there is no guarantee you will be refinanced under HARP if you do not otherwise qualify for a refinance.
The HARP program is available until June 30, 2012.
In order to qualify for the HARP program, your mortgage must either be owned or guaranteed by Fannie Mae or Freddie Mac. Additionally, you must meet the following criteria:
1. You are current on your mortgage payments.
2. In the last year, you have never been more than 30 days late when making a mortgage payment.
3. You do not have an FHA, VA, or USDA loan.
4. Your mortgage is for more than your home is currently worth. However, the outstanding amount of your mortgage is not more than 125% of the current value of your home.
5. You can demonstrate that you will be able to afford the new payments.
Note that if you do qualify for a refinance under HARP, you will still need to submit a loan application and a refinance fee, just as if you were obtaining a refinance through normal channels. The loan will be underwritten to see if you are qualified to obtain a loan in general. Just because you meet the criteria listed above, there is no guarantee you will be refinanced under HARP if you do not otherwise qualify for a refinance.
The HARP program is available until June 30, 2012.
Monday, March 28, 2011
FTC Rule Protects Homeowners from Mortgage Relief Scams
The Federal Trade Commission recently issued the Mortgage Assistance Relief Services Rule to protect homeowners from mortgage relief scams. When the real estate market started to flounder, a number of fly-by-night operations claiming expertise in loan modifications and short sales sprung up. As a result, homeowners -- many of whom were already struggling to stay on top of their mounting bills -- paid sums to such companies in an attempt to obtain mortgage relief or short sale assistance, to no avail.
In an attempt to protect homeowners, effective January 31, 2011, the FTC banned mortgage relief companies from collecting any fees from homeowners until a loan modificaton or short sale is in fact completed. For mortgage relief to be "complete", the lender must present a written offer which the homeowner accepts. Mortgage relief companies must remind homeowners that they have an option to reject any offer which they receive, without incurring fees from the mortgage relief company.
Mortgage relief companies should also disclose whether or not they are affiliated with any goverment agency; currenty many companies prepare marketing material which falsely implies that they are a government affiliate, causing unsuspecting homeowners to hire them. Mortgage relief companies must also clearly state that there is no guarantee that homeowners will in fact receive any mortgage relief. Additionally, all fees must be disclosed in advance.
Homeowners should be wary of mortgage relief companies. Prior to hiring a company, investigate them thoroughly!
In an attempt to protect homeowners, effective January 31, 2011, the FTC banned mortgage relief companies from collecting any fees from homeowners until a loan modificaton or short sale is in fact completed. For mortgage relief to be "complete", the lender must present a written offer which the homeowner accepts. Mortgage relief companies must remind homeowners that they have an option to reject any offer which they receive, without incurring fees from the mortgage relief company.
Mortgage relief companies should also disclose whether or not they are affiliated with any goverment agency; currenty many companies prepare marketing material which falsely implies that they are a government affiliate, causing unsuspecting homeowners to hire them. Mortgage relief companies must also clearly state that there is no guarantee that homeowners will in fact receive any mortgage relief. Additionally, all fees must be disclosed in advance.
Homeowners should be wary of mortgage relief companies. Prior to hiring a company, investigate them thoroughly!
Friday, March 25, 2011
Builder Liability or Developer Liability
Condominium associations often sue developers for construction defects. But can they sue the builder, even though the builder did not sell any of the units directly to the condominium owners? According to 1324 W. Pratt Condominium Association v. Platt Construction Group, (2010 Ill. App. LEXIS 1030), the answer is yes.
In this recent court decision, the builder built an 8-unit residential building for a developer, who then sold the units to individual owners. The individual owners eventually found out that the building (and their personal property) was damaged due to water leaking in from the roof. The condominium association then sued the developer, the builder, and the roofer.
The builder claimed he should not be held liable, since he sold the building to the developer, not to the individual unit owners. The court, however, disagreed, and held that the builder could be liable under the implied warranty of habitability, regardless of whether or not he sold units directly to condominium owners. Even though the unit owners had no direct contract with the builder, they could sue him.
Previously, courts in Illinois held that if there was no direct connection between the builder and individual unit owners, the builder could not be held liable. Whether these cases can be reconciled with the Pratt decision remains to be seen.
In this recent court decision, the builder built an 8-unit residential building for a developer, who then sold the units to individual owners. The individual owners eventually found out that the building (and their personal property) was damaged due to water leaking in from the roof. The condominium association then sued the developer, the builder, and the roofer.
The builder claimed he should not be held liable, since he sold the building to the developer, not to the individual unit owners. The court, however, disagreed, and held that the builder could be liable under the implied warranty of habitability, regardless of whether or not he sold units directly to condominium owners. Even though the unit owners had no direct contract with the builder, they could sue him.
Previously, courts in Illinois held that if there was no direct connection between the builder and individual unit owners, the builder could not be held liable. Whether these cases can be reconciled with the Pratt decision remains to be seen.
Monday, March 14, 2011
U.S. Military and Foreign Service Personnel May Still be able to claim a Homebuyer Tax Credit!
The famous homebuyer tax credits, as extended, are long gone now. Or are they? Actually, they are still available to you, but only if you are a member of the armed services, foreign service, or U.S. intelligence. In that case, you have until April 30, 2011 to enter into a contract for the purchase of your primary residence, and until June 30, 2011 to close it!
In order to qualify, you must have been on official duty outside of the United States for at least 90 days, anytime between December 31, 2008, and May 1, 2010. If you were married and on official duty outside of the United States for such a 90 day period, then your spouse also qualifies for the extended eligibility timeframe for the home buyer tax credit. Both spouses need not be overseas -- so long as one spouse qualifies, the spouse who remains in the United States receives the extension as well.
There is still more good news: If you purchase a home and receive the home buyer tax credit, and you (or your spouse) are subsequently ordered for extended duty, you will not be required to pay back the credit if you sell the home or it ceases being your principal residence. What qualifies as extended duty for these purposes? Well, if you need to travel more than 50 miles from your new home for 90 days or more, or if you need to live in government housing for 90 days or more, the IRS cannot require you to repay the tax credit. The IRS repayment and recapture requirements for the home buyer tax credit are quite strict, so this is a great incentive!
In order to qualify, you must have been on official duty outside of the United States for at least 90 days, anytime between December 31, 2008, and May 1, 2010. If you were married and on official duty outside of the United States for such a 90 day period, then your spouse also qualifies for the extended eligibility timeframe for the home buyer tax credit. Both spouses need not be overseas -- so long as one spouse qualifies, the spouse who remains in the United States receives the extension as well.
There is still more good news: If you purchase a home and receive the home buyer tax credit, and you (or your spouse) are subsequently ordered for extended duty, you will not be required to pay back the credit if you sell the home or it ceases being your principal residence. What qualifies as extended duty for these purposes? Well, if you need to travel more than 50 miles from your new home for 90 days or more, or if you need to live in government housing for 90 days or more, the IRS cannot require you to repay the tax credit. The IRS repayment and recapture requirements for the home buyer tax credit are quite strict, so this is a great incentive!
Monday, March 7, 2011
Do I have to pay back my Home Buyer Tax Credit?
As you may have heard, there were some fairly strong tax incentives available for homebuyers from 2008 until September of 2010. The most recent first-time homebuyer tax credit for up to $8,000, as well as a repeat homebuyer tax credit of up to $6,500, lured some buyers out of the woodwork. You may have been one of them.
But did you know that you may have to pay the credit back? There are a variety of situations in which you could be required to repay all or a portion of the credit you received. If you fall into any one of the categories below, the IRS can require repayment:
1. Receipt of the First Time Home Buyer Credit for a 2008 purchase, and the subsequent sale of your home to a related party within 15 years;
2. Receipt of the First Time Home Buyer Credit for a 2009 or 2010 purchase, and the subsequent sale of your home to a related party within 36 months;
3. Receipt of any home buyer credit for your primary residence (whether it was purchased in 2008, 2009, or 2010), and subsequent condemnation of the home, UNLESS you replace it with the purchase of a new primary residence within 2 years of the date of condemnation;
4. Receipt of any home buyer credit for your primary residence (whether it was purchased in 2008, 2009, or 2010), subsequent destruction of the home, UNLESS you either rebuild it or replace it with the purchase of a new primary residence within 2 years of the date of destruction;
5. Receipt of any home buyer credit for your home (whether it was purchased in 2008, 2009, or 2010), and subsequent conversion of the home to a rental property or other business use.
Additionally, any sale of your home within three years after your receipt of either the 2009 or 2010 credits can trigger repayment of the entire credit to the IRS.
If you find yourself in a situation where you might need to repay the tax credit, you should consult with your accountant!
But did you know that you may have to pay the credit back? There are a variety of situations in which you could be required to repay all or a portion of the credit you received. If you fall into any one of the categories below, the IRS can require repayment:
1. Receipt of the First Time Home Buyer Credit for a 2008 purchase, and the subsequent sale of your home to a related party within 15 years;
2. Receipt of the First Time Home Buyer Credit for a 2009 or 2010 purchase, and the subsequent sale of your home to a related party within 36 months;
3. Receipt of any home buyer credit for your primary residence (whether it was purchased in 2008, 2009, or 2010), and subsequent condemnation of the home, UNLESS you replace it with the purchase of a new primary residence within 2 years of the date of condemnation;
4. Receipt of any home buyer credit for your primary residence (whether it was purchased in 2008, 2009, or 2010), subsequent destruction of the home, UNLESS you either rebuild it or replace it with the purchase of a new primary residence within 2 years of the date of destruction;
5. Receipt of any home buyer credit for your home (whether it was purchased in 2008, 2009, or 2010), and subsequent conversion of the home to a rental property or other business use.
Additionally, any sale of your home within three years after your receipt of either the 2009 or 2010 credits can trigger repayment of the entire credit to the IRS.
If you find yourself in a situation where you might need to repay the tax credit, you should consult with your accountant!
Monday, February 28, 2011
What is a Reserve Study?
Like all things, condominium buildings get old. Eventually, things need to be replaced. The roof might start leaking, the fences may start to deteriorate, or the walkways may begin to crumble. Maybe these things haven't happened yet, but they could happen soon. Of course, when the time does come, all of these repairs will cost money. In these cash-strapped times, who has enough of that? How can a condominium association plan for these repairs now to prevent financial insolvency later?
As an association begins to age, it should consider completing a reserve study. A reserve study is usually conducted by a team of building and construction professionals. The company you hire to do this will probably utilize both engineers and architects in its evaluation. The professionals will come out to your building and do a thorough review of all of your systems. After the review is complete, they will give your association the estimated life expectancy of integral items, such as the roof, fence, driveway, siding, etc. Usually, they can even provide a range for estimated replacement costs.
Based on this information, the association can then begin budgeting appropriately for repair projects they may encounter in the near or distant future. Many associations have successfully implemented a plan involving one or more of the following to increase their savings for long-term repairs: 1) shopping for new vendors at lower prices; 2) negotiating down current vendor prices; 3) moderate increases in regular assessments; 4) occasional special assessments, especially for smaller projects, so as not to spend down savings; and 5) investing savings in interest-bearing accounts.
Reserve studies, of course, are not free. A smart condominium association will speak with and obtain proposals from various companies specializing in reserve studies to determine which company they are comfortable with and who provides fair pricing. But after doing its due diligence, a condominium association may find that the investment it made in the reserve study will pay off in the long-term!
As an association begins to age, it should consider completing a reserve study. A reserve study is usually conducted by a team of building and construction professionals. The company you hire to do this will probably utilize both engineers and architects in its evaluation. The professionals will come out to your building and do a thorough review of all of your systems. After the review is complete, they will give your association the estimated life expectancy of integral items, such as the roof, fence, driveway, siding, etc. Usually, they can even provide a range for estimated replacement costs.
Based on this information, the association can then begin budgeting appropriately for repair projects they may encounter in the near or distant future. Many associations have successfully implemented a plan involving one or more of the following to increase their savings for long-term repairs: 1) shopping for new vendors at lower prices; 2) negotiating down current vendor prices; 3) moderate increases in regular assessments; 4) occasional special assessments, especially for smaller projects, so as not to spend down savings; and 5) investing savings in interest-bearing accounts.
Reserve studies, of course, are not free. A smart condominium association will speak with and obtain proposals from various companies specializing in reserve studies to determine which company they are comfortable with and who provides fair pricing. But after doing its due diligence, a condominium association may find that the investment it made in the reserve study will pay off in the long-term!
Wednesday, February 23, 2011
Buying a New Home but Worried About the Neighborhood?
If you're buying a home, you have a lot on your mind. You love the house, so you're learning about mortgages and insurance and title and inspections. You still have to figure out whether your furniture will fit, what colors to paint the walls, and what repairs you will have to complete prior to moving in. And of course, there's the move itself. A lot to worry about, right? But there is still more on your mind -- what about my new neighbors? Is this the right neighborhood to raise my kids in? Will my family be safe? A thought is nagging you from the depths of your mind: am I making the right decision?
Of course, you don't really know what type of people your neighbors are. Hopefully they'll be kind, friendly people and welcome you with muffins, cookies, and open arms. You won't really know until you interact with them. But there is a little bit you can do to put your mind at peace. At the very least, you can check and make sure none of your neighbors are felons or sex offenders.
There are some websites that list felons on a national level. For example, on FelonSpy, you can enter a street address and pull up area felons. Of course, general websites such as FelonSpy are not necessarily updated regularly, and a felon may move but still appear at an old address and not at his or her new address.
Illinois also keeps a list of sex offenders at its online Illinois Sex Offender Information website. Because of Illinois registration requirements, this site is fairly up-to-date.
These sites may help you decide if your new home is in the right neighborhood for you. While the sites can't help you pack your boxes or paint your new home, at least they'll bring you some peace of mind!
Of course, you don't really know what type of people your neighbors are. Hopefully they'll be kind, friendly people and welcome you with muffins, cookies, and open arms. You won't really know until you interact with them. But there is a little bit you can do to put your mind at peace. At the very least, you can check and make sure none of your neighbors are felons or sex offenders.
There are some websites that list felons on a national level. For example, on FelonSpy, you can enter a street address and pull up area felons. Of course, general websites such as FelonSpy are not necessarily updated regularly, and a felon may move but still appear at an old address and not at his or her new address.
Illinois also keeps a list of sex offenders at its online Illinois Sex Offender Information website. Because of Illinois registration requirements, this site is fairly up-to-date.
These sites may help you decide if your new home is in the right neighborhood for you. While the sites can't help you pack your boxes or paint your new home, at least they'll bring you some peace of mind!
Monday, February 14, 2011
Recent Court Decision Reiterates Importance of Mortgage Contingency Clause
A recent court decision, YPI 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC (342 Ill. Dec. 879, 2010), reiterates the importance of the mortgage contingency clause in real estate transactions, whether large or small. In that case, the Buyer put down $6,000,000 in earnest money towards the purchase of a commercial property with a contract sales price of $124,000,000. The Buyer had arranged for financing from an Irish bank, who later pulled out of the transaction citing Irish and global economic issues beyond the bank's control. When the Buyer was unable to procure financing elsewhere, the Seller kept the earnest money.
Mortgage contingencies and earnest money are closely intertwined. If a Buyer fails to timely notify the Seller of financing issues, then according to a typical mortgage continency clause, the Buyer may forfeit the earnest money. When the buyers in the YPI 180 N. LaSalle Owner case did not receive their earnest money back, they filed suit, claiming that it was impossible to perform their end of the bargain because of the global economic crisis.
The court disagreed. Specifically, the court felt that the Buyer should have realized that an inability to obtain financing was a possibility all along. Moreover, the court stated that the Buyer could have protected itself from such a situation by putting an appropriate contingency in place in the Contract. The Buyer did not have an appropriate mortgage contingency in place.
Bottom line -- mortgage contingencies are important, now more than ever with loans being denied right and left!
Mortgage contingencies and earnest money are closely intertwined. If a Buyer fails to timely notify the Seller of financing issues, then according to a typical mortgage continency clause, the Buyer may forfeit the earnest money. When the buyers in the YPI 180 N. LaSalle Owner case did not receive their earnest money back, they filed suit, claiming that it was impossible to perform their end of the bargain because of the global economic crisis.
The court disagreed. Specifically, the court felt that the Buyer should have realized that an inability to obtain financing was a possibility all along. Moreover, the court stated that the Buyer could have protected itself from such a situation by putting an appropriate contingency in place in the Contract. The Buyer did not have an appropriate mortgage contingency in place.
Bottom line -- mortgage contingencies are important, now more than ever with loans being denied right and left!
Monday, February 7, 2011
Chicago Foreclosure Rate Second Highest in the Nation
Las Vegas and Chicago are too very different cities in many ways. But they do share one thing. They have the highest foreclosure rates nationwide. Specifically, the Las Vegas Area reported the most foreclosures last year. According to RealtyTrac, Inc., one out of every nine homes in Las Vegas received a foreclosure notice last year. Chicago ranked second, with one out of every twenty-seven homes in the Chicago area receiving a foreclosure notice. In total, there were 138,913 foreclosure or foreclosure-related filings in 2010 in Chicago. This in an increase of over 16% from 2009.
In case you're interested to see where we fall, the third, fourth and fifth highest foreclosure rates were in Detroit, Miami and Atlanta, in that order.
What can distressed Chicago homeowners do to avoid foreclosure? They can try to complete a loan modification to bring their loan back to a point where they can avoid it. They can try to short sell their house and hope a buyer comes along and the bank is willing to accept the offer. They can offer a deed in lieu of foreclosure to the bank and see if the bank will accept. There are many options out there for distressed homeowners who want to prevent foreclosure.
In case you're interested to see where we fall, the third, fourth and fifth highest foreclosure rates were in Detroit, Miami and Atlanta, in that order.
What can distressed Chicago homeowners do to avoid foreclosure? They can try to complete a loan modification to bring their loan back to a point where they can avoid it. They can try to short sell their house and hope a buyer comes along and the bank is willing to accept the offer. They can offer a deed in lieu of foreclosure to the bank and see if the bank will accept. There are many options out there for distressed homeowners who want to prevent foreclosure.
Monday, January 31, 2011
What's a Co-op?
So you've been looking and looking for that perfect condominium in Chicago, and you've finally found it. It's got everything you ever wanted -- a great location, beautiful view, spacious bedrooms, a new kitchen. . .But wait, it's not a condo. It's a co-op. A what? A co-op? What's a co-op?
In some parts of the country (New York City, for example), co-ops are fairly common. But in Chicago, most residential buildings consist of either apartments or condominiums. Co-ops are few, and sometimes, far between. Don't be surprised by the terminology. If your dream home happens to be a co-op, here's what you need to know to get you started:
Co-op is short for "cooperative"; in this case, it's specifically a "housing cooperative". A housing cooperative is essentially a corporation (or other entity) formed to to own the building. In some ways, it is a corporation like any other. The people who own the corporation own stock. If you own a unit in a co-op, you don't technically own the unit. Rather, you own shares in the corporation, and the amount of the shares you own correspond to the value of your unit relative to the other units in your building.
Since you are a shareholder in a corporation, your right to vote, and the value of your votes, is usually tied to the value of your shares (although occasionally you might come across a co-op where each unit gets one vote regardless of the shares it represents). Since any new shareholder (i.e. someone purchasing a unit in the co-op) would essentially be a co-shareholder with you, you can vote against the sale of a unit to a particular buyer. Indeed, if enough co-op owners band together, they can stop the sale of a unit.
Don't be surprised if you find a co-op you love, and the next thing you know, your real estate attorney or real estate agent is requesting copies of your tax returns and pay stubs to give to the board of directors of the co-op. It is not unusual for co-ops to request such documentation from potential buyers as part of their screening process. If you are not comfortable with your neighbors having so much information about you, a co-op may not be the way to go.
A typical co-op closing doesn't even take place at a title company. After all, since you are not buying real estate, there is no title insurance. You are buying stock, not land.
Of course, there are many differences between co-ops and other business corporations. There is one key difference, however -- co-ops are not typically profit centers. Their goal is usually to collect enough money to go about their business, and not much more.
Sure, it's unusual to own a co-op in Chicago. In other parts of the country, however, co-ops have proven to be a viable form of ownership. If you do find a unit you're interested in and it happens to be a co-op, don't worry. Make sure you investigate thoroughly before deciding whether or not to proceed!
In some parts of the country (New York City, for example), co-ops are fairly common. But in Chicago, most residential buildings consist of either apartments or condominiums. Co-ops are few, and sometimes, far between. Don't be surprised by the terminology. If your dream home happens to be a co-op, here's what you need to know to get you started:
Co-op is short for "cooperative"; in this case, it's specifically a "housing cooperative". A housing cooperative is essentially a corporation (or other entity) formed to to own the building. In some ways, it is a corporation like any other. The people who own the corporation own stock. If you own a unit in a co-op, you don't technically own the unit. Rather, you own shares in the corporation, and the amount of the shares you own correspond to the value of your unit relative to the other units in your building.
Since you are a shareholder in a corporation, your right to vote, and the value of your votes, is usually tied to the value of your shares (although occasionally you might come across a co-op where each unit gets one vote regardless of the shares it represents). Since any new shareholder (i.e. someone purchasing a unit in the co-op) would essentially be a co-shareholder with you, you can vote against the sale of a unit to a particular buyer. Indeed, if enough co-op owners band together, they can stop the sale of a unit.
Don't be surprised if you find a co-op you love, and the next thing you know, your real estate attorney or real estate agent is requesting copies of your tax returns and pay stubs to give to the board of directors of the co-op. It is not unusual for co-ops to request such documentation from potential buyers as part of their screening process. If you are not comfortable with your neighbors having so much information about you, a co-op may not be the way to go.
A typical co-op closing doesn't even take place at a title company. After all, since you are not buying real estate, there is no title insurance. You are buying stock, not land.
Of course, there are many differences between co-ops and other business corporations. There is one key difference, however -- co-ops are not typically profit centers. Their goal is usually to collect enough money to go about their business, and not much more.
Sure, it's unusual to own a co-op in Chicago. In other parts of the country, however, co-ops have proven to be a viable form of ownership. If you do find a unit you're interested in and it happens to be a co-op, don't worry. Make sure you investigate thoroughly before deciding whether or not to proceed!
Wednesday, January 26, 2011
Fannie Mae is Increasing Mortgage Fees for Borrowers with Good Credit
In response to the declining housing market in 2008, Fannie Mae created a new mortgage fee: the adverse market delivery charge. The adverse market delivery charge was intended to discourage borrowers with lower credit scores by charging them an additional fee to secure a loan. Borrowers with high credit scores, of 740 and above, were not subject to the fee and paid the lowest interest rates. Borrowers with good credit scores (i.e. between 720 nad 739) paid a fee also, but it was a smaller fee and it only applied to loans that were for sums between 75.01% and 80% of a home's value.
Effective April 1, 2011, however, Fannie Mae will charge the adverse market delivery charge to everyone, even borrowers with exceptional credit scores (i.e. over 740). Of course, borrowers with the best credit scores will pay the smallest fee. Borrowers with lower credit scores (i.e. below 620), on the other hand, will pay the highest fee, as much as 3.25% of the loan amount.
Is it fair to penalize homebuyers with good credit? Whether it's fair or not, Fannie Mae's mortgage fee will be widely implemented, since Fannie Mae will not purchase mortgages from lenders who do not meet their standards. Banks are widely expected to implement Fannie's Mae's newest requirements in the coming months!
Effective April 1, 2011, however, Fannie Mae will charge the adverse market delivery charge to everyone, even borrowers with exceptional credit scores (i.e. over 740). Of course, borrowers with the best credit scores will pay the smallest fee. Borrowers with lower credit scores (i.e. below 620), on the other hand, will pay the highest fee, as much as 3.25% of the loan amount.
Is it fair to penalize homebuyers with good credit? Whether it's fair or not, Fannie Mae's mortgage fee will be widely implemented, since Fannie Mae will not purchase mortgages from lenders who do not meet their standards. Banks are widely expected to implement Fannie's Mae's newest requirements in the coming months!
Thursday, January 20, 2011
Amendments to the Good Funds Act
The Good Funds Act took effect January 1, 2010, bringing with it one primary change as to how closings are conducted: If the Buyer needs more than $50,000 to close the transaction, he is required to have the funds wired. Prior to January 1, 2010, buyers usually brought in cashier's checks.
One year later, the Good Funds Act has changed. Here's how:
1. If a buyer wires funds into closing, and then finds out he needs more than expected, title company can accept cashier's checks, and subject to their individual policies, personal checks.
2. Earnest money is no longer part of a buyer's bottom line.
It remains to be seen whether these changes have any significant effects!
One year later, the Good Funds Act has changed. Here's how:
1. If a buyer wires funds into closing, and then finds out he needs more than expected, title company can accept cashier's checks, and subject to their individual policies, personal checks.
2. Earnest money is no longer part of a buyer's bottom line.
It remains to be seen whether these changes have any significant effects!
Friday, January 14, 2011
HAFA Rules Modified in 2011
The Home Affordable Foreclosure Alternatives (HAFA) program debuted last spring to much hype in real estate circles. For homeowners who could not qualify for a loan modification under the Home Affordable Modification Program (HAMP), HAFA could help with other options, such as short sales.
Now, ten months later, only 661 short sales qualified under HAFA. The program is far from a success and has hardly lived up to it's name: "foreclosure alternatives". Indeed, if a homebuyer doesn't qualify for a modification under HAMP or a short sale under HAFA, he could be foreclosed anyway.
The Treasury Department is trying to loosen HAFA's strict requirements as follows:
1. Banks no longer have to verify that the borrower's monthly mortgage expense is less than one-third of the Borrower's income.
2. If a borrower requests consideration under HAFA and it is approved, the bank must provide a short sale agreement within 30 days.
3. Lenders have more latitude in dealing with secondary lien holders.
Hopefully these changes will lead to more approved short sales in the near future! For more information and to determine whether you qualify for HAFA, click here.
Now, ten months later, only 661 short sales qualified under HAFA. The program is far from a success and has hardly lived up to it's name: "foreclosure alternatives". Indeed, if a homebuyer doesn't qualify for a modification under HAMP or a short sale under HAFA, he could be foreclosed anyway.
The Treasury Department is trying to loosen HAFA's strict requirements as follows:
1. Banks no longer have to verify that the borrower's monthly mortgage expense is less than one-third of the Borrower's income.
2. If a borrower requests consideration under HAFA and it is approved, the bank must provide a short sale agreement within 30 days.
3. Lenders have more latitude in dealing with secondary lien holders.
Hopefully these changes will lead to more approved short sales in the near future! For more information and to determine whether you qualify for HAFA, click here.
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