New Cook County Notary Rules Effective June 2009

Effective June 1, 2009, notary requirements relative to the transfer of 1-4 unit residential property in Cook County changed. The law, Public Act 95-988, is effective until July 1, 2013, and is designed to assist in the prevention of fraudulent property transfers.

Under this new law, an Illinois notary must fill out a Notarial Record for every grantor whose signature is being notarized if the grantor is transferring a single family home, condominium, or other 1-4 unit residential building in Cook County. Each Notarial Record must state the form of identification used to verify the grantor's identity. Such identification may include any ID issued by a state or federal agency, so long as the ID is current and not expired. Foreign identification is not acceptable. The Notarial Record must also include the grantor's thumbprint.

If a notary is an employee of an attorney, a title company, or a financial institution, the notary must deliver the completed Notarial Record to the notary's employer within 14 days. Other notaries must deliver the Notarial Record to the Cook County Recorder of Deeds an pay a $5 filing fee. Notarial Records are retained for 7 years, and are not disclosed except pursuant to a subpoena from a court.

Certain types of Cook County residential real estate is exempt from the requirements of the act. For example, court-ordered and court-authorized transfers, judicial sales deeds, deeds transfering the property to a trust in which the grantor and the beneficiary are the same, deeds from the grantor to himself, deeds from the grantor to himself and another grantee, and deeds in lieu of foreclosure, are all exempted.

Home Windmills and Tax and Energy Savings

While it's rare to see a windmill powering a home in Chicago and its neighboring suburbs, Congress recently passed a thirty percent tax credit as an incentive for people to use home windmills for power. An increasing number of such windmills are popping up in rural areas.

How do home windmills work? Combined with electricity from your local electric company, home windmills are used to power your home. When there is little or no wind, the electricity kicks in. Home windmills are very expensive, and typically it takes years until you save enough money in utility bills to justify the cost of the windmill itself. However, because home windmills are so energy efficient, Congress is attempting to encourage their installation by providing a tax credit.

Unfortunately, the reality is that it is very difficult to install a home windmill in an urban or suburban area. Neighbors will object, zoning ordinances will not allow windmills, and even a person who is considering the installation for him or herself may not be entirely convinced that it's the best way to go. Rural homeowners in Illinois however, may not only be more open to the idea of a home windmill, but they can also reap the benefits of the tax credit.

Short Sales, Foreclosures, and Property Disclosures

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

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

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

Vacant Property Ordinances on the Rise

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

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

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

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

Contractor Insurance Requirements under the Home Repair and Remodeling Act

Under the Illinois Home Repair and Remodeling Act, contractors are required to follow a number of rules in order to enter into a valid and enforceable contract with a homeowner. One of the most important features of the Act is that it requires the contractor to maintain sufficient insurance to protect the property owner in the event of damage. Specifically, contractors must have public liability and property damage insurance of at least $100,000 per person and $300,000 per occurrence in the case of bodily injury. They must also maintain insurance of $50,000 per occurrence for property damage. Additionally, because sometimes repairs fail to comply with applicable state, county, or local ordinances, contractors are required to maintain public liability and property damage insurance of $10,000 per occurrence, the proceeds of which would be used to remedy such non-conformance, if any.

Why is it that many contractors fail to maintain insurance policies such as those described above? Well, the insurance provisions of the Home Repair and Remodeling Act only apply to those contractors who have a net worth of $1 million or more, as stated in the contractor's financial statement as prepared within the last 13 months.

Therefore, when you are looking for a contractor, make sure you discuss insurance openly. If your contractor's net worth is less than $1 million, he may maintain little or no insurance. You need to make sure that your contractor not only has sufficient insurance, but that you, your homeowners' association (if any), and your lender (if any) are also added to the contractor's insurance policy as additional insureds. Any subcontractors working on your property should also maintain sufficient insurance and should also add you to their policy.

FHA and Mortgage Insurance -- What is the UFMIP?

FHA loans help to make real estate more affordable by allowing you to obtain a loan with a relatively small down payment. In today's market, you are required to put a substantial amount of money down for conventional financing, whereas you may be able to get an FHA loan with only 3% down. Because FHA loans are insured by the Federal Housing Authority, they are strictly regulated by them as well.

But the Federal Housing Authority won't insure your FHA loan for nothing. That's where the Up Front Mortgage Insurance Premium (the UFMIP) comes in. The UFMIP is similar to regular mortgage insurance -- it's insurance you, as the borrower, pay for to cover the balance of your mortgage in case you default.

However, the UFMIP is a bit more hefty. Typically, your premium will be about 1.75% of your loan amount (note the FHA changes the premium periodically -- last summer it was only 1.50%). In other words, if you are borrowing $200,000 today, your UFMIP will be $3500. You will pay the premium at closing, and you will also pay monthly premiums with your mortgage payment.

When buying a home with an FHA loan, keep the UFMIP in mind. The cost is considerable. Then again, you also get to buy your home -- and without the FHA and their required UFMIP payment, you may be unable to buy one otherwise.

Mortgage Insurance Basics

So you're trying to buy a home, but you have to pay mortgage insurance. What does that mean? How does it work?

In a standard real estate transaction, a buyer puts at least 20% down. All buyers, however, cannot afford to do that. When you are putting less than 20% down, banks are concerned that you have not invested enough of your own money into your home. They are also concerned that you won't be able to afford your monthly payment if your circumstances change. Mortgage insurance came about as a result of these concerns. Simply put, mortgage insurance is insurance for your lender in the event that you cannot make payments any longer and your lender cannot recoup its losses.

How does mortgage insurance work? If you are putting less than 20% down and have only one loan, your lender will have to arrange for mortgage insurance for you. Mortgage insurance companies typically take from 1-14 days to underwrite a file. A mortgage insurance company may decline your file, and then your lender will have to submit it to a different mortgage insurance company. If all goes well, your loan and your mortgage insurance will be approved. When you close on your purchase, you may pay an upfront premium for the mortgage insurance. Additionally, you will pay a monthly premium with your mortgage payment, depending on the size of your loan. Your lender will be able to tell you how much the mortgage insurance premium will be.

Mortgage insurance is often known as PMI, but this is a misconception. While the terms are used interchangeably, PMI (Private Mortgage Insurance) is actually the name of a specific company that offers mortgage insurance products. While many people refer to mortgage insurance as PMI, PMI is simply a brand. When you close on your purchase, your mortgage insurance may be offered through PMI or one of many other mortgage insurance companies.