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.
Tuesday, July 28, 2009
Monday, July 20, 2009
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.
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.
Wednesday, April 22, 2009
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.
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.
Sunday, April 12, 2009
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.
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.
Sunday, April 5, 2009
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.
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.
Tuesday, March 31, 2009
Tenant Rights in Foreclosed Chicago Property
During the past year, many Chicago tenants found out that they were living in a foreclosed home, apartment or condominium only when the sheriff's office turned up at their door to make them leave. However, Chicago has laws to protect tenants from sudden evictions, and as a tenant you have the right to expect certain notices in the event of foreclosure.
First of all, if you are signing a lease for a property that is the subject of a foreclosure suit, the landlord is required to notify you before you sign the lease. If the landlord doesn't do that, you are allowed to terminate the lease.
Second, if you are renting a home that becomes the subject of a foreclosure suit after you have already signed the lease, the landlord is required to notify you within seven days after the foreclosure is filed.
Third, if the property you live in has already been foreclosed AND if you are current on rent, you should receive at least 90 days' notice before an evictions action can be filed against you.
Lastly, if you are concerned that you are living in a property that is already foreclosed or is in danger of being foreclosed, you can go to the Cook County Circuit Court and try to find out if any action is pending or completed against your landlord with reference to the home you live in.
First of all, if you are signing a lease for a property that is the subject of a foreclosure suit, the landlord is required to notify you before you sign the lease. If the landlord doesn't do that, you are allowed to terminate the lease.
Second, if you are renting a home that becomes the subject of a foreclosure suit after you have already signed the lease, the landlord is required to notify you within seven days after the foreclosure is filed.
Third, if the property you live in has already been foreclosed AND if you are current on rent, you should receive at least 90 days' notice before an evictions action can be filed against you.
Lastly, if you are concerned that you are living in a property that is already foreclosed or is in danger of being foreclosed, you can go to the Cook County Circuit Court and try to find out if any action is pending or completed against your landlord with reference to the home you live in.
Friday, March 20, 2009
Do You Qualify for the Making Homes Affordable Initiative?
On March 4, 2009, the Treasury Department issued new guidelines and created the Making Homes Affordable Initiative, part of which includes a program to modify loans, called the Home Affordable Modification Program. If your lender can service your loan under the Home Affordable Modification Program, you may be able to reduce your monthly payment to 31% of your gross monthly income for five years. Additionally, if you make all payments on time during each of those five years, you may receive $1000 principal reduction per year.
Approximately four million qualifying homeowners will be able to take advantage of this plan. Are you one of them? To qualify, you must meet the following criteria:
1. The home must be your primary residence.
2. The principal balance on your home must not be greater than $729,500.
3. You must have obtained the loan prior to January 1, 2009.
4. You can only modify your loan once, and it must be done prior to January 1, 2013.
5. You must complete and submit certain documentation.
Lenders have until the end of this year to sign up with the Treasury Department to service loans under this program. If they do, they will receive a number of benefits, including financial assistance from the government to help defray the cost of the modification. If you believe you qualify for a mortgage modification, you should find out if your lender is participating in the Home Affordable Modification Program.
Approximately four million qualifying homeowners will be able to take advantage of this plan. Are you one of them? To qualify, you must meet the following criteria:
1. The home must be your primary residence.
2. The principal balance on your home must not be greater than $729,500.
3. You must have obtained the loan prior to January 1, 2009.
4. You can only modify your loan once, and it must be done prior to January 1, 2013.
5. You must complete and submit certain documentation.
Lenders have until the end of this year to sign up with the Treasury Department to service loans under this program. If they do, they will receive a number of benefits, including financial assistance from the government to help defray the cost of the modification. If you believe you qualify for a mortgage modification, you should find out if your lender is participating in the Home Affordable Modification Program.
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