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Buying or Selling a Home

For most people, buying or selling a home ranks as the most sizable financial matter they will ever undertake. For that reason, it’s essential to bring in a real estate attorney with experience and expertise to play a role throughout the process.

One who fits that bill and has been helping individuals and families for over 30 years navigate the complexities of a real estate purchase or sale is Attorney Vicki Gonzalez of the Chicago Business Law firm of Bellas & Wachowski.

Putting It in Writing

Real estate transactions are set into motion when the seller and buyer of a home put their agreement in writing through a real estate contract that lays out specifics like sale price, closing and possession dates, and other mortgage terms and agreements between owner and purchaser.

Required to complete the closing, this written contract lays down the guideposts and addresses any needed statutory issues like property condition, lead paint and mold disclosures. Typically put together by the seller’s attorney or, if they retain one, the real estate agent, the contract contains clear terms that both parties agree with, sealing the deal and setting in motion the time period to the closing.

While the buyer is working to obtain mortgage approval from their lender, the seller’s attorney generally prepares additional documents—such as the title, survey, all transfer documents, seller’s mortgage payoff and realtor’s fee statements, and state, county and local transfer requirements—based on the contract language.

Contingency Periods

Generally, within five days after the seller signs the contract, the next two steps in the process unfold: attorneys for the buyer and seller go over the contract, and the buyer hires an inspector to make sure the house in question does not have any significant red flags.

The Attorney Review ensures that the contract says what it’s supposed to say and provides the last chance to correct any omissions or change or remove unwanted verbiage. A professional inspector should be able to notice and report back on any issues with the roof or foundation, the potential shelf-life of existing appliances, and the conditions of systems like plumbing, electrical and mechanical. Seller often do not know about such deficiencies, and the inspection guards against any last-minute issues surfacing.

Getting the Money Down

The next step laid out in the written agreement regards when and how much the purchaser needs to pay what’s called “earnest money.” That’s a small down payment that indicates confirmation of the agreement and provides a reasonable guarantee for the seller that the buyer will not later walk away from the deal—otherwise, they forfeit the money.

Usually deposited one or two days after the attorney review and inspection periods finish, earnest money is held by the seller’s real estate agent in an escrow account—or by the seller’s attorney, if there is no agent.

Next, the purchaser will have a deadline written into the contract by which they need to gain approval for the financing of their mortgage. The language around this will cover the type, amount and costs of the buyer gaining approval for the mortgage, as well as the agreed-upon next steps if the purchaser cannot meet said deadline.

Time for Closing

The final deadline usually found in a real estate contract is the date for the actual closing, at which time the buyer and seller, their attorneys, and the bank making the loan gather at the title insurance company’s office.

That meeting commences with a flurry of signing documents that the attorneys have been busily preparing: the buyer signs their mortgage papers, the seller signs agreements to transfer the home’s ownership, and the title company representative ensures that it all meets the approval of their own company as well as the lender so that the title changes hands properly.

The Closing Statement is the centerpiece of this endeavor. Also called the HUD or RESPA statement to reflect the federal legislation that dictates its format, this document provides the sums that each party must pay to one another and/or to the service providers involved in the transaction.

The contract provides the base figures like the price, earnest money, and credits for both taxes and items the seller might have prepaid, such as association fees or utility bills. Bottom line, the buyer knows how much they will need to pay during the closing, and the seller knows how much they will receive.

Title Insurance Survey

Before the closing can go through, under most contracts the seller must prove to the buyer that there are no legal or financial issues pertaining to the title to the property in question. The seller’s attorney typically retains a title company with whom he or she has regularly worked to order a title commitment.

This process discloses a number of pieces of key information: names of parties in the title, liens or encroachments against the property, current or past real estate taxes due and payable, mortgages or home equity loans placed against the title, matters of public record like property setback lines or utility easements, and any liens or judgments against the property or either the seller or buyer.

Once these disclosures are made and any objections cleared up, the title commitment can be cleared and ready so the purchaser and purchaser’s lender can obtain title insurance prior to the closing date.

Lenders and title companies also will require seller to provide a recent property survey to help them clearly insure the property. Although the specifics may vary somewhat, the survey generally speaking will need to lay out particulars like lot lines, corners, setbacks and easements, as well as encroachments against any of those items.

Mortgage Payoff

A last step that needs to take place for the title to be transferred unencumbered is for any mortgages recorded against the property to be paid off in full. The seller forwards his mortgage information to his attorney, who asks each lender for a payoff statement that includes a promise to release the mortgage no more than 30 days after the full statement amount is paid. This document provides assurances to the title company that it will be able to properly pay off the mortgages and hand over a clean title to the buyer and his or her mortgage lender.

Date of Possession

Once the closing transaction concludes and money has exchanged hands, the seller typically then hands over possession—literally, the keys to the property—to the buyer. However, if the seller has not yet closed on their next property, and the buyer has some flexibility, the parties can agree to push back the possession date. The seller then pays the buyer a per diem for rent that can be any agreed-upon amount, although it normally would cover the purchaser’s costs for principal, interest, taxes and insurance.

In this scenario, the seller also must place a certain amount of money into what’s called a Possession Escrow account that provides collateral for the buyer in the event that the seller does not hand over possession of the property on the date in question. The seller forfeits some percentage of that account each day beyond that originally agreed-upon possession date.

Addressing Local Ordinances

In addition to the state and county transfer taxes that sellers must pay at closing, and state and county transfer declarations that all parties must execute at closing, many local municipalities have transfer requirements of their own. To meet these, attorneys, real estate agents and parties to the deal potentially will need to work together to prepare a declaration, pay transfer fees, and inspect either the property, the documents or both.

On top of local ordinances, properties that are part of homeowner or condominium associations likely will need to meet additional requirements laid out by those associations before a closing statement to enable clearance of the title.

The Need for Experienced Representation

Perhaps the best investment that any prospective home buyer or seller can make is to retain an experienced real estate attorney to guide you through the process of drawing up and executing upon a contract, which typically lays out myriad requirements that must be met in very specific sequences and time periods for maximum financial advantage. Any given transaction can bring unexpected twists and turns and unusual issues specific to a given property, buyer or seller. There is simply no substitute for the deep expertise of a seasoned practitioner in this area.

Those in need of such help for handling these complex transactions would do well to contact Vicki Gonzalez and the Chicago Business Law Firm of Bellas & Wachowski which has successfully negotiated thousands of real estate deals. To ensure a smooth, beneficial transaction, contact Vicki Gonzalez at (847) 823-9030 x220 or vicki@bellas-wachowski.com.