Cook County taxes are supposed to come out in September. Everyone, including lenders, knows this.
Cook County taxes usually come out later and sometimes much later. Lenders don't care.
We are now entering "TI Season". That's the time where lenders begin to require home buyers who escrow their tax payments to place funds in a TI for the second installment of Cook County real estate taxes. "TI" stands for "title indemnity". It is simply an escrow held by a title company so that the title company can provide insurance over some issue. TIs are not only used for taxes, but at this time of year, that is their most common purpose.
The process works like this. The lender says "taxes will be out in September and we will not have our buyer set up in our system in time to make that tax payment, so we will need the title company to guarantee that the taxes for 2009 second installment taxes are paid". The title company says "ok, we'll guarantee that the taxes will be paid, but we'll need to hold some money for those taxes and once the tax bill comes out, we'll pay the bill and return any overage in the TI account to the home buyer".
In order to accomplish this, the home buyer will have to put one and one half to two times the first installment tax bill into the TI account with the title company and will have to pay a TI or title indemnity fee, a fee for a tax bill, and a tax payment fee. These fees regularly range from $150 to $200.
Rumors we have heard say that the tax bill this year may come out as late as December 15, 2010. That means that from here on out in 2010, any buyer expecting to escrow for property taxes can also expect to fund a title indemnity for the second installment of 2009 taxes.
Note: this is not a problem in counties other than Cook County. In all other Illinois counties, the tax bill comes out in one bill and both the first and second installments are already know.
Showing posts with label real estate purchse. Show all posts
Showing posts with label real estate purchse. Show all posts
Thursday, July 22, 2010
Tuesday, April 20, 2010
Pre-Closing Possession
For one reason or another, a Buyer may need to take possession of real estate before a closing. For instance, if there is a "dry-closing" (ie. one where the lender fails to fund but all other parts of the closing are done and the lender's funding should take place shortly thereafter), a Seller may be willing to allow a Buyer to take early possession of real estate. Most attorneys disfavor pre-closing possession. Why? Mostly because of liability concerns. What if the deal fails to close? What if the Buyer discovers a condition in the property that causes the Buyer to decline to close? What if the Buyer burns down the property? What if the Buyer's property moved into the real estate is stolen?
A proper and well thought out pre-closing possession agreement can address some of those concerns. While granting possession only at the time of closing is preferable, sometimes pre-closing possession is necessary.
What happens if, having transferred possession, the property is destroyed? In such as case, the Illinois Uniform Vender and Purchaser Risk Act shall apply. Unless specifically disclaimed or modified, all real estate contracts in Illinois are subject to the Act.
The act provides first that when neither legal title nor possession of the real estate have been transferred, in the case that all or a material portion of the real estate are destroyed without purchaser's fault, the Seller can not enforce the contract against the Buyer.
The act makes provision, however, for pre-closing possession. When either legal title or possession of the real estate has been transferred, in the case that all or a material portion of the real estate are destroyed without Seller's fault, then in such a case, the Buyer is not relieved of the duty to purchase the real estate.
Thus, if a buyer takes pre-closing possession of a property and the real estate burns down, the Buyer is still on the hook to buy the property.
A proper and well thought out pre-closing possession agreement can address some of those concerns. While granting possession only at the time of closing is preferable, sometimes pre-closing possession is necessary.
What happens if, having transferred possession, the property is destroyed? In such as case, the Illinois Uniform Vender and Purchaser Risk Act shall apply. Unless specifically disclaimed or modified, all real estate contracts in Illinois are subject to the Act.
The act provides first that when neither legal title nor possession of the real estate have been transferred, in the case that all or a material portion of the real estate are destroyed without purchaser's fault, the Seller can not enforce the contract against the Buyer.
The act makes provision, however, for pre-closing possession. When either legal title or possession of the real estate has been transferred, in the case that all or a material portion of the real estate are destroyed without Seller's fault, then in such a case, the Buyer is not relieved of the duty to purchase the real estate.
Thus, if a buyer takes pre-closing possession of a property and the real estate burns down, the Buyer is still on the hook to buy the property.
Wednesday, February 17, 2010
Hey, Buyer, is a short sale for you?
Short sales get you a house at a big value, but they come at a cost! I would say that, for one reason or another, only about 50% of the short sales that our office handles for Buyers actually close. The reasons they fail to close are many and varied. Most commonly, they fail to close because the Seller's bank does not approve the short sale offer, the buyer can't get financing, the real estate's value changes during the long wait between contract and closing, a new buyer is found, or the buyer gets sick of waiting. This is not to say that short sales do not close, but they are a challenge.
During a short sale transaction, the Buyer has to serve two masters - one who says "wait, we need the Seller's bank to approve this deal" and the other who says "as soon as the Seller's bank is ready, you had better be ready to close at a moment's notice". It can be difficult to serve both masters at once. In a short sale transaction, patience is a virtue. The main question for a short sale buyer is “How long can you wait?” The answer is easier if the property the question is not necessary for immediate residential occupancy. For someone who really needs to move into their new short sale purchased home, a short sale is a disaster waiting to happen. Delays are the norm. A short sale Buyer can't count on the contract closing date. Despite all the waiting, once the Seller's lender approves the sale, all of the parties must act fast to close the deal. Oftentimes, the short sale approval may only have a window of a week or so. A Buyer might feel like a yo-yo with all the waiting and edge of the seat preparedness. When the Buyer requires a loan to complete the purchase, because underwriting takes time, loan programs change, and lenders generally do not act quickly, the Buyer's lender may not be able to meet the Seller's lender's time table for closing.
Many Buyers do not want to waste money on their short sale transaction until they know that the deal will “happen”. If a lender does not approve a short sale, the Buyer could be out real money spent on appraisals, inspections, lender fees, rate locks, and attorneys fees. Thus, they try to hold off on obtaining an appraisal or inspection until they know the Seller's lender approves the deal. Oftentimes, the Seller will not agree to delay these items. From the Seller's perspective, the Seller does not want to spend months obtaining a short sale approval only to see the Buyer pull out because of inspection issues. As for the Buyer who wants to wait to get the lending process started, they might find that their lender is unable to close in time.
Even if costly items can be delayed, the delay may make the deal more difficult. If an inspection is performed after the Seller's lender's has approved the short sale, the buyer should not expect any inspection credits (to get those would require going back to square one in the Seller’s short sale approval process) and short sale sellers usually have no money of their own to put into the deal!
The short sale Buyer trades a great price for any right to complain about much of anything, including legal rights. The Seller's lender controls the game. Any short sale seller represented by a competent attorney will work to reduce the Buyer’s right to require a closing absent the approval of all third parties who are owed money. The Buyer generally has to play along. Again, this is part of the trade off for a “great” price, as the lender is normally swallowing a big loss. If the price is not great, the Buyer should not do the deal. After all, there are lots of properties for sale on the market these days.
After overcoming all of tribulations of getting to the closing closing table, the majority of short sale closings that do close usually require more than one day to close! A short sale closing begins like most others. However, the title companies usually need the seller’s lender to sign off on the sale or their payoff letter. This process usually causes delays. I have personally witnessed a seller's lender take a week to approve their already approved short sale payoff letter. Short sale closings can take a full day. They can be re-scheduled several times. They can take multiple days to close. All of these are possible in a short sale.
A short sale Buyer who is flexible, patient, and willing to "play the game" can find a real bargain in the real estate market. They just have to be willing to do what it takes to get that bargain.
During a short sale transaction, the Buyer has to serve two masters - one who says "wait, we need the Seller's bank to approve this deal" and the other who says "as soon as the Seller's bank is ready, you had better be ready to close at a moment's notice". It can be difficult to serve both masters at once. In a short sale transaction, patience is a virtue. The main question for a short sale buyer is “How long can you wait?” The answer is easier if the property the question is not necessary for immediate residential occupancy. For someone who really needs to move into their new short sale purchased home, a short sale is a disaster waiting to happen. Delays are the norm. A short sale Buyer can't count on the contract closing date. Despite all the waiting, once the Seller's lender approves the sale, all of the parties must act fast to close the deal. Oftentimes, the short sale approval may only have a window of a week or so. A Buyer might feel like a yo-yo with all the waiting and edge of the seat preparedness. When the Buyer requires a loan to complete the purchase, because underwriting takes time, loan programs change, and lenders generally do not act quickly, the Buyer's lender may not be able to meet the Seller's lender's time table for closing.
Many Buyers do not want to waste money on their short sale transaction until they know that the deal will “happen”. If a lender does not approve a short sale, the Buyer could be out real money spent on appraisals, inspections, lender fees, rate locks, and attorneys fees. Thus, they try to hold off on obtaining an appraisal or inspection until they know the Seller's lender approves the deal. Oftentimes, the Seller will not agree to delay these items. From the Seller's perspective, the Seller does not want to spend months obtaining a short sale approval only to see the Buyer pull out because of inspection issues. As for the Buyer who wants to wait to get the lending process started, they might find that their lender is unable to close in time.
Even if costly items can be delayed, the delay may make the deal more difficult. If an inspection is performed after the Seller's lender's has approved the short sale, the buyer should not expect any inspection credits (to get those would require going back to square one in the Seller’s short sale approval process) and short sale sellers usually have no money of their own to put into the deal!
The short sale Buyer trades a great price for any right to complain about much of anything, including legal rights. The Seller's lender controls the game. Any short sale seller represented by a competent attorney will work to reduce the Buyer’s right to require a closing absent the approval of all third parties who are owed money. The Buyer generally has to play along. Again, this is part of the trade off for a “great” price, as the lender is normally swallowing a big loss. If the price is not great, the Buyer should not do the deal. After all, there are lots of properties for sale on the market these days.
After overcoming all of tribulations of getting to the closing closing table, the majority of short sale closings that do close usually require more than one day to close! A short sale closing begins like most others. However, the title companies usually need the seller’s lender to sign off on the sale or their payoff letter. This process usually causes delays. I have personally witnessed a seller's lender take a week to approve their already approved short sale payoff letter. Short sale closings can take a full day. They can be re-scheduled several times. They can take multiple days to close. All of these are possible in a short sale.
A short sale Buyer who is flexible, patient, and willing to "play the game" can find a real bargain in the real estate market. They just have to be willing to do what it takes to get that bargain.
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