Here are some tips for renters looking to find the right place.
1) Always remember that there are lots of rental units on the market. This is a renter's/buyer's market. If something does not smell right, walk away.
2) Consider using a real estate agent. In the downturn, many real estate agents have gotten into the game of showing apartments. It costs nothing from the renter's pocket to use an agent. Agents have access to MLS listings and can pre-arrange appointments to walk a potential renter through a number of units on the same day.
3) Tenants should be familiar with the Chicago Residential Landlord Tenant Ordinance and their rights under it vis a vis security deposits, prohibited lease provisions, and other required disclosures. It is actually better to find a landlord who complies rather than either 1) a landlord ignorant of the law or 2) a landlord who does not comply with the law.
4) Check the cook county clerk of the circuit court website to see if your potential landlord is a party to any lawsuits, especially foreclosures. You can also check the recorder of deeds website to see if there are any lis pendens recorded against the property. Building code violations can also be a good clue that the landlord has a big problem. Landlords involved in foreclosures are usually not going to be good landlords nor will a tenant's tenancy likely extend the full term.
5) If the landlord agrees that anything is to be done before a tenant moves in, the tenant should not move in before the work is done. This should be a provision in the lease excusing the tenant from performance until the landlord completes any necessary work. For instance, if a landlord is supposed to paint a bedroom but does not, a tenant can safely assume that most likely this is 1) probably the landlord's normal practice and 2) the yob will probably never get done. Tenants should negotiate a small hold fee or security deposit until any of those sorts of things are completed. A landlord who waits on those sorts of things is likely waiting for the tenant's deposit to have the money to do whatever work needs to be done or does not really intend to do the work.
6) Tenants should not spend their own money on a rental unit until they are sure that they will be staying/leasing. I was contacted a few months ago by a lady who told me that she had terrible allergies. After doing massive remodeling in the property, she told me she discovered mold in the unit and it was hazardous for her to live there. The landlord had committed numerous CRLTO violations that would give her a right to terminate the lease. The tenant declined to move because she "spent so much money fixing the place up". True story. Don't do this.
7) Plan in advance. A tenant should look in plenty of time before needing to move. Tenants should not get caught in a situation where they must move and then might have to accept a less than optimal situation.
8) Tenants should inspect a rental unit THOROUGHLY. Check under the kitchen sink or in places where water flows for mold. See how drafty the windows are. Listen for traffic/train noise. Make sure everything works (turn on anything that might leak and let it run for a while to be sure). Make sure there are no stains in the carpet being hidden. Look "UP" - at the ceilings for signs of water damage or repairs to water damage. Document the condition of the place. Take pictures. Sign something that indicates any bad conditions that exist at the start of the tenancy so there is not question as to who is on the hook at the end of the tenancy.
9) Prospective tenants should talk to other tenants in the building to get a sense of the landlord's responsiveness and practices. If things are bad, other tenants will usually say so.
10) Tenants should go with their gut and should not act stupid. Trust instincts when they say "run". Do NOT trust a landlord that does not have paperwork or copies available - if you don't get your lease and receipt up front, you might never get it.
I could probably go on and on, but those should give tenant's a good head start on having a successful run as a tenant.
Tuesday, August 3, 2010
Thursday, July 22, 2010
"TI" Time for Taxes
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.
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.
Monday, June 7, 2010
Will County Foreclosure Mediation
Just hours ago, the Illinois Supreme Court announced a program that will use mediation as a means of possibly reducing the burden of foreclosures in Illinois. The program will begin in the Circuit Court of Will County. Court has proposed this new program as a way to prevent vacant and abandoned homes and to keep families in their homes. The program will require any residential foreclosure complaint to be scheduled for mandatory pre-mediation. The mediation will focus on determining, with an outside mediator, whether or not a loan modification or other resolution can be found. If not, the mediation can be used to facilitate a consent foreclosure or the waiver of any deficiency against the borrower. Lenders will be required to participate in the program in food faith or face sanctions, including the possible dismissal of the foreclosure.
The program will be paid for by an increase in plaintiff's filing fees for each foreclosure from $276 to $426.
The program will be paid for by an increase in plaintiff's filing fees for each foreclosure from $276 to $426.
Wednesday, June 2, 2010
Fannie Mae's new rules for post-shortsale buyers
Many people wonder "what is the effect of a short sale on the ability to get a loan in the future"?
Fannie Mae, the company that securitizes mortgage loans, making them more affordable and the entity largely responsible for the guidelines that regulate most conventional mortgages, has provided a bit of an answer. Fannie Mae has released announcement SEL-2010-05 which sets forth the new requirements for home buyers to obtain a new loan if they have participated in a "pre-foreclosure event" (ie. a pre-foreclosure sale, a short sale, or a deed in lieu of foreclosure). Until now, there was no policy on short-sales. The new regulations go into effect on July 1, 2010.
For borrowers with a pre-foreclosure event in their past, there will be a waiting period before a new loan can be obtained. The amount of downpayment provided by the borrower will affect the length of the waiting period. The periods are as follows:
20% downpayment - 2 years
10% downpayment - 4 years
less than 10% downpayment - 7 years
The waiting period begins upon the completion date of the pre-foreclosure event. In addition, after 2 years with 90% LTV and with extenuating circumstances, a lender may be able to obtain an exception to the waiting period.
Guidelines can change on a regular basis, but for know, property owners considering a short sale or a deed in lieu of foreclosure will at least have an idea of some of the consequences of the pre-foreclosure event.
Fannie Mae, the company that securitizes mortgage loans, making them more affordable and the entity largely responsible for the guidelines that regulate most conventional mortgages, has provided a bit of an answer. Fannie Mae has released announcement SEL-2010-05 which sets forth the new requirements for home buyers to obtain a new loan if they have participated in a "pre-foreclosure event" (ie. a pre-foreclosure sale, a short sale, or a deed in lieu of foreclosure). Until now, there was no policy on short-sales. The new regulations go into effect on July 1, 2010.
For borrowers with a pre-foreclosure event in their past, there will be a waiting period before a new loan can be obtained. The amount of downpayment provided by the borrower will affect the length of the waiting period. The periods are as follows:
20% downpayment - 2 years
10% downpayment - 4 years
less than 10% downpayment - 7 years
The waiting period begins upon the completion date of the pre-foreclosure event. In addition, after 2 years with 90% LTV and with extenuating circumstances, a lender may be able to obtain an exception to the waiting period.
Guidelines can change on a regular basis, but for know, property owners considering a short sale or a deed in lieu of foreclosure will at least have an idea of some of the consequences of the pre-foreclosure event.
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.
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