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from Local Attorney, Michael H. Wasserman

Tuesday, November 3, 2009

NOVEMBER MONTH END CLOSINGS - A Warning

Many are first time home buyers trying to squeak "under the wire" in hopes of closing contracts before November 30th - the sunset date for the Federal First Time Home Buyer's Tax Credit. The impending deadline presents some unique challenges for Buyers and Sellers.

That November 30th deadline comes smack dab at the end of the Thanksgiving day weekend. (What genious in Washington did that?) That means a host of closings are being scheduled for Friday the 27th and Monday the 30th the last two possible days to get closings done.
  • Will the title companies and lenders cancel all holiday vacations and work at full capacity to get these closings done expeditiously, or will be have to sit for hours at the closing table while closers handle multiple simultaneous closings?
  • Will loan officers and processors get files to the underwriters with time enough for review and to satisfy conditions before the inevitable holiday slowdown, or will some Buyers be disappointed when there lenders "blow" the November 30 deadline?
  • What about those pesky property tax bills?
That last one worries me a bit more than the others. Don't forgot the interplay between the federal tax credit deadline and Cook County's Property Tax Deadline.

Cook County taxes are, of course, theoretically mailed in August to be due on September 1st. This year, as in what 16 of the last 17 before it, the taxes came out late; Mailed last week and due December 1st.

Sellers are going to have to pay those taxes at or before closing. If the Seller's mortgage lender pays the taxes from an escrow, the Seller is going to have to somehow prove to the title company that they in fact did so. We may be able to prove payment three different ways:
  1. Show a paid receipt
  2. Confirm payment on the County Treasurer's web site.
  3. Show proof on the lender's mortgage payoff statement that the tax payment was disbursed (even if not posted paid by the County).
Lenders do not all pay tax bills as soon as they are received (do you?) Most wait until the deadline nears before sending the payments in. The Treasurer does not report payments to her web site in real time. No title company is obligated to accept that payoff statement as a proof of payment. Many might refuse them altogether. Others may require sellers (or their attorneys) to sign "personal guaranties or hold money aside from the closings.

Sellers, Attorneys, and Real Estate Agents are strongly encouraged to coordinate property tax payments with mortgage lenders as possible to minimize the possibility of a title clearance problem or a hold back of seller proceeds.