Thursday, December 29, 2011
The City of Chicago has long required that real estate sellers obtain a water department "full payment certificate (FPC)" before a sale transaction is completed. The Chicago Department of Revenue will not seller property transfer tax stamps without the full payment certification, and the Cook County Recorder of Deeds will not accept a deed without the transfer tax stamps.
Certain classes of transactions are exempt from having to pay transfer taxes and have been historically also exempt from the requirement of obtaining / presenting a full payment certification. These include transfers to add a spouse (or other party) onto a title; transfer to change the form of ownership of a property, and transfers that are gifts. This includes transfers that are made for estate planning purposes, and transfers between current owners of the property among themselves.
Effective January 1, 2012, all transfers of property will require a FPC, including previously exempt transaction.
Does the City of Chicago really expect to recoup enough money in delinquent or unpaid water bills from "exempt" transactions to cover the extra cost of labor to process all the additional paperwork?
I do not know, but I do see a couple of issues for consumers and attorneys.
Additional Cost to the Consumer:
The City charges a $50 fee to issue out a full payment certification. Most law firms rely on clerking services to procure the FPC paperwork - who charge an additional fee to do so. Thus in a typical sales transaction, the seller will pay both an FPC fee and clerking service fee.
However, transactions exempt from transfer taxes will also be exempt from paying the City's $50 FPC fee. Most lawyers will still employ clerking services to procure the paperwork - or charge clients their hourly rates to do so themselves. (consumers will not be "exempt" from paying the "new" clerking fees or additional legal fees).
Aggravation and More Work for Unwary Attorneys:
I predict that more than a few hapless attorneys will try to record quit claim deeds in the coming weeks, unaware of this new policy. They will waste time (and perhaps charge clients) for their resulting additional efforts.
Unfortunately for all of us, the City did not do much of anything to announce this change. I only learned of this yesterday, having run into a learned colleague while we were both in line at City Hall to purchase FPCs for purchase/sale clients (thanks Bob!) and later confirmed by a call over to the Water Department.
The temporary waiver of FHA’s "anti-flipping" regulations has been extended through 2012.
"Flipping" is the industry term of art for a real estate purchase that is quickly followed by a resale - presumably for a higher price and resulting (but not excessive) profit.
With certain limited exceptions, FHA rules prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In other words, Buyers willing to purchase a property that want to rely on an FHA guaranteed loan would only be able to do so if the seller has owned the property long enough.
The FHA temporarily waived this regulation in 2010 through January 31, 2011, then extended the waiver through year's end.
The extension allows buyers to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.
The idea here is to allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
The Waiver does contain strict conditions and guidelines to prevent the predatory practices often associated with property flips - where properties are quickly resold at inflated prices to unsuspecting borrowers.
- All transactions must be arms-length between unrelated buyers and sellers.
- If a re-sale price is 20% or more above the seller’s acquisition cost, the lender must document justification for the increase in value; and
- The Waiver is limited to forward mortgages.
Effective January 1st, 2012, the Fidelity companies will charge Buyers a flat rate to record closing documents with local county recorders of deeds.
County Recorders of Deeds keep the "official" public registry of all land title transfers and liens placed against real estate, such as mortgages, foreclosure proceedings, and the like. The Recorders charge fees based on the number of pages in any given document,
This causes problems for residential mortgage lenders who are obligated by federal regulations to give their borrowers accurate "good faith estimates" of their closing costs, but may not know exactly how many pages of mortgage paperwork a borrower will need to sign at closing,. This happens because the loan originator may not know what end lender may be making the loan, what loan product will be used, what riders may need to be attached to the mortgage, or what document preparation service or software will be used to generate the mortgage paperwork.
In turn, this causes problems for attorneys who also want to give their clients an estimate of the cash to closing (aka the "bottom line") for a closing.
And most importantly of all, it adds to the problems Buyers have trying to figure out precisely how much money they will need to fork over at the title company office to close the deal.
Going forward, Chicago Title, Fidelity National & Commonwealth will all be charging Buyers at flat rate to record deeds and mortgages based on the average recording charge per transaction, rather than based on the actual number of pages to be recorded.
For Cook County transactions, the (purchase) flat rate will be $143.00
In DuPage, Kane, and Lake Counties, the fee will be $74.00
Kendall and McHenry County recordings will cost $86.00
Side effects? of course.
Cash Buyers will end up paying more for recording than they would have under the old system, as the average recording fee is certainly skewed by multi-page mortgage documents that they do not have to record.
By that same token of course, Buyers using first & second mortgages will likely receive a significant savings, again, because they will only be charged the average, and based on the additional second mortgage recording fees.
No word from the other local major title companies at this time.
Tuesday, December 20, 2011
An attractive home, in a nice neighborhood, well staged and ready for showings? An attactive price ?
Of course these things help, but cannot assure a sale, let alone an offer.
Many sellers are resorting to various forms of promotions to entice buyers agents to show/sell their offerings. Other promotions are geared directly towards buyers.
Here is a great article from the Washington Times on some of the various techniques being used.
Cover story: Incentives upgraded in down market - Washington Times:
The article falls short a bit for Chicago area home buyers and sellers. There are some pitfalls to be avoided. Mortgage underwriting guidelines may limit the types (and amounts) of concessions a buyer can take from a seller. Some concessions can have unintended tax consequences for unsuspecting sellers.
Do your homework before agreeing to offer - or accept a seller incentive. Better yet, do your homework, AND check with your lawyer.
Tuesday, December 13, 2011
The difficult lending climate has turned many would-be home buyers into temporary tenants.
Whichever side of the Landlord-Tenant relationship a person finds himself on, at least some familiarity with local landlord-tenant statutes is worth while.
City of Chicago landlords and prospective tenants ought to take note of a newly enacted provision of the State of Illinois Landlord Tenant Statute.
Effective New Years Day, 2012, many landlords in Chicago will be obligated to change or re-key locks for incoming tenants.
The law APPLIES to:
- City of Chicago Landlords
- Who rent residential dwelling units
- In buildings with 4 or more residential units, OR fewer, if the Landlord does not live in the building.
The law EXEMPTS
- Owner-occupied buildings with 4 or fewer apartments
- Written leases that obligate the tenant to change or re-key the locks
- Rentals of a singe room within a private home.
Wednesday, October 26, 2011
These net effect of these three announcements (and the many more that are about to follow) is that the rules have changed for ALL local closings... and anyone not keeping abreast is going to have an unfortunate problem at their next closing.
1st American's notice takes the issue even one step further, and this will be of particular concern and import to real estate lawyers: First Am will no longer accept third party title insurance company checks either. In other words, Buyers who intend to use the proceeds of a sale to close their next purchase at First American better have a lawyer (or realtor) who is hip to the new requirements --- or enough time to have that title company check clear into their bank account, and be able to document ("source") the funds to satisfy their mortgage lender.
Date: October 26, 2011
To Our Valued Customers:
Consumer banking technology now allows people to directly deposit checks into their bank accounts using Smart Phone applications and other computer technology. There have already been documented cases of fraud associated with this new technology. As such, we now require that all funds presented to us be payable directly to First American Title.
In addition, if a customer is presenting a title company check to us from a different transaction, the title company check must be made payable directly to First American Title.
When requested to redirect proceeds from our closing to another title company, First American Title will accommodate with written direction from the seller.
Thank you for your cooperation. Should you have any questions, please feel free to contact XXXXXXXXXXXXXXXXXX
It will be interesting to see how rigidly this rule is enforced over the next couple of weeks, but I see a very painful learning curve ahead for a lot of us.
Careful practitioners are not only going to have to update their own office procedures and client-closing instructions.... they are going to have to educate their clients, Realtors, and opposing counsel too!
Monday, October 24, 2011
The long standing "best practice" for having Buyers bring funds to a closing table has been to instruct them to bring cashiers' checks to a closing table made payable to themselves.
Until now, it has just the way things have been done my whole career.
Back in June, I reported seeing a notice from one of the local Chicago Title offices indicating that CT would require all checks be made payable directly to the title company. At that time, only one or two offices were actually requiring this, and everything was business as usual.
Closing bays at Chicago Title's flagship offices in Chicago now sport notices that CT will no longer accept such 3rd party checks.
Now, effective October 27th, Professional National Title Network, Inc (PNTN) is also requiring that only incoming checks made payable directly to PNTN will be accepted. Checks made payable to individuals to be endorsed over to the title company will no longer be acceptable.
I expect that other companies in the Fidelity National family, and agencies underwritten by CT will likely follow suit soon.
Closings will still take place, but i can already envision a great many of them will be delayed while uninformed or ill advised buyers rush back to their banks to replace the checks they bring to closing with checks that the title companies will actually accept.
Friday, August 19, 2011
Wednesday, June 29, 2011
lucky souls who's parents or other benevolent freinds or family might consider financing their real estate purchases - HUD announced rules that may actually let you execute on your plans.
To soon to know how the State of Illinois will interpret this one, but it seems pretty clear. Seller financing and parent-financing of mortgages can resume in Illinois. Buyers who are looking for "creative financing" have some new options - that is to say, some classic old-school financing tools that fell out of favor may be back.
Have a question about seller financing or other family-funded financing of your next real estate purchase? give me a call.
Thursday, June 23, 2011
Monday, June 20, 2011
Thursday, June 2, 2011
Outbound emails from CT's REO unit in Carrol Stream now advise recipients that the title company will no longer accept third party checks at closings. Apparently, company auditors want all funds to be made payable directly to the title company. The new rule is effective May 1, 2011, but I am told that Carrol Stream is implementing a "soft" introduction of the new rules to allow time for word to get out of the change.
The rule of thumb for as long as I have been handling Chicago area real estate closings has been that any funds a Buyer (or Seller) would bring to the closing table would be in the form of a wire transfer or a cashiers/certified check made payable to that Buyer (or Seller). Once the parties were satisfied with all of the closing documents and settlement figures, the Buyer would endorse that check over to the title company, who routinely accepted and deposited funds into the closing escrow.
If something went wrong at closing, the conventional wisdom holds that a Buyer can more easily reclaim the funds intended for closing by merely endorsing and re-depositing funds back into his or her own bank account.
Sure from time to time, instructing a client to write a check payable to "your self" had unintended consequences, but the system has worked well for my clients up to this point and Buyers had that extra measure of confidence that their money is safe and that they have full control over it up until the last possible moment in the closing process.
Switching over to the new system should not be too much of a problem - at least for those "in the know." There will no doubt be lawyers, loan originators and real estate agents who do not get (or read) the memo, who's clients will have to make an emergency run to the bank from a closing to get their closing checks re-issued. The rest of us will sit at the closing table and wait.
Tuesday, May 24, 2011
Last week, WalletPop reported:
The Internet Crime Complaint Center's latest scam alert includes a counterfeit check scheme targeting real estate professionals.
Alerts by the IC3, a partnership between the FBI and the National White Collar Crime Center(NW3C), reflect recent cyber-crime trends and new takes on existing scams. Here's a summary of the new threat:
Counterfeit Check Scam Targets Realtors and Real Estate Attorneys
The IC3 says it's received complaints about counterfeit check scams for years, which typically involve criminals convincing unsuspecting victims to cash checks or money orders and then wire them a portion of the funds overseas. Only after wiring the funds do the victims learn the check was fake -- leaving them holding the bag for the full amount.
The latest variation on this scam targets realtors and real estate attorneys, who are being contacted by overseas fraudsters purportedly interested in purchasing property in the U.S.
After requesting information on property listings, the criminals indicate their desire to pay cash for the property they're interested in, and ask the realtors for the name of a local attorney to handle the purchase and conduct the closing.
Once a selling price is negotiated, the real estate attorneys receive checks typically written for hundreds of thousands of U.S. dollars. Once the attorney deposits the check -- but before it clears -- the scammers contact them with a plausible reason to wire them a portion of the funds to their account.
The checks used in these scams, the IC3 says, are often from legitimate business accounts that have been appropriated illegally by the fraudsters.
If you think you've been the victim of one of these online scams -- or any other -- you can file a complaint with the IC3 here.
Wednesday, May 18, 2011
Thursday, May 5, 2011
In one of his final legislative acts, Mayor Richard Daley compromised with the Chicago City Council on an ordinance to fund affordable housing.
It took nearly two years of stalling, back and forth negotiations and political maneuvering.
But now some tax money is available to developers to buy and rehab vacant Chicago homes or apartment rentals. The money comes from a pot known as tax increment financing – or TIFS.
Ald. Walter Burnett worked with the neighborhood coalition known as Sweet Home Chicago to get the measure passed. Advocates see it as a way to mitigate the foreclosure crisis.
"People need some relief and they need some help. And this is a good step in the right direction. We pray that the next administration -- that it won’t take as long or be as hard," Burnett said.
The ordinance allows developers to receive up to 50 percent of the cost of purchase and rehab of multi-family rental buildings if more than half of the units go toward affordable housing – families earning no more than half of the area median income.
Sweet Home Chicago originally wanted a mandated percentage of TIF dollars to go toward affordable housing.
But activists said they are pleased with this compromise.
COMMENT - This is a good development (ha) for the City. Ask anyone who looks at Real Estate for a living and they will tell you more than you want to know about dilapidated, abandoned housing stock. Ask your local real estate developer or construction tradesman how business is, and they will almost certainly tell you that they could use another job or project to work on.
Is this TIF funding the sort of incentive we have been waiting for to kick-start a new rehab boom?
Tuesday, April 5, 2011
Could this happen again? Sure, I suppose so. Fortunately however, Illinois home buyers and sellers are now protected by a recent change to the Illinois Title Insurance Act that requires mandatory closing protection letters. Every title insurance agent's underwriter must now assure the buyer, new mortgage lender, and seller that no loss will be suffered as the result of a dishonest title agent. Of course, buyers and sellers are paying new fees for that protection, but lest we gripe about those new charges too much, it is worthwhile to look back to remember why.
Two plead guilty in massive DuPage mortgage scam
Thursday, March 31, 2011
Of all the nuances in my work helping buyers and seller close their real estate transactions, few facets of the process cause as much confusion as Cook County property taxes. There are a great many reasons for this, but on the bottom line, it is just darn messed up.
The property tax system pits citizen tax payers against citizen consumers of governmental services. We want the good services and benefits our State, County, and City...but we would like them a whole lot better if someone else would pay for them.
Carrie Porter over at the Morton Grove Patch is running a week long series on the Cook County property tax system. I highly recommend taking a look at her reports:
- A video explaining the basic computation of property tax bills
- A look at the extra burden our tax system places on business owners. (You think your residential bill is unreasonable?)
- An explanation of how / why owners of neighboring houses of the same relative value can pay radically different tax bills
- A fascinating peak at the way local governmental units work together to fight back against property owner tax appeals
Thursday, March 17, 2011
Progress Illinois reports that the mayor's bill, introduced on March 9:
"seeks to tackle the growing problem of vacant homes that are blighting neighborhoods across Chicago, and in particular in minority communities.
Called the Vacant Building TIF Purchase and Rehabilitation Ordinance, the bill (PDF) proposes allowing residents with a household income no greater than 100 percent of the regional median income to apply for a tax increment financing (TIF) grant that would pay for up to 25 percent of the cost of purchasing and rehabilitating an empty residential property. Single-family empty homes or units in condo and cooperative buildings with four units or fewer are eligible. The empty homes must be located in a TIF district and must be in need of at least $25,000 in fix-up costs, the proposal states. Homebuyers would be required to live in the property they are purchasing and fixing up and must be first-time purchasers. The full city council would have to approve each and every grant.
"We needed to incentivize a way to get these vacant buildngs back into productive use," said Department of Housing and Economic Development spokeswoman Molly Sullivan. "We have a huge amount of vacant buildings and most of them are from foreclosures."
According to the Woodstock Institute, banks filed 23,364 foreclosure cases (PDF) against Chicago mortgage holders in 2010, up 3 percent versus 2009. And while 10,569 properties completed the foreclosure process last year, there are an increasing number of vacant, deteriorating homes in the city that have gone into foreclosure but have not emerged from it with any clear outcome".
Tuesday, February 15, 2011
UNSAFE: UNINTENDED CONSEQUENCES OF SAFE MORTGAGE LICENSING ACT OF 2008 MAKE IT HARDER FOR SOME LOCAL BUYERS TO FINANCE THEIR HOME PURCHASES
Non-interest bearing mortgage loans are still allowed.
The new rule was enacted to implement a Federal law intended to enhance consumer protection and reduce fraud in the mortgage industry. That protection it seems, comes at a cost. Consumers have no choice now. Licensed mortgage lenders are the only game in town. At least for residential transaction.
THE FEDERAL LAW:
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), was passed on July 30, 2008. The federal obligated each of the 50 states to enact their own laws requiring licensure of mortgage loan originators (lenders) according to national standards and to participate in the Nationwide Mortgage Licensing System and Registry (NMLS). The Act sets minimum standards for licensing and registration of state-licensed mortgage loans. The Department of Housing and Urban Development (HUD) is charged by the SAFE Act with establishing and implementing a system for mortgage loan originators in States that do not meet the minimum requirements
State-licensed loan originators must
• complete pre-licensure training,
• pass written tests,
• take annual continuing education courses,
• be fingerprinted,
• submitted to a national registry and to the FBI for a criminal background check;
• provide authorization to the registry to obtain an independent credit reports, or provide appropriate surety bonds.
The SAFE Act required the states to have a licensing and registration system in place by either July 31, 2009 (for states whose legislatures meet annually) or July 31, 2010 (for states whose legislatures meet biennially). The federal registry itself just opened on January 31, 2011.
THE PROBLEMATIC FEDERAL PROVISION:
This law applies to any individual who, for compensation or gain, takes a residential
mortgage loan application or offers or negotiates terms of a residential mortgage loan application. There are no apparent exceptions. This means that anyone who expects to collect interest on a mortgage loan, including say, sellers wishing to give a buyer financing or parents intending to help a child out, are deemed to be receiving compensation or gain in the process. They must take the classes, tests and otherwise enter the federal registry.
THE PROBLEMATIC STATE PROVISION:
Although Illinois law exempts individual who offer loans with immediate family members and who offer loans secured by their own residences from registration as loan originators, the Illinois Residential Mortgage License Act prohibits the funding, originating and servicing of residential mortgage loans without a license.
HELP ON THE WAY:
Last week, Senator Michael Frerichs introduced SB1603, seeking to exempt anyone who makes three or fewer residential mortgage loans a year from licensure. If and when this bill is enacted into law, seller financing, and intra-family secured mortgage lending may resume.
Wednesday, February 2, 2011
Addicts are posing as home buyers and cleaning out medicine cabinets in homes for sale, according to recent police reports.
"It's commonplace – more common than you think," Detective Dennis Luken, vice president for the Ohio chapter of the National Association of Drug Diversion Investigators, told the Cleveland Plain Dealer. "It's everywhere."
In one recent case, a man showed up to an open house and while the real estate agent was distracted with other customers he went through the home owner’s medicine cabinet. The agent overheard the man going through the drawers, and he was later questioned by police officers. He admitted that he went to the house looking for pain pills and that he learned the trick from peers at a drug treatment program.
Authorities say some criminals also copy information off the home owner's prescription label and then call to have the drug refilled so they can pick it up later.
Carol Woodard, chair of the Cleveland Area Board of REALTORS®, says she advises clients who have a house on the market to have a filing cabinet or locked drawers to stow away any medicine, personal records, credit cards, mail, and any identifying information on their children.