LoftusLaw Goes To London

In another departure from the topic of real estate, I am pleased to report that LoftusLaw (basically just me) had the honor of spending a week in London, UK soaking in the sites and learning about the UK legal system and the legal traditions we share with our brothers and sisters across the pond.  I would like to give a huge thanks to the Chicago Bar Association, and especially Beth McMeen for organizing the trip.  It is no small feat to get over 100 attorneys and their guests moving in the same direction for three straight days!

The highlight of the trip was a banquet at the Inner Temple Main Hall.  The Inner Temple is one of the four Inns of Court in London.  All barristers in England and Wales must be a member of one of the Inns.  The exact date of founding of the Inner Temple is unknown, but it certainly existed no later than 1388 (according to Wikipedia at least).  Suffice to say there is a lot of history to soak in there!

After dinner, we were treated to a few words by Robin Griffith-Jones, the Reverend and Valiant Master of the Temple (what a title!) and Justice of the Supreme Court, the Right Honourable Lord Hughes of Ombersley.  The Master of the Temple is actually referred to by Dan Brown in the DaVinci Code!  Although the Master does not recall his meeting with Dan Brown (pre book), Brown apparently caught the Master on a bad day (you can read all about it in the Master’s book).  Both speakers were extremely entertaining.  To top of the evening, we were treated to a violin and piano concert in the Temple Church, which dates back to the 12th century.  Sara Su Jones and Neil Posner, both lawyers and CBA members, provided us with beautiful music.  The whole evening was a night that I will not soon forget.

There were many other highlights on the trip (Windsor Castle, Royal Courts of Justice, Middle Temple Hall, etc.).  Feel free to ask about them!  As always, please do not hesitate to contact me at 773-632-8330 or patrick@loftus-law.com.  And finally, as always, I am honored by your referrals.  To learn more about my practice, please contact me!

3 Negotiaton Strategies Sellers Can Use To Walk Away From Closing With More Money

Once you receive a decent offer for your home, you and the potential buyer will probably make the price the main focus of your negotiations.  As important as the price is, it is not the only contract term that determines how much money the Seller will walk away with from the deal.  Because the Buyer will likely be so singularly focused on the price, you may be able to gain valuable concessions from the Buyer along the way without much argument.  Here are three strategies you can use increase your bottom line without making a change to the purchase price.

Tip #1 – Tax Credit Percentage

A frequently overlooked contact term that directly affects the seller’s bottom line is the real estate tax credit. In Illinois, owners of real estate always pay the prior year’s tax bill.  As a result, a seller gives the buyer a credit at closing for unbilled taxes.  The credit is typically 105%-110% (the Proration Rate) of the the last tax bill, prorated through the date of closing.  A savvy buyer’s agent will make the offer with a 110% (or more) Proration Rate.  Your counter-offer should modify the Proration Rate to 105%, thereby reducing the credit given to the buyer at closing and putting more money in your pocket.  For example, 5% of a $10,000 is $500.  As they say, that’s not nothin’.  (For a more in-depth discussion of real estate tax credits, click here.)

Tip #2 – “As Is”

Another way a seller can negotiate some value is to include an “as is” provision in the contract. Although the buyer will still be allowed to have their professional inspection, the buyer is precluded from requesting repairs or credits based on the insepctor’s report.  Let’s face it, regardless of how immaculately you have maintained your home; the inspector will find “issues” to include in his report.  He needs to justify his fee, after all.  Every transaction is unique; however, I generally see sellers giving anywhere from $250 to $2,000 in credits or repairs for sometimes dubious inspection items just to keep the transaction moving forward.  By making the sale “as is” you can maintain your bottom line by cutting off the buyer’s leverage to request costly repairs to the property or monetary concessions based on the inspection.  This strategy is particularly useful in a sellers market, which is the case currently.  (For a more detailed discussion of ‘As Is’ contract provisions, click here.)

Tip #3 – Hire the Right Attorney

Come on.  You saw this coming, didn’t you.  Simply stated, real estate transactions involving the exchange of hundreds of thousands of dollars are not simple matters. These bits of advice are but the tip of the iceberg in terms of what an experienced advocate brings to the table for you.  LoftusLaw is a firm with its primary focus on residential real estate transactions. Our mission is to provide clients with personal, hands-on service, so that each client feels like they understand every aspect of their transaction. Attorney Patrick Loftus has handled residential real estate transactions in the Chicagoland area for 13 years. He is a member of the Illinois Real Estate Lawyers Association. Experience and personal touch are what sets LoftusLaw apart from the rest.

As always, I welcome your comments and questions, and especially your referrrals!  I can be reached at patrick@loftus-law.com or 773-632-8330.  I look foward to hearing from you!

Why Should You Hire An Attorney To Buy or Sell Your Home?

Answer: Because you do not want to risk flushing your money down the toilet.

     You have probably heard people say that you don’t really need a lawyer for a real estate transaction.  Or you may be under the impression that real estate closings are easy for lawyers, and your real estate lawyer really isn’t doing much other than collecting a check at closing.  To be honest, I hope and pray that your lawyer does not have much to do, because a smooth transaction makes the herculean task of moving a lot less stressful.  Unfortunately, most real estate transactions will involve some unexpected hiccups, and that’s when having an experienced real estate attorney will save you from suffering a potentially catastrophic loss.

     Take for example the story of military veteran Danny Shedd, whose story is told in an article published by Vice.  (click the link to read more)  The article describes how Shedd is currently being evicted from the home he purchased, because the deed he received at closing incorrectly described some swamp land somewhere in the woods rather than the property he was trying to buy for his family.  This type of mistake is exactly the type of error that your real estate lawyer can identify and deal with before you hand over your hard earned savings for unihabitable swamp land.  If you tell me that I can spend $500 to save a little over $172,000, I would ask you where I mail that check!

     The bad news is that the best result Shedd can hope for is a refund of his purchase money from the Seller.  Even worse is that it will not be cheap to arrive at that result, and now he has to find a new home for his family. probably not be cheap for him.  Had he been represented by an attorney in the transaction, the mistake would likely have been discovered before Shedd plunked down $172,425 in cash for the wrong plot of land.

    If you have questions about real estate closings, or any other real estate matter, as always, you can contact me at patrick@loftus-law.com or 773-632-8330.  To see what my clients have to say about me, please visit me at avvo.com or on my Google + page.

     Shout out to Vice for the good content.

Closing Costs Part 2 – Title Charges

In the second installment of my series on closing costs, I will tackle title charges.  Generally speaking, when you buy or sell a home, the closing of the transaction takes place at a title company.  The title company has two main roles: 1. escrowee and 2. issuing title insurance.  As escrowee, the title company receives funds from the buyer and lender and disburses the money at the end of the closing based on the parties instructions.  Title insurance insures the buyer’s clear title to the property.    Title companies don’t work for free, so there are some costs associated with the services they provide.

Escrow/Settlement Fee

This fee is for the title company’s escrow services, and if there is a lender involved, for the closer to be the eyes and ears of the lender at the closing table.  The amount of the fee depends on the purchase price of the property, and it generally runs between $1,100 and $1,900.  The buyer pays this charge unless it is a cash transaction, in which case the parties split the charge.

Owner’s Title Policy

The owner’s title insurance policy is purchased by the seller. To produce a title insurance policy, the title company first conducts a title search to determine any title defects in the public record.  Things such as mortgages, easements, mechanics liens, outstanding judgments, etc., are considered unpermitted title defects and must be removed by the seller prior to or at closing to pass clear title to the buyer.  In other words, if after the closing someone knocks on the buyer’s door claiming that the property is really theirs, the buyer has insurance to cover the costs of defending the claim and any losses sufferred as a result.  The cost of the policy is based upon the purchase price, and it ranges from $1,200 to $3,000.  The title company will also perform a second search on the day of the closing, for which it charges each side approximately $125.

Loan Policy

The loan policy is similar to the owner’s title insurance policy, except that it is insures the buyer’s lender from losses suffered as a result of title defects.  The buyer pays the cost of this policy, which generally costs around $500.  The lender may request coverage in addition to the standard loan policy in the form of endorsements, which generally cost an additional $150-$200 each.

Closing Protection Letters

Illinois law requires that the title company issue a closing protection letter to the buyer, seller and lender.  The letter offers protections to the parties in addition to those offered in the owner’s title policy and loan policy.  Specifically, if the closing funds or documents are lost due to fraud or negligence, the parties have a financially solvent entity (the title compay) from whom to recover.  The cost of this letter is $25 for the buyer and lender (both paid by the buyer) and $50 for the seller.

Chain of Title

The lender requires a 24-month “chain of title” report from the title company.  The purpose is to determine how many times the property has been conveyed over the preceding two years.  Several conveyances for steadily increasing amounts in a short period of time is one indication of mortgage fraud, and the lender may not fund the loan if it sees that kind of pattern.  The cost of the chain of title is $250 and is paid by the buyer.

“Junk Fees”

This is my description, not the title company’s.  The title company receives and sends a number of wire transfers, for which it charges roughly $40 each.  In addition, the title company will receive a loan package via email, which the closer will print for the buyer’s signature.  For this service, the title company will charge approximately $40.

There are additional costs which appear on the title invoice, which are collected by the title company, such as transfer taxes, recorder’s fees, etc.  Those are not what I would consider “title charges,” and I will cover those in a couple weeks.

You may be thinking to yourself, “Gee, that’s all great, but how do I figure out the title costs with any specificity?”  The good news, is that I have a tool provided by my friends at Citywide Title that will give you a fairly precise breakdown of all of the closing costs.  Please contact me at patrick@loftus-law.com or at 773-632-8330 to request a breakdown!  To see what my clients have to say about me, please visit me at avvo.com.

Estimate Your Closing Costs – Part 1

If you have ever bought or sold a home, you know that there are all sorts of charges that you incur in addition to the purchase price, which are known to most as “closing costs.”  We all know about them, but estimating the final number can be elusive if you are not familiar with the process.  In the next four emails, I am going to shed some light on calculating the closing costs, so that you can better understand what the home is really going to cost you as a buyer or what you can expect to walk away with as a seller.

Real Estate Taxes

The real estate tax credits at closing are only two, maybe three, line items on the settlement statement, but they are so significant that they deserve to be discussed all by themselves.

In Cook and the collar counties, real estate taxes are paid in arrears.  That means you are always paying last year’s tax bill.  On the closing date, there will always be taxes owed by the seller that have not yet been billed by the county.  Once the sale closes, the buyer will be responsible for paying those future tax bills.  The customary way to handle this problem is for the seller to give the buyer a credit at closing to cover those tax bills.  It is more secure that asking the seller for a reimbursement when the bills are issues and less cumbersome than putting money in an escrow to pay the bills.

The real estate tax credit is generally based off of the last known tax bill, which is then increased by 5%-10%.  The credit is prorated through the closing date.

As an example, let’s say that you close the sale of you home on February 15, 2016, which is the 46th day of 2016, and your 2014 tax bill was $5,000.  The 2015 bills are not out yet, so this is the last known tax bill.  If the tax credit is based on 105% of the last tax bill, your tax credit looks like this:

2015 – $5,000 x 1.05 = $5,250

2016 – $5,000 x 1.05 / 366 * 46 = $659.83

If the closing is a little later in the year, and the first installment taxes have been paid, the credit is reduced by the amount already paid by the seller.

In Cook County, once the second installment tax bill is issued, usually in July, that amount is used to calculate the tax credit.  In collar counties, the full year tax bill is issued all at once, usually in May.  Additionally, if taxes are owed at time of closing, that amount will be paid directly from the closing proceeds, in which case the amount paid is deducted from the real estate tax credit.

Importantly, real estate taxes can be very complicated.  Your attorney must conduct research to ensure that the credit contemplated in the contract is appropriate.  If the property assessment has jumped significantly (which happened in Chicago in 2015), an alternate method of calculating the credit is necessary to arrive at a fair figure.  Likewise, if there has been a successful appeal of the assessment, the credit should be reduced accordingly.  Choosing the wrong real estate attorney who is not familiar with real estate tax related issues can cost you thousands!

It is crucial to have the right professionals in place to protect you from coming up short come real estate tax time.  If you have questions about real estate taxes, or any other real estate matter, as always, you can contact me at patrick@loftus-law.com or 773-632-8330.  To see what my clients have to say about me, please visit me at avvo.com.

The Five Questions To Ask Your Real Estate Attorney First

  1. How much do you charge?

This seems like a no-brainer, but I am surprised at how often people do not ask me during the introduction phone call.  There is no reason to be shy!  No one expects the attorney to work for free, but you need to know that the cost is within your budget.  Is it a flat fee or hourly? Hint: it should be a flat fee for a standard real estate buy or sell.  Does the attorney front costs to be reimbursed at the closing, or do you have to pay as you go?  Do not leave the cost as a mystery to be solved at the closing table, or you may end up feeling burned.

  1. Will I be dealing with you or your assistant?

Most attorneys who handle a high volume real estate practice will have a trusted assistant who will handle many important aspects of the transaction.  This person is most likely very competent, but importantly, they will not be a licensed attorney.  You want to know that you will have access to you attorney’s ear and advise, not the assistant’s, when you need it.  You do not want to be speaking directly to your attorney for the first time on the closing date!

  1. Do you have any client reviews/testimonials?

In this day and age of yelp and avvo, any modern business has customer reviews available for potential customers to see.  This is a great way to crowd source your due diligence before pulling the trigger on your attorney hire.  Like any other service you shop for, you want to know that other customers like the product!

  1. Do you have a website?

It is 2016, and every reputable business has a website.  Not only do you want to see that the attorney has a website, you want to see that it doesn’t look like the attorney’s teenage daughter programmed it!  Is it a placeholder website gathering dust in some corner of the Internet? Is there useful content? Has it been updated?  The law changes constantly, and a vibrant website with good content is an indication that the attorney is up to date and keeps current with the trends.

  1. What can I expect the process to look like?

No one like surprises, and a good real estate attorney will give you a clear and concise description of the whole process from contract to closing.  For example, my real estate guides provide the steps in the process for both buyers and sellers.  Although no one can predict the future, the attorney should be able to provide an overview of the process and identify some common issues the come up during the typical transaction.  By providing you with this important information, the attorney arms you with information you can use to prepare yourself for issues that may arise along the way.

What questions do you have for your real estate attorney.  Feel free to leave them in the comments, and I will provide answers.

As always, I also welcome you to contact me at 773-632-8330 or patrick@loftus-law.com with any questions.  I am honored by your referrals! See what my clients have to say about my responsive service and fantastic results right here.

How To Hire A Real Estate Lawyer

My friends at avvo.com wrote a nice little guide for those of you who are in the market for a real estate lawyer.  Check out the guide here.  It’s definitely worth checking out if you want an anxiety free way to get some questions answered.

Another anxiety free way to get your real estate law questions answered is to email me at patrick@loftus-law.com or call me at 773-632-8330.  Telephone consultations are done free of charge!

See what my clients have to say about me!