Closing Costs Part 4 – Miscellaneous Charges

In the first three installments of my series on closing costs, I addressed real estate tax credits, title charges and lender costs.  This fourth, and final, last installment will address the last category of closing costs – everything else.  As you review your closing costs with your attorney at the closing table, it may feel like everyone is taking their pound of flesh from the transaction.  That is because it is essentially true.

Transfer Taxes

Whenever you buy or sell real estate, the government sticks its hand in your pocket.  The amount of the tax depends largely upon the location of the parcel.  The State of Illinois always gets $1 per $1,000 of the purchase price and the county gets half of that.  Municipalities have the authority to set their own individual taxes.  Some have none at all (eg. Palatine), and some are fairly hefty (eg. Chicago – $7.50 per $1,000 of the purchase price for the buyer and $3.00 per $1,000 of the purchase price for the seller!).  Unfortunately, in most instances these taxes are unavoidable.

Real Estate Broker Commissions

The brokers are paid from the Seller proceeds.  The amount they are paid is determined by the terms the listing agreement.  The brokers’ commission is usually 5% or 6% of the purchase price.  Regardless of the total commission, the listing broker gets a broker co-op commission of 2.5% of the purchase price paid by the listing broker from the total commission.

Recording Fees

The title company will record the deed and mortgage at the county recorder’s office to let the whole world know that you now own the property (and a mortgage on said property).  Of course, the buyer is expected to pay the recorder’s for this.  The cost is usually between $120 and $130 total.

Survey

If the property is a single-family, detached residence, the seller is required to provide the buyer and title company with a survey.  The cost of a survey is roughly $450.  If the property is a condominium, no survey is necessary.

Attorney Fee

Obviously, this is the most important cost of all!  It is crucial to have a good attorney (like me) to protect you when hundreds of thousands of dollars are at stake.  Attorneys, such as myself, who handle residential real estate transactions charge a flat fee paid at closing.  At the time of publication, LoftusLaw charges $500.  What a bargain!

Thus concludes my series on closing costs.  Your experience may vary, as each transaction is unique.  If you have questions about closing costs, 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.

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!

What The Meaning of “As Is” Is

From time to time, I get a contract in the office where the property is being sold “as is.” Sellers rejoice when they accept an “as is” offer, because they feel secure knowing that the 18 year old roof and 15 year old furnace are not going to cost them during inspection. However, as Lee Corso is fond of saying, “Not so fast, my friend.” As simple a concept it seems to be, “as is” can be tricky. Experience suggests that, more often than not, “as is” buyers still make inspection request. Why do Buyers do it? What is the justification for it? How do we prepare our clients to handle the situation without losing their cool? Keep reading!

Why do “as is” buyers make inspection requests? Wouldn’t you know, it all begins with the inspection. Even though the buyer is buying the property “as is,” the buyer wants to make sure that the property is not a money pit. Fortunately, this is not the case with most properties. (Quite frankly, if the property is trashed, the buyer probably already knew it and is not bothered.) However, as always, the inspector will find defects in the property. The buyer begins to panic and is now concocting all sorts of narratives in her head about how the seller “hid” all of these “terrible defects” from her. She is now in full on freak out mode regarding her “as is” purchase.

Miraculously, the buyer somehow still wants to buy the property. However, in order to make up for the seller’s “deceptive” behavior, she wants the seller to make some repairs or maybe give a credit for the “hidden” “defects” that the inspector discovered. How does the buyer justify this? She threatens to walk. Most “as is” contracts allow the buyer to inspect the property. If they find something they don’t like, the buyer can terminate the contract, and get her earnest money back. She will use that as leverage by threatening to walk from the deal unless the seller addresses the defects she deems unacceptable. What is the seller to do? At this point the property has been off the market for almost 2 weeks, and other interested buyers have moved on. In some cases, the seller needs the proceeds from this transaction to buy their new home, and that purchase will fall through if this buyer walks away. If the seller was not prepared for this situation, he is extremely stressed!

The fact is that most sellers do not fully appreciate the nuance of “as is.” That is why it is critical to address this potential scenario with your seller as soon as an “as is” offer comes in. The seller will have a better understanding and can incorporate it into their negotiation strategy.  The seller will not feel as “burned” when the buyer makes requests. We all know what happens when the parties start taking things personally, and it ain’t pretty! A prepared seller keeps a level head and is far more likely to make a good, rational decision.  Good, rational decision making closes deals!

In the event the buyer in your next “as is” transaction makes inspection requests, there is no need to panic. You will have prepared your seller.  He will keep his cool and is ready to evaluate the requests with his attorney.  They will determine a good strategy to move the deal forward. The deal is going to close, and you are already working on the next one instead of talking a panicked seller off the ledge.

Have a good story about an “as is” contract? Post it in the comments! If you like my article, please share it!

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