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.

New IHDA Program Offers Up To $50,000 In Assistance To Under Water Homeowners

The painful memories of the housing bubble are quickly fading amidst the red-hot real estate market here in the Chicago area.  However, the good news is not universal.  Some homeowners live in sort of a limbo where they can just afford their mortgage payment, but they cannot possibly sell their home due to the fact that they owe more than the property is worth.

There may be hope for some of you.  The Illinois Housing Development Authority (IHDA) has introduced a program for qualifying homeowners to receive up to $50,0o0 toward the balance due on their mortgage and refinance into a more affordable loan based on the market value of their home.  The following eligibility requirements must be met:

  • Current on your mortgage for at least 12 months
  • Live in the home as your primary residence
  • Credit qualify for a new IHDA mortgage through a participating lender
  • Be within IHDA’s income and home price limits 
  • Credit score must be at or above 640
    • 640 for Conventional, VA and USDA
    • 660 for FHA
  • Pre-assistance combined loan-to-value must be greater than 110%
  • Post-assistance loan-to-value will be 90-97%

The income and home price limits for the Chicago area vary depending on the number of people in your household and whether your home is new construction, existing or multi-unit.

If you qualify, I would strongly encourage you to reach out to one of the participating lenders.  Free money, after all!

If you have questions about this program, 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.

Closing Costs Part 3 – Lender Charges

The third installment of my posts on closing costs focuses on charges you may incur at closing from your lender.  The vast majority of buyers do not have the cash to plunk down a few hundred thousand dollars to buy a home.  As a result, most real estate transactions involve a loan through a mortgage broker.  Not surprisingly, lenders do not work for free, and there are a number of costs you can expect to incur in connection with borrowing their money.

Unlike title charges and real estate tax credits, lender charges vary quite a bit depending on the lender and loan product you choose.  However, there are some charges and costs that you can generally expect to see on the closing statement.

Origination Fee

Lenders often charge an origination fee for a new loan.  Ostensibly, this is the charge for the work necessary to vet you as a borrower and process the loan.  This charge is typically in the range of $1,000, although it varies from lender to lender.

It is worth mentioning, that the lender is making much more than just the origination fee in terms of profit from originating the loan.  Mortgage brokers make the bulk of their money on something called the yield spread premium.  The yield spread premium is the difference between the interest rate at which the broker can borrow money from the end lender and the interest rate at which you borrow the money from the broker.  That may sound a little unfair; however, it is important to understand that, as a borrower, you do not have access to end lenders who provide the funds.  In addition, banks the fund loans from their own money do not offer better rates than mortgage brokers.

Appraisal Fee

Whenever you borrow money to be secured as collateral for repayment of the loan, the lender wants to know that the collateral has enough value to repay the lender if you cannot.  Fair enough.  As such, part of the loan process involves having an appraiser determine the value of the property.  Typically, this costs somewhere between $300 and $500.

Miscellanous Fees

There are several fees you may see on the settlement statement of a relatively small amount, which I typically characterize as “junk” fees.  For example, there may be a credit certification fee ($10-$100).  This is the fee from the service used by the lender to obtain transcripts of your tax returns from the IRS.  Sometimes you will see a flood certification fee (usually around $10).  The lender wants to see whether the property is in a FEMA flood zone, and determine whether to make you pay for flood insurance.  You may also see a fee for obtaining your credit report (between $10 and $50).

Prepaid Interest

When you make a mortgage payment, you pay interest for the preceding month.  As a new borrower, your first mortgage payment will not be due until the beginning of the second full month after the closing date.  This leaves interest for the month of closing unaccounted for in the loan payments.  Since interest accrues daily, it is customary to pay the interest for the remaining day in the month of closing at closing.  This is not exactly a loan charge, but it is something you will need to pay at closing.  The amount varies depending on the amount you borrow, the interest rate and the time of the month you close.

Impounds

In most cases, the lender will set up an escrow account for the borrower to handle payment of property taxes and insurance.  Every month, the borrower pays some money into the escrow, and when the bills are issued, they are paid from the funds in escrow.  At closing the borrower puts some money into the escrow to get it started.  As with prepaid interest, it is not a charge, insomuch as the money still belongs to the borrower and will be used to pay the borrower’s property tax and insurance bills.  The amount that goes into the escrow varies depending on the amount of the annual tax and insurance bills and the time of year the closing occurs.

As mentioned above, the lender costs can vary quite a bit depending on the lender and loan product.  Do not necessarily be concerned if your settlement statement has additional costs or is missing some of these charges.  What you should do to make sure you are not taken to the cleaners is to hire a good real estate attorney, like me, to make sure the charges are accurate!

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.

Chicago Property Tax Rebates End Tomorrow

Many of us were caught by surprise when the second installment of the 2015 real estate tax bills arrived in the mail this past July.  Steep increases were the norm, especially for homeowners in parts of town that experienced healthy increases in property values over the past few years.  That’s the bad news.

The good news is that the City is offering many of us rebates of up to $200.  The amount can be more if you are eligible for a senior or enhanced grant.

From the City’s website:

     Eligibility:

     In order to qualify for a City of Chicago property tax rebate, homeowners must meet      all the following eligibility requirements:

  • Chicago Resident and Homeowner;
  • Received the Cook County Homeowners’ Exemption in the most recent property tax year;
  • Household adjusted gross income of $75,000 or less in 2015;
  • City of Chicago portion of property taxes increased on most recent tax bill;
  • Current on the payment of property taxes;
  • Do not owe real estate taxes on other property located in Chicago; and
  • Do not have City debt (e.g. parking tickets, overdue water bills). In cases where City debt is owed, the rebate will be applied to the debt.

For more details on the City’s “free” money, visit this link.  You can apply at any one of 26 neighborhood locations around the city.

Time is running short on this program.  However, if you are one of the many people who took this week off, here’s the perfect way to spend your Friday morning…

Happy New Year to everyone!  Hat tip to Curbed Chicago for the heads up on this program.  As far as I know, it was not very well publicized.

Quick Reference Guide For Informed Judicial Voting

Another election day looms in less than one week, and I know you are racking your brain trying to answer one crucial question:  What judges should I vote for on Tuesday?

The Good news is that once again, I have some cheat sheets for all of you to print and bring to the polls:

  1. Illinois State Bar Association ratings for judicial candidates.  You can see the ISBA’s ratings by county here.  This site will help if you are outside of Cook County.
  2. Chicago Bar Association has a handy pocket guide for you Chicagoans headed to the polls on Tuesday.
  3. Chicago Council of Lawyers is a non-partisian public interest bar association, and they too evaluate judges.

Finally, for those of you who really have nothing better to do, voteforjudges.org has all sorts of great information about judicial elections.  Feel free to pop over if you are somehow curious about such things.

Good luck voting!

New Illinois Law Brings Common Sense Approach To DUI And Pot

This is not about real estate.  However, some of you (wink, wink, no judgment here) should be aware of an important change in the DUI laws, which provides a more common sense approach to the issue of pot use and driving.

Until Governor Rauner signed SB 2228 into law last week, pot smokers were at risk of a DUI conviction unless all traces of THC (the intoxicating compound in pot) had left the system.  Although the intoxicating effects of pot last a few hours at most, it can take weeks for all of the THC to flush from the system.  This unreasonable standard resulted in many unneccasary arrests and convictions, often putting otherwise good people in jail and unnecessarily ruining lives.

The case of Alia Bernard is a prime example of the absurd results produced by the old law. People v. Bernard, 2014 IL App (2d) 130924.  In 2009, Bernard was involved in a fatal car accident, which occured when she rear ended a vehicle while fishing around the car for her sunglasses.  Two days prior to the accident, she had used marijuana.  Although the proscutors freely admitted that Bernard’s use of pot played absolutely no role in the accident, they charged Bernard with reckless homicide and aggravated DUI, based solely on the trace amount of THC detected in her blood after the accident.  Facing an unwinable case under the old law, Bernard entered a guilty plea to the aggravated DUI charge.  The judge threw the book at Bernard, sentencing her to seven years in jail.  But for the trace amounts of THC in her blood, the worst she could have received was a traffic ticket.  The old law made so little sense that had the driver of the car that Bernard rear ended been found with any THC in his/her blood, they would also have been charged with DUI!

The new law provides a new standard whereby a person can have up to five nanograms of THC in their blood, or ten nanograms in their saliva, before they can be charged with DUI.  As unpopular as it is, and should be, to relax DUI laws, the new law provides a more common sense approach.  Let me be clear, no one shoud be driving around whilst stoned.  However, once the concentration of THC in your blood is less than five nanograms, there is no longer any intoxication present.  No one should be convicted of DUI when they are not driving impaired.

So, for those of you who like to occassionally puff, please, for the love of God, do not drive stoned.  However, once you come down, feel free to go pick up the kids without the fear of going to prison for seven years after someone t-bones you after they run a red light.

For more, please take a look at the article from the Chicago Reader linked below.

The state’s new marijuana law sets a benchmark for driving under the influence of weed, but attorneys say it’ll be hard to enforce.

Source: New Illinois law defines ‘stoned driving’

Tips On Voting For Judges

Although the upcoming presidential election is dominating the headlines (thanks, Donald), next Tuesday’s primary is about so much more than who will be the next resident of the White House.  Statewide, we are voting on our representatives in Congress and in the legislature.  Here in Cook County, among other things, we are voting in the hotly contested race for state’s attorney.

Most of you are going to arrive at the section for judges having no idea who any of these people are.  Is one of these judges the lady who went off her meds and walked from Markham to the Daley Center to assault a sheriff’s deputy?  Is this the judge who was removed from the bench due to allegations of mortgage fraud?  Is this the guy who hit me with that big fine on that speeding ticket 2 years ago?

Well, I am here to help!  While I don’t know every judge in the State of Illinois or even Cook County, I know who does.  The Illinois State Bar Association (ISBA), Chicago Bar Association and Cook County Bar Association all have committees that evaluate judges, and they all publish the ratings.  Here are links to some of the judge ratings.  Print them, take them with you to the polling station, and brag to your friends how informed you are about this election.

Illinois State Bar Association – This is the one for you if you happen to live outside of Cook County.  They rate judicial candidates all over Illinois.

Chicago Bar Association – This is the one I use.  They even have a pocket guide, so that you can better conceal your voting crib notes.

Cook County Bar Association – In case you don’t fully trust the opinions of the other 2 bar associations.

If you live outside Cook County, your local county bar association almost certainly reviews and rates the judges and judicial candidates.  Just type “[my county bar association] judicial evaluations,” and the evaluations will probably be the top result.

So there you have it!  And if you don’t vote, don’t complain about how much President Trump is spending on the wall to keep Muslims out!