Financial Planning In The Era of Marriage Equality

Everyone should have some kind of financial plan.  For many people, this does not become clear until they get married and start a family.  Once there is more than one person to think about supporting, it becomes fairly obvious that a plan must be in place in order to avoid bad consequences for spouses and kids.

Most financial planning instruments were devised before America embraced marriage equality.  As a result, these devices and mechanisms make assumptions about families that, in many cases, no longer suit the real world.  As a result, it is a good idea to make sure that you have a financial plan in place that will fully protect your family.

I borrowed the above graphic from Prudential, because I think it gives a good jumping off point to see where some of the issues may exist.  It is worth noting that the graphic is from a piece of advertising, so take it with a grain of salt, because there may be certain biases.

If you would like to know more about this sort of thing, I would be happy to speak with you!  An attorney is a great resource for estate planning and other protections you can put in place for your family!

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!  And if you are looking to buy or sell property, I would love to set you up with one of my fantastic real estate brokers.

6 Myths About Homebuying — Translated

I came across an interesting article on Yahoo about “Homebuying Myths” (click here to see the article).  The article has some interesting information, but there are some things that I think could be added to make the article more helpful.  Here is what I would add —

Myth 1 – You don’t need a 20% down payment to buy a home.

This is true.  In fact, most of my clients do not put down 20% of the purchase price when they buy a home.  FHA insured loans require only a 3.5% downpayment, and there are other loan products that require as little as 5% down.  However, when you borrow more than 80% of the purchase price, your lender will require that you pay for mortgage insurance.  The details vary, but I generally see payments in the neighborhood of $100 per month paid for about the first 10 years of the loan.  This is in addition to principal, interest and escrow items.  Although this should not necessarily deter you from buying a home, it is worth taking into consideration when determining how much to put down up front.

Myth 2 – Your credit score is good enough.

Another fair point.  I would add that one easy way to increase your credit score is to ask your credit card companies for a credit limit increase.  You may even be able to do it in a few minutes online.  By increasing your available credit, you reduce your credit usage as a percentage of the available credit.  This, in turn, should increase your credit score.  Just don’t go and use all that new credit!

Myth 3 – Loan pre-approval determines your price range.

This is an excellent point.  Lenders make money based on how much you borrow.  They don’t care that you won’t be able to take a vacation for the next 5 years, because your mortgage payment has you tapped out every month.  Reality check that monthly payment before you start looking at that 4 bedroom McMansion.

Myth 4 – Once I make the offer, the hard work is done.

I may be off base, but I don’t think people really believe this.  But if you were under that misconception, just know that the contract is only the beginning of a long process.  One great way to make the process easier is to have a great attorney at your side to guide you (Hint hint!).

Myth 5 – Your home purchase is non-negotiable.

Well, duh!  But let’s put this one in proper perspective.  Yes, everything is negotiable.  However, sellers aren’t dumb.  When you ask for closing costs to be paid, in the seller’s mind, it’s a deduction from the price offered.  There’s no free money, so the Seller will take that into account when they counter.  Some people will gross up the price in order to include a closing cost credit.  This is fine, but it is important to understand that you are really just wrapping the closing costs into the amount borrowed and paying interest on it over 30 years.  While that may work for you if you don’t have a lot of cash in your pocket to bring to closing, you’ll save interest in the long run by paying the costs up front.  Closing costs are a fact of life when you buy real estate.  The better strategy is to make sure your lender isn’t gouging you on their closing costs, regardless of who is paying them.

Myth 6 – You bought the perfect home.

Of course, there is no such thing as perfect.  The best way to prevent regret is to do try to avoid a case of “oneitis” once you zero in on a home to buy.  Believe me that there is always another property out there for you.  If you keep that in the back of your mind, it will be easier to make the decision cut loose from a home that is increasingly looking like a lemon.

What do you think?  Anything else to add?

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!  And if you are looking to buy or sell property, I would love to set you up with one of my fantastic real estate brokers.

Mindfulness & The Law

The topic of mindfulness is near and dear to me.  Last year, I was in a bit of a funk when I was fortunate enough to stumble on Dan Harris’s podcast.  Some of you may know Dan as the 10% Happier guy.  Dan had a man named George Mumford on his podcast.  I really liked the way George talked about this thing called mindfulness, so I decided to download is audio book, “The Mindful Athlete,” and my journey began.

Mindfulness has a lot of definitions, but perhaps the best is from one of the first people to bring the practice of mindfulness from India to the western world, Jon Kabat-Zinn.  He says that “mindfulness is awareness that arises through paying attention, on purpose, in the present moment, non-judgmentally.”  You might also say that it’s the practice of removing yourself, at least momentarily, from the narrative going on inside your head.  By noticing your surroundings and the thoughts in your head, you become more present.  In time, the practice provides a way to get to know and understand yourself better.

What does that have to do with the law?  As lawyers, we tend to get wrapped up in results.  I want nothing but good things to happen for my clients, and dammit I’m going to move heaven and earth to create good results.  This creates a lot of anxiety, because you think a lot about things that might happen, especially the bad things.  Constant anxiety about things that might not even happen is no way to live life.

The practice of mindfulness allows me to notice when I am dwelling on outcomes instead of being present.  The world happens in the present, and that’s where I want to be.  The mindful lawyer understands that things will happen (or nor happen) in the future no matter what.  By being present, the mindful lawyer can take confident action knowing that he or she has the necessary skills to expertly guide clients through challenging episode of life.  There is no need to be anxious or fearful of outcomes that are out of our control.

Don’t get me wrong, I am always worried about you guys.  I just have a better sense of when I’m letting it get out of hand.  Mindfulness makes me a better, more complete person; and therefore, a better and more complete lawyer.

I will wrap this post up with some resources that I use or have heard positive things about with respect to the practice of mindfulness.  My personal practice is to meditate in the morning with an app called “Lucid.”  It is geared toward athletes, and I fancy myself a very amateur athlete.  It speaks to the neanderthal part of me.  In the evening I sit for 20 minutes of awareness of breath meditation.  There’s nothing magic about meditation, and you can’t do it wrong.  If you aren’t ready for 20 minutes, start with 1 and go from there.

I have also heard good things about an app called “headspace.”  Once in awhile, I like a guided meditation.  YouTube is great for that, because it is free.  Check out The Honest GuysJason Stephenson or Michael Seeley’s channels.  Or you can just go on YouTube and search “guided meditation.”  Pick something that looks interesting and give it a go!

No call to action on this entry.  If you are interested in a discussion on mindfulness, feel free to leave a comment below!

Checking Your Significant Other’s Email For Evidence of Cheating May Violate Federal Law

As if divorce cases weren’t bizarre and petty enough, an “innovative” divorce litigant has figured out yet another way to torture his soon-to-be former spouse.  According to an article in the ABA Journal:

“Paula Epstein, the defendant in the case, was sued by her husband, Barry Jay Epstein, the Chicago Daily Law Bulletin reports. The couple are in the process of divorcing, according to the opinion (PDF), and Paula accused Barry of “serial infidelity.” His attorney asked for proof, and her attorney produced email correspondence between Barry and several other women. According to the opinion, Barry did not know that Paula had access to his emails until they showed up in discovery. He alleges that she must have arranged for his emails to be automatically forwarded to her.”

Although the federal district court dismissed Barry’s complaint, the Seventh Circuit reversed the district court’s decision in part and reinstated the claim against Paula.  To its credit, the Seventh Circuit seems a bit disgusted with itself for essentially choosing form over function as it pertains to enforcing the Wiretap Act, with Judge Posner stating in his concuring opinion:

“Her husband’s suit under the Federal Wiretap Act is more than a pure waste of judicial resources: It is a suit seeking a reward for concealing criminal activity.  Had the issue been raised in the litigation, I would vote to interpret the Act as being inapplicable to—and therefore failing to create a remedy for—wiretaps intended, and reasonably likely, to obtain evidence of crime, as in this case, in which the plaintiff invoked the Act in an effort to hide evidence of his adultery from his wife.”

However, the fact stands that the case will move forward against Paula back in  district court.  Regardless of the outcome, the tactic seems to have worked in terms of creating leverage for Barry in the divorce case, as Paula will have to consider potential liability in the federal case as it pertains to the remaining issues in the underling divorce.  I’m sure that is what Congress intended when it enacted the Wiretap Act.

As it stands now, if you are going to snoop on your no good cheating husband, you’d better bone up on your knowledge of the Wiretap Act.  Otherwise, you might find yourself being sued in federal court in addition to being embroiled in a messy divorce.

Credit to today’s ISBA E-Clips for pointing this story out to me.  Further credit to ABA Journal and Stephanie Francis Ward for authoring the article.

The Tax Bills Are Here!

The 2015 Second installment real estate tax bills for Cook County have been released as of 10:00am this morning.  For Chicago residents, this bill has been highly anticipated (dreaded) since the 2015 re-assessments were announced.  As I wrote earlier this year, may of you expect to get dinged pretty hard.

To see how bad the damage is, head over to the Cook County Treasurer’s website by clicking here.  Once there, click “continue” and enter your PIN.  If you do not know your PIN, head over to the Cook County Assessor’s website here.  Click “Dont know your PIN?” and enter your address.

LIFE PRO TIP!!!

If you are an owner occupant, and you do not receive a homeowner exemption, you are paying too much tax!!!!  The property tax information on the Treasurer’s website will indicate whether you have the exemption.  If you do not receive the exemption, and you qualify, please contact me immediately!  I will help you find the forms you need to submit to save hundreds immediately, and I will not charge you!

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 or on my oh page.  Cheers!

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!

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.