WHAT YOU NEED TO KNOW BEFORE BUYING A HOME
By Howard Gopman

Howard Z. Gopman & Associates, Ltd.
Attorneys and Counsellors at Law

One Northfield Plaza, Suite 300
Northfield, Illinois, 60093

Phone:  847.965.8910
Fax:  847.965.8912

email:  hg@mrattorney.net

WHAT YOU NEED TO KNOW BEFORE BUYING A HOME

Your purchase of a home will probably be the largest single investment of your life. To protect that investment, it is important that you work with knowledgeable professionals at each stage of the buying process. As you shop for your home, you should also be assembling your “team” of real estate professionals. Each member of your real estate team (your real estate attorney, home inspector, and lender) has a vital role to play in the process. Selecting them with care at the outset of the process will keep you from making a bad decision as you look for your new home.

YOUR REAL ESTATE ATTORNEY

In recent years, the process of buying a home has become increasingly complex. Retaining a qualified, competent real estate law firm, Howard Z. Gopman & Associates, Ltd., at the outset can save you costly mistakes.  Ideally, you should bring your real estate attorney on board before you make a purchase and should consult with him or her before you sign any document.  You should have your attorney draft your Purchase Offer before it is presented to the Seller.  If this is not possible, be sure the offer provides an attorney approval/modification contingency provision granting your lawyer a reasonable period of time to review and possibly revise the terms of the offer.  The attorney approval contingency may also be limited by the offer to matters other than dates, purchase price, or other specified matters, thus limiting the attorney’s ability to assist you.      

BEWARE: IF YOU SIGN A CONTRACT WHICH DOES NOT CONTAIN AN ATTORNEY REVIEW CONTINGENCY, YOU MAY BE OBLIGATED TO PROCEED WITH THE PURCHASE REGARDLESS OF a) YOUR ABILITY TO OBTAIN FINANCING, b) THE CONDITION OF THE PROPERTY, OR c) ANY OTHER VALID REASON TO TERMINATE THE CONTRACT.

Your real estate attorney will hold the complex purchase process together. Your attorney will:

• Provide an overview of the process and the attorney’s role in that process;
• Draft, review explain and/or negotiate your contract to purchase;
• Discuss timing and possession issues;
• Communicate and negotiate home repair issues related by your home inspector;
• Examine the title commitment and survey to determine you are purchasing the property contracted for, without encumbrances or title defects you have not agreed to accept;
• Explain contract contingencies, if any, and monitor deadlines;
• Explain mortgage financing options;
• Verify and explain tax prorations and other closing figures;
• Attend the closing to ensure compliance with the contract and to review the loan documents; and
• After the closing, review the recorded deed, the final title insurance policy, and other closing documents for accuracy.

 YOUR HOME INSPECTOR

Recent legislation in Illinois requires most home sellers to provide prospective buyers with a completed disclosure form relating to the condition of the house prior to the formation of a contract.  Although the disclosure form may contain information of use to you in deciding whether to purchase a particular home or how much to offer, it is not intended to take the place of an independent, professional home inspection. If you do not have an inspection before you submit an offer to purchase, you should insist on a reasonable inspection contingency period after acceptance of your offer to allow for one or more professional inspections of the property. Also keep in mind:

Choose your own independent home inspector in advance, enabling you to act quickly during an often brief contingency period.
Obtain referrals for a qualified home inspector from friends or contact the American Society of Home Inspectors (ASHI) or its members near you.
You may wish to have a general inspection, supplemented by specialized inspections - for pests, fireplace, heating system or environmental concerns.
Do not forego hiring your own independent inspector simply because you are obtaining an FHA or VA insured loan which requires an inspection as part of the appraisal, or if the municipality requires it as a condition of any sale.
You cannot require the seller to undertake repairs for matters discovered during the inspection, but you may be able to terminate a contract for a home with unsatisfactory conditions, or you may be able to renegotiate a price that reflects unanticipated problems.
 

YOUR LENDER

Discuss your financial situation in detail with a mortgage lender before you shop for a home so you have a realistic assessment of your price range.  You should consider submitting a formal application for written loan preapproval.  This will give you the ability to shop with confidence and may give you an edge with home sellers.

When speaking with prospective lenders, ask about all loan costs and fees, not just interest rate and service charges (points). Find out whether a prospective lender can realistically meet your closing time frame and any financing contingency you may have. Once you have selected a lender:

• Prior to applying for a loan, ask your lender what documentation you will need to take to the application meeting.
• Make sure you do not lock in a rate that will expire before your contract closing date.
• If your lender suggests a co-signer, or a particular method of holding title, consult with your attorney before agreeing.
• Find out whether your lender will require escrows (reserves) for property taxes, insurance or private mortgage insurance.
• To avoid delays, resist the urge to continue shopping with other lenders for a better rate once you have applied.

         If your loan is approved, expect to see a written commitment and scrutinize it for conditions to be fulfilled (e.g., appraisal, explanation letters, copies of checks) before the commitment is binding on your lender.

         Review the “good faith estimate” of closing costs supplied by the lender to verify that the various fees charged by the lender are consistent with those quoted at application.

Our firm is familiar with the mortgage loan process and can recommend a competent lender to you, can help you understand the information you get from the lender, and can monitor your lender to keep the closing on schedule.

THE CONTRACT TO PURCHASE

Once you have selected the home you wish to buy, you must make a written offer to purchase. If your offer is accepted, you will then have a legally binding contract. The contract will govern the transaction, setting forth the rights and obligations of both buyer and seller. Other than possibly the deed, the contract is the single most important document involved in the purchase of a home.  The contract will include all the terms of your purchase, such as purchase price, amount of earnest money deposit, financing terms, closing date, possession date, personal property to be included in the sale, tax prorations, right of inspection, and possible contingencies, such as attorney’s approval, inspection, financing, or the sale of your present home.  Other concerns that may need to be addressed include existing leases, well and septic issues, and whether the property is being conveyed “as is”.

It is essential to understand the terms of your offer before you enter into a binding contract.  We as your attorney should assist you in preparing and presenting your offer.  If your offer is presented to the seller prior to you consulting our Firm, make sure the contract will allow us to review and modify it. AS STATED PREVIOUSLY, ONCE THE CONTRACT IS SIGNED BY BOTH PARTIES, UNLESS THE CONTRACT CONTAINS AN ATTORNEY APPROVAL CONTINGENCY, YOUR INTERESTS MAY NOT BE ADEQUATELY PROTECTED, AND YOU MAY BE LEGALLY OBLIGATED TO COMPLETE THE TRANSACTION. 

TITLE INSURANCE

In Illinois, it is common for the seller to provide you, at the seller’s expense, an owner’s title insurance policy in connection with your home purchase.  Your contract should make this a requirement.

A commitment to issue this insurance policy is furnished to your attorney prior to closing.  It will show who owns the property, what liens or other matters affect the seller’s ownership. We will review this title commitment and require that the seller clear up any items which are not permitted by your contract and which would adversely affect your ownership rights.  After closing, you will be issued an owner’s title insurance policy which insures your ownership rights subject to the terms of the policy. Standard real estate forms include a provision which obligates the purchaser to take the property subject to existing easements, covenants, reservations and restrictions of record. If such an offer is signed by the prospective purchaser and accepted by the seller, the purchaser has already agreed to accept any acceptable encroachments, which may exist, all without knowledge of their existence. This is why you must have qualified legal counsel to assist you and oversee the entire process.

If you are obtaining financing to purchase the property, you lender will require that the title company issue, at your expense, a title policy insuring the validity of your lender’s mortgage. It insures only the lender’s interest and does not take the place of the owner’s policy issued to you. The commitment for mortgagee’s title insurance should be sent to the lender in advance of the closing.

THE OTHER PROFESSIONALS

There are other professionals who may be needed as part of your real estate team.  They usually will perform a specific role and will not be involved in the transaction on an ongoing basis.  They may include:

• A surveyor, to determine the location of the improvements in relation to the lot line (as well as to determine the location of easements, building or setback conditions, and improvements on adjacent properties).  The contract will govern who is responsible for providing and paying for the survey.
• An appraiser, employed at your expense by your lender to determine that the value of the home corresponds with the purchase price.  If you are buying without the services of a real estate agent, you may wish to employ an appraiser to give you an idea of the value of the home before you make an offer to the seller.
• Your tax advisor or estate planner can work with your real estate attorney to assist you in determining how best to hold title or to maximize tax deductions for personal financial or estate planning purposes.
• The escrow agent or closer, usually an employee of the title company, who acts as your lender’s agent to ensure that the lender’s requirements are met before the loan proceeds are disbursed.

PRE-CLOSING CONSIDERATIONS

If there is more than one buyer, we will explain to you the various holding alternatives available to co-owners.  These are primarily tenancy in common, joint tenancy, or tenancy by the entirety.  If you are unmarried and living with a partner, our firm may suggest that you enter into a written agreement with your co-owner, to spell out such things as sharing expenses, unequal contributions, and terminating the co-ownership.  Inheritance rights will be determined by the form of ownership as well as your individual estate plan and state law.

You can also arrange a pre-closing inspection so you can determine that the seller has completed any repairs required by the contract and that the property is in the same general condition as when you entered into the contract.

The contract will control the time of transfer of possession from the seller to the buyer.  However, circumstances sometimes prevent absolute compliance with the contract.  Rather than terminating the contract or changing the closing date, the parties may wish to negotiate either pre-closing occupancy by the buyer or post closing occupancy by the seller.  Your attorney will point out risks inherent in such situations and should draft an agreement to address such concerns as occupancy charges, utility payments, insurance considerations, maintenance and repair, penalty provisions, and other consequences of non-owner occupancy. 

THE CLOSING

Once the mortgage loan is approved, the title insurance commitment is issued and approved, the property surveyed, and the final inspection of the property completed, you are ready to close. The closing will take place at the title insurance company office, the lender, or at the office of one of the attorneys.  The closing should be attended by you, your attorney, the seller, the seller’s attorney, the escrow agent or closer, and may include the lender. 

There will be many mortgage loan and closing documents to review and sign at the closing.  Your attorney will explain these to you and determine that they are accurate and appropriate.   You should receive copies of all signed documents, as well as the keys, garage door transmitters, and any warranties and instruction manuals from the seller.

We have discussed the basic type of home purchase – an existing family home purchase with conventional mortgage financing.  A variety of special circumstances, such as new construction, condominium purchases, cooperatives, etc., may require additional consideration which is beyond the scope of this explanation.  The “standard” forms used in your community may not be appropriate for all of these situations and may not sufficiently protect you.

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