the wasserblawg

• BUYING FLIPPED PROPERTIES
  Here is a really great article from a blog over at Zillow detailing some of the potential pitfalls of buying recently rehabbed / "flip" properties. Flipping is a "term of art" used to describe an investor's quick sale following the purchase of a home or condo, (hopefully with a tidy profit earned in the process).  There have been many reports in the media these days about  "flipping" properties, mostly touting them as investment opportunities, and the massive profit potential they offer.
  
  Six years ago, those flips would have started with  pre-construction condo purchases, resold shortly after the properties were completed. These days, almost all the flips I see involve the "rehabilitation" of foreclosed or otherwise distressed real estate. (Including, ironically enough, flips of those new-construction condos from years gone by).
  
  From a Sellers' point of view, there are great opportunities for profit here. I have several clients who are doing very nicely on these projects. A key is finding "the right" properties - ones that can be renovated quickly and economically. There is A LOT of competition out there looking for those opportunities, so anyone considering this sort of investment play really needs to assemble a quality team of Realtor, lawyer and contractor to make the deals
  
  Buyers seem to LOVE these deals too. At first, anyway. They show nicely when compared to some of the really shabby "inventory" out there. Particularly when priced to this current market. I have been also representing many Buyers looking at these types of homes lately, particularly first time home Buyers, and Buyers on tight budgets.
  
  As described in the linked article, a good many of the rehab/flippers are cutting corners - doing shoddy construction work. Some to code, some not. Some with building permits, some without. Buyers sometimes get blinded by shiny new appliances and fresh paint, and fail to see or appreciate the potential problems that lurk behind. Sadly, Buyers usually do not find out about problems in the construction until it is too late.
  
  What to do? The best buyers can do is to find out as much as they can before making a deal to buy one of these flipped properties. A couple of  things come to mind -
  
  First, a quick check with the Cook County Recorder of Deeds can help identify how long the Seller has actually owned a property (and who the Seller bought it from). Next, a City of Chicago Building Department web portal can help buyers determine whether or not there are open building code violations or permit applications for local properties.  I check both of these sites as a matter of routine now for every client buying a home or condo in the City.
  
  Second, a really thorough home inspection is in order. You really want a bulldog here. The most miserable, thorough,  passionate inspector you can find, doing his or her best to rip the place apart. They may not discover every defect, but trained eyes help. A lot.
  
  Finally, consider the warranty offer - if any. Many sellers are selling these properties "as is" leaving Buyers "stuck" with whatever unpleasantness is discovered after a closing. Others offer only  third party homeowners warranties that covers the appliances and systems (but not necessarily construction or improvements). Even if the seller is giving a direct warranty, Buyers must give thought to the likelihood that a Seller will be around to back a warranty up. Many Sellers use shell entities like LLCs to limit there exposures to risk. If something goes wrong, they may simply shut the LLC down and start again under a different name.
  
  As always, competent legal counsel and a very conscientious realtor are recommended. As the Zillow blog points out, Buyers have too much at risk and deserve all the help they can get.
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• CURRENT MARKET CONDITIONS - GETTING YOUR NEXT MORTGAGE LOAN
  Mark Greene at Forbes Magazine nailed it earlier this month in his article the perfect loan file, which really does capture the rigor with which lenders are scrutinizing every mortgage loan application these days. In my opinion, this should be mandatory reading for every buyer in the marketplace now.
  
  Lenders demands for proper / acceptable supporting documentation can be pretty daunting.  I see many clients with qualifying income and credit scores being driven to tears by the excruciating process. In recent weeks more than a couple have simply quit. Some are using all cash to make their deals, avoiding the hassle altogether. Others are giving up their dreams of home ownership. If I never hear a loan originator ask for (or a client complain about) "just one more thing,"  I will be a happy man.
  
  Certainly understandable that lenders are being very cautious while processing their loans applications. No one wants to see loan failures given the still-too-recent market collapse - particularly where Fannie Mae and Freddie Mac are making the originators buy back problem loans. But, just the same, ill prepared consumers are at their breaking points. Inadequate loan documentation leads to delays, multiple requests for "proofs," and general levels of frustration are pretty high. Trying to keep up with the underwriters demands can be pretty severe.  Many clients react poorly when told that the documentation they offered are rejected as "not good enough." Doubly so, when the loan officer "guesses" (hopefully suggests?) that they "might" be.  
  
  Smart real estate professionals, loan officers, processors, realtors, and attorneys must take extra care and effort, preparing their clients before the wage battle with the loan underwriter. Letting prospective buyers know what they are in for - early on - helps sets expectations properly, and will surely make the process a bit easier, at least less unpleasant that it currently is.  Smart professionals should probably refer their clients to this article, to help their clients understand why.
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• SHARING OUR SUCCESS - THANKS TO YOU
  For a second consecutive year, I pledge to donate a portion of my fee from each successful Chicago area real estate closing that I work on to a worthy charitable organization.  Clients designate the specific recipient from a list of ten pre-approved organizations and all donations are made in their honor.
  
  The Thanks to You program is intended to both express gratitude to the clients that hire me, and to help build a stronger community for us all. Together last year, we pledged more than $4,000 to organizations supporting better education, better health, and the fine arts.
  
  This year should be even better.
   
  I am pleased to announce the finalized list 2012 grant recipients:
  
  
  
  • WORKING IN THE SCHOOLS - Promotes literacy and the love of reading among low-income and minority students in Chicago Public Schools by providing one-on-one tutoring and mentoring.
  • READING IN MOTION - Provides at-risk children from Kindergarten through 3rd grade with the key tools required to achieve grade-level reading, through the power and discipline of the arts.
  • ALZHEIMER'S ASSOCIATION - The leading, global voluntary health organization in Alzheimer care and support, and the largest private, nonprofit funder of Alzheimer research.
  • RESPIRATORY HEALTH ASSOCIATION - A Chicago agency that promotes healthy lungs and fights lung disease through research, advocacy and education through community-based interventions.
  • WEST TOWN BIKES - Promotes bicycling among Chicago’s youth with a focus on under-served populations. WTB teaches independence, professional skills, environmental stewardship, & the importance of exercise & good nutrition. Earn-a-bike youth programs offer instruction in bike building, mechanics, & bike safety. (Even a little science too!)
  • GIRLS IN THE GAME - Girls who grow up playing sports develop into healthier, happier and more successful women. Chicago’s leading girls' health and fitness organization empowers making healthier choices and develops confidence and leadership skills needed to succeed on and off the field. 
  • EMERGENCY FUND - Provides immediate no red tape, short term financial aid to low income individuals and families on the brink of crisis. Crisis Solution Grants may cover transportation passes, food vouchers, eye glasses, prescription medicine, and clothing, rent, and/or utilities of clients in need.
  • GREATER CHICAGO FOOD DEPOSITORY - Chicago’s food bank, distributes donated and purchased food in Cook County, equivalent to  135,000 meals every day.
  • TREE HOUSE HUMANE SOCIETY - A cage-less, no kill cat shelter dedicated to the rescue & rehabilitation of sick, injured & abused stray cats, with a particular .focus on the care and placement of stray cats with special physical & emotional needs.
  • TIPITINA’s FOUNDATION - Supports New Orleans’ & Louisiana unique musical culture by providing youth band instruments, workshops, internships and coop work spaces to local artists
  
  
  Do let me know if you want to know more about this project, these organizations, or of course, if you are interested in working together on your next home purchase or sale.
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• Must a Seller Disclose a Home's Macabre History?
  
  A home being offered for sale was the site of a grizzly murder-suicide. Is the Seller obligated to warn prospective Buyers? A recent decision from Pennsylvania held that (at least in that Commonwealth) the answer is yes.
  
  Back in 2008, we reviewed an Alaska court opinion in which a Buyer's lawsuit against a Seller was dismissed. In that case, the home's former occupant's badly decomposed body was discovered   long after her death. The Sellers said nothing to the Buyer. The Buyer sued the Seller, but the Court turned that claim down.
  
  Working with an equally gruesome set of facts, a Pennsylvania Superior Court has held otherwise, upholding a Buyer's right to sue her Sellers and the real estate agents on both sides of the transaction  for failing to disclose a murder/suicide that took place in the house for sale.  Milliken v. Jacono, 2011 PA Super. 254
  
  The crime in question took place in 2006. Konstantinos Doumboulis, allegedly shot his wife and then himself, leaving (apparently) their three young children with the horrific task of calling the crime in to 911). The Buyer did not learn about the deaths until weeks after she moved in (no doubt from the neighbors who welcomed her into the neighborhood).
  
  Most everyone intending to sell a home in Illinois must make certain disclosures about the condition of the property. There are mandatory disclosure forms for known radon and lead based paint hazards and a separate 23 point Residential Real Property Disclosure Report, by which Sellers must disclose known material defects, covering the physical elements from the roof down to the foundation, histories of flooding or usage of  the property in the production of methamphetamine. None of the mandatory Illinois disclosure forms require any statements regarding occult or macabre events taking place on the premises.
  
  Pennsylvania (like most other states) has a similar "Seller's Disclosure Statement." Significantly however,  Pennsylvania law "allows" Sellers  to make additional disclosures to provide greater specificity or additional disclosures beyond sixteen specifically identified disclosure matters. In other words, Sellers are invited to disclose other or additional any material defects. In fact, the specific form that the Sellers used asked "Are you aware of any material defects to the property, dwelling or fixtures which are not disclosed elsewhere on this form?"
  
  The Court ruled that the 16 mandatory points were not exclusive. That the murder-suicide was a material defect, and should have been disclosed.
  
  Important side-note to real estate agents reading this post - The Sellers apparently asked their agent whether or not they needed to disclose - something along the lines of, “Should we tell the buyers that they’ll be living on the site of a recent murder/suicide?” The agents made inquiry with their Real Estate Commission before telling the Sellers they did not. Asking the board did not let them off the hook for giving the Sellers bad advice.
  
  The take away for Realtors & Sellers? let lawyers make legal determinations  - or risk suffering the consequences.
  
  For Buyers, as I tell my kids every morning before school, you gotta, always, ASK GOOD QUESTIONS. If you want to know about circumstances relating to a home that are not specifically listed in the Illinois Disclosure Forms, the only way a Seller is going to be obligated to tell you is if you ask.
  
  
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• Coming Soon: Cook County Property Tax Bills
  The tax man cometh. Cook County first installment property tax bills should be hitting mail boxes everywhere this week. The bills will be due and payable by March 1st.
  
  Taxpayers are reminded that the first installment bills are being sent out now, even though the County does not know how much is actually owed. These are "estimated" bills. For now, bills are simply computed based on a percentage of last year's tariff. A law change enacted in 2009 raised the estimated amount due from 50% to 55%.  The final reckoning will not be announced until later this fall.
  
  
  In theory, those final bills will be mailed out at the beginning of August and will be due September 3rd. The actual due dates may be (and typically are) much later. Our County is notorious for tardy tax bills. Last year's final installments were due in November. Bills paid in 2010 were so late that they were not due until December!  The Second Installment due dates vary because they are computed based on the delivery of various sets of data by several state and county agencies, and a delay anywhere along the line impacts the County’s ability to tally up our bills. Cook County Board President Toni Preckwinkle vows that  she is working hard to ensure that they will be mailed out on time this year.
  
  Property taxes in Illinois are paid one year in arrears. That is to say, the bills we will pay in 2012 are actually 2011 taxes.
  
  Oh, and just in case you are ready to wag a finger at politicians because your bill is too high, keep this in mind - Property taxes are imposed by local government taxing districts only, The state has not assessed a real estate tax of its own since 1932. 
  
  
  
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• MORTGAGE LOAN DEFICIENCIES
  
  
  Homeowners are not always "out of the woods" once their home is lost to foreclosure or sold by "short sale."  Foreclosures and short sales remove  the mortgage lien from a property, but do not eliminate the debt described in the note or loan agreement, or it's promise to repay the debt in full. That remaining balance due is the "deficiency." Contrary to public perception, banks are not only allowing short sales and completing foreclosures,  but they are still looking to borrowers to satisfy deficiencies well after closing.
  
  
  The Illinois Appellate Court has started the new year with a "win" for mortgage lenders. The Court confirmed  a bank's right to pursue it's borrower for everything that was due and owing, over and above the recovery from a foreclosure sale. Banks can be awarded deficiency judgments as long as borrowers are given proper notice of the fact that they were being sued.   This case held specifically that even a notice (summons) handed to another member of the household - also mailed to too - was a proper notice of the foreclosure lawsuit.
  
  
  Deficiency judgments go on your permanent record. Unpaid judgments stay there forever. In the short term, they can influence credit scores and employment applications or prospects. More importantly, and over the long term, they can be enforced by wage deductions or asset forfeitures (garnishments). Following proper procedures, a bank can enforce for up to 27 years! 
  
  Home owners using short sales to escape their mortgages may also see long term after-effects of their efforts. Many short sale lenders are asking their sellers to either pay additional money out of pocket at closings, to sign new promissory notes agreeing to make further repayments over time, or are simply refusing to waive the right to pursue deficiencies in the future.  Second lien holders in particular are very insistent on retaining the right to repayment.
  
  The best way to avoid deficiency complications is to try to get the lenders to waive them, Many will. Often times however, home owners have little choice but to sign loan re-affirmations or modifications. Doing so may be necessary to accomplish the much more important goal of ending the mortgage loan and cutting off liability.   Even still, there are several known and effective strategies that people facing deficiencies can employ to mitigate their losses. Legal counsel can and should be able to explore these with debtors and help craft courses of action best suited to the circumstances.
  
  A final problem - there may also be income tax consequences to borrowers where lenders waive a debt/deficiency. Debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Debt Relief Act of 2007 gives some protection to people who have lost their homes to foreclosure, but this relief is schedule to expire this year. Always best to consult your own tax consultant to evaluate these consequences.
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• Home Buyers Assistance for Iraq/Afghanistan War Vets
  There are a lot of great ways for real estate agents and mortgage lenders to add value to the service they give their clients. Certainly knowing ways to save clients money are always helpful.  Knowing the lenders and loan programs that do so help too.  These are, of course, the same reasons it makes sense for Buyers & Sellers to work with the best professionals they can find for their real estate deals too..
  
  Here is a good one: First Advantage Mortgage has a new program benefiting members of the armed forces who have served in Iraq and Afghanistan. Qualifying borrowers are eligible to receive $10,000 in assistance towards the purchase price and/or closing costs on their next home. (Hat tip Bob Brandle)
  
  These funds are available to all veterans using conventional, FHA and VA financing. Buyers on active duty or in the reserves are only eligible for first time home purchases.
  
  The $10,000 grants are actually second mortgages (so do understand that there may be some additional closing costs too), but - as is typical of targeted programs of this sort - the loan is forgivable over a period of time. In this case, the loan need not be repaid if the borrower owns the home for more than two years and who are not otherwise in default on their mortgages.
  
  Don't forget that Vets are also eligible for a Returning Veterans' Homestead Exemption - providing qualifying Veterans a one-time $5,000 reduction to their home's equalized assessed value (EAV)  upon their return home, and a Disabled Veterans' Standard Homestead Exemption that provides a reduction in a property's EAV to qualifying property owned by Veterans with service-connected disabilities as certified by the U.S. Department of Veterans' Affairs.  
  
  Do YOU know of any other home buyer assistance for military personnel?  (other targeted loan assistance programs?) If you do, please let me know.
  
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• FEES INCREASE at COOK COUNTY RECORDER
  The Cook County Recorder of Deeds has announced a $2.25 fee increase for all document recording effective January 15th, 2012. Recording a standard two page deed will now cost $52.50, up from $50.00. The fees for longer documents increase based on the number of pages the document contains.
  
  
  The Recorder's office maintains the County's official public registry of  real estate ownership, and record of persons (other than the owner) that may have rights over that property. The record helps owners prove their ownership rights. It helps mortgage lenders, judgment creditors, contractors and others assert their lien interests against those properties, and helps the rest of us research and investigate land transfers and sale histories.
  
  
  Buyers who use mortgages to purchase Chicago area property typically pay for the recording of  two documents with each closing - the Deed and the Mortgage. Sellers pay to record a Release of each existing Mortgage that is being paid-off as a part of the transaction.
  
  
  Readers are reminded that Fidelity family of title companies recently announced that it was abandoning the practice of collecting the precise recording fees from Buyers and Sellers in favor of a flat fee based on the average of all recording fees without regard for the number of pages in a document. As a result (at least for the time being), Buyers and Sellers will not see any change in their closing costs.        
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• Chicago Abandoned & Vacant Buildings
  We all know that the three most important factors in determining the desirability of a property are location, location, and location. As such, sharp Chicago area home buyers and the real estate professionals who advise them, are discovering - and embracing - Derek Eder's Vacant and Abandoned building finder tool.
  
  Built on data from Chicago's 311 reporting service, this site shows detailed information about known "problem" properties on an easily navigated google map overlay. Mr. Eder built this as part of the Apps for Metro Chicago contest. This app was an AM4C community winner.
  
  At best, abandoned buildings pose a visual blight on their neighborhoods. Unoccupied, they detract from the economic and social vitality to their surrounds.  At worst, they abandoned buildings can pose severe safety hazards, criminal and structural. Woodstock Institute research shows that vacate and foreclosed homes contribute to declines in neighboring property values and increases in violent crime.
  
  
  
  Savvy owners of  such properties can  exacerbate the toll unoccupied properties exact on the community by asking the County Assessor to lower  property valuations so as to reduce that owners taxes (forcing the rest of us to to  pay more).   The Chicago of Chicago says it spent $15 million last year alone dealing with more than 2300 vacant buildings – most of that to demolish or board them up. Woodstock Institute places that figure at $36 million.
  
  There are however some limitations to the data set used, as the City has only compiled data from January, 2010. The limited pool of information makes it a bit hard to place the data into any sort of historical context. (Is  neighborhood property abandonment  "getting better" or "getting worse." One this is certain - the devastation wreaked by the housing market crash is pretty shocking.  (The site designer's conclusion that there are more such buildings in poorer neighborhoods than in more affluent areas, may not quite as revealing.
  
  It will be interesting to see how recent changes to the City's vacant building registration law effects the data this web site generates. Last July, the  City Council extended  registration and maintenance obligation imposed on property owners to the mortgage lenders that also have interest in empty / unused properties.  (Owners  have been obligated to register and maintain properties that are vacant for more than 30 days since 2008),  The hope is that lenders will take over routine maintenance  when the owner borrowers give up.
  
  Now, owners of six or more properties, including lenders,  must cut grass; shovel snow, board-up entrances, post their contact information on signs in front of these lots, and post security guards at night,  and respond to complaints relating to the building;
  
  Vacant and abandoned buildings can and should be reported to the City by calling 311 or by reporting online.  When the City receives a report an inspector will investigate to determine whether or not the building is secured (or, as necessary, registered) and will issue violation notices to the owner.
  
  More information is also available at the City of Chicago's vacant and abandoned buildings web page
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• ATTENTION CHICAGO CONDO OWNERS - TIME SENSITIVE CHANGES TO THE CITY's TRASH REBATE PROGRAM
  
  
  Our great City of Chicago offers many many benefits to citizens. One of the less glamorous, albeit greatly appreciated services is garbage pick-up - at least for single family homes and small multi-unit buildings.
  
  
  The recognized that condominium owners were paying for this service through their taxes, without realizing any benefit. The result, a rebate program to qualifying Condominium Associations to offset some of the costs of waste disposal. 
    
  The most recent City budget and recent changes to the municipal ordinance make some very important, and time sensitive changes:
  
  
  • An association can only file for the rebate for the 2011 operating year. Applications for prior years are not being accepted.  If your association did not apply for rebates for prior years, you will not be able to do so for 2011 or future years (lets call this one the "you snooze, you lose" provision). 
  • The rebate for 2011 will be limited to a total of $75 per owner-occupied residential unit. (the operative words here being owner-occupied - no rebates for rental units!)
  • Applications for the 2011 refuse rebate MUST be in our office by January 31, 2012 to be considered, no exceptions. (a new, strict, filing deadline).
  • The 2012 rebates will drop to $50 per qualifying unit., then down to $25 for 2013, 2014 and 2015. 
  • Applications for future years will need to be on file before the January City Council meetings (whenever they are scheduled). The City is urging that application need to be filed at least two weeks prior to that meeting date.
  The Finance Committee is still processing 2008 and 2009 remittances, and will then move on to process 2010 and 2011 applications.
  
  Applications need to include the following:
  • Claim form (download here) 
  • Association board form of resolution authorizing someone to submit the application for the rebate. The resolution should be signed by the Board President and one other person.
  • A copy of the arrangement/contract for 2011 salvage collection services
  • Supporting documentation of the total refuse collection expenses for 2011 - copies of invoices or a statement from the contractor will be sufficient
  • If not on file with former year applications, the recycling certification form (download here)
  • Both the Claim form and the Recycling form must be notarized and delivered to your local alderman. 
  Click here to download a FACT SHEET on the changes
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• JANUARY is RADON AWARENESS MONTH
  Show of hands, how many of you can name  the second leading cause of lung cancer in the United States?
  
  OK, the headline was the give-away, but that would be Radon Gas.
  
  Radon is released by the decay of uranium, a naturally-occurring ore found in our soil. When released, Radon can seep through cracks in basements and foundations into our homes.
  
  According to the U.S. EPA, one in every 15 homes in the United States have radon levels that exceed the recommended radon action level. In Illinois between 2003 and 2007, 42% of homes tested for radon gas had levels above the EPA radon action level. It is believed that Radon is responsible for an estimated 20,000 deaths per year in America.
  
  Unlike tobacco usage where you pretty much know how carcinogens are introduced into the body, Radon is a much more insidious health problem - it is an odorless, colorless and tasteless gas. It is a naturally occurring phenomenon. You will never know you are being exposed to it, unless you specifically test the home you live in.
  
  Illinois home sellers have been obligated to disclose test results and known radon hazards to prospective buyers for more than three years now.
  
  Illinois Schools and Day Care Centers have been supposed to test for radon hazards too, based on recommendations in an amendment to the Illinois School Code that became effective in 2010.
  
  Now, effective January 1, 2012, Illinois residential landlords are also going to be required to disclose test results and known hazards to tenants renting dwelling units below the third story above ground level.
  
  

  A STRONG CAUTION FOR BUYERS & RENTERS - You must understand that the Radon Awareness law ONLY requires a disclosure of unsafe test results and known radon issues. The law DOES NOT mandate testing OR remediation.  

  
  Fortunately, Home buyers can (and in my opinion) should give strong consideration to radon testing as a part of any professional home inspection. Tenants, particularly with young children, may wish to test before signing a lease. Test kits can be purchased at most hardware or home improvement stores. They are simple to use and relatively inexpensive.
  
  If a  home or apartment has unsafe levels of radon, there are radon reduction systems that are effective and not too terribly costly. Quite often a seller can and will absorb the cost of remediation.
  
  I am often asked whether or not Radon testing is worth while. It certainly adds to the cost of "due diligence" investigation for home buyers. Money is tight enough and closings are plenty expensive already, before adding in "optional" tests.
  
  Well, certainly the health benefits cannot be over-stated. Of course you want to be healthy in the home you intend to live in. We all do. Check out these statistics from  the Illinois Emergency Management Agency (IEMA) Radon Program for homes tested for Radon between 2003 and 2007:
  
  COUNTY Pct. Of Homes Tested Pct. Of Homes with High Radon Levels
  Cook                   0.40 %                                 25.50 %
  DuPage                   4.40 %                                 39.50 %
  Kane                          5.20 %                                 43.60 %
  Will                           4.10 %                                 41.10 %
  
  More than one quarter of all homes tested in Cook County during this five year period had Radon problems. more than one third of all homes in the "collar" counties did too.
  
  
  Is testing worth the cost?  Boy I sure think so.
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• NEW YEAR - NEW REQUIREMENT FOR (SOME) CHICAGO REAL ESTATE TRANSFERS
  A recently amended municipal ordinance that becomes effective on January 1st is likely  to cause some headaches for unsuspecting  real estate practitioners and will definitely increase fees that some of our clients are going to have to pay to effect property transfers
  
  The City of Chicago has long required that real estate sellers obtain a water department "full payment certificate (FPC)" before a sale transaction is completed.  The Chicago Department of Revenue will not seller property transfer tax stamps without the full payment certification, and the Cook County Recorder of Deeds will not accept a deed without the transfer tax stamps.
  
  Certain classes of transactions are exempt from having to pay transfer taxes and have been historically also exempt from the requirement of obtaining / presenting a full payment certification. These include transfers to add a spouse (or other party) onto a title; transfer to change the form  of ownership of a property, and transfers that are gifts. This includes transfers that are made for estate planning purposes, and transfers between current owners of the property among themselves.
  
  Effective January 1, 2012, all transfers of property will require a FPC, including previously exempt transaction.
  
  Does the City of Chicago really expect to recoup enough money in delinquent or unpaid water bills from "exempt" transactions to cover the extra cost of labor to process all the additional paperwork?
  
  I do not know, but I do see a couple of issues for consumers and attorneys.
  
  Additional Cost to the Consumer:
  The City charges a $50 fee to issue out a full payment certification. Most law firms rely on clerking services to procure the FPC paperwork - who charge an additional  fee to do so. Thus in a typical sales transaction, the seller will pay both an FPC fee and clerking service fee.
  
  However, transactions exempt from transfer taxes will also be exempt from paying the City's $50 FPC fee. Most lawyers will still employ clerking services to procure the paperwork - or charge clients their hourly rates to do so themselves. (consumers will not be "exempt" from paying the "new" clerking fees or additional legal fees).
  
  Aggravation and More Work for Unwary Attorneys:
  I predict that more than a few hapless attorneys will try to record quit claim deeds in the coming weeks, unaware of this new policy. They will waste time (and perhaps charge clients) for their resulting additional efforts.
  
  Unfortunately for all of us, the City did not do much of anything to announce this change. I only learned of this yesterday, having run into a learned colleague while we were both in line at City Hall to purchase FPCs for purchase/sale clients (thanks Bob!) and later confirmed by a call over to the Water Department.
  
  
  
  
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• FHA EXTENDS WAIVER OF ANTI-FLIPPING REGULATIONS THROUGH 2012
  Goods news this week from Washington, DC for real estate investors, and the real estate agents that represent them -
  
  The temporary waiver of FHA’s "anti-flipping" regulations has been extended through 2012.
  
  "Flipping" is the industry term of art for a real estate purchase that is quickly followed by a resale - presumably for a higher price and resulting (but not excessive) profit.
  
  With certain limited exceptions, FHA rules prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In other words, Buyers willing to purchase a property that want to rely on an FHA guaranteed loan would only be able to do so if the seller has owned the property long enough.
  
  The FHA temporarily waived this regulation in 2010 through January 31, 2011, then extended the waiver through year's end.
  
  The extension allows buyers to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.
  
  The idea here is to allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
  
  The Waiver does contain strict conditions and guidelines to prevent the predatory practices often associated with property flips - where properties are quickly resold at inflated prices to unsuspecting borrowers.
  
  
  According to FHA waivers are limited to sales meeting the following conditions: 
  
  
  • All transactions must be arms-length between unrelated buyers and sellers.
  • If a re-sale price is 20% or more above the seller’s acquisition cost, the lender must document justification for the increase in value; and
  • The Waiver is limited to forward mortgages.

  FHA research finds that in today’s market, acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential 
  FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.
  
  
  
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• NEW TITLE COMPANY POLICY MAY ACTUALLY HELP BUYERS / LENDERS ESTIMATE CLOSING COSTS ACCURATELY
  Title Insurance Companies owned by Fidelity National (including Chicago Title Insurance) have a announced a new policy that will, among other things, help Buyers, Mortgage Lenders, and Attorneys estimate closing costs more accurately.
  
  Effective January 1st, 2012, the Fidelity companies will charge Buyers a flat rate to record closing documents with local county recorders of deeds.
  
  County Recorders of Deeds keep the "official" public registry of all land title transfers and liens placed against real estate, such as mortgages, foreclosure proceedings, and the like. The Recorders charge fees based on the number of pages in any given document,
  
  This causes problems for residential mortgage lenders who are obligated by federal regulations to give their borrowers accurate "good faith estimates" of their closing costs, but may not know exactly how many pages of mortgage paperwork a borrower will need to sign at closing,. This  happens because the loan originator may not know what end lender may be making the loan, what  loan product will be used, what riders may need to be attached to the mortgage, or what document preparation service or software will be used to generate the mortgage paperwork.
  
  In turn, this causes problems for attorneys who also want to give their clients an estimate of the cash to closing (aka the "bottom line") for a closing.
  
  And most importantly of all, it adds to the problems Buyers have trying to figure out precisely how much money they will need to fork over at the title company office to close the deal.
  
  Going forward, Chicago Title, Fidelity National & Commonwealth will all be charging Buyers at flat rate to record deeds and mortgages based on the average recording charge per transaction, rather than based on the actual number of pages to be recorded.
  
  For Cook County transactions, the (purchase) flat rate will be $143.00
  
  In DuPage, Kane, and Lake  Counties, the fee will be $74.00
  
  Kendall and McHenry County recordings will cost $86.00
  
  Side effects? of course.
  
  Cash  Buyers will end up paying more for recording than they would have under the old system, as the average recording fee is certainly skewed by multi-page mortgage documents that they do not have to record.
  
  By that same token of course, Buyers using first & second  mortgages will likely receive a significant savings, again, because they will only be charged the average, and based on the additional second mortgage recording fees.  
  
  No word from the other local major title companies at this time.
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• Cover story: Incentives upgraded in down market - Washington Times
  What will it take to get your property sold these days?
  
  An attractive home, in a nice neighborhood, well staged and ready for showings? An attactive price ?
  Of course these things help, but cannot assure a sale, let alone an offer.
  
  Many sellers are resorting to various forms of promotions  to entice buyers agents to show/sell their offerings. Other promotions are geared directly towards buyers.
  
  Here is a great article from the Washington Times on some of the various techniques being used.
  Cover story: Incentives upgraded in down market - Washington Times:
  
  The article falls short a bit for Chicago area home buyers and sellers. There are some pitfalls to be avoided. Mortgage underwriting guidelines may limit the types (and amounts) of concessions a buyer can take from a seller. Some concessions can have unintended tax consequences for unsuspecting sellers.
  
  Do your homework before agreeing to offer - or accept a seller incentive. Better yet, do your homework, AND check with your lawyer.
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• A Landlord's (new) Duty to Re-Key Locks
  Declining property values over the past several years have caused many property owners into reluctant landlords.
  
  The difficult lending climate has turned many would-be home buyers into  temporary tenants.
  
  Whichever side of the Landlord-Tenant relationship a person finds himself on, at least some familiarity with local landlord-tenant statutes is worth while.
  
  City of Chicago landlords and prospective tenants ought to take note of a newly enacted provision of the State of  Illinois Landlord Tenant Statute.
  
  Effective New Years Day, 2012, many landlords in Chicago will be obligated to change or re-key locks for incoming tenants.
  
  The law APPLIES to:
  
  
  • City of Chicago Landlords
  • Who rent residential dwelling units
  • In buildings with 4 or more residential units, OR fewer, if the Landlord does not live in the building. 
  
  The law EXEMPTS
  
  
  • Owner-occupied buildings with 4 or fewer apartments
  • Written leases that obligate the tenant to change or re-key the locks
  • Rentals of a singe room within a private home. 
  Landlords are liable to their tenants where a theft occurs in an apartment because the landlord failed to re-key.
  
  
  The new law can be read in full here:  765 ILCS 705/15 
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• FUNDS AT CLOSING - UPDATE - UPDATED
  First American Title Insurance Company announced today that it too will no longer accept third party checks at Chicago area residential real estate closings. They join Chicago Title and PNTN, who already declared an end to the age old practice of telling buyers to bring funds to closing in the form of cashiers checks made payable "to themselves."
  
  These net effect of these three announcements (and the many more that are about to follow) is that the rules have changed for ALL local closings... and anyone not keeping abreast is going to have an unfortunate  problem at their next closing.
  
  1st American's notice takes the issue even one step further, and this will be of particular concern and import to real estate lawyers:  First Am will no longer accept third party title insurance company checks either. In other words, Buyers who intend to use the proceeds of a sale to close their next purchase at First American better have a lawyer (or realtor) who is hip to the new requirements  --- or enough time to have that title company check clear into their bank account, and be able to document ("source") the funds to satisfy their mortgage lender.
  

  Date: October 26, 2011  To Our Valued Customers:    Consumer banking technology now allows people to directly deposit checks into their bank accounts using Smart Phone applications and other computer technology. There have already been documented cases of fraud associated with this new technology. As such, we now require that all funds presented to us be payable directly to First American Title.  In addition, if a customer is presenting a title company check to us from a different transaction, the title company check must be made payable directly to First American Title.  When requested to redirect proceeds from our closing to another title company, First American Title will accommodate with written direction from the seller.  Thank you for your cooperation. Should you have any questions, please feel free to contact XXXXXXXXXXXXXXXXXX

  
   It will be interesting to see how rigidly this rule is enforced over the next couple of weeks, but I see a very painful learning curve ahead for a lot of us.
  
  Careful practitioners are not only going to have to update their own office procedures and client-closing instructions.... they are going to have to educate their clients, Realtors, and opposing counsel too!
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• UPDATE: GOOD FUNDS AT CLOSING - DON'T MAKE THAT CHECK PAYABLE TO YOURSELF -
  Title Companies are changing the way some Buyers are going to need to bring purchase money funds to closing. If these changes are rigidly enforce, the transition is likely to be a rough one and anyone with a purchase or sale closing coming up in the near term should expect a greater likelihood of delays / aggravation.  
  
  The long standing "best practice" for having Buyers bring funds to a closing table has been to instruct them  to bring cashiers' checks to a closing table made payable to themselves.
  
  Until now, it has  just  the way things have been done my whole career.
  
  Back in June, I reported seeing a notice from one of the local Chicago Title offices indicating that CT would require all checks be made payable directly to the title company. At that time, only one or two offices were actually requiring this, and everything was business as usual.
  
  Closing bays at Chicago Title's flagship offices  in Chicago now sport notices that CT will no longer accept such 3rd party checks.
  
  Now, effective October 27th, Professional National Title Network, Inc (PNTN) is also requiring that only incoming checks made payable directly to PNTN will be accepted. Checks made payable to individuals to be endorsed over to the title company will no longer be acceptable.
  
  I expect that other companies in the  Fidelity National family, and agencies underwritten by CT will likely follow suit soon.
  
  Closings will still take place, but i can already envision a great many of them will be delayed while uninformed or ill advised buyers rush back to their banks to replace the checks they bring to closing with checks that the title companies will actually accept.
  
  
  
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• Help Nice Cream get back in business
  
  Think for a moment about the pure ecstasy of that sweet first lick of ice cream on a hot summer day.
  
  
  Client Kris Swanberg needs your help.
  
  
  Kris is the brains and brawn behind Nice Cream, the reigning champion of Chicago-based artisanal frozen dairy confections. No offense to the late great Kid Millions (i miss you guys a lot). This is the good stuff.
  
  
  Stoopid state regulators are shutting her down for not having a "dairy" license - insisting (suggesting) she is committing for the high crime of using REAL strawberries instead of syrup;
  
  
  PLEASE support Kris & Nice Cream: - Save Chicago Ice Cream!" http://www.eventbrite.com/event/2027922571/estw via @eventbrite
  
  
  Nice Cream works to get back in business
  contact mike: mwass@wasserlaw.net www.wasserlaw.net
  
  
  
• HUD ANNOUNCES FINAL RULE SETTING STANDARDS FOR STATE COMPLIANCE WITH SAFE ACT
  Big news today from Washington, for sellers who would consider offering financing to potential buyers and for
  lucky souls who's parents or other benevolent freinds or family might consider financing their real estate purchases - HUD announced rules that may actually let you execute on your plans.
  
  Shockingly, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, or SAFE Act seems to have outlawed these sorts of financing tools. The SAFE Act established  minimum standards for state 
  licensing of residential mortgage loan originators in order to increase uniformity, improve 
  accountability of loan originators, combat fraud, and enhance consumer protections. but in enacting restrictions on their qualifications and authority, the law included everyone in the universe who made, or wanted to make, mortgage loans.
  
  
   The SAFE Act defines “loan originator” to mean “an individual who takes a residential mortgage loan application; and offers or negotiates the terms of a residential mortgage loan for compensation or gain,"  including individuals who “engage in the business” of a loan originator.  
  
  
  As interpreted in Illinois, a parent  could not lend money to a child to purchase a home or condo unless that parent was a licensed Illinois mortgage lender or originator. Making even a single loan is deemed to be a venture for compensation or gain.
  
  Sad to say, I have had several clients who's plans were dashed by this nasty, and surely unintended consequence of SAFE act implementation.
  
  
  Today's HUD announcement 11-133 appears to (finally) change all of that. 
  
  
  • HUD notes that nothing in the SAFE Act rule prohibits an individual property owner from financing the sale of his or her own property, nor does the SAFE Act require an individual to become a licensed loan originator in order to provide financing in the sale of his or her property.
  • The rule change also clarifies that individuals are not required to be licensed by states) when offering mortgage loans on behalf of an immediate family members. 
  
  To soon to know how the State of Illinois will interpret this one, but it seems pretty clear. Seller financing and parent-financing of mortgages can resume in Illinois. Buyers who are looking for "creative financing" have some new options - that is to say, some classic old-school financing tools  that fell out of favor may be back.
  
  Have a question about seller financing or other family-funded financing of your next real estate purchase? give me a call.
  contact mike: mwass@wasserlaw.net www.wasserlaw.net