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How Do I Sell My CCLT Chicago Community Land Trust Property Condo or Home

How do I Sell My CCLT Chicago Community Land Trust Property Condo or Home

Its Easy, get it listed for sale with the Chicago Community Land Trust (CCLT).  Then wait for a buyer to get approved by the CCLT.  Once approved, the buyer will be instructed to enter into a contract with you.  Once the contract is entered into, you will hire an attorney such as myself to review the contract, pull title and prepare the transaction for closing.  It typically takes as long as 90 days to close a CCLT sale because most buyers need their lender to do extensive underwriting thanks to the typical four mortgage financing used in most of these transaction.  When pulling title, it is important your attorney have experience in working with the CCLT system and that they are using a Title Company and Title Insurance Provider that is able to fully understand the complexities of closing a four mortgage transaction.

How do you get four mortgages?  The typical CCLT purchase will include a traditional first mortgage usually covering about 80% of purchase price.  The second mortgage which actually behaves like a first mortgage is the affordability rider and restriction that are recorded by the CCLT to ensure that not transfer of the property can occur without CCLT approval.  The third mortgage is typical a forgivable grant for $15,000 or more from the Illinois Housing Development Authority to assist with the purchase of the property.  The fourth mortgage is often a $5000 grant for closing costs that is also usually forgiven after 5 years.  Lastly, a fifth mortgage is often found as well which is often recorded in the first position.  This mortgage is the assumption by the buyer of the sellers original affordability loan/mortgage usually originally issued by the Illinois Housing Development Authority.  This is typically $40,000 is not forgiven for 30 years.

The Affordability Mortgage can be a real wake up call when selling your property.  You may list your property for sale at $180,000 thinking you only need to pay off the first mortgage and your closing costs if you have lived in the unit for five years or more, but then are surprised to learn that the $40,000 affordability mortgage doesn’t get forgiven for 30 years.  Currently the Illinois Housing Development Authority is required to review and approve this assumption by a new buyer at two board meetings.  This can often extend a closing to 6 months after the contract was entered into.  It is important to have your seller’s attorney carefully review title immediately after the contract is entered into to fully review all of the mortgages that must be paid off or assumed by the buyer.  This can radically change the sales price for the buyer if the buyer only expects to live in the unit for 10 years and doesn’t want to have to rely upon the Illinois Housing Development Authority to allow an assumption by the next buyer.   In practicality, this assumption should always be allowed to keep the property “affordable” but you are relying upon a government agency in the future and some buyers may be advised by their attorneys to reject this.

Given what we’ve discussed today, only one rule needs to be followed when selling a CCLT unit – have an attorney who has experience with the CCLT.

Prorate a Chicago Water Bill

Prorate a Chicago Water Bill.  First, get a copy of the most recent water bill.  Find out the billing cycle.  For a non-metered account it is issued every six months so look at the bill and use the month it is issued and then add six months for the other billing month.  Determine the last date through which the water bill has been paid or is supposed to be paid.  By the way on a non-metered bill, water and sewer are billed together and are typically each 1/2 of the total bill amount.  Then do the following calculations:

Closing Date – Last day of previous water/sewer billing period = Number of Days to charge per diem water/sewer charge

Last water/sewer bill total amount/180 – per diem rate

Prorated Amount that you should be credited at closing = Number of Days  X (times) Per Diem Rate

Example:

  • Closing Date is July 31, 2015
  • Last day of last water/sewer billing cycle:  April 30, 2015
  • Last total bill:  $379.14
  • 7/31/2015 – 4/30/2015 = 92 days
  • 379.14/180 = $2.11
  • 92 days x $2.11/day = $194.12

The amount the seller should pay the buyer at closing is $194.12

Conclusion:

Water Bills and Sewer Bills are traditionally not prorated in the Chicago, Cook County and Collar County areas.  But they could be prorated if needed and/or desired by clients.  In Chicago, the Chicago Water Certification is really the only thing traditionally required at closing to ensure that there is no lien from a prior unpaid water bill.  However, since the water bill issue date controls who is liable on that day by who is the owner on the day the bill is issued instead of who was the owner during period in which the bill accrues.

Disabled Can I File Chapter 7 with Equity in Home

Disabled with Equity in Home Can I file Chapter 7 Bankruptcy. Are you disabled? Have you applied for disability but are waiting for approval? Have you applied, been denied and have appealed disability? Do you have over $20,000 in credit card debt and can pay your credit cards? Have you owned your own home for many years and now have equity? You’re not alone. Many Americans are now seeing the value of their home rise, but are saddled with unsecured debt such as credit cards.

Recently, I had a similar situation. Debtor had $50,000 in unsecured debt i.e. credit cards. Debtor had applied for disability but was denied and had been working half shifts for the last several years pending approval of disability. Debtor did not qualify with his income to get a new home equity loan or refinance his home, but has $80,000 of non-exempt equity. What does debtor do?

1) Cannot file Chapter 7. This will result in the home being sold in the bankruptcy to pay off creditors at 100% which results in debtor losing home, not getting full value of home and debts are paid off in same fashion as outside of bankruptcy.
2) Debtor cannot refinance or get home equity loan even though he has $80,000 of free and clear equity. This is because debtor cannot prove adequate current income to be approved for refinance or new home equity loan.
3) Debtor cannot sell his home because an apartment that matches his current income would not provide enough space for his family.
4) Debtor cannot file Chapter 13 because his income is inadequate and even if he had full disability pay, this is not considered income under Chapter 13 and the case would be dismissed.

The only solution; add a credit worthy person to the title of the home and have them apply for home equity loan, hope that full disability is approved soon and then pay off loan as normal with additional person being primarily liable for the refinance or home equity loan. This type of application will typically only apply to individuals who have family units or friends who are comfortable with the risk associated with this type of arrange.

Proration of chicago water bill

proration of chicago water bill.  You can prorate a chicago water bill.  To prorate simply request the prior years full bill which is two six month bills. Then divide the total year bill by 360 to get the per day cost.  Then count the days from when the last bill was issued.  Use following equation to caluculate the credit that should be given to buyer at closing

X = number of days since last bill issued

Y= the cost per day for water 

Z= the amount of credit given to buyer at closing

Equation

(X)(Y)=z

Example

Sellers received a water bill for $318 dated February 8, 2014 and another water bill for $324 dated August 18,2014.  Sellers have signed a contract to sell the home to buyers closing on January 31 2015.

To determine coat of water per day, add the two water bills issued in 2014 for 2014 water cost and the. Divide by 360

(318 + 324)/360 =1.783

To find out credit that should be issued to buyer calculate where 134 is the number of days since last bill in August through date of closing

(134)(1.783)=238.92

The credit at closing will be $238.92

Condo Buying Tips 2014

Condo Buying Tips 2014

Here are some tips when buying a condo.  Over the years these have changes and this article is tailored for some of the important ones in 2014

  1.  Sellers Past Due Assessments:  If you are purchasing an REO Condo Property from a Bank or other Entity that acquired the property out of foreclosure, be aware that you are liable for up to six months of past due assessments from the prior owner.  Have your attorney fix this in attorney review by requesting that the current seller pay this liability.
  2. Special Assessments:  The good news is that nearly every contract form in existence requires the seller to pay all current special assessments to ensure that you take the property clear of any liens or encumbrances.  But what is to stop the housing association from slapping on a new special assessment the day after you close?  Have you attorney fix this property by demanding Section 22.1 Documentation including a filled out disclosure listing any planned or expected special assessments for  the next two years.
  3. Parking and Storage Spaces – Are they deeded, a limited common element or assigned:
    1. Deeded:  The parking space deeded to the new owner and can be alienated at any time.  Another way to say this is that you own the space with no restrictions and you can sell it at anytime.   The upside is that your spot can be sold as a separate asset or retained after you sell the main living unit to used as rental.  The downside for the homeowners association is that groups can form buying up all the spaces leaving lots of units dependent on only rental parking making the condo development harder to sell units and also making for a lot of absentee parking space owners.  In general this is now disfavored and in very few condominium declarations
    2. Limited Common Element.  This is where you are deeded a parking spot and/or storage space which always go with the unit but cannot be alienated (another word for sold) except when seller the living unit, parking space and storage space together.  This is generally favored today as a way to keep housing associations stable with every unit having parking an generally reducing the likelihood of anyone one person or group from owning the majority of parking spaces.
    3. Assigned by the Board.  This is a form of Limited Common Element where you own the right to a parking space and/or storage space but it is assigned by the housing association board and can change from time to time.  This is also favored today and is especially useful in large housing associations.
  4. Rental Restrictions:  These restriction are very important to nearly every condo owner.  Today there is a trend away from allowing rentals.    Better Quality Condominium By-Laws will include an exception for hardship allowing rentals when needing to move for work or otherwise but not being able to sell the unit – for a variety of reasons – including being underwater on a mortgage.  Have your attorney review these provisions in the condo decs and bylaws during attorney review.
  5. Pet Restrictions:  Be careful with these ironclad provisions from which there is almost no mercy and discretion by the board.  If your dog is one pound heavier than allowed, he or she is on their way to a new home.  If pets aren’t allowed, don’t try sneaking in a cat – they will be found out and removed.  This a heartbreaking area that should be discussed even before making an offer.  Any good seller discloses this restriction but it is your realtor who can be your early advocate to learn about this when not listed in the listing.
  6. Small Homeowners Associations:  These are associations 12 units and smaller.  If the association has a management company, generally these are the same experience as living in a large association.  However, small associations are much more sensitive to lawsuits and homeowners who are delinquent on assessments.  Have your attorney check into whether the association is professionally managed, has delinquent assessments or properties in foreclosure.

home sale net profit How to Calculate Your Net Profit or Loss from Selling your Home

home sale net profit How to Calculate Your Net Profit or Loss from Selling your Home

Every year starting in January, homeowners will often decide whether to sell their home either for pending employment change, school change or other reasons such as getting a larger home for a growing family.  When getting ready to put your home on the market, it is important to figure out your estimated gain or net profit from selling the home.  This will help you to understand whether you will have money to invest in your new home, break even or need to consider a short sale.  In today’s markets this calculation can also help you to understand just how low you can go – in price and and still exit ownership of the home.  For condos in Chicago this is often critical as condo owners often make less profit and but have strong needs to move based on increased home size .

How to Calculate Your Net Profit or Loss

Sale Price $

Less:

  1. 1st Mortgage Balance
  2. 2nd Mortgage Balance
  3. Any Grants or mortgage type liens that have not been forgiven such as a closing cost grant or IHDA grant.
  4. Realtor Commission (6% of sales price – to be safe use this figure)  (do not include if for sale by owner)
  5. Title Costs:  $7000 (may be less bits good to have extra in this area)
  6. Tax Prorations ($5000 in Chicago)  $8000 to $14,000 in suburbs)
  7. Any Taxes that are unpaid or sold and must be redeemed.  – Get Redemption Quote from Tax Assessor
  8. Attorney Fees:  $500 to $2000 depending on simple closing or for sale by owner)

**

While not an exhaustive discussion of how to figure out your net profit or loss, this can be helpful in figuring out right away whether you need a short sale.  Short sales are covered in other articles on this site, but needless to say these are much more involved with only one goal which is to exist the home and hopefully not have any remaining liability.  As discussed before this is most common  in Chicago with condos in Chicago, but can apply to any property.

Please see our other articles on Tax Prorations and Short Sales

 

Seller Refuses to Hire Attorney and Won’t Pull Title

Seller Refuses to HireFrustrated Attorney and Won’t Pull Title.  Recently, I had a client that entered into a real estate contract.  The contract called for the seller to pull title and draft a deed.  When I called the seller and asked who the attorney way, the seller simply said “we are not hiring an attorney, we have a title company and you are paying for title and drawing up all of the documents”.  Now here is the real kicker, the seller had received $5000.00 already from the buyer.   What should the buyer do?  1)  Hire Legal Counsel  2)  Declare the contract in default 3)  Demand return of the earnest money 4)  Look for another property to buy.

Alternative Answer:  What is the buyer really wants the property and the is simply a difficult person, what can the buyer’s attorney do at this point?  In Illinois, the seller is required to purchase title insurance when conveying title to the buyer.  Only Attorneys licensed to practice in Illinois can draft deeds.  Under these circumstances, the buyer could hire legal counsel and ask him to also pull title and do all of the activities of the seller’s attorney.  A waiver should be signed by the buyer and the seller stating that an inherent conflict of interest exists and that the seller is unrepresented by the attorney and is only drafting documents for the sole benefit of the buyer.  Also, the buyer’s attorneys selects the title company and not only earns title fees but is responsible for hiring the escrow company that distributes proceeds to the seller.

In conclusion, a real estate transaction is always best when attorneys are present on both the seller and buyer sides of the transaction.  In Illinois, the seller always selects the title company, pulls title and drafts the deeds.  The buyer is responsible for purchasing title coverage for his lender only and is by contract usually responsible for the entire escrow closing fee.  It is unclear whether it is a flagrant violation of the law to have the buyer pull title and draft the deed.  But it appears that will full disclosure and consent from all parties this is allowed.

Do you need legal counsel for your next real estate closing?  If yes, please contact us today for a consultation:

  • Your Title Here




 

Foreclosure Sales Reach 35,000 in 2012. The Highest Since the Real Estate Collapse.

The Chicago Tribune is reporting today that foreclosure sales topped 35,000 in 2012. The Highest since the Real Estate Collapse. See (http://www.chicagotribune.com/business/ct-biz-0206-foreclosure-auctions-20130206,0,4902617.story)  What does this mean to you as a first time homebuyer or someone looking to move up to a bigger home:

1)  Good Values – Most of the homes sold at foreclosure were taken back by the bank.  Oftentimes, these homes will sell for less than 50% of the appraised price to move them quickly.

2)  If you are selling your home to purchase another, short sales are being approved much more quickly and rental rates have been improving.  This will allow more turnover of our housing stock in 2013.

3)  FHA loans continue to be a great value with interest rates less than 4.5% and approvals usually fairly easy for workers with stable incomes.

The downside:

1)  Housing values overall will continue to remain depressed.

2)  Many homeowners will continue to be “trapped” in their house where it is impossible to sell either at a profit or break even transaction.

The conclusion:

It is 2013 nearly 5 years since the official beginning of the “Great Recession” and our economy has not improved.  The Great Depression is a good lesson – nothing really improved until War Order for Munitions started in 1939.  Clearly that wasn’t the greatest way to end an economic slow period.

Chicago Area Foreclosures are Up 30% in 2013

IMG_0988rChicago Area Foreclosures are Up 30% in 2013.  In a recent article by the Chicago Tribune (Chicago Tribune, January 31, 2013), foreclosures were listed as being up 30% in 2012.  This is consistent with prediction for foreclosure activity way back 2009 when I attended and October, 2009 ABI Seminar at the Standard Club.  Clearly, we were shocked in 2009 that foreclosures were predicted to get worse, but it makes sense.  A large portion of our mortgaged housing stock was underwater in 2009 and more of it was underwater in 2012 as housing pricing had not really rebounded but instead fallen.  One of the reasons for the “real” housing price decline is that our housing stock as become “illiquid” as a home may be appraised for $400,000 but no one who would purchase the home can get a loan to purchase it.  Therefore causing a “gap” between the demand and supply curves.

Why is foreclosure so attractive to lenders – quite simply recovering of money NOW.  On average a bank recovers more than 1/3 of the loan principal in a foreclosure.  Then the bank applies to either the private mortgage insurer or the Federal Government to cover the rests – have you ever heard of Fannie Mae – that’s what they do – pay out on losses.

Chicago Area Foreclosures are Up 30% in 2013.  Home Loan Modifications are Pure Profit for Lenders and Foreclosures are a nearly 70% recovery for lenders.   When a bank offers you a home loan modification they are not doing so to “help” you.  Instead it is a nifty way to make more money off of you.  Keep in mind that a bank that offers you a home loan mortgage at 6% is currently paying only 0.5% or less for the money they borrow from Federal Funds to cover this loan.  Therefore, if a bank offers a 5 years interest rate break to 2% – they still make 1.5% off of you and they increase their chances for full repayment by giving you five years to have the value of your home rise and also have you either keep your employment, get better employment or get a job (if you are unemployed).

In conclusion, Congress and the Senate should get together and allow borrowers to restructure their loans through Chapter 13 Bankruptcy which is a comprehensive reorganization where everyone is paid fairly, comprehensively and people are not uprooted out of their homes and communities.

Condominium Assessments Discharged in Bankruptcy

Condominium Assessments Discharged in Bankruptcy

Are condominium assessments discharged in bankruptcy? Yes and No. Condominium assessments incurred prior to the date of filing your bankruptcy petition (pre-petition) are discharged. Condominium assessments incurred after the date of filing your bankruptcy petition (post-petition) are not discharged.

What should I do if I am surrendering my condominium? You should pay your monthly assessments until you are no longer the owner. You are no longer the owner after the property is sold oftentimes by a foreclosure sale.

What should I do if I have already abandoned the condominium? You should pay your assessments post petition until title transfers out of your name. But I just went bankrupt, how do I pay for this? You should try to rent it and also list it for sale. But what If the association says I can’t rent it? Then go to a board meeting and ask the condo association to rent it on a 13 month lease as they are allowed to do to recoup delinquent assessments by the Illinois condominium act. If you are outside Illinois check out that states condominium association laws.

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