Purchasing a Home in Illinois
Buying a home is a major life event. For many of us, it is the single most significant purchase we will make in our lifetime. Understanding that process, combined with having the right professionals to guide you, will truly make a difference in your overall home buying experience.
Your Offer Becomes a ContractAfter spending countless hours viewing properties online and in person, you finally found the one you hope to call "home". At this point, your real estate broker will assist you with preparing an offer to present to the Seller. It is important to understand that unless your broker is also licensed to practice law, he or she may only "fill in the blanks" on the form contract and cannot give you any legal advice. Any legal questions should be discussed directly with a licensed real estate attorney. That said, once the offer is completed, your broker will then present it to the listing broker, who represents the Seller in the transaction. The Seller will review your offer and may either accept it, reject it, or make a counteroffer of his or her own. Eventually, once both parties agree upon the final terms, the Seller will sign the offer, which then becomes a legally binding contract. At this point, however, the contract remains subject to several contingencies, including attorney review, professional inspections, and financing (see below for a detailed discussion of each contingency). The date upon which the Seller signs the contract (i.e. the Date of Acceptance) is very important in the process, since those contract contingencies begin running as of that date. Accordingly, it is imperative that a copy of the fully executed contract is provided to your attorney, as soon as possible, after the Seller has signed it.
Attorney Review and Professional InspectionsTwo important contract contingencies are 1. Attorney Review; and 2. Professional Inspections. It is common for these contingency periods to begin the next business day after the Date of Acceptance stipulated in the contract. Generally, they operate for a period of five (5) business days; however, this timeframe may vary depending upon the terms of the contract. Further, contracts for new construction properties may not include either of these contingencies. In the event that you are purchasing a new construction residence, it is highly advisable to request an attorney review Rider to be incorporated into the builder's contract.
The Attorney Review contingency provides your attorney with the opportunity to complete a comprehensive review of the terms of the contract. Based upon that review, the attorney may then propose certain modifications designed to clarify the contract in order to better protect your interests. Most contracts also enable the attorney to disapprove the contract for reasons other than the stated purchase price.
The Professional Inspection contingency provides you with the opportunity to conduct inspections to determine whether there are any major defects affecting the property. This encompasses the structural integrity of the property, as well as the major systems and appliances. Common inspections include (1) a general home inspection; (2) radon inspection; (3) wood destroying insects (e.g. termite) inspection; and (4) well and/or septic inspection (if applicable). It is important to understand that generally the contract will limit the scope of the inspection to defects which are considered major or safety related. Accordingly, any issues that would be characterized as minor, cosmetic, or general maintenance, are excluded. Further, the age of a system or appliance is deemed irrelevant as long as it properly performs its intended function. For example, the home inspector may indicate that the furnace is "beyond its useful lifespan". However, that mere fact alone does not entitle you to demand its replacement or to request a concession from the Seller. Once your inspections are completed, you should discuss any legitimate concerns with your broker and attorney. Your attorney will then formally address them with the Seller's legal counsel within the contingency timeframe stipulated in the contract.
As previously stated, it is common for the Attorney Review and Professional Inspections contingencies to operate concurrently during the first five (5) business days after the Date of Acceptance. Once your attorney presents your demands to the Seller's legal counsel, it is also common to then have an additional five (5) business day period for the parties to reach a final agreement. During that time, the Seller may agree to some or all of your requests, or possibly offer concessions (e.g. closing cost credit) in lieu thereof. Certainly, the Seller also has the option of declining to address anything at all. Ultimately, if a final agreement is not reached, either party may terminate the contract. In that event, the earnest money deposit will be refunded.
Financing ConsiderationsAnother important provision of the contract is the financing contingency. This contingency establishes the terms of the mortgage you are seeking, including the type of loan (conventional, FHA, VA) , interest rate (percentage, fixed or variable) and term (15 or 30 years). It may also require you to make a written loan application with your lender within a certain number of days after the Date of Acceptance. In addition, the financing contingency contains critical contract dates by which you are obligated to provide certain documentation. For example, there is generally a requirement for the Buyer to provide a loan commitment letter (also known as a "clear to close") by a certain date which is often 1-2 weeks prior to the closing date. Once the loan is clear to close, then the closing may be scheduled. In the event that the financing is denied, as long as the contingency remains open, and assuming that the buyer did not intentionally cause the denial by failing to comply the lender's underwriting conditions, then the earnest money deposit will be refunded.
The Final Walk ThroughPrior to closing, you will complete a final walk through of the property. This is typically done either the evening before or the day of closing. Your real estate broker will assist you with scheduling this, as appropriate. It is important to understand that the purpose of the final walk through is limited to verifying that the Seller has completed any agreed upon repairs, as well as to confirm that the condition of the property has not materially changed since your home inspection. It is also your final opportunity to check that all systems and appliances are operating properly. However, you may not use the final walk through to present any new issues originating from the professional home inspections. Generally, contracts require the Seller to remove all items of personal property not included with the sale and to leave the property in "broom clean" condition. Broom clean condition essentially means that floors must be swept, carpets vacuumed, and drawers wiped out; however, it does not require the Seller to have the property professionally cleaned. Any material changes in the condition of the property, or any other legitimate issues, should be promptly brought to the attention of your attorney. If possible, walk through issues should be resolved prior to closing.
The Closing CeremonyFinally, the day to close on your new home has arrived. Plan on between 1-2 hours for the closing ceremony. At least three business days prior to closing, your lender should provide you with a Closing Disclosure (CD) which contains an estimated bottom line figure of your funds to close. In the event your bottom line is $49,999.00 or lower, you may bring a cashier's check made payable to the title company (Under no circumstances should the cashier's check be made payable to you personally!). However, pursuant the IL Good Funds Law, if your bottom line to close is $50,000.00 or higher, then the funds to close must be sent to the title company via wire transfer. A word of caution about wire transfers: cases of wire fraud have been on the rise in recent years; accordingly, it is highly advisable for you or your bank to contact the title company to verify the accuracy of the wiring instructions which you are provided prior to initiating your wire transfer, if applicable. Also at the closing ceremony, your attorney will review the loan package, title, survey and conveyance documents with you. Once you have signed all of the necessary loan and title company documents, the lender will issue its funding approval. Congratulations on the purchase of your new home!