REPRESENTING A FIRST TIME HOMEBUYER THROUGH The Law Project

Transcription

1 REPRESENTING A FIRST TIME HOMEBUYER THROUGH The Law Project Volunteer Attorney Training Session Where: Katten Muchin Rosenman 525 West Monroe Street Chicago, IL When: November 18, 2013 Time: 12 2 pm Conducted By: Angie Hall, TLP Rose Ann Zona, The CHA CHGO2\

2 AGENDA I. THE CHA Choose to Own Program Overview Rose Ann Zona, Homeownership Coordinator, The CHA and Angie Hall, TLP II. Representing the Buyer: Justin Winerman, Angie Hall Initial Consultation Verify correct name, spelling and marital status of clients III. Initial Matters When You First Receive the Case File Relevant Parties Engagement Letter Attorney Review Period Extension IV. Reviewing the Contract: Justin Winerman, Angie Hall Review essential terms CHA Riders Negotiations during attorney review period New Construction Condominium Declaration & By Laws Disclosures, warranties V. Moving the Deal Along: Justin Winerman, Angie Hall Inspections Appraisal Financing Title Commitment Survey Affidavit of Title Deed Final walk-through Additional Requirements of the Grant Programs What to bring to closing VI. Right Before the Closing & the Closing: Justin Winerman, Angie Hall Review and explain closing documents Closing costs Explanation of Real Estate Taxes Copy of deed; waived commitment Post-possession Transfer VII. Post-closing Issues: Angie Hall Recorded deed / owner s policy to Buyer Landlord / Tenant Defects (Disclosure) Items VIII. Closing Remarks and Q and A period

3 Representing the Buyer (15 mins.) Initial Consultation: Meet or telephone the Buyer and introduce yourself. Explain the role you will play in the transaction. Let the Buyer know that he/she can contact you at any time with any questions or concerns. Introduce yourself to lender, governmental agencies and Buyer s counselor. If Buyer speaks a foreign language, seek assistance from Buyer s counselor. Verify correct name, spelling and marital status of clients.

4 III. The Purchase Contract (30 minutes) Review essential terms: Front and back of Purchase Contract are reviewed, as well as all riders. Date of Acceptance is clearly written. Name of Seller is legible. Financing Contingency. Mortgage / Interest Rate provisions. Expiration of Attorney Approval Period. Expiration of private Inspection Period. Real Estate Tax Prorations: custom is 110% in Cook County; 105% in remainder of counties. However, try to obtain a larger reproration percentage. if new construction, terms of Purchase Agreement will control. Possession at Closing. Closing to be held in loop. However, most purchase contracts state closing will be held at title company nearest to the property. Obtain Seller s attorney s contact information. The CHA Rider: Must be attached and executed by Seller and Buyer. Ensure earnest money has been deposited with escrowee. Negotiations during attorney review period: Beware of making counter-offers. Verify that interest rate is favorable to Buyer. This arises in the context of the financing contingency. Delete sentences that allow Seller to obtain a mortgage for Buyer. Insist on receiving copies of underlying title documents to review (as soon as possible, but not less than a week before the closing); and allow a contingency period for approval/rejection. Verify real estate tax prorations. Verify liquidated damages clause conforms with Grossinger. Verify closing to be held in the loop. Verify possession to be given at closing. If a condo, ensure Buyer has received and reviewed all condominium documents. If not, request same from Seller s attorney. Verify that notices may be tendered to the attorneys, via facsimile. Review any additional terms.

5 If new construction: Ensure there is a drop dead date. If Seller does not consummate closing by a certain date, Buyer can terminate the Purchase Contract with a refund of all earnest money. Verify tax proration is fair to Buyer. Seller must pay all prior year s taxes. Ensure Buyer understands timing of new construction and timing to pick finishes and extras. Residential Real Property Disclosure Report and Lead Paint Disclosure are not required on new construction (see tab 6). If a condominium conversion: Verify that current tenant has waived its statutory right to purchase the unit. Either obtain proof or include verification in attorney approval letter. Residential Real Property Disclosure Report and Lead Paint Disclosure must be obtained on all conversions. Disclosures, warranties: Ensure Buyer has received and reviewed the Real Property Disclosure and Lead Paint Disclosure. Neither document is required if the property is new construction. However, since a conversion is not considered new construction, these disclosures are required on conversions.

6 IV. Moving the Deal Along (30 minutes) Players: Ensure you have the correct names for Seller and Buyer. Ensure you have correct name, facsimile and notice addresses for Seller s attorney, Buyer s realtor and all lenders. Obtain from CHA, the contact information for the Buyer s counselor. This individual should receive copies of all notices. Inspections: CHA requires its own inspection. When the Seller executed the CHA Rider, seller agrees to allow CHA to conduct its own inspection and agreed to correct any deficiencies found in the inspection. Buyer is required under the CHA program to conduct a private inspection. This should be facilitated through the realtor or Buyer s counselor. Please note that the private inspection is different from CHA s inspection. However, at the time of closing, Buyer is not allowed to spend more (outof-pocket) than $1,500 to make repairs to the property. This requirement does not prevent Buyer from performing additional work on the property after the closing. In general, escrows for repairs are not allowed. The Seller must either (i) repair before closing, or (ii) credit the Buyer to repair after closing. It is best if the Seller makes all necessary repairs before closing. Lead paint inspections are not always required, it depends on type of program and lender. Lenders: Buyer will obtain a first mortgage from a first lender. Buyer will also obtain secondary financing usually from a governmental agency (City of Chicago and Illinois Housing Development Authority). Cooperate with these parties. Forward them documents, as requested, and copies of letters you send out. Checklist / Calendar Dates : Prepare closing checklist. See samples included in these materials. Calendar dates: Expiration of attorney approval period. When Buyer must conduct the private inspection. When Buyer must obtain a mortgage contingency. Closing date. Title Commitment : Receive copy of signed title commitment. Review title commitment for Schedule B exceptions. Request copies of underlying documents (as soon as possible, but not less than a week before the closing) and ensure that any restrictions contained in the documents do not interfere with the Buyer s intended use of the property.

7 Survey: Obtain a copy prior to closing if you can (facsimile copy is acceptable). Review the legal description to ensure it matches legal description in title commitment. Review for any encroachments, building line violations. If property is a condominium, there will not be a survey. If a condominium: Obtain copy of the declaration and bylaws. Read for any restrictions on use and prohibitions on property. Ensure Buyer understands same. Obtain copy of the certificate of insurance for first lender. Obtain copy of Budget and all other documents required under Section 22.1 of the Illinois Condominium Act (see sample attorney approval letter). Contact the condominium association to see if any move-in fees must be paid by Buyer and whether a form needs to be filled out. Deed: Review prior to closing. Person or entity shown in title on the title commitment must be the grantor on the deed. If there is more than one Buyer, ensure how Buyers will take title to the property and inform Seller s attorney of same. Types of tenancies: Joint tenancy with right of survivorship: need not be married and many individuals may hold title. Parties hold an undivided interest in the property. If one party were to die, the property passes by operation of law to surviving party(ies). Tenants in Common: need not be married and many individuals may hold title. Parties hold a divided interest in the property. Upon the death of any tenant in common, the property does not pass to the remaining surviving party(ies). Instead, the interest of the deceased party will pass to its heirs. Tenants by the Entirety: parties must be married, to each other, and property must be their homestead property. Hence, only two individuals may be in title. Parties hold an undivided interest in the property. If one party were to die, the property passes by operation of law to surviving party(ies). However, with this tenancy, creditors cannot enforce any lien or judgment against only one tenant. Final walk-through: Buyer should schedule walk-through with his/her realtor not more than two days before the closing. Property must be in the same condition as when the Buyer purchased the property, all repairs must be made and property must be left in broom clean condition.

8 If new construction, remind Buyer to prepare a punchlist of items not finished or extras not made. This document must be brought to closing. As a reminder, developers usually have a reasonable amount of time to complete the punchlist. If your client is getting a grant from the American Dream/ADDI program, two weeks prior to closing, you or the homeownership counselor must send the City of Chicago Department of Housing the following documents: Title commitment Wiring instructions to title company Closing request form What to bring to closing: Advise Buyer that he/she must bring the following to the closing: Picture ID issued by the government (driver s license, passport or other governmental issued ID). Certified check, made payable to the Buyer, in the amount of the bottom-line figure. Checkbook. If a single family residence, original insurance policy, with paid receipt, containing the correct mortgagee clause (as previously approved by lender). Voided check to set-up the electronic debit payments. Proof that Buyer has $1,000 in a separate bank account to be used towards future home repairs, if needed.

9 V. Closing (30 minutes) Review and explain closing documents: Deed (if a condominium, and storage space and parking space are limited common elements or deeded spaces, legal descriptions for storage space and parking spaces must be included in deed) Bill of Sale Affidavit of Title Loan Documents Recapture Documents Zoning Certificate Water Certification (not needed on condominiums) Condominium Documents: Paid assessment letter. Waiver of Right of First Refusal. Certificate of Insurance. Transfer Declarations (see tabs 4f-h): State of Illinois transfer stamps are a seller s charge. Cook County s transfer stamps are a seller s charge. City of Chicago s transfer stamps are a buyer s charge. Title Commitment Closing costs: Explain charges on Loan Settlement Statement and RESPA. Explanation of Real Estate Taxes: Real Estate taxes are paid arrears, payable twice a year. First installment taxes are always 50% of prior year s taxes. Buyer should prepare change of address and submit to assessor s office. Copy of deed; waived commitment: Obtain copy of the deed; ensure recorded deed will be returned to you. Obtain copy of waived commitment. Electronic debit form and coupon. Collect voided check to tender to CHA. Post-possession: CHA requires that possession is tendered at closing.

10 Endorsements to final owner s title policy: Request standard waiver and inflation endorsements on all properties. If a condominium, request a condominium endorsement as well. Transfer: Buyer to receive all keys and garage openers to property, interest on earnest money check and any refund of funds brought to closing.

11 IX. Post-closing Issues and Question and Answer period (15 minutes) Recorded deed / owner s policy to Buyer: Ensure that owner s policy is identical to waived commitment. Original recorded deed and original owner s policy to Buyer. Keep copy of both documents, including policy jacket of owner s policy, in your file. Landlord / Tenant: Buyer should obtain refund of his/her security deposit with current landlord. Defects (Disclosure) Items: If problems with appliances or the property are found after closing, Buyer must contact TLP s attorneys for assistance.

12 List of Documents Related to the Transaction 1. Sample Purchase Contract and The CHA Rider 2. Sample letters Attorney approval Mortgage contingency extension request Closing extension request Closing Confirmation Letter 3. Sample seller closing documents A. Title Commitment. B. Deed C. Affidavit of Title D. Bill of Sale E. ALTA Statement F. Paid Water Certificate G. Zoning Certificate H. Closing Statement I. RESPA Statement/Settlement Statement (HUD-1) J. TLP Invoice 4. Sample loan documents A. Note B. Mortgage 5. CHA Choose To Own Documents