Residential Real Estate FAQ

RESIDENTIAL REAL ESTATE FREQUENTLY ASKED QUESTIONS

PURCHASE OF REAL ESTATE

Do I need an attorney?

While there is no requirement to have legal representation, we strongly suggest you retain an attorney. The process of purchasing a home can appear to be "routine", however, there are many variables and pitfalls for which having experienced legal representation can significantly protect your interests. It has been our experience that the legal cost of correcting errors that may result from not having legal representation, far out-weigh the cost of having had an attorney to begin with.

Should an attorney review the contract prior to my signing it?

We always recommend an attorney review any document prior to execution. However, there is an exception; the standard Realtor's® contract used in this area, along with many other commonly used residential real estate contracts, contain a provision to allow each party's attorney to review, modify, or disapprove of the contract within several days of contract execution. This provision allows the parties to get the property "under contract" while still protecting their rights to legal representation. Prior to executing a contract, verify that the document has an attorney modification/approval provision.

How much Earnest Money should I put down?

The Seller will want as much earnest money as possible, while you, as the Purchaser, will want to put down as little as possible, so there is a little negotiation involved. It has been our experience that the higher the purchase price the higher the earnest money. The range for earnest money is typically somewhere between one to four percent of the purchase price.

In the event I do not close on the transaction, is my total exposure to damages limited to my earnest money?

Assuming that your failure to close is a default (ie, any contingencies have expired, and the failure is not caused by the Seller), damages are not limited to earnest money. In the event that the purchaser is in default on the contract by failing to close, the purchaser can be held liable for any and all damages incurred by the Seller. These damages can certainly exceed the amount of earnest money put down on the transaction, plus the cost of the Seller's legal fees are sometimes awarded by the court.

I have a loan pre-approval from my lender, do I need a financing contingency in my contract?

Yes you should have a financing contingency. Most pre-approvals from lenders are merely an indication of your general credit worthiness, and is NOT a commitment to loan you money for the particular house you are buying.

What costs can I expect to pay at closing?

You may have to pay the following fees:

1) Legal; we would be happy to provide a quote to you;

2) Lender; verify amount with your lender. Depending on the specific loan product, these can range from $250 to several thousand dollars;

3) Title Insurance/Closing fee for the loan; these costs are typically tied to the purchase price, but range from $950 to $3,000;

4) Transfer taxes; some municipalities charge the Purchaser a transfer tax. By way of example, the City of Naperville charges three tenths of a percent of the purchase price (on a $300,000 home, this would be $900); and

5) Recording fees; for the deed and a single mortgage, is approximately $100.

Depending on your specific circumstances, these fees can vary greatly. This list is offered as an example and not as a comprehensive final list.

SALE OF REAL ESTATE

Do I need an attorney?

While there is no requirement to have legal representation, we strongly suggest you retain an attorney. The process of selling a home involves the drafting, review and execution of numerous legal documents and that may be very difficult for you to do on your own.

Should an attorney review the contract prior to my signing it?

We always recommend an attorney review any document prior to execution. However, there is an exception; the standard Realtor's® contract used in this area, along with many other commonly used residential real estate contracts, contain a provision to allow each party's attorney to review, modify, or disapprove of the contract within several days of contract execution. This provision allows the parties to get the property "under contract" while still protecting their rights to legal representation. Prior to executing a contract, verify that the document has an attorney modification/approval provision.

How much earnest money should I request?

The Purchaser will want to put down as little earnest money as possible, while you, as the Seller, will want to have as much as possible put down, so there is a little negotiation involved. It has been our experience that the higher the purchase price the higher the earnest money. The range is generally between one and four percent of the purchase price.

In the event the Purchaser does not close on the transaction, do I get to keep the earnest money?

Assuming that the Purchaser's failure to close is a default (i.e., their contingencies have expired, and the failure is not caused by you), damages are not limited to earnest money. The Purchaser may be held liable for any and all reasonable damages incurred by you to sell the home to someone else and possibly also be responsible to pay your legal fees. However, the suit to recover such damages is very time consuming and there is no guaranty that a Judge would award the damages you are requesting. From a practical standpoint, most Sellers settle for the amount of earnest money or some portion thereof.

Can I be assured the transaction will close?

Absolutely not, from a practical standpoint, most real estate transactions close. However, most contracts have contingencies whereby the Purchaser may terminate the contract and receive their earnest money back. These contingencies include; the attorney review/approval provision mentioned above; any finance or home sale contingency.

What costs can I expect to pay at closing?

You may have to pay the following fees:

1) Legal; we would be happy to provide a quote to you;

2) Survey; typically between $300 and $450;

3) Title Insurance; These costs are typically tied to the purchase price, but start at $1,500;

4) Transfer taxes; The State and County charge 1.5 tenths of a percent of the purchase price (on a $300,000 home, this would be $450). Also, some municipalities charge the Seller a transfer tax. By way of example, the City of Aurora charges three tenths of a percent of the purchase price (on a $300,000 home, this would be $900); and

5) Property Taxes; while not exactly a fee, you will have to provide the Purchaser with a credit for property taxes. In the State of Illinois property taxes are paid a year in arrears, so in effect you will be pre-paying your property tax bill. Depending on the assessed value of your home, and the time of year the closing occurs, this tax amount can be very significant. We would be happy to provide you with an estimate.

Depending on your specific circumstances, these fees can vary greatly. This list is offered as an example and not as a comprehensive final list.