Although a buyer and seller typically negotiate a majority of the terms of a real estate transaction prior to executing a contract, once the parties have both signed on the dotted line the attorney review process begins, which can often lead to further discussions and negotiations. The below points highlight just a few of the most common scenarios I address for clients and how having the right attorney can help navigate through some difficult issues.
What Is Attorney Review?
“Attorney Review” is typically the 5 or 7 business days after contract execution where the attorneys for both the buyer and the seller review the contract and have the opportunity to raise any issues that perhaps were not addressed during contract negotiation. During this time, your attorney should also schedule a call with you to discuss any questions or concerns you may have as it relates to the contract, the property, or the process as a whole so that you have a firm understanding of the transaction and realistic expectations.
During the attorney review period the buyer will have the opportunity to conduct a professional home inspection. Through their attorney, the buyer will provide a list of material defects that were found in the property during the inspection and will request certain repairs be made prior to closing or credits to be given in lieu of repairs. For a buyer, it is important to realize that this is not an opportunity to have the seller redecorate the entire home. The buyer should put emphasis on requests that are true health or safety hazards that could result in further damage to the property (for example a leak that has gone unaddressed) or items that could cause a life threatening situation (such as an electrical panel that presents a fire hazard). The seller should thoroughly review the inspection report and list of buyer requests with their broker and attorney to carefully determine which items should be addressed. At this stage communication between the parties is key and it is important for both parties to remain calm and keep in mind that the end goal should be a solution that is fair to both parties.
Taxes can often times be one of the more confusing components to a residential real estate transaction. Taxes are paid in arrears, which simply means that the buyer will get a tax bill after they close for time that they did not live in or own the property. The way we account for this is by having the seller give a credit to the buyer at closing to adequately cover this amount. Unfortunately, there are many variables that make this amount practically impossible to predict with 100% accuracy. Several critical numbers, such as the property tax rate and equalization factor are often unavailable at the time of the credit calculation. It is extremely important that your attorney discuss taxes with you to ensure that you understand, at least on a basic level, how property taxes function.
Another layer of complexity in regards to property taxes is the Assessed Value. In Cook County, property taxes are reassessed every 3 years. This triennial cycle means that properties in City of Chicago townships were reassessed in 2018 and will next be reassessed in 2021, Northern Cook County townships will be reassessed in 2019 and Southern Cook County townships will be reassessed in 2020. A majority of City of Chicago homeowners saw an increase in their assessed values in 2018. This increase directly impacts the amount of property tax one can expect to pay. Each county has a specific protocol in terms of evaluating property values and how a homeowner can dispute an assessed value. It is incredibly important your attorney stays up to date on information released by the Assessor’s Office and discusses any increases or changes with you.
Inspection, tax and assessment issues are just a few of the issues that can come up during a residential real estate transaction. Your attorney should be able to counsel you on items such as:
-When is my earnest money in jeopardy?
-The association documents revealed litigation against the association or, perhaps, a contemplated special assessment, now what?
-The seller moved out and damaged the property, what recourse does the buyer have?
-The property is a condominium and comes with a parking space. What is the difference between a parking space that is a limited common element, deeded, or assigned?
-The appraisal has come in lower than the purchase price, now what?
-What is a tax escrow? How does it work?
-What is the impact to the buyer of a tax exemption, such as a senior citizen exemption or senior freeze?
-Should the parties ever agree to pre or post closing possession arrangements?
-What do I need to understand about an offer that is based on a home sale contingency?
Sarah L. Donnellan, Real Estate Attorney – Praedium Law Group
Content provided by Women Belong member Sarah Donnellan