Real Estate Law: Residential
Real estate law covers the rights to possess, use, improve, rent, encumber, and sell real property. It is not concerned with the rights to personal property, such as a car, although it does cover what is attached to real estate, such as a house.
In this section we'll discuss residential real estate, focusing in particular on home ownership. For information on commercial real estate, including landlord-tenant rules, see Real Estate Law: Commercial. For information on financing a real estate transaction, see Real Estate Finance Law. For information on real estate taxes, see Real Estate Tax Law.
Buying a home. Assuming that the homebuyer knows where she wants to live, and she has concluded that the desired area has houses in her price range, the first step is to begin looking at houses. Once upon a time, not too many years ago, looking at houses involved driving around with a real estate agent. Today, the Internet offers many opportunities to view houses online, including the opportunity in some cases to take virtual tours.
Once the search has been narrowed, the next step is to contact a real estate agent and begin seeing the houses. The one thing you should remember when selecting an agent is that there is no such thing as a buyer's agent in Illinois anymore. Under the old system, sellers would find seller's agents, and buyers would find buyers agents, but no more. On the one hand, it's actually a much simpler system because the buyer should never have to pay any fees to her agent. On the other hand, the buyer no longer has anyone looking out directly for her interests, which means no one is going to tell her that the sellers are desperate or that the roof leaks.
The agent who works for the seller is called the listing agent. Everyone else is just working the middle. They're trying to match buyers with sellers, but they aren't supposed to favor one side or the other.
Bids. Once the buyer finds a house she would like to buy, she begins the process by making a bid. The seller's asking price is not an offer. It is an indication of what the seller thinks is a fair price. A "serious" bid is generally considered to be one within 20% of the asking price, but the buyer should in no way feel obligated to make a bid within 20% of asking price if the buyer thinks the property is overpriced. Once the buyer makes a bid, the seller can either accept the bid or make a counteroffer. A counteroffer is considered to be a rejection of the previous bid.
A valid contract requires an offer, an acceptance of the offer, and consideration paid for what was purchased. Once a bid is made, and it is accepted, the parties have to put their contract in writing because all contracts for the purchase of real estate must be in writing. The realtor will help the buyer draw up a residential real estate contract. Among the more important provisions in the contract that the buyer needs to decide on are statements about what is to remain with the house and what is to be removed, the date the sale is to be closed, the date by which the loan commitment must be made, and the amount of earnest money the buyer will be required to pay up front.
The contract will contain a mortgage contingency provision, which says that the contract is void if the buyer is unable to obtain a loan commitment by a certain date. In that event, the buyer gets her earnest money back. If the loan commitment is not made by the date agreed upon and the parties don't want to void the contract, either the seller can agree to extend the date or the buyer has to waive the mortgage contingency provision. If the buyer waives the mortgage contingency provision, and the loan is subsequently not approved, the sale is off, and the buyer loses her earnest money.
At the time of sale, a buyer will usually retain a lawyer, preferably one experienced in real estate matters, to review the contract and handle the loan closing.
In sales involving houses built prior to 1978, Illinois requires that the seller provide the buyer with a statement regarding knowledge of any lead-based hazards in the house. The seller is also required to fill out a report that discloses knowledge about material defects in the house, such as whether there were any flooding or electrical problems in the previous 12 months.
Selling a home. A person who wants to sell her home can either sell it herself or hire a realtor. If she hires a realtor, the realtor will ask her to sign an exclusive listing agreement, which gives that realtor the exclusive right to sell that house for some period of time, usually 90 days. The seller agrees to pay a broker's fee, usually around 5%, although for multi-million dollar homes it runs a little less. Once the house is sold, the fee is paid, and the seller's realtor and the buyer's agent split it up.
The seller usually will retain an attorney to review contracts and to handle the loan closing.
Ownership. When real property is owned by more than one person, it can be owned in one of two ways. One option is joint tenancy, which is far and away the most popular choice for married couples because, upon the death of one owner, the property immediately goes to the survivor, which means that real estate taxes and probate are avoided. The other option is tenancy in common, which differs from joint tenancy because there is no automatic transfer to the surviving owner or owners. Thus, where real property is owned as tenants in common, the interest of someone who dies is determined by his or her will or, if there is no will, by the intestacy laws.
Condos and townhouses. Condominiums and townhouses are similar to single-family homes in the sense that they are owned rather than rented. The condominium owner owns title to his unit, but the condominium association owns the common ways. Some prefer to own condominiums because they offer some of the benefits of home ownership without the burdens of yard maintenance and other home-related upkeep. In the typical condominium, the owner pays a mortgage, plus a monthly fee to the homeowner's association for upkeep. Townhouses are similar to condominiums, except that they have additional home- like features, such as a small yard and a door at street level. Condominiums and townhouses can be subject to restrictions that are homes aren't subject to because they are governed by an association. For example, a condominium might restrict pets or prohibit subleasing.
Deeds. When title is transferred from one to another, the document that reflects the transfer is called a deed. The most common type, the general warranty deed, includes promises by the seller that she owns title and that there are no encumbrances against the property, such as unpaid mortgages or tax liens. The other type, the quitclaim deed, involves merely a transfer of one to another of whatever interest the seller has.
Deeds are recorded at the county courthouse, together with any encumbrances on any real property in the county. The filing of the deed provides notice that the buyer is the owner of record of the property.
Foreclosures. The mortgage contract between the owner and the lender will provide terms under which the lender is given the right to foreclose on the property. When property is foreclosed, it is sold, and the proceeds are used first to pay off the lender. Because the foreclosure process is time consuming, the lender will usually try to work with the owner before pursuing a foreclosure. Once the foreclosure process is begun, the owner has time within which to pay off the debt, called the redemption period, but the owner will also have to repay the lender for court costs and attorney's fees.
Discrimination. The anti-discrimination statutes discussed in Civil Rights also apply generally to housing. In addition to the prohibitions against discriminating against anyone on the basis of race, religion, color, creed, age, etc., the laws prohibit sellers from discriminating against families with children under 18. In Chicago, a city ordinance forbids landlords from discriminating against gays. Those who believe that they have been the victims of discrimination should contact the Illinois Department of Human Rights.