Transcript Slide 1

Representing FirstTime Home Buyers
Through TLP
The Law Project
March 16, 2011
Justin Winerman and Tom Kennedy
Initial Matters
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When you first receive the case file...
 Introduce yourself to the client and discuss your role
 Identify the relevant parties, introduce yourself, and
get contact info:
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Seller
Seller’s attorney
Brokers
Buyer’s primary lender
Buyer’s secondary lenders (e.g., funding agencies)
Buyer’s counselor
 Draft initial correspondence with seller’s attorney
 Ensure that you have a legible copy of the contract
names – spelling, full legal names – and marital
status of client
 Check for time-sensitive deadlines
 Verify
Relevant Parties
Lender
Seller’s
Broker
Closer
Seller’s
Attorney
Seller
BUYER
Government
Agencies
(e.g., IHDA)
Title Company
CHA
Counselor
(e.g., NHS)
Buyer’s
Broker
Start a contact list early to keep everyone up-to-date and to
determine who you can approach with questions at each agency
The Engagement Letter
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Sets out firm policy
Sets scope of the
engagement and its
termination point
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Limited scope
“As described to us, the
Engagement involves
solely reviewing the
contract for the
purchase of the
property and assisting
with the closing of the
transaction.”
Attorney Review Period Extension
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You may receive the case near the end of the period specified in the
contract for attorney review
Choose a period long enough that you will have time to review and discuss
the relevant provisions with the Seller’s counsel
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Budget time for communication delays
Further extensions are common
If inspection is complete, roll in requests for repairs
Ensure that language is used to avoid “counteroffer” problems; i.e.,
“alteration”
Example language from opening letter:
Reviewing the Contract
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Make sure the contract is complete and
readable
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Ensure that the CHA Rider is attached
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Must be signed by both parties
Look for attached disclosures and warranties
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Usually fully-negotiated, but not always
Real Property Disclosure
Lead Paint Disclosure
Review all sides, all attachments
Ensure earnest money has been deposited with
escrowee
Buyer must take possession at closing
Other Documents to Review With
Contract
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Condos
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Condo declaration/bylaws
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Review with client, who as first-time homebuyers
may not be familiar with these types of documents
Homeowner association
New Constructions
Often-Negotiated Terms:
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Negotiate for:
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Better tax proration – at
least 110% for Cook
County
Lower maximum rate on
mortgage (so buyer can get
out of deal if they can only
get a high rate)
Lower down payment in
mortgage contingency
Location of closing – in the
Loop
Title agency – pricing
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Delete:
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Provisions that allow Seller
to obtain mortgage for
Buyer
Any provisions
contemplating buyer’s nonpossession at closing
(post-closing rent, escrow,
etc.)
Setting a Timeline
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Pull the relevant dates from the contract
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Acceptance date of contract
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Critical
Date Seller accepts offer from Buyer
Other deadlines measured from this point
Financing/mortgage contingency date
Expiration of attorney review period
Expiration of inspection period
Closing date
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Be prepared to extend
Tentative until ALL parties give go-ahead
Inspections
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Two inspections
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CHA
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Repairs MUST be made
Independent
Facilitated through Buyer’s broker or counselor
 Buyer can negotiate additional repairs, but cannot
spend more than $1,500 to repair before closing
 Safety concerns must be addressed
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Sample Inspections – CHA
Sample Inspections – Independent
Appraisal
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Required in the
CHA rider
May result in
modification of
purchase price if
appraisal is too
low
Financing
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Buyer will have at least two sources of financing:
 Primary Lender
 Marquette
 Harris
 PNC Mortgage
 Secondary Lender(s)
 IHDA (grant administered through LUCHA or Spanish
Coalition of Housing)
 ADDI (grant administered through City of Chicago Dept. of
Housing)
 1%
or 3% of the purchase price must come from
client’s personal funds
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Lenders are generally aware of this
 Coordination
with all parties is important
Title Commitment
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Gives history of property
 Legal title holder
 Any mortgages, liens,
easements, encumbrances,
etc.
 Status of taxes
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Obtain as soon as possible
Make sure it’s signed
Verify insured amounts match loan amounts
from agencies
 Important:
failure to have correct amounts can result
in delay of closing
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If they don’t, you usually can call title co. directly
to have changed
Affidavit of Title
Deed
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Review prior to closing
Things to note:
 General
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Make sure person selling property (i.e., the “Grantor”) on
deed is same person on title commitment
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accuracy (names, property, tenancy etc.)
Can only convey what you own
Tenancies
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Joint Tenancy
Tenancy in Common
Tenancy by the Entirety
Survey
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Try to obtain a copy before closing
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you don’t, not a problem; review for general
accuracy on closing date
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Review legal description of property make sure it
matches that in the title commitment
Review for any encroachments, building line
violations
No survey for condos
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Condo get declaration and bylaws
Bill of Sale (for personal property, if any)
Loan Documents
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Review documents
– security agreement
 Promissory Note – loan
 Recapture Agreement
 Mortgage
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Verify Terms
 Interest
rate
 Amount of mortgage
 Review recapture provisions in all documents
Transfer Declarations
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Mostly Seller’s obligation – review for
general accuracy at closing
 State
of Illinois
 Cook County
 City of Chicago
Before Closing
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Coordinate with all agencies
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Paperwork needed – get checklists early
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E.g., ADDI needs title commitment, wiring instructions, closing request form
Wiring instructions for the title company
Prepare list of contact information for each agency at the beginning
Confirm that all grants are funded and will be there at time of closing
If possible, confirm with all agencies a week before closing
Final Walk-through
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During day
Check that all repairs have been made
Broom-clean condition
No need to attend – Buyer can go with broker
 Buyer should inform you ASAP of any problems
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Give notice to client’s current landlord and agree on times for
showing in writing
Before Closing
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Inform your client what documents/items he or she will need to
bring:
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Certified Check
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Make it payable to them
Picture ID
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Issued by Gov’t agency
E.g., passport, driver’s license
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Checkbook
Original Insurance Policy
 Voided Check
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Proof that Buyer has $1,000 in separate savings account
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To set up electronic debit payments
For future home repairs, if needed
Remind client of time and place of closing
Explain general idea of what documents will be involved – granting
documents, loan documents, tax documents – so clients are not
surprised when they see the stack at the closing
At Closing
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Explain charges on Loan Settlement Statement and RESPA
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Explain forms – mortgage, grants, deed, escrow account for taxes,
etc.
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Twice a year, in arrears
Bring your cell phone and contact list
Make sure TLP gets fee!
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Residency requirements/recapture provisions
Explain real estate taxes
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Settlement Charges
Title Company fee
Junk fees – e.g., Yield Spread Premium
Cash From Borrower – the “bottom line”
Currently $250
No money can go back to client if overage – call counselor or CHA
for tips
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Flood insurance, TLP fee, purchase home warranty
After Closing
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For client’s records:
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Forward title insurance policy
 Forward recorded documents
 Forward RESPA
Refer clients with maintenance or other
ownership issues back to counselors
 Termination letter
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Questions or Comments