Common legal issues in residential real estate transactions include the breach of a real estate contract and sellers hiding information they should share. Issues related to closing can arise, too. For instance, the buyer’s financing may fall through, or title searches in Chicago or Des Plaines could turn up problems with ownership of the property.
Working with a real estate lawyer can help a buyer or seller deal with legal issues. Call The Rogoff Law Group at (847) 768-2194 to talk about your needs.
Understanding Contracts in Residential Real Estate Transactions
In August 2024, about 8,640 single-family homes and condominiums sold in the Chicago metro area. Contracts form the foundations of home sales, since they outline sale terms and both parties’ legal obligations. A contract that is well-drafted usually includes the following items:
- Purchase price: The amount the buyer agrees to pay
- Closing date: The date when the property changes hands
- Contingencies: Conditions such as financing, inspections, or sale of another property that need to be met before the sale can become final
- Disclosures and representations: Known issues, such as structural problems or environmental hazards
A financing contingency protects buyers if they cannot get a mortgage, and an inspection contingency can enable buyers to back out or renegotiate if an inspection reveals major issues. Meanwhile, a contingency called sale of buyer’s property requires that buyers sell their existing property before they complete the new purchase.
Common legal issues in residential real estate transactions occur with breaches of real estate contracts. A breach may happen if either party does not meet its obligations. Perhaps one party misses deadlines or does not follow through on getting an inspection.
In Illinois, when a seller breaches a real estate contract, the buyer may seek damages or try to force the sale. The actions available depend on the contract terms and how severe the breach is. A real estate lawyer can explain your rights and courses of action.
A right of first refusal clause in the contract can affect the transaction, too. This right allows a party such as a tenant or neighbor to have the first opportunity to buy the property before sellers offer it to others. If the contract fails to handle the right of first refusal properly, then sale delays and complications occur. For example, the seller might try to sell the property without giving the holder of the ROFR the chance to match an offer.
Problems With Property Disclosures
Not disclosing defects are among the common legal issues in residential real estate transactions. Under Illinois law, sellers must disclose material defects through a Residential Real Property Disclosure Report.
The report includes information about structural issues, environmental hazards, plumbing, electrical systems, and the like that could impact the property’s value or safety. If sellers do not make accurate disclosures, they put themselves at risk of legal action for misrepresentation or concealment of defects.
For instance, a seller might purposefully hide information about mold. The buyer could then try to hold the seller liable for the buyer’s damages post-sale. In some situations, a real estate agent may be liable, too, if he or she knew about the defects and withheld that information. Likewise, liability may apply if the agent was negligent in not finding out about a defect of which he or she reasonably should have been aware.
Buyers should review these disclosures. A home inspection can help verify the property’s condition. Even with these steps, undisclosed issues may show up after closing. A real estate lawyer can help if they do.
Issues During the Closing Process
Many common legal issues in residential real estate transactions arise during the closing process. During this process, ownership of the property (the land registration) officially transfers from the seller to the buyer.
To prepare for closing in Chicago or Des Plaines, make sure your real estate contract will hold up if problems show themselves. An attorney can help with this step. Verify that you are taking care of contingencies for which you are responsible. If you are the buyer, get title insurance to protect against future title claims.
Avoid mistakes that can derail final approval of your mortgage. They include making large purchases on credit, changing jobs, or not paying bills or debts. Any of these can have a negative effect on your credit score and debt-to-income ratio, perhaps causing your lender to deny final approval. Give your lender all required documents on time, and communicate financial changes to the lender right away.
Also, make sure you have a handle on your closing costs and have the resources to meet these obligations.
Closing in Chicago and Des Plaines
The closing process starts with contract negotiation and acceptance. Both parties finalize the terms of their agreement and resolve contingencies. Next, a title search verifies that the property has no outstanding liens, unpaid taxes, or ownership disputes. Buyers should get title insurance. Lenders also review buyers’ financial history and the property’s appraised value before final approval of the loan.
Illinois prorates property taxes at closing. Sellers are generally responsible for paying any outstanding property tax bills and may give a credit to buyers under the terms of their real estate contract. Buyers’ lenders may require escrow accounts for future property tax bills.
Closing costs include attorney fees, title insurance, and recording fees. Knowing how much a real estate lawyer costs can help.
A lawyer can help at any stage of a transaction, but the earlier you talk to one, the better. Contact us at The Rogoff Law Group to discuss your real estate needs.
