Sternic Law Offices

Attorneys and Counselors at Law

Real Estate & Property

Closing & Title Insurance Services

Don’t Be A Victim of Loan Fraud

FREE Buyer’s Guide

Predatory Lending – What is it?

Property Survey

Refinancing

Seller’s Tips

Tax Benefits of Your Home

Closing & Title Insurance Services

Sternic Law Offices provides sellers and buyers with the most complete real estate services. You can count on us for all your real estate related needs. Our Closing Service offers you experienced attorneys well trained in real estate procedures, title insurance, taxes, deeds, refinancing, and property insurance. Our wealth of technical experience and knowledge is your assurance of a smooth closing. Sternic Law Offices is an Agent of the Chicago Title Insurance Company, and we offer closing services throughout the Chicago Metropolitan Area in one of the Chicago Title Insurance Company’s 30 locations near you. As to sellers, we will do everything possible to prepare and obtain all the necessary documents in the shortest period of time to ensure a smooth transition to your new home.

For more people, purchasing a home is the most significant financial commitment they will make. Today, as you know, buying a home is no longer a simple transaction. It has become a complex legal and financial process. Thus, we recommend that an attorney be consulted before a homebuyer singes an offer to purchase a home. One of our attorneys can ensure that the buyer enters the real estate transaction with a full understanding of legal obligations and potential liabilities. We will work hard to ensure that our client does not see the dream of owning a home turn into a legal nightmare.

For more information on how to obtain a Free Buyers Guide, please give us a call. The Guide contains information on the following topics:

Buying and Financing a Home

Role of the Real Estate Broker
Selecting an Attorney
Terms of the Agreement of Sale
Shopping For a Loan
Selecting a Settlement Agent
Securing Title Services
RESPA Disclosures
Processing Your Loan Application
RESPA Protection Against Illegal Referral Fees
Your Right to File Complaints

Your Settlement Costs

Specific Settlement Costs
Calculating the Amount You Need At Settlement
Adjustments To Costs Shared By Buyer and Seller
HUD‑1 Settlement Statement

Why to Have Your Property Surveyed?

You may think you know everything there is to know about the legal description of your property. If you had to, you could dig up that old plat and calculate precisely where your property begins and ends, and you know exactly who has a right to come onto your property and why.

If that is true, you may be one step ahead of most property owners. Most people seek out the expertise of a professional surveyor to settle common property description issues before they become problems. In addition to a professional survey, many people seek other specific certifications such as an environmental certification, a zoning opinion letter, or a flood plain classification from the U.S. Department of Housing and Urban Development. Following are some common reasons property owners hire a surveyor.

Boundary Lines. One of the most common reasons a landowner seeks the assistance of a surveyor, the location of boundary lines and other lines of occupancy or possession is a critical piece of information to have before you build a fence, add a sunroom or pave your driveway. All too often the survey shows that you and your neighbors were operating under the wrong assumption about the placement of the boundary line between your properties. Before you have that fence erected, you want to make sure it will be built on your property, not your neighbor’s. The boundary line certification will also tell you whether the legal description of your property is accurate.
Gores, Overlaps, and Gaps. Part of the boundary line certification, most surveys include a statement that unless the surveys says otherwise, there are no discrepancies between the boundary lines of your property and the adjoining property. This is especially pertinent if your property is continuous with alleys, roads, highways, or streets.
Rights-Of-Way, Easements, and Abandoned Roads. A survey will show all the conditions imposed by law that are reflected in your property's title report and other agreements. If your property blocks your neighbor’s access to the road, for example, there may be an old agreement that gives your neighbor the right to walk across your yard to the street.
Ponds, Rivers, Creeks, Streams, Wells, and Lakes. The typical survey reports visible or surface waters only. Underground waters and wetlands are topics that are better covered by other professional inspections.
Joint Driveways, Party Walls, Rights-Of-Support, Encroachments, Overhangs, or Projections. Unbeknownst to you or your next-door neighbor, you may have an obligation by law to support your neighbor’s driveway by maintaining your own.
Existing Improvements. The surveyor will usually certify that the buildings and other improvements, alterations, and repairs to your property that exist at the time of the survey are not in violation of laws or other restrictions such as those regarding height, bulk, dimension, frontage, building lines, set-backs, and parking. Of course, the surveyor will also tell you if your latest improvement is in violation of a local ordinance or other law, which will put you on notice that a change is in order.
Water, Electric, Gas, Telephone And Telegraph Pipes, Drains, Wires, Cables, Vaults, Manhole Covers, Catchbasins, Lines, and Poles. Poles and above-ground wires are obvious, but the surveyor can usually report on the existence of underground cables and drains, as well, if the information is provided to him or her by your utility companies and municipality. Such information is important for two reasons. A utility company may have the right to use a portion of your property for upkeep of utility lines, and may have a say in how tall you let your trees grow, for instance. Also, knowing the exact location of underground utilities is critical before any excavation or construction begins.
Cemeteries. It is unlikely that unbeknownst to you there is an old family burial ground in your back yard. The survey will show the exact location of any old cemeteries on your plat.
Access, Ingress and Egress. Your survey should state, at a minimum, whether there is physical vehicular ingress and egress to an open public street. It may also specify the adequacy of access for a particular purpose, such as delivery trucks, emergency vehicles such as fire trucks, and driveways for tenants.
Zoning Classification. You probably know whether your property is zoned for residential or light industrial use. But you may be surprised to discover that your zoning classification puts specific restrictions on how you use your property. This part of the survey simply reports your zoning jurisdiction and classification. Once you have your completed and certified survey, you may want to consult an attorney about whether you are using your property in conformance with zoning ordinances or for other advice about the legal ramifications of your property survey.

Don't Be A Victim Of Loan Fraud

Protect Yourself from Predatory Lenders

Buying or refinancing your home may be one of the most important and complex financial decisions you’ll ever make. Many lenders, appraisers, and real estate professionals stand ready to help you get a nice home and a great loan. However, you need to understand the home buying process to be a smart consumer. Every year, misinformed homebuyers, often first-time purchasers or seniors, become victims of predatory lending or loan fraud.

Don’t let this happen to you!

Interview several real estate professionals (agents), and ask for and check references before you select one to help you buy or sell a home.
Get information about the prices of other homes in the neighborhood. Don’t be fooled into paying too much.
Hire a properly qualified and licensed home inspector to carefully inspect the property before you are obligated to buy. Determine whether you or the seller is going to be responsible for paying for the repairs. If you have to pay for the repairs, determine whether or not you can afford to make them.
Shop for a lender and compare costs. Be suspicious if anyone tries to steer you to just one lender.
Do NOT let anyone persuade you to make a false statement on your loan application, such as overstating your income, the source of your downpayment, failing to disclose the nature and amount of your debts, or even how long you have been employed. When you apply for a mortgage loan, every piece of information that you submit must be accurate and complete. Lying on a mortgage application is fraud and may result in criminal penalties.
Do NOT let anyone convince you to borrow more money than you know you can afford to repay. If you get behind on your payments, you risk losing your house and all of the money you put into your property.
Never sign a blank document or a document containing blanks. If information is inserted by someone else after you have signed, you may still be bound to the terms of the contract. Insert “N/A” (i.e., not applicable) or cross through any blanks.
Read everything carefully and ask questions. Do not sign anything that you don’t understand. Before signing, have your contract and loan agreement reviewed by an attorney skilled in real estate law.
Be suspicious when the cost of a home improvement goes up if you don’t accept the contractor’s financing.
Be honest about your intention to occupy the house. Stating that you plan to live there when, in fact, you are not (because you intend to rent the house to someone else or fix it up and resell it) violates federal law and is a crime.

What is Predatory Lending?

In communities across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:

Sell properties for much more than they are worth using false appraisals.
Encourage borrowers to lie about their income, expenses, or cash available for downpayments in order to get a loan.
Knowingly lend more money than a borrower can afford to repay.
Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
Charge fees for unnecessary or nonexistent products and services.
Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.
Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.
“Strip” homeowners’ equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.
Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.

What Tactics Do Predators Use?

A lender or investor tells you that they are your only chance of getting a loan or owning a home. You should be able to take your time to shop around and compare prices and houses.
The house you are buying costs a lot more than other homes in the neighborhood, but isn’t any bigger or better.
You are asked to sign a sales contract or loan documents that are blank or that contain information which is not true.
You are told that the Federal Housing Administration insurance protects you against property defects or loan fraud - it does not.
The cost or loan terms at closing are not what you agreed to.
You are told that refinancing can solve your credit or money problems.
You are told that you can only get a good deal on a home improvement if you finance it with a particular lender.

Remember: If a deal to buy, repair or refinance a house sounds too good to be true, it usually is!

Seller’s Tips

If you have decided to sell your home, your probably are caught up in a host of emotions. You may be looking forward to moving up to a new dream house or facing the uncertainty of a major move across country. You may be reluctant to leave your memories behind or eager to start new adventures. Whatever turbulent feelings you are experiencing right now, there are plenty of practical matters that need your attention. Keep in mind the following considerations to help the transition go more smoothly.

Time is Money

It is a good idea to place your home on the market as far in advance as possible of purchasing a new one. If you find a new home first and then try to sell your present home, you may wind up with two mortgages. If this does happen, ask your real estate agent or banker about a bridge loan to help you make the double payments. Lenders use the same criteria for offering bridge loans as they use for mortgages. Should you qualify for a bridge loan, beware of the expense; during the term of the loan you must continue to pay both mortgages. Shop around for the best terms.

Keep in mind that when people move, sell and buy, there usually is a domino effect. Closing and moving dates have to be coordinated, and the more firmly everyone commits to a window of dates and sticks to them, the better for all involved. Thus, to reach the best term for your specific situation, it is paramount that you consult an attorney beforehand.

Check Your Curb Appeal

A house that is visually appealing will attract more potential buyers driving down the street. We suggest that you use this checklist to view your property through an outsider’s eyes.

1. Are the lawn and shrubs well maintained?

2. Are there cracks in the foundation or walkways?

3. Does the driveway need resurfacing?

4. Are the gutters, chimney and walls in good condition?

5. Do the window casings, shutters, siding or doors need painting?

6. Are garbage and debris stored out of sight?

7. Are lawn mowers and hoses properly stored?

8. Is the garage door closed?

The Inside Look

Strong curb appeal will lure potential buyers inside, where you have to live up to their expectations. Fortunately, there are plenty of easy improvements you can make to your home’s interior without spending a lot of money. Cleaning is First Priority. Your windows, floors and bathroom tiles should sparkle. Make sure you have clean heating and air conditioning filters, clean tubs and showers, repair dripping faucets and oil squeaky doors. Keep your home neat, clean and picked-up at all times. It may not seem fair, but a peek in the oven may be the hallmark by which a buyer judges how well you have kept up your home.

Remove unnecessary clutter from the garage, basement, attic, closets and straighten stored items. Also remove any items that might make a statement that would be offensive to others who may not share your same views, beliefs or sense of humor. If your home is crowded with too much furniture, consider putting some things into storage. If a room needs a fresh coat of paint, use a neutral off-white. Think, too, about how your home smells. You may be used to the smell of a pet or cigarettes, but such odors can be a strong turn-off to others. Be certain to remove valuables such as jewelry and other items from view. It might be wise to put these items in a safe deposit box before showing your home. Finally, set a mood for the buyer. Make your house homey with live flowers and fresh guest towels in the bathroom. Place scented potpourri around the house or, on the day you are expecting a potential buyer, pop a batch of frozen cinnamon rolls into the oven for a welcoming aroma.

Remember, cosmetic changes do not have to be expensive. In fact, costly home improvements do not necessarily offer a good return on your investment when you sell. It is attention to the basics. Anything that says “this home has been carefully maintained,” might help you get the price you want.

Do It Yourself, or Choose an Agent?

Some homeowners decide to sell their homes themselves in order to save the commission charged by a real estate agent. The commission rate may vary, depending on where you live or what agency you choose, but it is generally upwards of 5%. However, handling your own sale means you will be responsible for placing ads, answering phones and showing your home to strangers. Moreover, buyers who know you are saving on an agent’s commission may offer less for your home, wiping out the financial incentive.

You may decide an agent’s commission is a bargain the first time that a would-be buyer shows up unannounced at dinnertime. Also, be aware that a real estate agent probably knows a lot more about the business of selling a home than you do. Here are some of the advantages professional agents offer:

1. They will help you establish a fair asking price for your home.

2. They will promote your home to other agents and list your property in multiple listing services. A multiple listing service is a book or computer database that all real estate agents who subscribe to the service can access. Your home will get exposure to all those agents, one of whom may have the perfect buyer.

3. They will create, pay for and place advertising for you.

4. They will schedule appointments to show your home to prospective buyers even when you are not there.

5. They can weed out buyers who will not qualify for a mortgage.

6. They can refer you to sources for insurance, inspections, legal counsel and financing.

7. They will help you negotiate with the buyer.

8. They can make suggestions to help make your home more attractive to a potential buyer.

If you decide to sell through an agent, ask friends and neighbors for recommendations. Talk to several agents before picking the one you want to work with. Taking a walk through your home with an agent should give you a feel for how that person will handle prospective buyers. Ask prospective agents how they plan to market your home. Do not sign up with an agent just because he or she suggests the highest asking price. Negotiate the broker’s commission prior to listing your home, and sign for a limited period of time—usually three to six months.

Setting a Fair Price

Naturally, you want to get top dollar for your home. But, at the same time, you do not want to scare off potential buyers with a price tag that’s too high. Setting an artificially high price may cause your property to languish on the market for months. Reducing your asking price later on may lead buyers to wonder if there is something wrong with your home. Here are some factors to consider in pricing your home.

1. Your location

2. Economic conditions

3. Supply and demand in the local housing market

4. Seasonal influences

5. Local schools

6. Average home prices in the neighborhood

7. Your home's extras -- pool, fireplace, central air, etc.

8. To determine the value of your home, you probably will want the advice of a real estate agent or appraiser. Ask an agent to prepare a market analysis for you, showing the recent selling prices of three neighborhood properties comparable to your own. The agent can help you adjust for the unique features of your own property.

Qualifying a Buyer

Either you or your agent will want to quickly weed out potential buyers who cannot really afford to purchase your home. A number of factors will help determine whether or not you are wasting your time negotiating a sale.

1. The buyer’s debt and credit history

2. The buyer’s current income and employment

3. The buyer’s cash position and availability of a down payment

4. The length of time the buyer needs before closing on your home

5. How interested the buyer appears to be in your home versus others

Seek Legal Representation

When selling your home, particularly if you are selling on your own, we strongly advise you to be represented by an attorney. Look for an attorney with expertise in real estate transactions. When a potential buyer puts an offer in writing and you accept it, the signed acceptance becomes the sales contract. Your attorney will be present at the actual closing to protect your interests and can assist you with the following elements of a sales contract:

1. The sale price

2. What is included in the sale price -- draperies, carpeting, light fixtures, heating oil, etc.

3. The amount of the down payment

4. The date of settlement and possession date

5. Contingencies to the sale--inspections (e.g. structural, lead-based paint, radon), required improvements, legal review of the contract by the buyer's or seller's attorney, etc.

6. The amount and length of the mortgage loan, interest rate and time limits to secure the loan

7. Determining which closing costs are to be paid by the buyer and which by the seller

Tax Implications

Selling a home can have a major impact on your federal and state tax returns. Check with your tax consultant on the factors that may affect taxes resulting from the sale of your home. For example:

1. Whether you purchased the home or acquired it by gift or inheritance

2. Whether you used your home partly for business or rental

3. Costs associated with selling your home

4. Home improvements or additions, which may help to offset capital gains

5. The sale of your home. In certain cases you can exclude up to $250,000 in gain ($500,000 for married couples filing a joint return) on the sale of property that was your principle residence for at least two years. Generally, you can use this exclusion every two years.

Your Home is a Tax Shelter

Your home provides many tax benefits, from the time you buy it until it is time to sell. Here is a summary of the tax benefits of home ownership; you can get details by visiting the IRS website at http://www.irs.gov.

Mortgage Interest

Joint tax filers can deduct all the interest on a maximum of $1 million in mortgage debts secured by a first and second home. The maximums are halved for married taxpayers filing separately. You cannot use the $1 million deduction if you pay cash for your home and later use it as collateral for an equity loan.

Points

There are a variety of lender fees associated with getting a mortgage, notably points. Each point equals 1% of the loan principal. One to three points are common on many home loans, which can easily add up to thousands of dollars. You can fully deduct points associated with a home purchase mortgage. You cannot deduct a mortgage broker’s commission.

Refinanced mortgage points are also deductible, provided they are amortized over the life of the loan. Homeowners who refinance, however, can immediately write off the balance of the old points and begin to amortize the new.

Mortgage Tax Credit

A homebuying program called Mortgage Credit Certificate (MCC) allows qualifying first time homebuyers to benefit from a mortgage interest tax credit of up to 20 % of the mortgage interest payments made on a home. This credit is available each year you keep the loan and live in the house purchased with the certificate.

The credit is subtracted, dollar for dollar, from the income tax owed. For example, if you paid $10,000 in interest, your tax credit would be $2,000. The remaining 80 % of the interest, $8,000, is taken as a typical mortgage interest deduction.

Equity Loan Interest

You may be able to deduct some of the interest you pay on a home equity loan. However, the IRS places a limit on the amount of debt you can treat as home equity debt for this deduction. Your total home equity debt is limited to the smaller of:

1. $100,000 for a married couple filing jointly ($50,000 for those who file separately), or

2. the total of your home's fair market value -- that is, what you would get for your house on the open market -- less certain other outstanding debts against it.

The IRS rules about the home equity loan interest deduction are complicated. IRS Publication 936 explains the details.

Home Improvement Loan Interest

There is no limit on interest deductions for home improvement loans, provided the work is deemed “capital improvements” rather than repairs.

Qualifying capital improvements are those that increase your home's value or prolong your home’s life, including a fence, driveway, new room, addition, swimming pool, garage, porch or deck, new built-in appliances, insulation, new heating/cooling systems, a new roof, landscaping and the like. Do keep in mind that capital improvements that increase the square footage of your home could trigger a reassessment and higher property taxes.

Work that does not qualify you for an interest deduction includes painting, plastering, wallpapering, replacing broken or cracked tiles, patching your roof, repairing broken windows and fixing minor leaks. Wait until you are about to sell your home to gain tax benefits from repair work. See Selling Costs, below.

Property Taxes

Often referred to as “real estate taxes,” property taxes are fully deductible from your income. You cannot deduct escrow money held for property taxes until the money is actually used to pay your property taxes. A city or state property tax refund reduces your federal deduction by a like amount.

Home Office Deduction

Along with ordinary business expenses, such as photocopies and professional memberships, you can deduct part of your rent or take a depreciation deduction to the extent that a portion of the home you own is used for business purposes.

Selling Costs

Real estate broker’s commissions, title insurance, legal fees, administrative costs and inspection fees are all considered selling costs. They also include items otherwise considered repairs such as painting, wallpapering, planting flowers, maintenance and the like, provided you complete them within 90 days of your sale and provided they were completed to make the home more saleable.

All selling costs are deducted from your gain. Your gain is your home’s selling price, minus deductible closing costs, minus your basis. Your basis is the original purchase price, plus capital improvements, minus any depreciation.

Thanks to the Taxpayer Relief Act of 1997, many home sellers no longer suffer a taxable gain. Married taxpayers who file jointly now get to keep, tax free, up to $500,000 in profit on sales of homes used as a principal residence for two of the prior five years. Single folks and married taxpayers who file separately get to keep up to $250,000.

Moving Costs

If you move because you got a new job, you can deduct some of your moving costs. To qualify for these deductions, your new job must be at least 50 miles from the old and you must work full-time at the new workplace for 39 of the 52 weeks following the move. Deductions include travel or transportation costs and expenses for lodging and storing your household goods.

If you are self-employed, you must work full-time for at least 39 weeks during the first 12 months and a total of 78 weeks during the first 24 months after arriving at the new job location.