Representing First- Time Home Buyers Through CEDLP Community Economic Development Law Project August...
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Transcript of Representing First- Time Home Buyers Through CEDLP Community Economic Development Law Project August...
Representing First-Time Home Buyers Through CEDLP
Community Economic Development Law Project
August 12, 2010
Justin Winerman and Brad Wilson
Initial Matters 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: 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 Verify names – spelling, full legal names – and marital
status of client Check for time-sensitive deadlines
Relevant Parties
Closer
Seller
Title Company
CHACounselor
(Usually NHS)
Buyer’sBroker
GovernmentAgencies
(e.g., IHDA)
Seller’sAttorney
Seller’sBroker
Lender
BUYER
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
Sets out firm policy Sets scope of the
engagement and its termination point 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 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 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 Make sure the contract is complete and readable
Usually fully-negotiated, but not always Ensure that the CHA Rider is attached
Must be signed by both parties Look for attached disclosures and warranties
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 Condos
Condo declaration/bylaws Review with client, who as first-time homebuyers
may not be familiar with these types of documents
Homeowner association New Constructions
Often-Negotiated Terms:
Negotiate for: 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
Delete: Provisions that allow Seller
to obtain mortgage for Buyer
Any provisions contemplating buyer’s non-possession at closing (post-closing rent, escrow, etc)
Setting a Timeline
Pull the relevant dates from the contract Acceptance date of contract
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
Be prepared to extend Tentative until ALL parties give go-ahead
Inspections
Two inspections CHA
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
Appraisal
Required in the CHA rider
May result in modification of purchase price if appraisal is too low
Financing 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 Lenders are generally aware of this
Coordination with all parties is important
Title Commitment Gives history of property
Legal title holder Any mortgages, liens, easements, encumbrances,
etc. Status of taxes
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 If they don’t, you usually can call title co. directly
to have changed
Deed
Review prior to closing Things to note:
General accuracy (names, property, tenancy etc.) Make sure person selling property (i.e., the “Grantor”) on
deed is same person on title commitment Can only convey what you own
Tenancies Joint Tenancy Tenancy in Common Tenancy by the Entirety
Survey
Try to obtain a copy before closing If you don’t, not a problem; review for general
accuracy on closing date 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
If Condo get declaration and bylaws
Loan Documents
Review documentsMortgage – security agreementPromissory Note – loan Recapture Agreement
Verify Terms Interest rateAmount of mortgageReview recapture provisions in all documents
Transfer Declarations
Mostly Seller’s obligation – review for general accuracy at closingState of IllinoisCook CountyCity of Chicago
Before Closing
Coordinate with all agencies Paperwork needed – get checklists early
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 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
Give notice to client’s current landlord and agree on times for showing in writing
Before Closing Inform your client what documents/items he or she will need to
bring: Certified Check
Make it payable to them Picture ID
Issued by Gov’t agency E.g. passport, driver’s license
Checkbook Original Insurance Policy Voided Check
To set up electronic debit payments Proof that Buyer has $1,000 in separate savings account
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 Explain charges on Loan Settlement Statement and RESPA
Settlement Charges Title Company fee Junk fees – e.g. Yield Spread Premium Cash From Borrower – the “bottom line”
Explain forms – mortgage, grants, deed, escrow account for taxes, etc. Residency requirements/recapture provisions
Explain real estate taxes Twice a year, in arrears
Bring your cell phone and contact list Make sure CEDLP gets fee!
Currently $250 No money can go back to client if overage – call counselor or CHA
for tips Flood insurance, CEDLP fee, purchase home warranty
After Closing
For client’s records: Forward title insurance policy Forward recorded documents Forward RESPA
Refer clients with maintenance or other ownership issues back to counselors
Termination letter