Area Real Estate News & Market Trends

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April 10, 2024

Land Trusts and Protecting Property From Creditor Claims

 

LAND TRUSTS AND PROTECTING PROPERTY FROM CREDITOR CLAIMS

 

A land trust is an agreement to have a trustee hold property for the benefit of the beneficiary of that land trust agreement. In many cases the land trust beneficiary is the original land owner that sets up the land trust agreement with the trustee.

 

A land trust provides a number of benefits including the following:

 

1. Privacy

 

For those who are working in the public spotlight, working high risk professional jobs, investing in real estate, or simply in any position where you rather not let the public know here you live and what properties you own, a land trust is an excellent tool.

 

If someone was to look up a property that is held in a land trust then they will see that the property is held by a land trust per a land trust agreement that provides no other information about the beneficiaries including the former land owner, their family, or anyone else that benefits from the property. They would only see the third party trustee that holds title to the trust and nothing else.

 

2. Avoiding Probate

 

The land trust agreement provides for protection from interested parties petitioning for ownership or interest in the property being held in the land trust. In the case that something happens to the original owner of the property the land trust agreement can dictate how the property will be managed upon their death or incapacitation. This dynamic also holds true in the case of the death or incapacity of any of the beneficiaries. This helps avoid costly battles in probate court with respect to the property being held in the trust.

 

3. Protection from Creditors

 

To some degree land trusts can provide protection against the claims of a beneficiary's creditors including the original land owner of the property being held in trust. First of all with respect to probate since the property held in trust does not become part of a beneficiaries probate it cannot be used to pay off debts owed by the beneficiary in probate. Creditors can file liens against the property but Illinois case law has held that creditors cannot enforce a lien against co-owners of property protected in the land trust unless that co-owner is liable for the debt themselves.

 

4. Ease of Transferability

 

Instead of having to set up quit claim deeds or otherwise to transfer property from one person to another you can simply add whomever you want as a beneficiary to the land trust. This helps avoid having to record new documents and paying state and county fees for recording. It makes the process much easier.

 

Land trusts are only for the protection of land or property being held in the trust. Land trusts are a simple and inexpensive way to protect your property from costly probate proceedings which can cost $30,000.00 or more in court and lawyer's fees. Land trusts can also protect that property from being used to settle creditors' debts. However, land trusts do not protect other property like a living trust can which will provide a much more comprehensive asset protection plan.

March 20, 2024

NAR Settlement: Will Buyers Be Forced to Pay for Representation?

THE NAR SETTLEMENT

The National Association of Realtors or NAR is currently facing a few class action lawsuits that allege it and other brokerages have conspired in anti-competitive for its cooperation compensation requirement.

 

If you have entered the real estate market during your lifetime you have likely found that in most cases, a seller of a home will pay a buyer's agent's commission stemming from the sale of the home. This is true across most of the United States including Illinois where I practice.

 

Listing agreements typically provide a space for sellers to add the amount of compensation they want to provide to not only their own seller's agent that is responsible for marketing their home but also the buyer's agents who are responsible for bringing that seller qualified buyers. Sellers have always had the option to leave this field blank or write in zero.

 

This system is called cooperative compensation in that the seller is compensating both their agent and the buyer's agent for their cooperative role in bringing a home to closing.

 

Now class-action lawsuits are alleging that this practice is anti-competitive in the anti-trust law sense. Anti-trust law is an area law that protects the free market from practices that are anti-competitive. Anti-trust law serves to protect the consumer under the theory that competition is good for the end consumer which the law serves to protect. Competition drives innovation, fair prices, and choice for the end consumer.

 

The trail in the class action lawsuit that brought cooperative compensation under scrutiny ended in a jury verdict that decided that this practice was indeed anti-competitive.

 

 

CHANGES TO THE REALTOR-CLIENT RELATIONSHIP

 

This proposed settlement means that the cooperative compensation clause will no longer be baked into listing agreements. Buyer's agents will have to sign buyer's agent agreements with their buyers in retainer fashion and negotiate their own compensation directly with their buyer-clients instead of leaving it up to a seller and their listing agent.

 

This buyer’s agent agreement will list the agent’s obligations to you as your representative in the real estate market and what they will be compensated for that work. The major fear now is that the compensation owed to a buyer's agent for their services will need to be paid by the buyer, who previously could reasonably expect the seller to pay for the buyer's agent's commission.

 

But let's remember what change is really happening here. Listing agreements will simply no longer have a clause for cooperative compensation where the seller will be able to pay the buyer's commission. Will this really change how business is done? Will buyer's be forced to either pay a buyer's agent for their work or forego representation in the market? Will seller's decide to forego offering compensation to buyer's agents? Will home prices be reduced?

 

 

UNDERSTANDING BUYER’S AGENT’S ROLE AND HOW THEY ENRICH A BUYER’S OFFER

 

Seller’s were never required to pay a buyer’s agent fee, so why would they even them pay them in the first place? The reason was a marketing one. The marketing strategy is to open up the listing to a pool of the most vetted and qualified buyers. These are buyers that are represented by a buyer’s agent.

 

To understand what makes an offer from a buyer represented by an agent so great, we have to understand what a buyer’s agent role is.

 

A buyers agent serves the client in the following way:

1.        Understanding the clients needs with respect to home buying

a.        Price

b.       Criteria

c.        Timeline

d.       Lifestyle requirements

e.        Aesthetic tastes

f.          Any unique requests to be met

g.        Advising clients on all criteria of a home and what it means to value and style

2.        Educating a client on financing options and alternatives

a.        Providing information on downpayment and closing cost assistance

b.       Advising clients on credit repair for better rates

c.        Advising clients on rates and changes in market trends per rates

d.       Connecting clients to vetted loan officers

3.        Establishing a targeted search based on clients’ needs/wants

a.        Highlighting hot listings for clients before they exit the market

b.       Setting showing times according to clients schedule

c.        Contacting the listing agent for additional information not on the listing sheet

d.       Advising clients on comparable properties

e.        Advising clients on listing cues such as listing time, as-is clauses, and photos

4.        Educating clients on relevant neighborhood home values and market trends

a.        Educating clients on what makes an offer competitive

b.       Educating clients on how to knock down a seller on price

c.        Reviewing comparable properties to help figure out which is the one best for them

d.       Educating clients on buyers and sellers markets

e.        Educating clients on market seasonality

f.          Educating clients on general economic conditions

g.        Educating clients on interest rates and their effect on monthly payment

5.        Educating client on home renovation and project costs

a.        Educating clients on what a fix-upper is going to cost them in terms of time, effort, and money

b.       Calculating likely return for flip projects

c.        Educating clients on the scope of a planned renovation

6.        Educating clients on navigating inspection issues

a.        Educating clients on potential inspection credits and repairs

b.       Connecting a client with a professional inspector

c.        Interpreting inspection report for the client

d.       Negotiating with seller’s agent or seller to obtain repairs or credits for repair

7.        Educating client on homeowner and condo associations

a.        Interpreting condo or homeowner association rules

b.       Educating client on assessments and what they include

c.        Advising client on costs of assessment vs non-association home ownership

8.        Drafting offers

a.        Providing market data to support offer

b.       Navigating multiple offer situations

c.        Obtaining information to leverage against seller in negotiations

d.       Educating client on home warranties

e.        Obtaining tax credits for client

f.          Obtaining closing cost credits for client

9.        Bring the deal to close

a.        Maintaining communication between all parties; lender, attorney, sellers agent, title closing agent, inspector, etc.

b.       Providing client updates and insight to the process

c.        Resolving problems in the process

d.       Explaining every step in the process and developments during

e.        Attending a final walkthrough to ensure property is sold in condition expected

f.          Attending closing for support

10.   Maintaining relationship as personal advocate and real estate advisor

a.        Providing information on homeownership and maintenance

b.       Connecting new homeowner to contractors and service providers

c.        Advising clients on appreciation of their home investment

d.       Providing updates on the market

e.        Answering any questions new client homeowners may have

 

WHY SELLERS WOULD WANT TO PAY A BUYER’S AGENT COMPENSATION

For a seller the most important takeaway from all these services is that a buyer’s agent will have prepared the buyer to make the offer. They will come with an offer that is formally written and with all the information and experience that they need to be confident in their decision. Experience comes with researching the market with their agent and furthermore going to see specific houses with the advisement that comes from their expert buyer's agent.

A buyer’s agent that advises their client on market conditions and home values will help their client make a competitive and educated offer that goes beyond just meeting the price wants of the seller but also their needs in timing, risk, convenience, and anything else that could motivate a seller to look at a buyer’s offer more favorably.  

A buyer’s agent that advises their client on the entire closing process and developments during the process will help ensure that a buyer won’t get cold feet. This gives a seller peace of mind. A seller knows that a buyer represented by an agent will have someone to lean against during an arguably stressful process. This support helps the buyer not back out of the deal unless there is a very good and educated reason to do so.

A seller therefore has every incentive to ensure that they get offers from buyers that are represented. So much so that they were willing to pay the fees associated with that representation for a buyer directly out of the closing.

Why not just have the buyers pay for their own representation? Buyers are already responsible for a lot of closing costs out of pocket. Sellers have the advantage of using the sales proceeds of their home to pay for their closing costs related to title, attorney, agent representation, and so on. So realistically buyers could be priced out of paying for representation if the seller does not offer a buyer’s concession to pay for it themselves so they can get offers backed by representation.

Now going forward if this lawsuit settlement is approved by the judge, buyers will be expected to sign buyer’s agent agreement with their agents. This agreement will list out all the obligations that a buyer’s agent has to their agent in exchange for their service fee to cover all the work listed above. You can start to expect to see this everywhere. It may be a good idea regardless of the lawsuit. Some states already require this.  

However, a buyer’s agent responsibility is to get their buyer the best deal possible. Part of that responsibility will be to negotiate that the seller pay for their buyer’s agent’s service fee. This negotiation point is similar to when buyer’s agents negotiate tax credits, closing cost credits, or other credits for buyers when writing up an offer on a home.

Since sellers will remain interested in keeping the pool of potential buyers to the best and most qualified I expect sellers to continue to offer compensation to buyer’s agents as part of the concessions given to buyers. This concession will encourage buyers to consider their home when going about their home search. It is a solid marketing strategy and always has been.

Sellers will either make the concession directly in their listing agreements with their listing agents, or provide a credit for the buyer to cover their agent service costs via a credit in an accepted or modified offer. If the seller does not pay then the buyer will be responsible for the fee. Out of these two having the concession in the listing will be better because it won’t affect the closing credit limits for buyers mortgages. Call me about that for more.  

 

IN CONCLUSION

Ultimately, I do not think that the removal of the cooperative compensation clause from listing agreements is going to do much to change how sellers marketing strategies will change. Buyers have a lot to pay for already with respect to closing fees and they do not have the funds from a home sale to cover those costs like sellers do. They must make those payments out of pocket. This reality is why buyers in most cases are not in a position to add a buyer’s agent fee to their costs especially as first time home buyers that do not have the funds from a home sale to rely on.

The final question is whether home prices will now fall if sellers stop paying buyer’s agent fees. First, like mentioned above I do not think that sellers will stop paying buyer's agent fees because of how counterintuitive it is to obtaining a good offer. Second, the reality is that as a listing agent my responsibility is to provide the seller with market data that helps them get the most for their home at sale. If I provide a seller with market data that shows they can sell their home for the highest possible price of ‘X’ do you really think a seller is going to reduce the price of their listing by the amount that they would pay for buyer’s agent service fees? Highly unlikely. Everyone is looking for a good deal, especially now in this sellers’ market. Even if they did reduce the price it would be less clear to a buyer than simply writing as a buyer’s concession that the buyer’s agent fee is covered.

So stay cool the major changes that people say are coming are unlikely. I think that if this settlement is ratified and goes through this will simply require more transparency between buyers and their agents going forward. I think that is a great thing. I am an attorney as well. I never do anything for my legal clients until I have a retainer signed that outlines my responsibilities and my service fees. To set that as a new standard for buyers agents is great, and I think it was a long time coming.

As always feel free to reach out to me with any questions regarding buying, selling, renting, in my capacity as a Realtor, or otherwise in my capacity as a real estate attorney, real estate closings, and estate planning. Consultations are always free and I am happy to set you on the right path, talk to you then!

 

 

Kacper Jastrzebski, Esq.
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Illinois Attorney & Real Estate Broker
The KRLG Team - KRLGTeam.com
Office: 224.223.6001 
MovingToChicagoIllinois.com | KRLGTeam.com
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March 13, 2024

Chicago Rent Increases and How to Avoid Them: Transfer Tax Referendum Discussion

In the last few weeks there has been a heated battle over a referendum that will adopt a new system of transfer tax. This tax is going to increase transfer taxes for properties selling for over $1,000.000.00 in Chicago. Since a majority of properties over a million dollars in Chicago are commercial properties the concern is whether a hike in a transfer tax will cause that additional cost to be passed on to the cities many residential and commercial renters who are arguably already struggling to make ends meet as rents have been increasing.

In short now is the time to start searching for your first home. Chicago rent prices are going to keep increasing regardless if this referendum passes or not. The referendum has drastic effect on the issue of limited supply in the market. Although it may limit development some because of an increased barrier to entry with a higher tax as explained below.

The point is to avoid the super-hot rental market by exiting it and taking the route of homeownership instead. Know that there are many programs out there to help you make that jump especially as a first time buyer. Private and public programs alike will help you with down payment and closing costs. So get out there and start looking and you can avoid all the riff raff explained below.

 

First an Explanation of the Current Transfer Tax Calculation in Chicago:

A transfer tax is a tax set on transfers of real estate. In Illinois sellers must pay a transfer tax based upon the sale value of the property being sold. This tax is applied at the state, county, and in the case of Chicago properties, municipal level. 

 

The current tax system is a flat tax with all properties being taxed the same no matter what their cost is. 

On the state level Illinois imposes a transfer tax of 0.1% ($0.50 for every $500) of the sale price.

On the county level, Cook County imposes a tax of 0.05% ($0.25 for every $500) of the sales price. 

On the municipal level, Chicago currently imposes a tax of 0.3% ($1.50 per $500) of the sales price on the seller, and an additional 0.75% ($3.75 per $500) for the buyer. 

 

Chicago is not the only municipality that imposes a transfer tax on top of the State and County taxes. Evanston a town just north of Chicago imposes a tax of 0.5% ($2.50 for every $500) of the sales price of the home. Schaumburg imposes a tax of 0.05% ($0.25 for every $500.00). I have linked an entire list of transfer tax rates as provided by the Illinois REALTORS at the bottom of this blog. 

 

As it currently stands the sale of a $300,000.00 home would impose a tax of 

- $300.00 Illinois state transfer tax to the seller.

- $150.00 Cook County transfer tax to the seller.

- $900.00 Chicago municipal transfer tax to the seller.

- And an additional $2,250.00 transfer tax to the buyer.

Total to the seller would be $1,350.00 and $2,250.00 to the buyer. 

 

For a $1.5 million dollar home the math would shake out as follows:

- $1,500.00 Illinois state transfer tax to seller.

- $750.00 Cook County transfer tax to the seller.

- $4,500.00 Chicago municipal transfer tax to the seller.

- And an additional $11,250.00 transfer tax to the buyer. 

Total to the seller would be $6,750.00 and $11,250.00 to the buyer. 

 

The New Transfer Tax System and it's Potential Effects:

The new transfer tax is going to be a tiered system. As you see the last system was simply a flat tax based on a single percentage. The referendum suggests different tax rates at different levels. In summary it will tax more expensive properties at a higher rate. 

Specifically properties over $1 million would have taxes increased for buyers from 0.75% to 2.00%. For properties over $1.5 million the tax would increase from 0.75% to 3.00%. 

However, for properties under $1 million the tax would reduce for buyers from 0.75% to 0.60%. 

In Chicago the amount of properties that clear the million market are overwhelmingly large commercial properties which includes large apartment and condo complexes, business locations, mixed use locations, and basically any large building where the owner intends to rent out the property tenants either looking to live or work there. 

You can see below that the amount of properties with a sale price of over a million that fall into the commercial category substantially outweigh the amount of single family homes for sale at that price point by a factor of 8. Likewise, the amount of 2 to 4 unit homes outweigh single family homes over a million by double. 

Amount of commercial property for sale in Chicago

Also keep in mind that these numbers only take into account properties that are listed on the MLS and not necessarily very large commercial properties that list at around $200 million or so. So there may be even more commercial properties that will be effected to consider here. 

So the concern is that the increased property transfer tax is a cost of business for buyers of these commercial properties that will ultimately be passed along to the tenants of their buildings both residential renters and business owners of all kinds looking for a place to operate out of. 

 

How Much Cost Are We Really Talking About? 

Well if we talk about a $1.5 million dollar property which could be a 8 unit residential building in need of a remodel outside of the center of the city that is an increase transfer tax from $11,250.00 (0.75%) to $30,000.00. An increase of $18,750.00 in transfer tax to the buyer of the property. If that cost was passed along to the unit tenants that could be an additional cost of $2,343.75 to each tenant over a period of time. How long that time is would depend on the new buyer and their financial timeline to make this money back. It would also depend on the market comparable in the area as residential and business tenants alike are going to consider all their options. So the commercial buyer isn't going to be able to simply dump this additional costs on their tenants immediately.  

The median price for a commercial property in the city of Chicago is about $1.45 million so the above calculation is relevant albeit the final cost being a bit smaller.

Is this really a cost that is going to substantially increase the cost of rents for tenants? In a 8 unit building as described above a cost of $2,343.75 just dumped on the tenants over a single yearlong lease would equal to an increase in monthly rent of $195.31. That could be enough to push many people out of qualification. 

An apartment management company in Streeterville neighborhood Chicago encouraged its tenants to vote no on the referendum. One of its buildings at 441 E. Erie St. a 615 unit building that they purchase for an estimated 200 million plus. So assuming that the price was $200 million the company would have paid $1.5 million in transfer tax under the current tax scheme. Under the new tax scheme that would be $6 million. A enormous jump of $4.5 million. Now naturally the company is not going to just take this additional cost of doing business on the chin, they will use their newly acquired rental property to make it back. $4.5 million split across 615 units is $7,317.07 per unit. Rent will increase but how dramatically is the question, the company needs to  have competitive rent rates and cannot just dump this additional $7,317.07 cost onto prospective tenants without having those prospective tenants seek rental housing elsewhere.

 

Is This Going to Increase Housing Costs for the Residents of Chicago? 

But what about the overall change in trend? Will increased transfer taxes cause an increase in the overall cost of properties? Potentially.

The issue is not due to the increased tax directly but rather the indirect effect of keeping more buyers out of the market and that means sellers too. Currently buyers and sellers alike are having trouble entering the market due to high interest rates. However, if you notice the amount of commercial properties for sale has been on a steady increase over the last year. This is largely due to the amount of foreclosed commercial properties out there. Remember that once everyone went remote a lot of these properties in Chicago and the surrounding suburbs had a major issue with filling the spaces as companies found remote work was more effective in productivity and cost for everyone. So now these commercial property owners are seeing their COVID era low interest commercial loans reach maturity without a way to pay them, and then they get hit with foreclosure. To save their losses they sell the property. 

The supply of commercial properties has increased 25.7% over the last year which reflects the phenomenon explained above. However, the market time for commercial markets has increased 31.8% reflecting that there simply are less people available to buy these properties or with interest to purchase the property at the sales prices that they are offered at. 

Longer market times for commercial properties will force sellers to drop their price. Even longer market times due to increased transfer taxes for buyers will force property values even lower. Since the median price of commercial properties in Chicago is 1.450 million then you might even see some properties that otherwise would be listed at a million or a little over listed instead for $999,999.00 to avoid that spike and take that sweet 0.6% transfer tax rate over the 2.0% rate. 

In the past 12 months the average percentage of original listing price for commercial properties has decreased 5.3%. So commercial property values are being knocked down, sellers are feeling the pressure from buyers looking for a deal and reducing their original listing price to sell. 

What does cheaper commercial property mean? That is unclear. Will savings be passed on to tenants of those buildings? Potentially. The reason being is that the demand for such commercial rental property has lowered so owners have to drop prices to entice commercial property renters to rent with them. However, with residential rent demand being so high it is unlikely that rent rates will drop even if the buyer of a property got a deal on it due to the mechanism described above. They will simply look at the fair market value of those rentals and charge competitively. 

Another consideration is that with increased transfer tax fees the entrance barrier for those interested in developing and building large multi-family complexes will increase. This could slow the construction of rental properties to offset the supply problem we are facing that is causing high rent prices. 

 

The Bottom Line

There are simply too many variables for me to comfortably tell you what is going to happen if the referendum passes.  These are my best estimates just analyzing the data out there and based on my experience operating in the market myself. 

In the best case scenario that the increased transfer taxes for properties over a million will limit the pool of buyers for commercial properties even more to cause even more drastic cuts in commercial properties, it is unlikely that renters are going to get a break. 

In fact a reduction in the price of these commercial properties may just encourage buyers to spend more renovating them so that they can charge higher rent prices for the units. So by that logic we may indeed see that this increase in transfer tax will cause an increase in rent. 

Additionally, slowed development of rental properties could cause more supply problems that are causing the spike in rent prices in the first place.

However, on the flipside a decrease in transfer tax for buyers under a million will see a slight decrease in the barrier to entry because of the lowered transfer tax. 

So if you are a renter thinking about buying a home the time to plan is now. If the referendum passes you may be able to catch onto a lower transfer tax rate to make your purchase before rent increases across the city due to indirect effects of the transfer tax. 

The referendum voting day is on March 19th, which is Tuesday of next week. I encourage you to go read up more about this topic and make your voice heard. 

 

 

Here is the link to the municipal transfer tax fees for Chicago and its suburbs:
https://www.illinoisrealtors.org/wp-content/uploads/2018/01/TransferTax.pdf

 

Feb. 28, 2024

Deed Breakdown

 

When it comes to transferring property. Deeds are the instrument that makes it happen. They come in different forms and if you've purchased a property you may be familiar with some of them.

The key differences between them come down to what each type of deed guarantees from the transferor or seller of the property. The Illinois Compiled Statutes outline three primary types of deeds. 

 

A "General Warranty Deed" that guarantees everything.

A "Quitclaim Deed" that guarantees nothing.

A "Special Warranty Deed" that only guarantees some things. 

 

So what does "everything" mean? Let's start therefore with a General Warranty Deed. Within the compiled statutes a Warranty Deed comes with certain implied covenants (not a Halo reference) or promises by the person giving the property to the person receiving the property. The promises or covenants are as follows:

First, the person granting the land and any improvements described is the lawful owner of that real estate and has the full power to convey it over to them.

Second, the land is free from all encumbrances. This means that the property is not tied up in any other entity or persons rights to it either by access, monetarily, or otherwise. 

Third, that the grantor promises to protect the grantee as well as their heirs and whoever they assign the property to, to defend against any claims against the property that come up by anyone who claim an interest to the land. That means if there is a dispute over the property and who has rights to it the grantor will defend the grantee against those claims!

 

These are some big promises and your closing attorney and the title company he works with do careful work that there are special exceptions given to these rules. In reality no property is free from encumbrances. One that stays eternal it seems is property taxes. You do not want to be on the hook for property taxes down the line after you sold a home. What a nightmare that would be. 

 

On the other end of the spectrum is the Quit Claim Deed. These offer no warranties or promises. However, they are effective to transfer property. They are useful for transferring property between trusted parties like family members. In simple transfers where you would like to just add your child or spouse onto the title these can be appropriate. 

 

Special Warranty Deeds on the other hand are between a Quit Claim Deed and Warranty Deed. They offer some of the warranties and therefore protections to the grantee that Warranty Deeds do but not all of them. If they offered all of them they would just be Warranty Deeds and if they offered none of them they would be quit claim deeds. 

The major difference between a Special Warranty Deed and a General Warranty Deed is that the Special Warranty Deed states that the grantor, the person conveying the property, will only protect the grantee, the person receiving the property, against encumbrances caused or created by the conduct of the grantor. The grantor will not therefore protect the grantee against encumbrances not caused by its actions including any claims that originated before their ownership unlike a General Warranty Deed. 

These could therefore be useful when dealing with stigmatized properties where who knows what encumbrances there might be on the property. By providing a Special Warranty Deed you can rest assured that you are only willing to defend against any claims due to encumbrances caused by your actions. This will be more favorable to your prospective buyer than a Quit Claim deed because it does guarantee that you can legally transfer the property to them, it just limits how much liability for encumbrances you are willing to take on.

 

Naturally this means properties sold via quit claim or special warranty will be cheaper. However, know that you are gambling. You get what you pay for and although it is very uncommon to come across such properties unless you are a sophisticated investor it is still something to keep in mind.

 

In your own home purchasing journey you are likely to deal with General Warranty Deeds and certain special occasion deeds like Trustee's Deeds for when the property is transferred from out of a trust by the trustee of that trust. 

If you have any questions on deeds and how to best convey or take ownership of a property please email us with your questions.

 

The KRLG Team
KRLG@KRLGTeam.com

 

Feb. 14, 2024

A Guide to Buying Property as a Couple In Illinois

 

 

Buying a home together is often the biggest financial decision a couple will make together. It is dedication to a shared commitment and the start of a new chapter. This is naturally an exciting prospect as homes provide the stage for your life and a new life together under one roof.

However, it is important to understand and consider the legal and practical aspects of buying a home together and searching for one.

 

Finding a Dream Home Together

Remember that despite being a couple each of you have your own interests, concerns, and fears with respect to purchasing a property. It is important to sit down alone and consider all of them individually. Note your must-haves and deal breakers. Consider location, size, what your current home is lacking, and what your future plans are. Then come together and compare your answers. The reason it is important to do this alone is so that no one person controls the conversation and everything can get out on paper.

It is important to get all this information organized and understood now instead of at the closing table when it may be too late.

 

Understanding Joint Property Ownership

Buying a home together implies that the property will be titled in both of you and your partner's names. There are two primary types of joint ownership in Illinois.

 

Tenancy by the Entirety: This is exclusive to married couples and provides for the automatic transfer of the home to the surviving partner in the event of one partner's death. It also provides to protect the home against the claims of the creditors of one spouse.

 

Joint Tenancy: This is available for both married and unmarried couples as well as group ventures into property and will ensure that the property automatically transfers to the surviving owners/partners in the event of one or more partners/owners death(s).

 

 

When engaging in a joint venture to own property it is important to understand everyone's rights and obligations with respect to the property. This is especially important when engaging in a joint venture to purchase an investment property. Each owner should understand how the property will be split among them in terms of rights and obligations. This will help avoid future conflicts that will typically end in a judge forcing the sale of the property and division of the proceeds, if any, to the former joint owners. Setting up a property agreement now is big money saved later.

 

 

Understanding the Homestead Exemption

 

In Illinois a homestead exemption is a legal tool that protects homeowners from collection attempts by creditors and property tax collectors which means prevention of foreclosure and seizure in bankruptcy. This homestead exemption can also apply to single owners but it is equally as important for couples and joint owners to understand.

This law was created to protect those in debt from becoming homeless as well. Creditors are just going to have to wait longer to get paid back and cannot force the sale of someone's home to get paid what they are owed quicker. This is a public policy consideration that the Illinois legislature made when creating this law. This is a great example of how real world considerations can trump the often black and white interpretation of terms of a contract.

With this exemption single owners can exempt $15,000.00 of equity (equity being the amount of property you actually own after considering the amount of mortgage/liens there is to pay) in a home from a creditors collection efforts and $30,000.00 for joint property owners. However, if the equity in your home is more than this then your home can be seized and sold to satisfy debts. So when you go into foreclosure then you are guaranteed $15,000.00 or $30,000.00 out of the sale of the property.

Again the law is created to avoid debtors from becoming homeless after a disaster scenario. The legislature has considered that walking with $15,000.00 or $30,000.00 is enough to get folks back on their feet after losing a home.

The homestead exemption is also a tax relief exemption available on the Cook County Assessors site.

 

Qualifying for Homestead Exemptions

 

  1. Property must be a primary residence

  2. You must be the owner of record or have a legal or equitable right to the property (for example a leasee who is responsible for paying property taxes as part of the lease)

  3. To obtain the homestead tax exemption apply on the Cook County Assessor's site and once approved it automatically renews every year.

 

Note on Waiving Homestead Exemptions

 

It is not uncommon for mortgage companies to require you to waive homestead rights before agreeing to give you a mortgage. This is so they can foreclose on your home without needing to fork over $15,000.00 or $30,000.00 that is otherwise protected for you per the homestead laws of Illinois.

Make sure you understand all of your obligations with respect to a home purchase so that you are working with a payment that is comfortable and also takes into consideration annual taxes, home insurance, any applicable assessments, future tax increases, and any other financial obligations that could impact your ability to pay your mortgage.

 

 

In Conclusion…

Buying a property is always an exciting endeavor to embark on. Part of that journey is going to be understanding how to best navigate the financial and legal paths that this process will take you down.

Contact us today for more information on all of this and more so you can make the best decision for yourself and your partner together.

 

 

Feb. 7, 2024

Timeshare Exit Strategies

Well, we are past the peak vacation season in the United States, which typically occurs in December. This is the busiest time of the year for timeshare companies due to the influx of vacationers to their areas and resorts.

 

You may have heard of timeshares before, and likely what you have heard is not great. Timeshares are properties shared among multiple people. Each person signed up for a timeshare is actually signing up for the right to time at that specific timeshare during certain seasons.

 

Ownership structures for timeshares can vary, including fixed-week ownership, where a specific week of the year is allocated consistently, or floating-week ownerships and points-based ownerships, offering more flexibility in scheduling.

 

Timeshares may seem like a low-cost method of having a vacation home. However, if you do not use the timeshare regularly, it can quickly become a financial burden. Timeshares charge maintenance fees to upkeep the property and its amenities for each guest accessing it. These fees are generally similar to homeowner association fees, ranging from $200 to $400 per month, depending on the timeshare.

 

Canceling your 'subscription' to a timeshare can be notoriously difficult, as there are typically no clear exit strategies in the agreement.

 

If a timeshare gives you trouble about exiting your agreement, here are a couple of things to keep in mind to help your situation.

 

First, understand that exiting a timeshare involves negotiation. They may push back, emphasizing that an agreement is binding, but try to show that your situation has changed. Evidence of changes, especially during events like COVID, can encourage the timeshare to reconsider your position.

 

Second, leverage against them strongly. If you cannot afford to pay, let them know. They may prefer a settlement over receiving no payments at all, impacting your credit. Explore alternatives that are more challenging for them than settling.

 

Third, be prepared for a lengthy settlement process. Convince the timeshare to stop maintenance and late fees during negotiations.

 

Fourth, if dealing with an inherited timeshare, there are methods to exit it effectively. Seek legal advice to prevent claims against the estate in probate court.

 

Fifth, document any leverage against the company for breach of contract or fraud to use in negotiations. Make it clear that fighting you will be more costly and headache-inducing than allowing you to leave the agreement.

 

At the end of the process, aim for a settlement, a document showing a zero balance, and a deed confirming the property is no longer in your or a family member's name.

 

I hope this blog provides insight into exiting timeshares, reminding you that there is hope in dealing with these companies. While a cheap vacation home may seem great initially, circumstances change, and there are ways out of a timeshare agreement.

 

Feel free to call us to discuss the matter further, and we can provide additional insight!

 

 

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Jan. 24, 2024

Exploring Chicagoland's Romantic Hotspots: A Valentine's Day Preview

Here's a good tip, make your Valentine's Day reservations now!

 

Finding the perfect home extends beyond just bricks and mortar. It's about the lifestyle an area provides, and what better way to discover that than through Chicagoland's vibrant culinary scene? With Valentine's Day just around the corner, let's take a peek at some romantic hotspots in the Chicagoland area that not only offer great dining experiences but also contribute to the unique charm of their neighborhoods.

 

1. Mama Delia – Tapas Delight with a Cozy Ambiance

Nestled in the heart of the city, Mama Delia is a tapas haven that promises an intimate date night without breaking the bank. Boasting an impressive selection of Sherries and reasonably priced dishes, Mama Delia provides the perfect setting for a romantic evening. The cozy atmosphere adds a touch of warmth, making it an ideal spot for couples seeking a delightful dining experience.

 

This spot is located in Chicago Community Area 24 of 77, West Town. It currently has a median sale price for homes of $500,000.00. The Division street strip that Mama Delia's is located on features a bunch of great restaurants and bars to keep you entertained. It also has easy access to CTA lines and the highway making this an ideal spot for investors looking for a place to rent out or a place to settle down while enjoying some of the best that Chicago has to offer.

 

Link: https://www.mamadelia.com/

Here is also a link to our West Town video on our YouTube: 

https://youtu.be/3J6a-Hrg_xc?si=NyhLPqkZrDu9bXkw

 

 

2. Bordel – Speakeasy Elegance Above Mama Delia's

For a touch of mystery and sophistication, head upstairs to Bordel, the speakeasy above Mama Delia's. With delectable appetizers and crafted cocktails, this intimate venue sets the stage for a memorable evening. Open until 4 am, Bordel is an excellent choice for a nightcap, whether after dinner or a night of dancing. The secret entrance only adds to the allure of this hidden gem.

 

This is located right above Mama Delia's and therefore is also in West Town sporting the same stats and features as mentioned before. Above Bordel is another venue that you can rent out for private events which is just as swanky! 

 

Link: https://www.bordelchicago.com/

 

 

3. Vito and Nick's – A South Side Pizza Gem

For those looking for a more laid-back evening, Vito and Nick's on the South Side offers a true taste of Chicago's renowned thin-crust pizza. A local favorite, this spot provides a casual yet authentic experience. Perfect for a relaxed night in or a casual date, Vito and Nick's ensures that you savor the essence of Chicago's pizza scene beyond the deep-dish stereotype.

 

This is an institution that has been open since 1932. The cracker thin crust is really the true Chicago style. Pair this with a beer, PBR or Miller if you're a local. Honestly you can't go wrong here. No reservations necessary. This is located in Scottsdale area which is part of Ashburn community area 70 of 77. Median home prices here are roughly $250,000.00. 

 

Link: https://vitoandnicks.com/index.php

 

 

4. Murasaki Sake Lounge – Intimate Atmosphere, Exceptional Sake

Located in a vibrant neighborhood, Murasaki Sake Lounge offers an intimate setting for couples to enjoy small plates, exceptional cocktails, and engaging conversations. With its proximity to various restaurants and clubs, Murasaki becomes an excellent starting point for a night filled with culinary adventures and entertainment.

 

This is a small but cozy spot I found In Streeterville area Chicago which is part of the Near North Side community area, that is community area 8 of 77. Median home prices here are roughly $300,000.00. Streeterville is probably one of my favorite neighborhoods in Chicago. Super cool spot that is not very busy on most nights I've been there offering a great spot to just sit and have a good conversation at. 

 

Link: https://www.murasakichicago.com/

 

 

5. Daifuku Ramen – Noodles and Whiskey in Chinatown

In the heart of Chinatown, Daifuku Ramen stands out for its delicious ramen with perfectly chewy noodles. The full bar, featuring an enticing selection of Japanese whiskeys, adds an extra layer of enjoyment. After a satisfying meal, take a stroll through the nearby shops in Chinatown to find a unique and cute gift for your date. Solid casual spot. 

 

This is located in Chicago's own Chinatown which is part of Armour Square community area 34 of 77. Median home prices here can range from 300k to 600k depending on what kind of property you are looking at but there are many more affordable single units here than you might think. 

 

Link: https://www.daifukuchicago.com/

 

Here is also a link to our Chinatown on our YouTube Channel: https://youtu.be/Vh5prFDK6sM?si=zy-iXyGE5pbMSU-B

 

 

And here's a pro tip: Chicago Restaurant Week is in full swing until February 4th! Take advantage of the prix fixe full dinner options at these establishments to preview their offerings before the big day on February 14th. It's the perfect opportunity to explore the local dining scene and plan a Valentine's Day celebration that your partner will cherish.

 

Don't wait until the last minute—start making those reservations now to secure a spot at these fantastic venues and make this Valentine's Day an unforgettable experience for you and your loved one. Cheers to love and delicious adventures in Chicagoland!

 

If you have any questions about these areas or any others in Chicago or the surrounding suburban Chicagoland please consider me your guide.

 

The KRLG team
224.223.6001
KRLG@KRLGTeam.com

 

Or start searching on your own at:
www.MovingToChicagoIllinois.com

Dec. 20, 2023

Appealing Property Taxes in Illinois

In Cook County taxes are out for the first installment of the 2023 tax year and many people are feeling the sting. Illinois has always ranked as having high property taxes compared to the rest of the country. Currently only New Jersey is beating us out with an average effective property tax of 2.21% versus our average tax rate of 2.05%. Still taxes have been raising even beyond what Chicagoans and other Cook County residents are used to. 

The reason is that property values have been dramatically going up in the last few years since the pandemic. Less sellers means less inventory for a pool of hungry millennial buyers that are waiting for an opportunity to snag up their first home. But with high demand and low supply comes a spike in home prices. In the entire MLS area covering Illinois generally the median home price has gone up from about $230,000.00 in 2020 to about $300,000.00 today. 

 

If you read up on the history of property taxes in this state as I covered in this blog below, you'll know we have a right to appeal our property taxes: 

https://www.movingtochicagoillinois.com/blog/illinois-property-taxes-paying-arrears-high-costs/

 

Property taxes are based on several variables including the assessed property value of a home. If you receive a property tax bill and notice that the assessed value of your home is significantly higher than what you initially thought, you may be in a good position to appeal your taxes.

What's better is that this process can be done online and without paying an attorney. However, if you decide that you need help doing this then please feel free to reach out to us for more information on how we can set that up for you. 

 

The Cook County Assessor's office website is a great source of information related to appealing property taxes. There you will see instructions on how to file your appeal online as well as other useful hints on how to see success in doing so.

The Cook County Assessor's office states that a good rule of thumb for deciding on whether or not to appeal your property taxes is to see if the appraised value of the property is 10% more than the estimated market value of your property then it might be a good idea to appeal. Any lower than that is likely going to results in a denial. 

The Assessor's office looks to the market values of comparable properties in an area to determine what the assessed value of a property will be for taxing purposes. This review of comparable is very similar to the research that a Realtor will do when preparing a home for listing. The Assessor's office website also has links on how to find comparable properties for the purposes of your application as well as information on every step in this appeals process. More information can be found at the link below:

https://www.cookcountyassessor.com/online-appeals

 

Different properties require different appeals so make sure that you use the right application for the property type that you are appealing for. Additionally, make sure that you appeal on time as you generally have 30 days from getting a reassessment notice in the mail. For more information on when you can file your reassessment check the appeal schedule at the link below for more information:

https://www.cookcountyassessor.com/appeals

 

This process is one that according to the assessor's office can be done in as quickly as 20 minutes. If you have any trouble feel free to reach out to us. 

Learning how to appeal your taxes is not only something that could save you hundreds to thousands of dollars but is also your duty as a citizen to keep our taxing offices in check! Learn more about how Chicagoans in the past fought for this right in a greater battle against administrative corruption in our blog post below:

https://www.movingtochicagoillinois.com/blog/illinois-property-taxes-paying-arrears-high-costs/

 

Contact us for more information!

The KRLG Team
224.223.6001
KRLG@KRLGTeam.com
www.MovingToChicagoIllinois.com

Dec. 13, 2023

December FOMC Meeting and Mortgage Rate Forecast

Today is the final day of the December Federal Open Market Committee meeting. As I stated in my last Newsletter and Market Update video the Federal Reserve is likely to pause rate hikes for now.

Remember that the rate hikes serve to combat the US Inflation rate which is currently sitting at 3.1%. Now this is good progress as last year December we were sitting at 6.5% which makes for a reduction of more than half. The rate hikes are working and the pauses are working to keeping the economy going despite the increased scarcity of credit due to the rate hikes which is reflected in low unemployment numbers. 

Currently mortgage rates in Illinois are averaging in the 6.0% which is great news for Buyers and Sellers alike. It is not only about the rate cut and the money saved but indirectly this means that sellers that needed a new home but could not justify the move are now that much closer to trading up to their next home confident that their monthly payment amount will not overwhelm them.

 

If we look at average Chicago rates as provided by Realtor.com (https://www.realtor.com/mortgage/rates/Chicago_IL) then we can see that with great credit in the mid-700s one could obtain a 30-Year Fixed mortgage at close to 6.0%. Those with credit in the mid-600s can obtain rates in the mid 6.0% range. 

Again keep in mind what this might mean for your monthly payment. For example, if we consider a home that valued at $300,000.00 with $5,000.00 annual property tax, and $200 for home insurance coverage and with a 3.5% downpayment these are the figures that result at different rates.

 

At 7.0% your total estimated payment in consideration of the above variables would be $2,484.38.

At 6.5% the payment would be $2,388.17 which amounts to about $100.00 off the monthly payment.

At 6.0% the payment would be $2,294.03 which is another $100.00 off the monthly payment.

 

So next year you could potentially see yourself saving $200.00 a month on your monthly house payment compared to if you were to purchase a home now at the current available rates. However, keep in mind that when the rates drop more competition is going to drive up home prices to potentially beyond what can be offset reasonably by a lowered monthly payment.

If you get into a bidding war where you end up spending a conservative $5,000.00 over the market value of a home then it would take you over 2 years to make up that loss and over 4 years to make it up with a $100.00 cut on your monthly payment. At that point you may be looking to move anyway and so you should question whether trying to wait to enter the market when rates are lowest is going to serve you best.

Keep in mind the amount that you will save is even lower with a lower priced home. However, if you are looking at especially expensive luxury options then expect less competition for those homes and perhaps you will be able to get away with waiting to enter the market without overpaying in a bidding war situation. As the price gets higher the amount saved on a monthly payment is going to be much higher. 

If we take the above example and change the home price to double at $600,000.00 then the monthly payment across the different rates splits as follows:

 

7.0% results in a $4,535.43 monthly payment.

6.5% results in a $4,343.01 monthly payment which is about $200.00 less.

6.0% results in a $4,154.73 monthly payment which is roughly another $200.00 less.

 

But will we even see the rate cuts next year to merit this? 

 

We went up from about 2.65% in 2021, 3.22% in 2022, to a staggering 8.0% in 2023 in the national rate. The Federal Reserve had already acknowledged that this drastic hike in rates has slowed the economy. It knows that it must balance combating inflation against bringing the economy to a disastrous halt. 

Analysts predict rates to start dropping come next summer and they are likely to continue to drop through the rest of the year. Come 2025 the rates are going to inspire a lot of selling activity as sellers are freed from their golden handcuff situation where their current mortgage rate is better than anything the market can offer.

 

Now is the time to get ready for your home shopping journey. Either snag something now and avoid the rough competition next year knowing that you can still refinance and save on your monthly payment. Refinancing does cost money too but it will be likely less than the thousands you might end up spending bidding for the still limited inventory out there. With less spent on refinancing you can make up the money lost much quicker with your lowered monthly payment. 

Remember demand is very high right now for homes. The unemployment rate is low and people will have the money to spend. So expect some tough competition next year. The way that you can combat this is by knowing what you want and knowing what it is worth so you can move quickly when you find it. 

 

Get in touch with us today to get a free consultation on what you can expect from today's market and the 2024 market with respect to the type of home your looking for and the neighborhood that you are looking in. Knowing can save you thousands of dollars in this market. 

 

Nov. 16, 2023

Old School v. New School Real Estate (Podcast Preview)

Today I had the opportunity to join up with Citywide Title on their podcast and YouTube channel Eat and Drink Real Estate.

There I joined my father Jarek Jastrzebski of the JRE Group to discuss the different approaches that we take in serving our clients and running our respective broker's practices as well as my practice as a real estate attorney.

The video will be out in a week but I wanted to type up this blog post as a preview and give some insight into what defines new school versus old school real estate practice in our opinions.

Generally defining new school versus old school can be split into age groups. My father is older obviously and has been a real estate agent since before the 2008 crisis. His approach to things tend to be more person to person as that was the primary form of communication back then absent using phones and mail.

However, I grew up with the internet as it was being developed. First with dial up and the golden age of AOL and Angelfire blogs. Things have certainly changed since then but the impact has been the same. This technology has allowed us to reach more people more often and with greater ease. Even right now I can communicate with you as I usually do through my website, blog posts, videos, and other media that I self-publish into the world.

All the same I do believe that the personal element is going to be king. Some of you reading this may know me personally, others just via the interaction we have had through the site in helping set up your search or provide consultation, others still may just be getting started and have no idea who I am.

Ultimately the best way that we can connect as people is in person. That leaves a more lasting impact on and helps me really get to know you as a person. That is going to help me serve you better if I know what drives and motivates you in the search.

The technologies I use to serve my clients go beyond just communication style. Back in the day my father said that the broker's offices were the only places to get information on the available real estate in the market. People would have to roll up to a real estate office to see what inventory was available. Whereas now as you know yourself you can log on MovingToChicagoIllinois.com or any other website to start pulling information about listings, property history, home valuations, and more. Access to data and expectations for that access have fundamentally changed how real estate is marketed and sold.

Furthermore, access to data includes access to services. In this age a lot of client facing professionals have an issue of figuring out when to turn off and draw boundaries with their client care. Don't get me wrong I am so grateful for everyone that uses my website, reads my blogs, and gets something useful out of the content that I create. However, I still need to remember to sleep, make time for myself, and go out and have my own fun every once in a while. Even when I am having fun though I try to capitalize on it by sharing with you the cool things that I find in Chicago and its surrounding suburbs in hopes that it may give you insight into what city or suburban living can offer you.

However, with the expectation to be always on and the ability to reach so many more people comes a challenge of making sure that all those people are well served in their real estate journey whether they are just starting their search, in need of a listing consultation, in need of closing services, or otherwise want to set their estate plan.

So these days most Realtors use a CRM or Client Relation Manager of some sort. This allows me to keep track of your case file and to understand where we left off in your journey so I can continue to serve you best. My CRM is also directly linked with this site, MovingToChicagoIllinois.com, in that I can see what types of properties you are taking interest in so I can provide some additional insight into your search or helpful tips to help you find what you need. This is all without having to contact you to find that out. That makes the communication seamless since I know what page you are on because at any point I can go and see that page myself!

I think ultimately the technology available to me now as a new school Realtor and real estate attorney makes it easier for me to provide my clients and others the information that they need to make a better decision for themselves. It helps me connect with them better and serve them better throughout their real estate journey. However, one constant is that in person connection is king and a lot of the old school methods of reaching out and staying in touch have no changed much, absent maybe the format, medium, or platform those efforts are done on. I think so long as we keep giving value to our clients and meeting them where they are in terms of communication, which is usually online, we can continue to help people make the best decisions for themselves and their future no matter what the market is like.

Posted in Real Estate Tips