Category: Real Estate Law

Understanding the transfer on death instrument for real estate.

The transfer on death instrument (TOD) is one of several estate planning tools that a property owner may wish to employ. The transfer on death is an automatic transfer of one’s interest in residential real estate to a named beneficiary, upon the death of the interest holder (owner), without probating the estate.

It is a mechanism by which a real property title holder can transfer their interest upon their death, to a designated beneficiary or beneficiaries. It is statutory, codified in 755 ILCS 27 (Illinois Residential Real Property Transfer on Death Instrument Act). When the owner dies, their interest transfers to the named beneficiary(ies).

What categories of real estate are eligible under the Act?

The Act is specific, and as the name suggests it only applies to residential real estate. More specifically, it limits the transfer to real property with 1-4 units; condominium units; condominium parking (if individually owned or allocated to a specific residential condominium unit); and agricultural land with a single family residence (but limited to 40 acres or less, and must be a single tract of land).

Who is responsible for taxes and maintenance if I execute a transfer on death instrument?

A transfer on death instrument has no effect on the owner’s rights to sell transfer or encumber the property. Additionally, the TOD should have no effect on the owner’s and the beneficiary’s rights to public assistance.

What if I change my mind after I file a Transfer on Death Instruments?

If you change your mind after recording the Transfer on Death instrument, it can be revoked. However, the revocation cannot be done through a Will, it must be recorded.

Will a transfer on death instrument help avoid creditor’s claims upon my death?

No, the owner is still permitted to encumber the property and the transfer on death instrument does not affect the rights of the owner’s creditors, regardless of whether they are secured or unsecured creditors.

What should be done when the owner dies?

The beneficiary can file what’s called a Notice of Death Affidavit with the recorder’s office. This notice must contain: the name and address or each beneficiary, a legal description of the property, the street address and parcel identification number of the property; the date of the Transfer on Death instrument and its recording document number; the name of the deceased owner; the date and place of death; and the name and address for mailing of future tax bills. However, regardless of whether the Affidavit is filed, the title still transfers at death.

Can the owner executing the Transfer on Death be a corporation, trust, LLC, etc.?

No, the statue defines an “Owner” as an individual who owns an interest in real property. Which makes sense, since corporations, LLCs and trusts can, at least in-theory, survive in perpetuity. However, the beneficiary of the transfer on death may be a legal entity (trust, corporation, LLC, etc.), such as a charitable entity.

This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.

Increasing the Attractiveness of Your Offer – Real Estate Buying

In a fast paced real estate market, with multiple offers, you might want to get creative in making a more attractive bid. Although offering a higher purchase price could increase your chances of going under contract, that means paying more for the property. Focusing on and adjusting other conditions in the contract may be just what it takes. 

  • Financing. Cash is King. Many homebuyers purchase pursuant to a mortgage contingency, where the lender must approve both the credit worthiness of the buyer(s) as well as the appraisal value of the home.  If either one of these contingencies aren’t met, the closing may be cancelled. A cash offer removes those contingencies. However, a cash offer requires actually having the cash available to close, and many first-time homebuyers are unable to buy without financing.
  • Closing Date.  This can swing both ways, some sellers may want to close as soon as possible, and others may need additional time to close, for whatever reason(s).  Real estate agents could discuss the seller’s intentions before putting an offer in, and the buyer can adjust their offer accordingly. Additionally, if closing needs to take place sooner, the parties may be able to negotiate a post-possession closing period, where the seller is permitted to stay beyond closing.  
  • “AS-IS Condition” and/or Waiver of Professional Inspection.  If you are using the Multi-Board 7.0 Contract, paragraph 36 can be selected if you are willing to take the property ‘as-is’.  It doesn’t mean that you can’t conduct an inspection and a buyer is still permitted to cancel the contract if the condition of the property is unacceptable following the inspection. If purchasing with financing (mortgage), certain lenders or financing programs may be harder to obtain if the property is being sold “AS-IS”. 
  • Increasing the Earnest Money. Earnest money, usually held by a third-party or one of the parties Agents/Attorneys, can be increased to show additional ‘earnestness’ to follow through with the purchase. It doesn’t mean the seller is permitted to keep the earnest money if the contract is rightfully cancelled by either party, but it is held and can be used to cover potential damages from a wrongful termination of the contract by the buyer.  
  • Expediting the Attorney Review Period.  This isn’t one that will help your offer get initially accepted, but it may help prevent the seller from backing out during the attorney review. If an attorney review period is extended and extended, it may give pause to the seller to re-think the contract and the buyer’s willingness to purchase the property. Asking for too many repairs, credits, or other assurances may also give a seller concern, and they may opt to cancel the contract. Having the right attorney to assist you in this process can make a huge difference.

This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.

Do I need a Deed to Transfer Real Estate?

In feudal England, real property possession was conveyed through a symbolic act, termed ‘livery of seisin’ (or seizin). Livery of seisin roughly translates to the delivery of possession of land. It could be a lump of soil, a tree branch, or even a fixture of the house. When the grantor passed this symbolic item to the transferee, possession was conveyed.

Although the Illinois Conveyances Act recognized livery of seizin, it provides that this symbolic act in not necessary (765 ILCS 5/1). Instead of passing lumps of soil or tree branches, we currently rely on deeds of conveyance to transfer interest in real property. In Illinois property is routinely transferred by warranty deed or via quit claim deed.

A Warranty Deed transfers title with the grantor’s warranting that title is free of any adverse claims. This includes adverse claims that might have occurred prior to the grantor’s period of ownership.

By conveying via warranty deed, the grantor is basically warranting: (1) that the grantor is the lawful owner of the estate in fee simple and has the right to convey the property to the grantee; (2) that there are no encumbrances (such as a mortgage, lien, lease, etc.); and (3) that there aren’t any adverse claims against the land and title, and if there are then the grantor will defend against those claims. These warranties become part of the conveyance regardless of whether they are expressly stated in the deed. The exact language of the grantor warranties can be found in 765 ILCS 5/9.

A Special Warranty Deed is a deed that limits the warranties. It can be limited to claims that might have occurred during the grantors period of ownership or claims that could have occurred by the grantor. The deed will need to include operative language to the effective limitation(s). Special Warranty Deeds are more common when the grantor acquired the property through a tax sale, foreclosure, or other debt related transfer. In those cases the grantor may limit the warranties to claims by, through or under the grantor. Unlike Warranty Deeds, Quit Claim Deeds provide no warranties as to title, and the grantee takes title subject to any adverse claims.

This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.

How important is the appraisal when buying real estate?

The appraisal is an important part of many mortgage loan financed residential real estate purchases. The appraisal is usually ordered at the buyers requests, and sometimes paid for prior to closing. The appraisal is done by a third-party appraiser, who provides an opinion as to the value of the real estate. The opinion is based on the type of analysis the appraiser performs.

Common appraisal methods include: the Sales Comparison Approach; the Cost Approach, and the Income Approach. The Sales Comparison Approach uses recently sold properties that are similar to the subject property, applying adjustments for variations, to determine an estimated value.  The Cost Approach basically uses an estimation of the value of land and the price it would cost to build an equivalent building on that land (Cost of Land + Cost to Build – Depreciation).  The Income Approach uses the income or anticipated income generated by the property to determine a value.          .  

What happens if the appraiser’s estimated value comes in lower than the agreed upon purchase price?

Sometimes there is subjective value to a buyer that exceeds the appraisal done by a third-party appraiser, and that buyer may decide to proceed with the real estate purchase knowing the appraisal was lower than the purchase price.  Lenders may permit the buyer/borrower to provide additional funds at closing to cover the difference.  If a buyer/borrow cannot come-up with the difference, or even if they can, the buyer and seller might agree to a reduction in the purchase price to reflect the appraisal value.  Additionally, a buyer might want to contest the appraisal, pointing to errors or omissions in the report.      

What can I do to protect myself, if the appraisal doesn’t come in at the agreed upon purchase price?

Some attorneys will negotiate a clause, pursuant to the Attorney Review (Section 10 in MBRE 7.0), permitting the Buyer to cancel the contract if the appraisal doesn’t meet or exceed the agreed upon purchase price, or to allow the parties to negotiate a lower price.   Even without such a provision, if a buyer cannot obtain financing because the appraisal value was too low, they won’t be able to get the loan commitment, and therefore won’t be able to close on the purchase.    

Does a Seller have to lower their purchase price if the appraisal comes in low?

No, unless that is a stipulation in the contract. However, a seller may be compelled to reduce the purchase price, because there is no guarantee that a subsequent prospective buyer may be able to get a better appraisal, and/or the seller may not want to re-list the property.

If you are unsure about your obligations/rights, or would like to speak with an Attorney regarding your real estate purchase/sale, please contact Blume Law

This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.

Mortgage or cash offer when purchasing a home in Illinois

The majority of residential real estate financing in Illinois is loan contingent (mortgage) or cash (no mortgage), with variations as to each.  This post focuses on the financing options as used in the Multi-Board Residential Real Estate Contract (“MBRE”) 7.0.  The following are three types of financing used in the MBRE 7.0: 

Loan Contingency (Paragraph 7(a) of MBRE 7.0):

If the parties agree that the transaction will be subject to a Loan Contingency (mortgage), the buyer is only required to purchase the property if they are able to meet all the terms of the Loan Contingency.  The Loan Contingency provision protects a buyer from having to purchase real estate when they don’t qualify for the agreed upon loan terms (or better, with some terms), including: (a) the percentage of the purchase price to be borrowed; (b) the maximum interest rate for the loan; (c) whether the rate is fixed/adjustable; (d) the specified period of time for loan repayment; and (e) the maximum amount of ‘points’ to be paid by buyer. 

If the Buyer is unable to provide loan approval and serves notice to the Seller by the ‘Loan Contingency Date’, the Contract shall become null and void.  The default ‘Loan Contingency Date’ is either 45 days after the date of acceptance or 5 business days prior to the date of closing, whichever is earlier. Although, this date can be modified during the Attorney Review, or may be extended by mutual agreement of the parties.

Cash transaction with no mortgage (Paragraph 7(b) of MBRE 7.0):

This should be selected if the buyer wants to pay cash (no mortgage loan).  It also has the added benefit of splitting the escrow fee between the buyer and the seller (unlike when financing with a mortgage).  A seller may ask the buyer to verify they have the requisite funds to purchase the property, and the buyer may be required to provide financial information to verify those funds.  This option can be used when a buyer has sufficient money to cover the purchase, and when acquiring property that may be difficult to obtain with a mortgage loan. Unlike the Loan Contingency, the buyer is generally obligated to purchase the property, regardless of their change in financial circumstance.

Cash transaction, mortgage allowed (Paragraph 7(c) of MBRE 7.0):

This option may be selected if the buyer has the funds to purchase without a mortgage, but would like to have the option to purchase using a mortgage loan. Regardless of whether the buyer is able to qualify for a mortgage/loan, he or she is still required to purchase the property.  Some buyers that have the cash available to make the purchase, but would like to explore the option of a mortgage may choose this option.  It may appear as a stronger offer to the seller, since they know the buyer will not be able to back-out for inability to obtain a mortgage loan.   The escrow fee will be split between the seller and buyer if purchase without a mortgage loan, otherwise the buyer will pay the entire escrow fee.   

If you are unsure about your obligations/rights pursuant to the selected financing, or would like to speak with an Attorney regarding your real estate purchase/sale, please contact Blume Law

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This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.

How to ‘Hold’ Real Property with Other People

Illinois recognizes several distinct types of real property ownership when multiple people/parties are involved, this blog article will discuss the three most common: Tenancy in Common, Joint Tenancy and Tenancy by the Entirety.

Tenancy in Common:

In Illinois, tenancy in common is the default method of holding property with multiple owners. That is, unless otherwise expressly stated in the deed conveying ownership, multiple owners will hold the property as tenants in common. (See 765 ILCS 1005/1). Tenants in common have equal rights to possess the property, regardless of their percentage ownership interest.

Tenants in common need not own equal percentages of the common property, and may acquire their property at different times and through separate conveyances. Each tenant in common is permitted to sell or otherwise transfer their interest in the property at any time. However, each owner’s interest is subject to creditor’s claims. There is no right of survivorship amongst tenants in common; when a tenant in common dies, their interest in the property passes to their heirs or as otherwise provided in a testamentary document.

Joint Tenancy:

Holding property in joint tenancy requires the “four unities”: time, title, interest and possession. That is, all owners must take title at the same time, via the same title instrument, with an equal ownership interest, and with each having a right of possession. Additionally the title instrument conveying the property must expressly indicate that the property is to be held in joint tenancy.

Joint tenants have what’s called a right of survivorship; when one joint tenant dies, their interest passes to the other joint tenant(s), as a matter of law. The right of survivorship in property held in joint tenancy supersedes any testamentary document that might provide otherwise.

The joint tenancy can be severed, if any one of the four unities (time, title, interest, possession) is broken. An individual’s interest in real property held in joint tenancy is subject to their creditor’s claims.  And, a joint tenant cannot be a non-individual, such as a corporation, LLC or partnership.

Tenancy by the Entirety for Marital Property in Illinois

Illinois is one of several states that permits real property to be held in tenancy by the entirety. Tenancy by the entirety is similar to joint tenancy, but with the added element of marriage and that the real property must be maintained or intended for maintenance as a homestead by both spouses together. Spouses must obtain the ownership interest at the same time, through the same title, with equal ownership interest, with equal rights to possess the whole of the property, and the property must be maintained as a homestead by both spouses. It is important to note that Illinois permits parties to a civil union to hold property as tenants by the entirety.

Like joint tenancy, holding property as tenants by the entirety permits a right of survivorship (i.e., property passes to the surviving spouse when one spouse dies).  Unlike joint tenancy, one spouse cannot sever the tenancy by the entirety unilaterally by transferring his or her interest to the property. Property held in tenancy by the entirety protects the homestead property from creditors of only one spouse. A creditor can’t attach a lien and foreclose on a property held in tenancy by the entirety, if the debt is only owed by one of the two spouses, whereas a creditor can attach a lien and foreclose on a property held in joint tenancy. For example, if one spouse owes a debt for a credit card held in his name only, the credit card company cannot attach a lien or foreclose on property owned by both spouses as tenants by the entirety.

If property is held in tenancy by the entirety and the spouses divorce, the ownership interest will become a tenancy in common as a matter of law. If the spouses decide to elect to maintain another property together as a homestead (e.g., move to a new home and maintain ownership of the old property), the tenancy by the entirety becomes a joint tenancy. Additionally, both spouses must execute any deed, contract for deed, mortgage, or lease of homestead property held in tenancy by the entirety for it to be effective.

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This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.

The Importance of Earnest Money in Real Estate Transactions.

Earnest Money can demonstrate a buyer’s intent to follow-through with a real estate contract and also entice a seller to accept an offer.  This blog article will primarily look at the Earnest Money as it applies to residential real estate transaction, and specifically in the Multi-Board Residential Real Estate Contract (“MBRE”) 7.0.  The MBRE is not the only real estate contract template that provides for earnest money.  

Do I have to deposit earnest money when buying real estate? 

No. Earnest Money is not required, like many other aspects of a real estate purchase agreement earnest money can be negotiated.  However, it is quite common, and a Seller may be reluctant to accept an offer without earnest money. 

How much should the Earnest Money amount be? 

This is something to discuss with your broker, if you are using one.  Some brokers may use 1% of the purchase price as a starting point.  However, if the listing is more competitive (multiple offers), then a broker might advise their buyer to increase the earnest money, in order to make their offer more competitive.  Like many other aspects of the agreement, the amount of earnest money can be negotiated between the parties.    

Who holds the Earnest Money?

The Earnest Money is held in trust by an Escrowee for the mutual benefit of the parties to the contract.  The Escrowee can be designated in the offer or determined during an attorney review period, it can be the Buyer’s/Seller’s Brokerage the Buyer’s/Seller’s Attorney, or any other designated party.  It is important to note that an Escrowee is responsible for complying with the terms of the earnest money disbursement, and may be held liable for improper distributions.

Can Earnest Money be increased as the purchase and sale progresses to closing?

Yes.  Some contracts may call for the deposit of initial earnest money, followed by additional earnest money to be deposited at a later date, such as after the Attorney Review and Inspection periods are completed.

Is the Buyer’s liability limited to the amount of the Earnest Money?

No.  The Earnest Money is not a default amount (or liquidated damages amount) to be paid in the event the Buyer breaches the real estate purchase agreement.  Parties can certainly limit damages to the amount of the earnest money, which is not an uncommon request in attorney modification letters.  Without any such limiting language/agreement, the Seller can seek to recover damage in excess of the Earnest Money amount, if the Buyer breaches the contract.   

What happens to the Earnest Money if the Real Estate Contract is declared null and void?

If using the MBRE 7.0 the disbursement of earnest money is generally governed by paragraph 26, which requires Earnest Money to be refunded upon the joint written direction by the Parties to the Escrowee, or upon an entry of an order by a court of competent jurisdiction.  Without consensus amongst the parties, either party may file suit seeking a court order directing the disbursement.

What can the Escrowee do if there is a dispute over the disbursement amount(s)?

If the parties cannot agree in writing as to the disbursement of earnest monies, either party can seek a court order directing disbursement.  If using the MBRE 7.0, the Escrowee may elect to give written notice as to how they intend to disburse the funds at least 14 days prior to the date of intended disbursement.  Absent an objection by either party, the Escrowee may disburse the funds as so stipulated in their written notice.   Alternatively, or in addition to the above option, the Escrowee may file lawsuit for Interpleader and deposit the earnest money with the Court, less any amount to reimburse the Escrowee for court costs and reasonable attorney’s fees.    An Escrowee that fails to properly handle/disburse the Earnest Money may be held liable.

Since Earnest Money is a common part of many residential real estate contracts, it is important for Brokers, Agents, Sellers and Buyers to understand the implications of using Earnest Money. If you would like to speak with an Attorney regarding the sale or purchase of real estate in Illinois, please reach out Christian Blume, 773-706-7514.

This blog and materials available at this web site are for informational and marketing purposes. You can contact an attorney to obtain advice with respect to any particular issue or problem or for representation. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or bro

A Big Closing Cost (sometimes): determining real estate tax prorations at closing in Illinois.

When selling residential real estate, a significant closing expense is often the real estate tax prorations made at closing, in the form of a credit, which can dramatically decrease the amount of money a seller might receive at closing. Real estate tax prorations are one of the items that can be negotiated when a real estate contract is executed and/or during an attorney review period.

In Illinois real estate taxes are paid in arrears, the taxes you pay this year cover the property taxes incurred for the prior year; which is why sellers typically provide a credit to buyers for property taxes not yet due, or otherwise not paid. 

Since the total tax amount to be credited is often not known at the time the property is transferred, many residential real estate contracts call for a proration based on the “the most recent ascertainable full year tax bill.” And, often times the taxes are prorated at 105% or 110% of the most recent ascertainable full year tax bill, which can protect a purchaser from anticipated property tax increases.     

Sometimes lawyers will modify the language to use various taxing metrics to calculate the prorations, multiplying the prior year equalized assessed value (EAV) by the current year tax rate, if known, is one alternative.

Calculations for Tax Prorations when using “most recent ascertainable full year tax bill”

Prior Year Taxes to Prorate = (“Proration %” multiplied by “the most recent ascertainable full year tax bill”) less any taxes already paid in prior year (if any).

Current Year Tax to Prorate = (“Proration %” multiplied by “the most recent ascertainable full year tax bill”) x (day of year of closing/365(366 in leap years)).

This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.

Who owns that tree? Boundtree line disputes.

The value of a tree extends beyond its branches and dives deeper than its roots.  Shade on a hot summer afternoon, a barrier to unpleasant sights and sounds, prevention of ground erosion, wind protection, and some trees even produce edible fruit.  Not to mention the environmental impact, intercepting airborne particles, reducing smog and the overall greenhouse gases in our atmosphere.  Trees can also present problems: unwanted leaves, falling branches, lack of sunlight, and damage to underground utilities and foundations.

Recently I planted a some fruit producing shrubs/trees on my property.  Although they are small now, I hope they grow big enough to bare edible fruit, and provide shade on hot summer days.  Some of these trees are planted along my fence adjoining my neighbors’ properties.  What happens when the tree starts to produce branches that extend above my neighbor’s property or roots under my neighbors land?  What if the trunk of the tree widens enough to protrude the boundary line of my property?   You may pine the answers in-tree-guing.

Illinois follows a general rule that a boundary line tree may be jointly owned by the adjoining landowners. Ridge v. Blaha, 166 Ill.App.3d 662 (Ill. App. 1988). 

What is a boundary line tree? 

The location of the trunk of the tree determines whether a tree is a boundary line tree, not the roots or branches.  It is measured from the point at which the trunk emerges from the ground.   It does not matter what percentage of the tree grows on one neighbor’s property versus the other, any portion of the trunk crossing the boundary line creates joint ownership of the tree.   This means that ownership of a tree may change as the tree grows, if the trunk protrudes beyond the property line.  One day the tree may be exclusively yours, and the next it may be jointly owned by you and your neighbor.

What is joint ownership of a boundary line tree?

It means that one owner can prevent the other (enjoin them) from removal of the tree, to a certain extent.  It doesn’t matter who originally planted the tree, once the tree becomes a boundary line tree, it is the joint property of both land owners, and either can enjoin the other from removal. Although, if one neighbor is able to prove that the boundary line tree threatens imminent damage to their property, they may be able to have it removed.    

What about the roots? 

The extension of roots beyond the property line is not determinative.  Illinois borrowed precedent from an 1836 Connecticut Supreme Court opinion, “[d]ue to practical considerations, the fact that a tree’s roots alone cross a boundary line is insufficient to create common ownership, even though the tree thereby derives part of its nourishment from both parcels. Ridge, 166 Ill. App. 3d 662 (citing Lyman v. Hale (1836), 11 Conn. 177, 183). 

What about the branches?

In Lyman, the Conn. Supreme Court was addressing a dispute over whether an adjacent landowner committed trespass, when he gathered pears from a fruit tree branch that extended over his property.  The Conn. Supreme Court o-pined that if the branches overhang a boundary line then the non-owner would be permitted to remove those branches, if deemed a nuisance.   However, that same neighbor (non-owner) would not be permitted to convert those branches or the fruit on those branches to his own use.  As a cautionary note, removal of branches that cause damage to the overall health of the tree may result in liability to the removing party.   

Boundary line trees may give rise to neighborly dispute; it is important to know your rights before undertaking any action to remove a boundary line tree.  In many cases it may be wise to conifer with your neighbors before attempting to remove a tree or branch that may give rise to a future dispute.      

*Christian is an Illinois lawyer and focuses his practice on real estate and business law.

This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem.  The information in this article is current as of the date indicated, and may not be updated to reflect future changes/developments.  Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.

How to comply with the Illinois Residential Real Property Disclosure Act

Selling a home can be stressful: finding the right agent, determining a listing price, preparing your home for showings, conducting open houses, negotiating offers, etc. Home owners have likely become intimately aware of many of the imperfections and issues of their home. Do those homeowners need to disclose all such issue in their disclosure reports?

Illinois law requires the disclosure of certain defects, not all defects. One disclosure form your real estate agent will likely ask you to complete is the Illinois Residential Real Property Disclosure Statement, which is a requirement, pursuant to the Illinois Residential Real Property Disclosure Act.

What is the Illinois Residential Real Property Disclosure Act?

The Illinois Residential Real Property Disclosure Act (765 ILCS 77/1 et. seq.) requires property transferors (e.g. sellers) to make certain disclosures of material defects. The Act applies to single family homes, multi-family homes (up to 4 units), condominiums, town-homes and co-ops. The Act does not apply to certain types of transfers pursuant to court order and others. An exhaustive list can be found in the statute (765 ILCS 77/15).  

When does the Seller complete the IL Real Property Disclosure Statement?

The real estate listing agent may ask the seller to complete the form prior to listing or prior to entering into a written contract. The Act requires the seller to deliver a copy of the disclosure statement to a prospective buyer prior entering into a contract for the purchase and sale of the property (765 ILCS 77/20).

What must be disclosed? 

General items of disclosure include issues related to flooding, material defects, and the presence of harmful elements. Areas of concern include: structure, roof, walls, windows, doors, electrical, plumbing, well, heating/air condition/ventilation, septic, sanitary radon, asbestos, lead, termites, and other items (including knowledge of use of the property for the manufacture of methamphetamine). A full list can be found at 765 ILCS 77/35.  

*A material defect “means a condition that would have a substantial adverse effect on the value of the residential real property or that would significantly impair the health or safety of future occupants of the residential real property unless the seller reasonably believes that the condition has been corrected.” 765 ILCS 77/35.

Does the Seller have to investigate each specific question when making the disclosures?

No, the Act specifically provides that the seller is not required to investigate or make inquiries into the specific nature of the items in the disclosure report.

What if the buyer is aware of a defect, but the seller failed to disclose the defect on the disclosure statement?

In many residential real estate transfers, a buyer will conduct an inspection during the attorney review and inspection period. The buyer may have the option to declare the contract null and void due to material defects discovered through an inspection.  But what if the buyer doesn’t decide to cancel the purchase? 

If the seller made the error, inaccuracy or omission with actual notice or knowledge, the Seller is still liable, even if the Buyer later discovers the error. “A seller who knowingly makes a false statement is subject to liability under the Act; no exception is made because of a buyer’s knowledge of the defect.” Woods v. Pence, 708 N.E.2d 563, 303 Ill.App.3d 573, 236 Ill.Dec. 977 (Ill. App. 1999).

This blog and any materials available at this web site are for informational purposes and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the Law Office Of Christian Blume, LLC or Christian Blume and the user or browser.