FOR REAL ESTATE SELLERS: WHAT YOU CAN EXPECT TO DO AND PAY
The residential real estate Seller may look back to the time when they first purchased the home and think, “ok, I just need to wait for the Purchaser to get its financing approved, and then we’re ready to close.” In reality, there are a number of steps the real estate Seller must take in order to be prepared for closing. Also, there are a number of closing costs that the Seller should be aware of so as to avoid any unpleasant surprises at closing. YOU HAVE DECIDED IT IS TIME TO SELL YOUR HOME: One of the first decisions you have to make is whether or not to list your home with a real estate broker. Many people choose to list their home with a real estate broker because they feel that it is the most effective way to market your home for sale. A listing agent will help you determine the appropriate listing price of the home, prepare your home for marketing, and help you negotiate any potential offers you may receive. In order to list your home with a real estate broker, you must sign a listing agreement that will obligate you to pay the real estate broker a commission from the sales. The listing agreement will likely have a section referencing “dual agency.” In that section, you either grant or decline the listing agent the right to act as a dual agent for both the Seller and Purchaser, in the case the listing agent procures a Purchaser for the purchase of your home. YOU HAVE ACCEPTED AN OFFER TO PURCHASE YOUR HOME: Once you have accepted an offer to purchase your home, forward a copy of the accepted offer to a real estate attorney. Be aware of the attorney who claims to practice real estate law “on the side.” Some attorneys, in addition to performing the occasional real estate closing, also “do” family law, criminal law, patent law, admiralty law, etc. Just as with the practice of medicine, all doctors cannot be intimately familiar with every part of the body or every disease; likewise, all attorneys cannot be intimately familiar with every aspect of law. The risk the Seller runs when it retains their divorce attorney to do their real estate closing is that correspondence is not timely sent, closing requirements are missed, and costly delays arise. Once you have forwarded the contract to an attorney, the attorney will review it to determine all of the Seller’s obligations. YOU ARE SELLING A CONDOMINIUM OR HOME SUBJECT TO ASSESSMENTS AND AN ASSOCIATION: If your home is part of a condominium or homeowner’s association, your attorney should immediately contact the association to order the relevant condominium documents and disclosures. Your association may
charge a fee for providing these documents. Your association will either require that these fees be paid prior to releasing the requested documents or permit you to pay the fee at closing. In order to convey the Property, you will have to make sure all assessment payments are current. If you are behind in your assessment payments, the association will note the status of your account on the “paid assessment letter,” and you will be required to pay the balance due at closing. Also, in some instances, associations perform inspections of the Property to ensure compliance with the association’s rules and regulations. If the association performs such an inspection and finds a violation, you may be required to make that repair prior to closing. Also, if there has been a special assessment confirmed for the Property, the association will disclose that fact. Whether the Seller is responsible for payment of the special assessment is a matter that can either be determined by the form sales contract or negotiated by the parties. INSPECTION: Your contract will likely have an inspection provision that permits the Purchaser to have an inspection of the Property. This provision will allow the Purchaser to either disapprove of the contract, or request that the Seller repair (or grant a credit) for the raised inspection items. When the inspector completes his inspection, he will prepare a report for the Purchaser that contains its findings and recommendations. If the Purchaser timely raises inspection requests, you and your attorney will review the requests and determine what matters, if any, you agree to repair/credit. Your attorney should explain to you what types of inspection issues are covered by the inspection paragraph, what items are customarily repaired, and what your options are. MUNICIPAL TRANSFER REQUIREMENTS: In some cases, your city or municipality may have some requirements and transfer fees that you must comply with in order to effectively convey title. Such requirements may include final water readings, submitting transfer forms, purchasing transfer stamps, or municipal inspections of your home. Your attorney should review these requirements with you well in advance of closing to avoid any mad rushes to the municipal building just prior to closing. MORTGAGES: In order to be able to pay off your mortgage(s) at closing, you will be required to obtain “pay off” letters from your lenders. You should contact your bank immediately upon acceptance of the contract to determine how much time your bank will need to process your payoff request. Then, after you’ve made the final payment prior to closing, order a payoff letter for all mortgages on the property, and forward the statements to your attorney. Your attorney will help you with this payoff request process, including giving you a “good-through” date for the statement. If you escrow with your bank, your bank should release any amounts it is holding in escrow after you pay off the mortgages at closing. Also, it is important that you let your attorney know if you escrow with your bank for taxes. If your close date is close to the time a tax bill becomes payable, the title company will require the tax bill be paid at the time of closing. To avoid a double payment by the title company and your bank, you will need written confirmation from your bank that either (i) they have paid the upcoming tax bill; or (ii) will not pay the tax bill and will release that escrow money to you after closing. COMMON SELLER CLOSING FEES: The following is a list of potential closing fees you will have to pay at or prior to closing:
Mortgages: Seller’s pay off existing mortgages out of the sales proceeds at Closing. Your bank may charge some processing and release. Carefully review the payoff statements to ensure that they reflect the most recent payments. Survey: Unless your home is a condominium, you will have to order a survey. The average cost of a survey is $300. The contract calls for a survey that is no older than six months. If you have a recent survey but it does not meet the age requirement, your attorney may be able to get the approval from the Purchaser, Purchaser’s lender, and title company to accept that survey. Also, if you are selling a town home, you may not need a survey. Some town houses are actually condominiums (they have been submitted to the Illinois Condominium Property Act). Your attorney will be able to determine whether your town home is in fact a condominium. Title: There are a number of title fees the Seller is obligated to pay, per custom and the form purchase contract. The Seller will generally pay for the owner’s policy, as well as some miscellaneous title fees. If the deal is a “cash deal,” the Seller will also generally pay half of the escrow fee. Title fees vary, depending on the title company and purchase price of the home. I usually quote my Sellers a range of $800-$1400. Real Estate Commission: If you listed your property with a listing agent, then you will be required to pay the commission, per the listing agreement at closing. Transfer Taxes: In most counties of Illinois, the Seller is obligated to pay a tax to the state and county. The state transfer fee is $1.00/$1000 of purchase price, and the county fee is usually .50/$1000 of purchase price. Additionally, some municipalities charge a transfer tax. Please refer to the municipality document to determine if you are subject to a municipal transfer tax. Association Fees: As discussed above, you may be required to pay some closing fees to your association. Such closing fees will include any assessments due and owing, as well as various “processing” fees your association charges. Tax Credits: This is typically one of the more costly Seller closing costs. In order to convey title to the Purchaser, all taxes must be current. If you are delinquent in any of your tax payments, you will be required to take the necessary steps to make it current. Additionally, per custom and the form purchase contract, the Seller will generally grant the Purchaser a credit for taxes, at closing. If you recall when you first purchased your home, you were likely given a credit from the Seller for taxes. The reason the Seller gives a credit for taxes is that taxes accrue in arrears. For example, the tax bill that accrued for the 2005 tax year is not payable until 2006. So, you technically owned the property when the tax bill accrued, but the tax bill will not become payable until after closing. Accordingly, the Seller grants a credit to the Purchaser for that portion of the tax bill that accrued prior to closing. Your attorney can help explain the formula used to calculate the tax credit. Liens and Judgments. If there are any liens or judgments against the Property, you will need to either (i) pay them, or (ii) obtain releases for them. It is important that you advise your attorney as early as you can if you believe there is a lien or judgment against you so that there is sufficient
time to address the issue. Otherwise, your attorney will catch the lien/judgment when the title commitment is complete, and there may or may not be enough time to timely address it. Short Sale: In some instances, the Sales Proceeds are not enough to cover all of the closing costs. This is a fact that the Seller should be well aware of way before closing. If your transaction will be a short sale, you will be required to bring your funds in the form or a certified or cashiers check. Make the check payable to yourself. If you do not have the funds to bring to closing and are in a state of economic duress, you may consider applying for a lender short sale. To learn more about lender short sales, click here. Closing Time: Once you have completed all pre-closing requirements and your Purchaser has advised you that they’re ready to close, we’re ready to schedule the closing. If you are unable to attend the closing, or just would rather not attend the closing, your attorney can arrange for you to pre-sign the conveyance documents. Advise your attorney whether you want your sales proceeds in the form of a check or a direct wire to your account. Also, if you are purchasing a home with the sales proceeds, it is important that the closings are “strategically” scheduled to ensure your sales proceeds are available for your use in your purchase. Good Luck! This document is not a substitute for the representation of an attorney and should not be relied upon as legal advice. This document is not a complete, but only a partial list of the obligations of a TYPICAL Residential real estate Seller. If the client requires any assistance or clarification regarding the terms of this document or its real estate transaction, the client should contact Pissetzky, Berliner & Zhitnitsky, and P.C .