FHA renovation loan program "reconstituted"

Potential good news to the fixer-upper crowd as the Federal Housing Administration (FHA) rolls out its revised 203(k) renovation loan program that allows borrowers to roll the cost of major repairs into mortgages that are based on the "as completed" value of the property. Under a version of the new program, buyers can roll the cost of various repairs into a government-insured mortgage without the need for a second mortgage.

FHA now has no minimum on the amount of repairs that must be done and raised the maximum amount for repairs to $35,000.

Hire an inspector when buying home

Good reminder article from the January 29, 2006 Chicago Tribune Real Estate section regarding tips on using a home inspector when purchasing real estate.

These were some ideas of mine and the article:

1. Experience. A qualified inspector should have at least 5 years of experience and should conduct 150+ inspectitions per year.

2. Certification. I am familiar with three national associations: National Association of Certified Home Inspectors, National Association of Home Inspectors, and American Society of Home Inspectors. This is where you should find your inspector...not a referral from someone with an incentive to get the deal closed.

3. Insurance. Does he/she have it and how much?

4. Written Agreement. You want to know in writing what the inspection covers.

5. Observation. Good inspectors and thorough home buyers ARE present at their inspection.

More energy efficiency

A little bit of a follow-up on my January 19, 2006 posting regarding energy efficiency.

First, I came upon a good Website regarding the new tax law which provides up to a $500 federal tax credit to homeowners who install energy-efficient improvements called the Tax Incentives Assistance Project.

Also, the American Council for an Energy-Efficient Economy has useful information regarding calculating the payback of various home improvements.

I have to credit our current administration (who is not typically considered too "green") for some of these tax incentives regarding the above and also the alternative fuel car items.

Home sales fall in December

Well no suprise to see the fall in home sales as widely reported yesterday: (http://www.nytimes.com/2006/01/26/business/26homes.html?emc=eta1).

How will this impact your business in '06? Buried in this issue is the fact that December sales in the Midwest dropped only 2.6%. I think this is somewhat of a California/Florida issue. It's another one of the joys of living in the boring Midwest. We don't get 100% appreciation year-to-year nor the opposite.

Condominium due diligence

I heard two horrer stories today regarding attorneys who did not represent clients properly when they purchased condominium properties. More on their stories below.

If you don't know your obligation, note Section 22.1 of the Illinois Condominium Property Act:

Sec. 22.1.

(a) In the event of any resale of a condominium unit by a unit owner other than the developer such owner shall obtain from the Board of Managers and shall make available for inspection to the prospective purchaser, upon demand, the following:

(1) A copy of the Declaration, by‑laws, other condominium instruments and any rules and regulations.
(2) A statement of any liens, including a statement of the account of the unit setting forth the amounts of unpaid assessments and other charges due and owing as authorized and limited by the provisions of Section 9 of this Act or the condominium instruments.
(3) A statement of any capital expenditures anticipated by the unit owner's association within the current or succeeding two fiscal years.
(4) A statement of the status and amount of any reserve for replacement fund and any portion of such fund earmarked for any specified project by the Board of Managers.
(5) A copy of the statement of financial condition of the unit owner's association for the last fiscal year for which such statement is available.
(6) A statement of the status of any pending suits or judgments in which the unit owner's association is a party.
(7) A statement setting forth what insurance coverage is provided for all unit owners by the unit owner's association.
(8) A statement that any improvements or alterations made to the unit, or the limited common elements assigned thereto, by the prior unit owner are in good faith believed to be in compliance with the condominium instruments.
(9) The identity and mailing address of the principal officer of the unit owner's association or of the other officer or agent as is specifically designated to receive notices.
(b) The principal officer of the unit owner's association or such other officer as is specifically designated shall furnish the above information when requested to do so in writing and within 30 days of the request. (c) Within 15 days of the recording of a mortgage or trust deed against a unit ownership given by the owner of that unit to secure a debt, the owner shall inform the Board of Managers of the unit owner's association of the identity of the lender together with a mailing address at which the lender can receive notices from the association. If a unit owner fails or refuses to inform the Board as required under subsection (c) then that unit owner shall be liable to the association for all costs, expenses and reasonable attorneys fees and such other damages, if any, incurred by the association as a result of such failure or refusal. A reasonable fee covering the direct out‑of‑pocket cost of providing such information and copying may be charged by the association or its Board of Managers to the unit seller for providing such information.

Now the two horrer stories. First, an attorney settled a malpractice action for $20,000 because he had not made his 22.1 request and after the Buyer moved into the condominium the condominium passed a special assessment. If the attorney had done his job, capital expenditures must be disclosed (note (3) above).

Second, another attorney did not make his 22.1 request and later it was found that the condominium did not allow renters. The Buyer only was purchasing as an investment. This one is still pending but I'd call my legal malpractice carrier if I were the attorney.

Bottom line, as an attorney who represents condo boards and people buying condos and as a person who currently lives in a condo, the financial condition of your association is a HUGE part of your investment. Know the law and know your responsibility!

Realtors face new challenges

There was an informative piece in the January 22, 2006 Chicago Tribune Real Estate section regarding the National Association of Realtors (NAR) and their continuing efforts to insulate themselves from competition and their lobbying efforts in Washington.

Of course late in 2005 the Justice Department brought suit against NAR alleging discrimination against Internet-based brokers. Many consumer groups are also fighting NAR on a state by state basis.

To me the largest threat to NAR's collusion are Web-based companies and discount brokerage firms. As both a real estate lawyer and regular real estate consumer I have been using HelpUSell, Assist2Sell, ZipRealty, and RealEstate.com over recent years. When I represent clients in real estate transactions I strongly emphasize my involvement before the listing agreement is signed. The client/realtor relationship is the biggest money-saving potential in the transaction. If there's a listing agreement in place by the time I get involved, I can't be as effective in saving client's money.

Regulators review title insurance

A recent piece from the Wall Street Journal brought to mind some of the ongoing battles regarding title insurance. These are a few of my general thoughts as an attorney and title insurance agent for a number of insurers:

Educate clients early in the game about title insurance. I see that as problem number one. If you're not in the industry, who the heck knows what title insurance is and why it's required. If you mention a few tales of people almost losing their homes but for title insurance, I don't think $1,000 or $1,500 will be as difficult to swallow.

Disclose costs early on. Too many clients don't see these numbers until the closing table. Show a few companies' fee schedules right when the contract is signed and it should be fine. I've known many attorneys who bury big fees in their title costs that are not appropriate. These people need to get reported to the A.R.D.C.

Chicago landlords

The City of Chicago comptroller has determined the interest rate to be paid in 2006 on security deposits covered under the Chicago Residential Landlord and Tenant Ordinance to be 1.71% effective January 1, 2006. This is up from 1.01% for 2005.

Improved FHA standards

The Federal Housing Administration's (FHA) decision to eliminate various rules regarding property conditions and repairs may be a stimulus for the housing market. Under the new standards announced December 19, 2005, minor defects no longer will have to be repaired before the mortgage closing. More serious defects such as structural problems, foundation damage, roofing and electrical hazards will continue to be subject to a mandatory repair rule.

Also, termite, septic system, and well inspection standards have been greatly relaxed.

The rule changes should get the attention of buyers and sellers in the moderate-cost segments of the real estate market.

Home energy ratings?

I read a recent bit about the burgeoning field of home energy raters related to the purchase of single family homes. Seems as if they're somewhat of a rage now with our ever-increasing energy prices. There's a non-profit called the Residential Energy Services Network that's doing some certifying and such of professional inspectors in the field. It's an interesting concept that might be worthwhile prior to buying a home rather than simply counting the number of windows or something. I would strongly consider it once you own a home too. Those monthly energy bills add up quickly and if $10 or $20 is saved you'll recoup the cost of inspection very quickly.

Chicago condos online

Good new site for City of Chicago condos:

http://chicagocondosonline.com/logon.aspx.

What happens when a Buyer/Seller is not represented by a lawyer?

I was reviewing some back reading and came across a nice piece from the November 2005 Illinois Bar Journal entitled Unrepresented buyer and seller and opposing lawyer beware. It provides some valuable information to real estate professionals when one of the parties is not represented. Some highlights:

• Never stop urging the other party to retain counsel;
  
• If Buyer's not represented, let the closing agent explain all documents. Seller's attorney should never advise Buyer of their legal obligations.
  
• If Seller's not represented, Buyer's attorney can draft conveyance documents.

It happens...be ready!!

First Post

Well here we go...Chicago's preeminent blog committed to that exciting topic of real estate. My goal with this blog is simply to serve as an educational and marketing tool for professionals in the field. I have been an attorney practicing heavily in the real estate field in the Chicago area for some four years now and want to share what I know and give my opinion on things that need to change. I hope to develop of a community for attorneys, real estate agents and any of the financial people to hang-out in cyber-space.