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Barrington Illinois Home Buyer's Lawyer

Attorney for Home Sales in Cary, Lake Zurich and Palatine, IL

We typically provide the following initial information to our clients who are buying a new residence. We have many years of experience representing both buyers and sellers successfully. To get started, we will need the following information from you:

  • Listing sheet
  • Contract of sale
  • Your Social Security number(s)

Mortgage Contingency

Please let us know the name of your lender so that we can supply the necessary information to the mortgage lender. In the event you do not have confirmation of your loan within the time period provided for in the contract of sale, you must let us know so that we can notify the seller in writing. Please advise us immediately if you do not obtain financing.

Mortgage Commitment

Please send us a copy of your mortgage commitment as soon as it becomes available.

Insurance

You should arrange for homeowners insurance to be effective as of the closing date (or possession date, if earlier). For your protection, care should also be taken to obtain coverage in an amount at least equal to 80 percent of the insurable value of the residence (normally the replacement value of the residence, exclusive of land and foundation), to avoid the possibility of becoming a co-insurer. The insurable value is not always directly related to the purchase price, and you should discuss this with your insurance representative.

You will be required to provide your lender with a homeowners insurance policy or binder in at least the amount of the mortgage from an acceptable company at or prior to the closing. Your insurance representative should be given the exact name of your lender as they require, so that the policy will reflect coverage for the loan. You will need a paid receipt for the first year's premium at closing.

Condominium Insurance

The condominium association will provide fire and extended coverage insurance on the unit and community areas, and we will obtain an insurance certificate at closing. However, you will need to obtain insurance on your furnishings and other personal property.

1997 Tax Act changes the Prior Tax Law

Under the prior tax law, Homeowners could defer their gain on a sale of a principal home by "rolling over" their sales proceeds into a new home of equal or greater value. Those Homeowners who were age 55 or older could exclude up to $125,000 of their gain on the sale of their principal home. The new 1997 Tax Act creates a $500,000 exclusion of the gain that all Homeowners filing a joint federal income tax return receive on the sale of their principal residence. The exclusion is $250,000 for single taxpayers. These exclusions are available for sales on or after May 7, 1997. These exclusions replace the old "one-time only" $125,000 exclusion provisions available to taxpayers who were 55 years or older. There are no requirements to purchase a replacement residence under the new law and it is available once every two years. However, there is no ability to "rollover" and defer any gains in excess of $500,000.

Financial Records

Your financial records on the cost of and improvements made to all previous residences should be retained if the sales price on the residence is $500,000 or greater since the cost of improvements should be added to your cost basis in computing any gain or loss on the sale of the residence.

Capital Gains

If you do not meet all of the requirements to defer any gain on the sale of your residence, a capital gains tax will be due on your profit from the sale. Generally, your estimated tax payments must be 90 percent of your tax due for the year. There are certain exceptions to this rule which may apply. You should be sure you qualify for an exception or increase your estimated tax payments.

Moving Expenses

Internal Revenue Code Section 217 provides that reasonable expenses incident to commencing work in a new location are deductible within certain limitations by taxpayers who itemize their deductions. Moving expenses are not subject to the 2 percent floor on miscellaneous itemized deductions.

Smoke Detectors

At closing, you may be required to sign a document which puts you on notice of the Illinois Smoke Detector Act. The Act states that each single family residence must have at least one approved smoke detector installed and operating on every story of the residence, including the basement, and the smoke detector must be within 15 feet of every sleeping room in any dwelling unit. There are more specific requirements for split level homes. Willful noncompliance with the Act is a crime.

Walk-Thru

You should arrange to have a walk-thru of your new purchase within a day or two before the closing and again after closing if you are not granted possession until after closing. Look carefully through your home to make sure that there is no damage and that everything is operational in accordance with the contract. You should call us right away if there are any problems.

INFORMATION ON INTEREST DEDUCTIONS

Only certain types of interest are presently deductible for income tax purposes. Interest on your home loans can be deductible if it is "Qualified Residence Interest" on a principal residence or second residence. There are two kinds of interest on indebtedness which will qualify as a deduction, as described below:

  1. "Acquisition indebtedness" is defined as indebtedness to buy, construct or substantially improve a first or second residence and which is secured by the residence. The maximum amount of acquisition indebtedness is $1,000,000 ($500,000 for a married taxpayer filing separately). Refinanced acquisition debt is limited to the remaining principal of the original loan.
  2. "Home equity indebtedness" is debt other than acquisition indebtedness that is secured by the residence and does not exceed the residence's fair market value reduced by the amount of acquisition indebtedness; it is further limited to a maximum of $100,000 ($50,000 for married taxpayers filing separately). The proceeds of home equity indebtedness can be used for any purpose.

If you will be taking out a bridge loan, please contact us so that we can structure the transaction to make certain that the loan is secured by the new residence to comply with these tax requirements.

The tax information given above is only a summary of certain tax provisions commonly affecting non rental residential real estate transactions. They are given to you here to alert you to opportunities and problems, and they cannot be relied upon for specific advice concerning your situation.

If you have any questions about these tax provisions, please contact us or your own tax adviser.

ATTORNEY'S ROLE IN RESIDENTIAL REAL ESTATE TRANSACTIONS

  • Review or prepare contract of sale between buyer and seller;
  • Preliminary negotiations in finalizing contract; more extensive negotiations would be billed at our normal hourly rate.
  • Review existing title evidence, survey, tax data, mortgage data, assessments, liens, easements and restrictions;
  • Interview and counsel client;
  • Coordinate with lenders, realtors and attorney for opposite party;
  • Advise client concerning procedures relating to the transaction, including obtaining and discharging mortgages, obtaining insurance, acquiring possession and paying expenses related to closing;
  • Monitor compliance with contract including obtaining of mortgage by buyer, payment of balance of earnest money, and establishing closing time, place and procedures, and arrangements for possession;
  • Review title commitment and ascertain the nature of title exceptions, and prepare necessary documents to clear title exceptions. Review current survey for accuracy and encroachments;
  • Prepare or review closing documents, including the following: deed to real estate (including counsel on proper method of delivering and holding title), affidavit of title, bill of sale of personal property, mortgage documents (for buyer), transfer tax declarations, ALTA statement, tax affidavit, and closing proration statement;
  • Supervise the signing of documents;
  • Attend closing and supervise title procedures and the delivery of closing documents, verification of closing figures and compliance with contract, payment of purchase price or delivery of proceeds, delivery of possession, recording of deed and ordering title insurance and payoff items to be paid from closing proceeds;
  • Provide advice concerning post-closing procedures and the tax aspects of the transaction;

Any complications on the transaction other than as mentioned above describing our representation will be billed at our hourly rate.

For more information about buying a home, contact our Barrington, Illinois office at 847-381-8700. We serve clients in Kane County, Lake County, Cook County and McHenry County.


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