What is a 1031 exchange? What are its pros and cons? Clients ask me this question at least a couple of times each month, and I think it’s time for a simple answer. With respect to real estate transactions, a 1031 exchange is a way for you to sell your investment property and use those funds to buy another investment property, without paying any capital gains tax on the property you sold for the time being. Pursuant to Internal Revenue Code Sectin 1031, the real estate you sell and the real estate you purchase must both be in the United States to qualify for a 1031 exchage. Sounds great, right? But there are a few things you should be aware of: 1) A 1031 exchange must be arranged prior to the closing of your sale. Your real estate attorney should be notified in advance so she can make arrangements for… read more →
Whether you lease out one unit or dozens, if you are a landlord in the City of Chicago, you must be careful to adhere to the requirements of the Chicago Residential Landlord and Tenant Ordinance (Municipal Code Title 5, Chapter 1). All residential rental units in Chicago are covered by this Ordinance, except those in owner-occupied buildings with less than six units, dormitories, hotel or motel rooms, hospital rooms, residential living space provided by an employer to an employee, and any residential unit in which the tenant is under contract to purchase the space from the landlord. The Ordinance specifies the landlord’s obligations and the tenant’s remedies for landlord’s failure to act as required by law. In order to avoid costly lawsuits from litigous tenants, a landlord should utilize a proper Chicago apartment lease that takes the Ordinance into account. Landlords must be especially careful when dealing with the following… read more →
This week’s post is an amalgamation of two ideas – a client’s suggestion about a possible blog topic, and an idea I had after speaking with another client who is concerned about the transfer of management at her new association. If there is a topic you are interested in hearing about, please do not hesitate to let me know!The Illinois Condominium Property Act requires developers to turn over control to condominium owners within sixty days after 75% of the condominium project is sold, or in the alternative, three years after the condominium declaration was recorded. When all parties are working together and the developer has kept proper documentation, turning over control to the homeowners is a clear-cut process. First of all, upon at least three weeks’ notice to all homeowners, the developer has to call a meeting to start the election process for the first Homeowners’ Board. If the developer… read more →
When purchasing a condominium, buyers must be extra-careful. Condominiums are a form of common ownership, and come with their own set of challenges. Condominium Declarations/Bylaws and Rules and Regulations govern condo living, and must be followed to avoid fines, liens, and friction with the neighbors. Before purchasing a condominium, buyers should be diligent to make sure that they are comfortable with their purchase. Pursuant to Section 22.1 of the Illinois Condominium Property Act, the seller of a condominium is required to provide certain documents to a prospective purchaser. By reviewing these documents thoroughly, buyers can avoid surprises at or after closing. For example, the Condominium Declaration/Bylaws and Rules and Regulations typically explain condominium governance, management, and items that will affect the condominium owner daily, such as rules concerning pets, noise, renting units, parking, etc. The condominium budget will lay out how much money the association collects and spends every year,… read more →
When buying a property from a developer, buyers are typically asked to sign a special contract, prepared by the developer in advance. The vast majority of developers will not accept any of the realtor-prepared forms that are widely used throughout Illinois. Developers are subject to certain Illinois laws and want to use their own contracts to avoid various liabilities. Prior to signing a developer’s contract, you should look through the contract and familiarize yourself with it. Developers’ contracts are notoriously one-sided, especially with respect to tax credits, property inspections, mortgage contingencies, resale provisions, warranty restrictions, and closing dates. Traditionally developers have been unwilling to negotiate. Because of the changing market conditions, however, more and more developers are working with potential buyers to make the sale. If the legal jargon in the contract seems like mumbo-jumbo, the buyer shouldn’t fret unnecessarily. Instead, he should make sure that there is at least… read more →
I thought I would post a bit of “law humor” this week. I don’t know who originally wrote this piece, but it was sent to me some time ago: In the year 2008, the Lord came unto Noah, who was now living in the United States, and said, “Once again, the earth has become wicked and over-populated, and I see the end of all flesh before me. Build another Ark and save 2 of every living thing along with a few good humans.” He gave Noah the blueprints, saying, “You have 6 months to build the Ark before I will start the unending rain for 40 days and 40 nights.” Six months later, the Lord looked down and saw Noah weeping in his yard – but no Ark. “Noah!” He roared, “I’m about to start the rain! Where is the Ark?” “Forgive me, Lord,” begged Noah, “but things have changed.… read more →
Short sales are becoming more and more common these days. Every week I seem to have another client who has become involved in a short sale, whether on the sale side or the purchase side, and is completely bewildered by the process. So what is a short sale? How does it work? A short sale comes into play when you have someone who is trying to sell real estate, but cannot get an offer that is sufficient to cover the mortgage owed on the property. For example, Seller A might own a property with an outstanding mortgage of $175,000, but Seller A is unable to sell the property for at least that amount. Not only that, Seller A can no longer afford the mortgage, taxes and other costs associated with keeping the property. Seller A is not making loan payments and knows that he is on the road to foreclosure.… read more →
For years I’ve had buyers complain to me about the City of Chicago’s transfer tax. At $7.50 per thousand dollars of sales price, it was already one of the highest real estate transfer taxes in the state. For example, if you were buying a property in Chicago for $250,000, your transfer tax would have been $1875. That’s quite a bit more money for a buyer to budget for closing. But if you were hoping to get that bargain rate, today is the last day! Tomorrow, April 1, 2008, the tax goes up to $10.50 per thousand dollars of sales price, and that is no April Fool’s joke. There is a silver lining, however, but only for buyers! The extra $3.00 per thousand is the responsibility of the seller. So using our previous example, the tax on a $250,000 property is now $2625. The buyer is still paying $1875, and the… read more →