Reasons Why Real Estate Transactions Don't Close

The purchase or sale of real property is an exciting time, however, procuring a signed real estate contract is only half the battle. Once an offer is accepted and a contract is signed, a number of issues may arise that may hinder the ability to close. This time frame between the signed contract and the actual closing is known as the executory period. For this reason, a properly drafted purchase and sale contract along with appropriate representation for all parties involved by experienced real estate attorneys is essential to protect the seller and the buyer during this transaction.

Obstacles to Closing

The most common issues that arise during the executor period that can cause a real estate closing to fail include:

Contingencies are not met – it is not uncommon for the closing of the contract to be dependent upon the occurrence of events, known as contingencies. If the contingency does not occur within the stated time frame, the transaction can be canceled. The closing may depend upon the buyer obtaining financing, the property appraising for at least the contracted purchase price, the sale of buyer’s property, and a satisfactory inspection report.

Title is clouded – the transfer of interest in real property requires marketable title, meaning the deed to the property must be free and clear from valid claims by outside parties. If title is not clear, the closing cannot occur.

Discoveries found during final walkthrough – it is possible to find the property for purchase in a different condition than when it was first seen and, as such, final walkthroughs are strongly suggested.

Erroneous documentation – simple mistakes in paperwork such as typos including misspelled names, transposed numbers in the property address, incorrect loan or interest amounts and missing documents, are all ways that will halt a closing.

Delay in loan documents – sometimes, due to no fault of their own, the parties arrive at the closing at the scheduled time and the loan documents have not arrived. At the least, the closing will be rescheduled unless a “time is of the essence” clause was included in the contract, which may result in cancellation of the sale.

Chicago Real Estate Attorneys Available

The purchase or sale of a home can be one of the largest transactions during one’s lifetime. Contact an Illinois real estate attorney today if you are considering purchasing or selling a property. Prudent investment in legal fees upfront will save you thousands of dollars in the long run by avoiding legal consequences from mistakes or omissions during the sale. The Law Offices of Gilbert C. Schumm has over three decades of experience and serves the real estate needs of residents in the communities of Mt. Prospect, Hanover Park, Arlington Heights, Rolling Meadows and Roselle, among others. 

After Foreclosure: Arlington Heights Deficiency Judgment

The effects of the economic recession are still being felt throughout the nation, even though foreclosure rates have dropped significantly. Unfortunately, some homeowners who are underwater in their mortgages are facing foreclosure. And once the foreclosure action is over, the owner may still be held liable for the balance of the loan that is not covered by the proceeds of the sale.

Deficiency Judgment Explained

In a foreclosure or short sale, sometimes a homeowner owes the lender more money for the property than what is received from the proceeds when the home is sold or auctioned. When this happens, there is a remaining loan balance still owed by the borrower. This balance is called a “deficiency.” Numerous states throughout the nation, called non-recourse states, do not provide legal remedies for the lender against a buyer who has a deficiency. Illinois, however, is not one of these states. Consequently, a borrower in Arlington Heights, Schaumburg, Palatine or elsewhere in Chicago is liable to the lender for the remaining loan balance on a property after a short sale or foreclosure occurs. The legal action the lender may take against a borrower in this circumstance is called a deficiency judgment.

The lender will have to obtain a court-ordered deficiency judgment against a borrower who owes a balance post foreclosure or short sale in order to collect the funds. A judgment is a court decision on the rights and claims of parties to a lawsuit. If the court approves the request, the lender can use the judgment to place a lien on bank accounts or other assets the borrower owns or even garnish wages earned.  

How to Avoid a Deficiency Judgment

Illinois foreclosure law provides several options for a borrower who is facing a foreclosure. A lender may or may not seek a deficiency judgment against a borrower. Nevertheless some available options for homeowners who are underwater include:

1.         Deed in lieu of foreclosure – borrower gives lender the deed to the property in exchange for not filing a foreclosure action.

2.         Consent foreclosure – borrower gives lender the deed free and clear of all claims.

3.         Loan modification – consists of a restructuring of the mortgage, approved by the lender, allowing the borrower to remain in the home and have lower monthly payments.

4.         Redemption – borrower must pay all money owed on the loan, including late fees and charges, becoming up to date on the mortgage (can only occur up to 90 days after a foreclosure summons).

Contact a Foreclosure Attorney

If you are facing foreclosure or short sale of your home and believe you may owe a balance on your loan once the sale has occurred, contact an Illinois foreclosure attorney today to learn about your rights and obligations. Don’t navigate this complex process alone. With over 35 years of experience fighting for clients’ rights, the Law Offices of Gilbert C. Schumm can provide real estate advice, and serves the Chicago area including Arlington Heights, Rolling Meadows, Des Plaines, and Streamwood.