When purchasing a home in Chicago, there are certain regulations that must be followed to ensure the legality of the purchase. In doing so, you can feel confident that the home you buy doesn’t harbor any surprises.
Home seller and buyer laws
Although Chicago and the state of Illinois do not require a licensed attorney to be present at a mortgage closing, Illinois does require a lawyer be involved in writing all legal documents necessary for the sale. The bank or lender may hire a lawyer for this purpose, while real estate agents use many standardized forms drawn up by lawyers.
Disclosure is one of the key components of a home purchase. After all, you want to make sure you are getting exactly what is advertised. In Chicago, disclosure is required per the Illinois Residential Real Property Disclosure Act. Every home seller is required to complete a Residential Real Property Disclosure Report, which asks for information on the following:
- Material defects in specified structures, components and systems
- Any unsafe conditions
- Flood history and risk
- Environmental issues
- Boundary line disputes
- Municipal code violations
Also, per The Illinois Radon Awareness Act, the home seller is required to provide two informational pamphlets outlining radon hazards to the homebuyer prior to signing any contracts.
For homes built before 1978, the EPA requires the home seller to provide the following information regarding lead-based paint:
- An EPA pamphlet on lead-based paint hazards.
- Any known information regarding lead-based paint or lead-based paint hazards found in the home.
- Language in the home sales contract that includes a “Lead Warning Statement,” plus confirmation from the seller that they have complied with all disclosure requirements regarding lead-based paint or lead-based paint hazards in the home.
- A 10-day period to evaluate the home for lead-based paint or lead-based paint hazards in the home. The parties may agree to change this time period, but must do so in writing. In addition, homebuyers may waive inspection.
As a judicial foreclosure state, Illinois —and therefore Chicago — handles all foreclosures in court. In the event you are unable to pay your mortgage on time as agreed, the lender may file a foreclosure lawsuit in court. Once you are served with the complaint in the lawsuit, you will have 30 days to file an answer or any motions related to the case. Throughout the time the case is moving through the court, you have the opportunity to obtain a loan modification or work out other arrangements with the lender.
Four to six months after the original complaint is filed, the judge will rule on the complaint. If there has been no progress toward resolving the foreclosure, the judge may enter a judgment of foreclosure, leading to the sale of the property.
With regard to real estate in the event of divorce, Illinois is an equitable distribution state. This means that marital property isn’t considered equally owned by both spouses and thus will be divided equitably in the event of divorce, not necessarily 50/50. If a couple does not agree, the court will determine which party receives specific real and personal property based on factors such as:
- The age, health, income and financial circumstances of each spouse
- Length of the marriage
- The contributions of each spouse
- Custody arrangements of minor children
- The tax consequences of any property division
Buying a home requires the payment of real estate transfer taxes. When purchasing a home in Chicago, there actually are three sets of taxes that must be paid. First, the state of Illinois requires taxes in the amount of $1 per $1,000 of the purchase price. This tax is usually paid by the seller. Second, Cook County requires taxes in the amount of $0.50 per $1,000 of the purchase price. Again, this tax is usually paid by the seller.
The city of Chicago also requires taxes on a home purchase. The city portion is $7.50 per $1,000 of the purchase price, and a supplemental tax for Chicago Transit Authority (CTA) is $3 per $1,000. For these taxes, the buyer usually pays $7.50 per $1,000, while the seller usually pays $3 per $1,000.
In Cook County, home to Chicago, the median property tax is $3,681 per year for a home worth the median value of $265,800, according to Tax-Rates.org. This is one of the highest median property taxes in the country.
You may be able to reduce your property tax bill by filing for a property tax exemption with the Cook County Assessor’s Office. Exemptions are available for eligible homeowners, seniors, veterans and disabled persons. Contact the Cook County Assessor’s Office or go to the website for full details and to apply for an exemption.
Conforming loan limits
In the state of Illinois, including Cook County where Chicago is located, the maximum conforming loan limit is $484,350 for one-unit properties.
A conforming loan meets all terms and conditions as outlined by government-sponsored entities Fannie Mae and Freddie Mac. Only loans that meet conforming loan limits are eligible for purchase by Fannie Mae and Freddie Mac. Loans that exceed these limits are known as jumbo loans and tend to have higher interest rates.