As in most states, the real estate market in Illinois is governed by specific rules, regulations and tax laws. Here are some of the most important things to know:
Home seller and buyer laws
According to Illinois law, sellers are required to provide potential buyers with a residential property disclosure report before a sale can be completed. The report asks sellers to disclose whether they have ever had knowledge of some two dozen home defects like flooding, structural damage, unsafe drinking water or problems with internal systems like those for plumbing, electricity and sewage. Sellers are also required to let buyers know whether their homes may pose a risk of exposure to radon.
As a potential homeowner you should know that Illinois is a judicial foreclosure state. This means lenders are required to take their case to court before they can foreclose on your home in case you can’t pay your mortgage. Illinois also allows for so-called deficiency judgements. This means a lender can sue you to recoup any losses if the sale price of your foreclosed home is less than the mortgage amount. However, they can only do so if the homeowner has been personally served.
Like most states, Illinois is an equitable distribution state when it comes to deciding how a couple’s assets (including property) and debts will be split after a divorce. In common property states, marital assets are split equally in half, but Illinois courts are required to ensure that the split is fair and equitable, based on factors like each spouse’s income and earnings potential.
Illinois is also an escrow state, which means state law does not require buyers to hire an attorney to oversee a home closing. Instead, buyers can use a representative from a title company.
When property changes hands, most states—and many municipalities—collect a real estate transfer tax. In Illinois, the state collects a tax based on the property’s sale price and calculated at the rate of $0.50 for each $500 of value. This means the sale of a $250,000 home would require payment of a $250 state transfer tax.
Many municipalities in Illinois collect a transfer tax, too. Counties, for example, are allowed to collect a tax equal to $0.25 for every $500 of home value. Once you’ve identified a home to buy, your lender is responsible for letting you know exactly how much transfer tax either you or the lender will have to pay.
According to Tax-Rates.org, Illinois now has one of the highest property tax rates in the U.S., with only six states charging a higher percentage. As in most states, your exact property tax rate will depend on the county where you live. However, the average rate in Illinois is now 1.73%, which means a homeowner would need to pay $3,507.00 per year for a home worth $202,200. If you’re looking to buy in Lake County, in the northeastern corner of the state, expect to pay much more, about $6,285 a year.
It is possible to lower your property tax bill in Illinois by taking advantage of one of the exemption programs available statewide. For example, Illinois offers a general homestead exemption that can help you shave your final bill by exempting up to $10,000 of the value of your home if you live in Cook County, or $6,000 if you live in other counties. The state offers similar exemption benefits to qualified low-income individuals over 65, veterans, and those with permanent disabilities.
Conforming loan limits
Throughout Illinois, the conforming loan limit for a single-family home is now $484,350, the same as it is for most of the U.S. Keep this number in mind as it represents the maximum loan amount homebuyers can take on and still qualify for a government-insured conforming loan. Conforming loans generally offers borrowers the best interest rates, especially if they have strong credit. If you need to borrow more than the conforming loan limit in your area, your loan will need to be a jumbo loan, and it will probably come with a higher interest rate.