Title Taking Tips for Residential Real Estate
Overview
This article provides a general explanation of four of the most common ways to take title to residential real estate in Illinois. We at County Title need to know in advance of the closing of the sale how the buyers want to take title to their real estate. If the buyers are getting a real estate loan, the credit union, bank or other lender also needs to know well in advance.
First of all, it should be noted that single persons typically take title in their own name individually and sometimes through a trust. Married couples (or those in civil unions) may select any one of the types of title discussed below. Multiple buyers other than one married or civil union couple may not select Tenants by the Entirety but may select any of the other forms of title taking.
Four Forms of Title Taking
Joint Tenants
Joint Tenancy occurs when multiple persons, frequently but not always or necessarily a married couple, take title together at the same time to the same parcel of real estate from the same seller or sellers with the same rights to possess the real estate and an equal and undivided interest in the property. The Deed conveying the property to the buyers must contain certain language required by Illinois law in order to create the joint tenancy correctly. If one of the owners dies, the deceased person’s ownership passes immediately to the remaining owner or owners in equal shares. It does not pass under the terms of the deceased person’s Will or to the heirs of the deceased person.
Tenants in Common
Tenancy in Common occurs when multiple persons simply own real estate together. The owners all have an equal right to possession of the property, but they do not need to have an equal ownership percentage in the property. Nor are there special rules for taking title as there are for other forms of title taking. If one of the owners dies, the deceased person’s share will pass under Illinois law to the deceased person’s heirs or under the terms of the deceased person’s Will. It does not automatically pass to the other owners of the real estate as in a joint tenancy.
Tenancy by the Entirety
Tenancy by the Entirety is a special method of title taking established by the Illinois Legislature for the special benefit of married couples or those in civil unions for their marital residence only. This method is not available to any other persons or property. The Deed to the married or civil union couple must contain special language in order to create it properly. The primary benefit is that if only one of the married or civil union couple has a lien or judgment against them, the person who filed the lien may not seize the couple’s home. This special method of title taking is only available if the couple is married or in a civil union when they take title and lasts only for so long as they remain married or in the civil union and only for so long as they occupy the property as their marital or civil union residence. A couple may only have one residence in tenancy by the entirety at one time. Neither of the married or civil union couple may convey any interest in the property without the signature of the other person. It takes two to transfer. If one of the married or civil union couple dies, the surviving person takes title to the property automatically.
Trusts
A trust is a special device that an attorney drafts at the request of a client. It may be used for estate planning or for any other lawful purpose. The person responsible for managing the trust, called the trustee, takes title under the terms governing the trust. The trustee may or may not have an ownership interest in the property. The trust may or may not provide protection against judgments and liens, depending upon the circumstances. The death of an individual with an ownership interest in the trust may or may not have an impact upon the trust property as determined by the language in the trust, the terms of which are almost never disclosed to the public but remain private.
There are many other ways in which title to Illinois real estate may be held, such as corporations, partnerships, limited liability companies and so on. These are beyond the scope of this article and should involve the active participation of the attorney for the buyers.
We always recommend that buyers consult with their own attorney in order to make certain that they make the best title taking choice for their individual circumstances.
Closing Table Tips
Thousands of real estate loans and real estate sales are closed at County Title Company. We have put some well-defined procedures in place for the purpose of insuring a timely and accurate process resulting in a professional and convenient closing. We want you to leave our closing tables satisfied with your experience.
It is important to note first of all that we sincerely welcome your input prior to the scheduled closing. Feel free to contact us in advance if you have any questions, concerns or special requests. Whenever possible, we contact the parties in advance to go over figures and requirements so that there are no surprises at the closing. In most cases, closing figures can be verified to the penny before the closing starts. However, there are cases where figures are being worked on right up to the minute that a closing starts and even those where changes are made during the closing. Some of these cases are caused by the particular facts and circumstances of the transaction.
Identity of all Parties
Every seller, buyer and borrower must be identified. We need to make certain that we have all the right people at the closing table. Typically, each party provides an original driver’s license. Any form of identification is acceptable at County Title so long as:
- It is issued by a state or federal government agency.
- Has the photographic image of the individual.
- Has the individual’s signature. Identification documents issued by any foreign government are not acceptable under current Illinois law.
Please be certain that the form of identification has not expired. Occasionally parties have had to make a second trip back to the closing table at County Title, when, for example, their driver’s license has expired. This can cause inconvenience for everyone involved in the closing as documents not properly authenticated will normally delay the closing until the issue has been resolved.
Property Insurance
In every real estate loan transaction, whether it is a sale or refinance transaction, the credit union, bank or other lender must be named as an additional insured on the property insurance policy. It is frequently the case that proof that this has been done will be provided for the first time at the closing table. It is important that the insurance agent be notified by the buyer or borrower of the correct language to be inserted on the declaration’s page of the policy or policy binder, as the lender directs. Failure to do so can cause a delay in the closing. There may be specific requirements such as the premium amount that must be paid in advance, or the lender’s name or their address.
Real Estate Taxes
For real estate sales transactions in Illinois closing between about May 1 through about September 1, there are frequently real estate taxes that must be paid out of proceeds at closing. It may be important to bring the original real estate tax bill to the closing table along with any notice of assessment change or any other documents pertaining to the real estate taxes. Some counties in Illinois levy a small charge if the original real estate tax bill is not presented to the treasurer at the time that the taxes are paid.
Money Due At Closing
Buyers and sellers of real estate sometimes must sometimes bring money to a real estate closing. The only two forms accepted at County Title are a cashier’s check (for amounts less than $5,000.00) or a wire transfer.
A wire transfer, also called an electronic funds transfer (or EFT), is a process by which money moves electronically from one bank to another so that funds can get to the right place without being hand carried to the closing. The person whose money is being electronically transferred initiates the process through his or her bank and the person or business (in this case, County Title) provides the sending person with instructions, commonly called wire instructions. This insures that the sending (or originating) bank knows precisely to what account the money is to be moved to.
It should be noted that the use of the term “money” in this article will normally be referred to by people in the banking and real estate industry as “funds” and that cashier’s checks and wires are referred to as “good funds” due to their wide and almost exclusive acceptance in real estate transactions.
Other forms of payment such as personal checks, cash, business checks and money orders are used only for amounts less than $500.00 at the sole discretion of County Title.
Since the person paying over the money (or funds) must make arrangements in advance, it is much better if the amounts due at closing are known to the penny in advance of the closing so that appropriate arrangements may be made with the credit union or bank for the issuance of a cashier’s check or a wire. That is why we devoted attention at the beginning of this article to the benefit of efforts to work out the final figures in advance of closing.
We do our best to make certain that final figures are accurate and available in advance of the closing.
Miscellaneous Matters
It seems like there is no end to the types of documents that may be needed at closing. It may be a recent pay stub of a borrower, an old tax return copy, a copy of a paid real estate tax bill, a copy of a divorce decree or death certificate, and many others. That is why it is so important to communicate with us in advance of your closing in order to determine that all necessary information is collected at or before the closing. We at County Title want your closing to be smooth and efficient.
An Overview on Working with Contractors
This article is intended to be a very general and broad overview on working with contractors. It is the objective of this overview simply to make customers of County Title generally aware of the importance of the process of working with contractors and the impact it may have on your home if you do not follow safe practices. Even more so than many other areas of the law, this is complex and confusing legislation.
Illinois has a special law, called the Mechanic’s Lien Act (even awkwardly and confusingly named), which was enacted primarily to make certain that working men and women who supply labor or materials to the job site of new construction, repair and remodel jobs, etc. are paid for their work. If they are not paid on time, the contractors have rights to file liens against your home. The law is incredibly complex and is impacted by other laws and many court cases, making it almost impossible for any non-lawyer to understand completely. But every homeowner in Illinois should be aware of the existence of and the importance of the law to the title status of their home.
Homeowners in Illinois should never start any new construction, remodel job or even repair job with a contractor without a written contract, preferably reviewed by their attorney. The contractor should also provide to the homeowner a contractors’ written statement setting forth the name and address of each and every supplier of labor or materials (generally called sub-contractors) and the amount of the contract to the penny that will be paid to each. When the total of those figures is added to the profit and/or overhead of the contractor, it should equal the contract price. Homeowners who attempt to borrow money on a home with recent construction activity of any type are also normally required by a lender to execute a homeowner’s statement, listing the name and address of the contractor and, if more than one, all contractors.
As the construction process moves forward, the contractor, sub-contractors and suppliers are paid in phases, typically called “construction draws”, in which they are normally paid according to the percentage of work they have completed. The process of construction draw administration is extremely detailed and time consuming and is ordinarily supervised for a fee by the lender, the title company or an attorney. As each contractor, sub-contractor and supplier is paid, they must execute a written waiver of their right to file a lien against the home to the extent of their payment. Those lien waivers must be examined closely by trained personnel for accuracy and authenticity. This process goes on until the project is finished and the last dollar is appropriately distributed. The homeowner is entitled to and should demand full and final lien waivers from every contractor, sub-contractor and supplier who was involved in any way on the job at the same time as the payments to them are distributed.
If these orderly processes fail, the negative consequences for the homeowner that accrue from the filing of liens against the home can include making it practically impossible to finance, refinance or sell the home pending the resolution of the problem. Mechanics Lien filings are a frequent source of lawsuits. Like the law itself, lawsuits that arise out of Mechanics Lien filings can be extremely complex and thus expensive and time consuming.
We know that we have not provided much detail here about the subject of contractor and supplier liens, a subject about which volumes of books have been written. We at County Title only hope that this brief summary of the subject helps make you think about the importance of the potential for real problems if any construction job of any type is started without proper planning for contractor lien avoidance.