Glossary

Illinois Contract

What Is Escrow? Escrow is when a neutral third party holds on to funds during a transaction. In real estate, it’s used as a way to protect both the buyer and seller during the home purchasing process. After a property is purchased, the new homeowner continues to put money into escrow as a means of paying mortgage and insurance payments. ​ For example, earnest money is an amount paid in to escrow early in the home purchase process to essentially put a “hold” on the property for the buyer. It’s a way of showing serious intent that the buyer is going to stay true to their offer, and protects sellers from having to deal with buyers putting out multiple offers or going into negotiations on multiple properties. At closing, the earnest money payment is generally taken out of escrow and put toward the buyer’s down payment. ​ The purpose of escrow is two-fold. It guarantees the seller that the buyer has the funds needed for the purchase and that the money will be handed over once the title is transferred, and it guarantees the buyer that they won’t be scammed by a fraudulent seller who actually holds no claim to a title. Ultimately, escrow helps ensure trust in a high-stakes transaction where neither party may be familiar with each other and where both have a lot to lose. ​ Escrow vs Escrow Account ​ Here’s a set of terms that are closely related but not to be confused with each other. Many people have trouble understanding real estate escrow because they mistake it for an escrow account, so it’s important to know the difference. ​ An escrow account is a separate account managed by a lender to collect advance insurance payments and tax payments from a homeowner. Usually, a lender will add up the total amount due for these payments in a year, divide it by 12, and tack on that extra amount to each mortgage payment. When those payments are due to either a homeowners insurance agency or the IRS, the lender pays them for the homeowner out of the escrow account. Many states, but not all, require lenders to pay interest to homeowners on their escrow account. ​ The simplest way to think of the difference is Escrow happens during the process of buying/selling the home. After the house is sold or purchased, Escrow Accounts are where your mortgage payments are partially paid to in order to pay for your PMI payments and property taxes . ​ ​

Attorney Review Although Illinois does not require buyers to use a lawyer to prepare the purchase agreement, Illinois is considered an attorney-review state. This means that it is customary for both parties to have a real estate lawyer look over the purchase agreement before it is finalized. The purchase agreement will have terms regarding how many days each party has for the attorney review (typically five days) and what happens if the attorneys fail to reach an agreement during this time. Ordinarily, both parties can walk away from the purchase agreement with no penalty during this review period. The attorneys will review the entire agreement and can propose modifications to any part of the agreement except the purchase price and the broker's fees. The attorneys are likely to propose modifications after the house has been inspected, so the attorney review period and the house inspection tend to happen during the same time frame. When there is an attorney review period clause in a real estate contract, the initial contract that you sign will only be conditional. In most cases, you are only signing to confirm the agreed upon price and that there will be an attorney review period. The typical attorney review period is 5 business days after signing the initial contract. During the 5-day period, your attorney will need to decide whether to: Approve the contract; Reject the contract; or Entering into negotiations to modify the contract. The attorney review period allows either the buyer or the seller to modify the contract to meet their particular needs. Your attorney will review the contract and suggest modifications to the contract that would be in your best interest. If the contract is not expressly rejecting or approved, your attorney will make an initial request for modification of the original contract terms within the 5-days allowed for attorney review. Maybe you want to add real estate tax provisions to the contract. You might also want to make the contract contingent on certain terms as well. The attorney review period is the time to make sure all of these terms are added to the contract. The other party has the right to accept or reject the proposed changes. The other party may also want to counter the proposed changes and make additional proposals. During these negotiations, either party may walk away from the transaction without penalty if there is a failure to agree upon mutually acceptable terms. If the 5-day attorney review period passes without anyone making proposed changes, then no changes will be made to the initial contract terms. Both parties will be bound by the terms of the initial contract. ​ ​

Buyer's Agreement (Illinois)

Final Walk-Through Final walk-throughs are not home inspections . It is not a time to begin negotiations with the seller to do repairs or a contingency of sale . The primary purpose of a final walk-through is to make certain that the property is in the condition in which you agreed to buy it. Agreed-upon repairs, if any, were made, and nothing has gone wrong with the home since you last looked at it. A final walk-through is performed before settlement of the home buying transaction. Buyers are often pressed for time as the transaction closing date draws near, so they might be tempted to pass on this opportunity. But many issues can come up, and it's never a good idea to skip the final walk-through. The walk-through serves as a final check for any remaining, unresolved issues with the home. Follow this checklist to ensure you don't overlook any steps. Turn on and off every light fixture. Run water and check for leaks under sinks. Test all appliances. Check garage door openers. Open and close all doors. Flush toilets. Inspect ceilings, wall, and floors. Run the garbage disposal and exhaust fans. Test the heating and air conditioning. Open and close windows. Make sure all debris is removed from the home.​

Deed of Title A deed of title, or title deed, is a specific legal document that transfers the title of real estate from one person to another. Full ownership to a piece of real estate is given to the new owner. Usually, such a transfer would happen through a traditional real estate sale; however, a title may be transferred in other ways. An example of this would be when someone gifts a piece of property to another person. ​ In most cases, the deed of title is classified as a general warranty deed. This is a specific type of deed in which the current owner guarantees that they hold a clear title to a piece of real estate. This means that they are not only guaranteeing that they received a clear title from the previous owner of the property, but that no other individuals retain any interest in the property. ​ A general warranty deed is utilized for most real estate deed transfers due to the fact that it provides the greatest amount of protection of any deed. It may be known as a grant deed in some states. ​ Deeds of title should not be confused with a deed of trust. A deed of trust simply grants a lender or mortgage lender a lien on the property if a debt is owed.

Appraiser An appraiser is a professional that is certified and licensed by each State to properly assess the value of a property and provide their clients with an appraisal report for the property. According to the Appraisal Institute, an association of professional real estate appraisers, a qualified appraiser should be licensed or certified—as required in all 50 states—and be familiar with the local area. Per federal regulations, the appraiser must be impartial and have no direct or indirect interest in the transaction.