Part 2: The Market from the Eyes of a Real Estate Attorney

As part of the continued series on offering broader perspective than just my own, I have interviewed other respected professionals working in the Chicago real estate market. Part 2 of this series is reflecting the market from the eyes of a real estate attorney, Kent Novit.

Kent has been practicing law since 1984: currently, First Ward Alderman in Lake Forest, Illinois: Member of the Public Works and Finance Committees for the City of Lake Forest, Illinois: Liaison to the Lake Forest Real Estate Coalition for the City of Lake Forest, Illinois; formerly the chairman of the Zoning Board of Appeals for the City of Lake Forest, Illinois. Kent has represented a good number of my clients as buyers and sellers.

Q: Depending on who you talk to, the Chicago real estate market is in a state of flux or a total standstill. Where is most of your business coming from now? New construction/re-sale or 1st time buyers or relocations?

A: In regard to residential real estate transactions the majority of the new contracts that I am assisting clients with are for the resale of existing homes at sales prices that are at or under $417,000.00. It seems to me that the existing market for properties that have asking prices between $600,000.00 to $1,500,000.00 is very slow.

Q: What are the toughest challenges today? Have you seen any positive changes as a result of this market correction?

A: I believe that the biggest challenge facing the Chicago area market is having Sellers list their homes at prices that realistically reflect the deflated market. While some Sellers are reluctant to reduce prior listing prices others face the dilemma of having outstanding mortgage balances that exceed the current market value of their home. Until the market truly adjusts to reflect the deflated values it is going to be slow going.

Q: I advise all my clients to get hire an attorney, even if they are one. How are real estate transactions different in Illinois and in Chicago? Can a buyer or seller work without an attorney? What is the benefit to hiring an attorney? Can the title company close the deal, as in other areas? Are new construction contracts different from re-sales? Are your rates flat or hourly? Benefit?

A: As an attorney it is, of course, my opinion that an attorney's assistance is needed for clients that are purchasing or selling homes in the Chicago area. I normally charge a flat-fee of $450.00 for residential closings. In areas that involve attorneys in the closing process the number of claims made under title insurance policies is dramatically lower. I believe that actual number of title claims for transactions in the Chicago area is among the lowest for metropolitan areas nationally, which results in lower title insurance costs in the Chicago area. That savings is offset by the cost of using an attorney in relation to a purchase or sale. Normally attorneys are used to review the contract for a transaction; negotiate inspection provision issues; protect contingency dates; review the title record for the subject property; attend closing to verify that the documents and figures are correct; and to act as a contact to work through issues quickly and with as little stress as possible

Q: With new construction what hurdles are you encountering? Are closings happening on time? Are buyers able to get their financing?

A: The developers that I am working with have encountered tremendous hurdles in gaining financing that is needed to acquire properties and to construct new residences. Existing developments face difficulties with getting units closed when they have been purchased by investors who cannot obtain financing. I have been contacted by a number of Purchasers that are hoping to get out of contracts to purchase units in new high-rise developments.

Q: In the past, I've had clients that had to bring money to the closing because they over financed their home by borrowing more than the home was worth. Now it's worse. Have you dealt with many foreclosures or short sales? Is it different working with institutions and banks, as opposed to a sellers?

A: Short sales and purchasers of foreclosed properties now compose a large percentage of transactions. Short sale purchases are for clients that either are buying for investment or that have fluid housing needs as they are usually very slow...usually taking 5 or 6 months to achieve, but with no guaranty that they will be approved by the mortgage holders. My advice in regard to short sales is to determine the number of mortgages that a seller has on an offered property as well as there amounts before entering into a contract. That information can be gained by using the Cook County Recorder of Deeds website. Sellers that have more then one mortgage will have an increased difficulty in gaining a successful short sale. Also a sales price that under the appraised value can make a successful transaction not likely. Buying properties that have been foreclosed upon is less of a problem and can be a bargain so long as a Purchaser has that property professionally inspected so to be well aware of its condition.

For more information about Kent or to hire him as your real estate attorney, contact him directly at novitlaw@covad.net or 312-332-2407 x 2.