The Language of Foreclosures

Talking about foreclosure real estate can be hard enough without even entering the market. That’s because foreclosures tend to have their own language, employing many obscure words originating in government housing legislation and real estate law. Without a background in these areas, prospective investors won’t be able to decipher even the simplest foreclosure contract. This article lists some of the more common foreclosure-related terms as a reference for people interested in this lucrative market. 

Abandonment: Wherein a property owner has given up ownership rights without coercion and does not want to retrieve those rights or pass them to somebody else. A situation involving an unused property does not guarantee abandonment.

Acceleration Clause: A clause commonly written in a mortgage enabling the lender to demand full re-payment immediately, rather than at the end of the contracted term. The clause must also detail an occurrence that would put it into effects, such as a default on regular payments, sale of the property, or re-assignment of property rights. In most cases, the debtor must be given reasonable notice, and a chance to reverse the occurrence. The debtor is also immune from acceleration if there is no such clause written into the agreement. 

Chattel: Personal property, including household items.

Closing Costs: Expenses not related to the marketing and selling of the property, sure as loan fees and paperwork fees. Foreclosures might also involve extra-legal and escrow fees.

Deed in Lieu of Foreclosure: Property owners may deed their property to the lender if foreclosure is imminent, rather than go through the entire process. For the deeding to be official, the lender must give approval. 

Default: Failure of the borrower to make payments as required by the lender. “Default” may refer to a missed payment without any further repercussion or a series of missed payments resulting in a failed mortgage.

Equity Right of Redemption: The right of the borrower to remove all encumbrances related to the mortgage, in order to avoid foreclosure.

Federal Housing Administration (FHA): A part of the Housing and Urban Development Federal agency responsible for determining industry standards for mortgage loans by private lenders. FHA also insures mortgages by private lenders. Foreclosure investors must occasionally deal with this agency. 

Federal National Mortgage Association: Also known as FNMA, or Fannie Mae, this federal agency oversees conventional residential mortgages and will buy out loans that follow its rules. Some foreclosure investments require direct communication with this agency. 

HUD1 Statement: A form mandated by the US Department of Housing and Urban Development that specifies the costs of acquiring a foreclosed home.

Loan-To-Value Ratio: A comparison of the total loan amount and the lesser of the property’s sale price or appraised value. 

Notice of Rescission: A notice from the lender notifying the borrower that he or she is again in good standing with the loan, and payment deficiencies have been corrected. 

Short Sale: A property sale priced at or below market value, and lower than the amount of a mortgage on the same property. 

Truth-in-Lending Act: A law requiring the lender to provide the borrower with a full written explanation of the mortgage’s terms.

Real Estate Terms From Appraisals to Comps

When youre selling your home or other real property on your own, you dont have to know everything about the process. It does help to have a practical knowledge of the terms that come up during the process.

Keep in mind, these arent intended as be all, end all, penultimate definitions. Theyre working definitions for pragmatic folks. Lets go

1) Acceptance – A legal term referring to the acceptance of a buyer’s offer by the seller. Acceptance is often preceded by a number of counteroffers between the parties.

2) Appraisal – a professional opinion of the value of real property. Most jurisdictions have careful rules defining who may call themselves an appraiser, and most lenders have a stable of approved appraisers whom they use regularly. Typically, the lender making the new mortgage loan will require that the property appraises for at least as much as the purchase price. Occasionally, a buyer will require the same thing in an all-cash transaction.

3) Bridge Loan – Short term loans used to bridge any time gap between the sale of a home and purchase of the next one. These loans can be valuable when escrow is delayed on the sale of a home and the seller has committed to the purchase of another home. Bridge loans are also known as panic loans but can be a lifesaver.

4) Coinciding Settlements – when a buyer needs the funds from the sale of his prior home (which is under contract to be sold) in order to purchase his next home, he may well make settlement under his sale a contingency for settling on the home he is purchasing. In reality, the sales don’t usually coincide. They usually take place back to back. Funds from the first are often wire transferred to the second.

5) Closing – Depending upon the state you live in, Closing can have different meanings. Generally, the closing of a real estate transaction refers to the exchange of necessary documents, execution of the same and transfer of money.

6) Comps – This term refers to the sales prices of similar properties in the area of a house in question. Comps are used to help determine the fair market value of a property.

7) Conditions – any conditions which must be met before the sale can be consummated. Some typical conditions include things like the property’s appraising for the purchase price or more, the property being in good condition when a home inspection is done, the buyer’s loan is approved.

As you can imagine, there are many real estate terms for which you have a general understanding.

Illinois ranks #4 in foreclosure rate

From an article written in, foreclosure filings increased 5.3 percent nationally from April to May according to ATTOM Data Solutions, a firm that tracks foreclosures.

Illinois ranked #4 with foreclosure filings last month was 1 in every 1,057 housing units.

You can read more of the article and compare your state by clicking on the link below:

Illinois Real Estate Laws Effective 2015

On January 1, more than 200 new laws took effect in Illinois.  Here is a brief synopsis of these laws related to Real Estate.

Real Estate/Property

PA 98-1106 (SB 2952) “Last known address” now includes e-mail
E-mail addresses are now included in the definition of the term “last known address” in the Self-Service Storage Facility Act. This law provides that notice under the Act shall be delivered by verified mail or by electronic mail to the last known address of the occupant. It provides that a notice sent by electronic mail is presumed delivered when the owner receives a receipt of delivery to the occupant’s last known address. It further provides that a sale shall be deemed to be held at the self-service storage facility where the personal property is stored if the sale is held on a publicly accessible online website.

PA 98-1109 (SB 3044) Amendments to the Real Estate License Act of 2000
This bill amended the Real Estate License Act of 2000 to add the definition of “Broker price opinion” and “Comparative market analysis” to the Act. It provides requirements and reasoning for broker price opinions and comparative market analyses. It provides what must be included in written/electronic broker price opinion/comparative market analysis and requires a criminal background check, including fingerprinting to Illinois State Police, for each new applicant for licensure by examination or restoration.

PA 98-0735 (HB 4784) E-mails for condo associations
Allows condo boards to deliver notices electronically to unit owners with their permission in order to facilitate more effective communication with their members.  Also allows a condo owner to designate an e-mail address, postal address, or both, for official purposes and for an association’s records

PA 98-0754 (SB 2597) Seller disclosure in residential sales
A technical change to include “windows” and “doors” in what a seller must include in known material defects when selling residential property.  Previously, the law specified “walls”; that language was intended to cover windows and doors as well.  This law makes clear that inclusion.

PA 98-0933 (HB 5709) Real estate valuation waiver
Since county engineers are already exempted from having a license for valuation on property under $10,000 this would allow municipal engineers to be equal to county engineers for the purposes of a valuation of property under $10,000.

PA 98-0966 (SB 3286) Access to gated communities for process servers
Requires employees of gated communities provide access to process servers showing legitimate credentials to serve process on a resident of that gated community.

PA 98-0996 (HB 4782) Condo Board Lease
The civil code is amended to allow a condo board of managers to take possession of a property under authorized judgment and within 8 months after the month of termination, may permit or extend a lease for additional terms not to exceed 13 months.

PA 98-1068 (HB 4783) Condo association preventing suing developers
Condo association bylaws are often written with clauses that prevent a property owner from suing a developer.  In many cases, there are defects to the condos and the owner must seek the approval of the association to seek legal action.  This law does not allow such clauses in association bylaws.

PA 98-0821 (SB 2656) Power of attorney during condominium transfer after death
During any transfer of a condominium residential unit after the death of the owner, any parking or amenity owned and used by the owner is to be included. The law revises the Illinois Residential Real Property Transfer on Death Instrument Act to restrict the agent from exercising certain decision making powers, however it does not restrict the agent from the ability to sell.

PA 98-0836 (SB 2985) Changes regulations for small estate affidavits
Amends the Probate Act of 1975 to requiring anyone executing a small estate affidavit to list and classify the debts of the decedent. Should a decedent’s estate be insufficient to cover the costs of the affidavit, then it shall be paid pro rata. Allows the executor of a small estate affidavit to examine and remove the contents of the safety deposit box of the decedent of the affidavit.

PA 98-1062 (HB 4123) Protections for mobile home owners
Mobile home owners used to run the risk of mobile park owners going out of business or filing for bankruptcy and not being told until the day they are required to leave.  The law requires more transparency about who the park owner is and notice requirements should the mobile home owner have to leave.

PA 98-1042 (HB 5322) Electronic voting for condo associations
Amends the Common Interest Community Association Act to allow condo associations with more than 10 units and up to $100,000 in assessments to allow voting, required notices, signatures, consent or approvals through electronic transmission. Associations must make reasonable accommodation, at its expense, for any person to conduct business with the association without the use of electronic or other means.

PA 98-0842 (SB 3057) Amends the Common Interest Community Association Act
Exempts certain provisions of the Act requiring a common interest community unit owner leasing a unit to deliver a copy of a lease to the association if the community instruments provide otherwise.


The Real Estate purchase agreement

The Real Estate purchase agreement is the most important document in the transaction. Although standard printed forms are useful, it is recommended that you have a lawyer with Illinois Real Estate transaction knowledge explaining the form and making changes and additions to reflect the buyer’s and or the seller’s desires.

There are several issues that may need to be addressed in the purchase agreement; below are some common examples:

  • If the property has been modified or there has been an addition to the property, was it done lawfully, with permits?
  • If the buyer has plans to change the property, may what is planned for the property, what are the zoning restrictions, etc.?
  • What happens if a buyer has a home inspector inspect the property and discovers termites, asbestos, radon, or lead-based paint is found?
  • What if the property is found to contain hazardous waste?
  • Is the closing appropriately conditioned upon the buyer obtaining financing?
  • What are the legal consequences if the closing does not take place on time, and what happens to the down payment?

Most buyers finance a substantial portion of the purchase price for a home with a mortgage loan from a lending institution. The purchase agreement should contain a carefully worded provision that it is subject to the buyer’s obtaining a commitment for financing.

Mortgage loan commitments and mortgage loan documents are complex. Seek advise from an Illinois Real Estate Lawyer and let them review and explain the importance of these various documents.