Saline Opinion (to be taken with a grain of salt) by: Scott Wm. Cheffer

Many people try to save the cost of sales commission by selling their homes without listing through a Realtor®. The term used for this is ‘FIZZ-bow’ from the acronym of For Sale by Owner (FSBO). There are some instances where this may work well:

• Your home is in a high-traffic area. Therefore, many people will see your yard sign, and ones you place at the end of the block.
• You have a potential buyer like a neighbor, close friend or family member who knows the actual condition of the property but still wants to buy it.
• You are highly organized, have plenty of free time, and haven’t even started looking for a new place so there is no need to sell the property quickly.

Attorney
Too many people contact an attorney after they have either bought a new house or negotiated a sales price on their existing one. When this happens, an attorney will charge you a $200 idiot fee, which, pun intended, is what you have been. Face it, you’re talking about a lot of your money here. Not only in the sales price, but also in the fees and taxes (and there are plenty of them) and the impact a sale has on your overall financial position.

One of the most important roles an attorney plays is that of a negotiator. Many people don’t negotiate well, and it reflects in the price they pay (buying) or accept (selling).

Another valuable attorney service is preparing the sales contract and seller’s statement. These documents summarize all of the elements of the transaction. They describe, in legal terms, exactly what you are selling, provide a timeline for the transaction to follow with deadlines and show other details of the deal. Besides the sales price, you need to calculate the amount of real estate taxes you owe when you sell, any rent charges or occupancy escrows if you are continuing to live there after the closing date, what local municipal fees need to be paid, and more.

Yes, you can prepare the legal documents yourself. That is your right. Many industry professionals can assist you by providing reference material, but, in Illinois, the only other entity that can prepare legal documents (besides those directly involved) is an attorney. In Illinois, paralegals can not prepare legal documents. That would be equivalent to having a nurse do surgery.

NOTE: Because seller-prepared documents are often used in fraud schemes, and because they often contain mistakes, they get special scrutiny at the closing table. Not every FSBO is fraudulent, but a lot of fraud schemes use seller-prepared (but forged) documents somewhere.

Speaking of surgery, real estate attorneys are specialists. Would you want a psychiatrist delivering your baby? We have seen successful, well-respected corporate attorneys who are clueless at a real estate closing. They don’t know the documents, and, in my experience, hardly ever do any research. To make matters worse, they usually try to re-negotiate at the table. This often delays the closing, as the others involved must be excused from time to time to go down the hall and laugh. According to Thomas J. Polinski, “…Real estate practice is one of the highest categories of lawyer malpractice claims by consumers.” I suspect that is because too many non-specialists attorneys get involved.

Many attorneys in Illinois are affiliated with a title insurance company. Some are attorney-agents, and actually do part of the title company’s work. If this is the case, they collect some of the title fees and will insist on placing the title order (and sharing the fees).

Sometimes this is to your advantage, other times it is not. Keep this in mind when you are interviewing attorneys.

Title Insurance Agent
There are usually two title insurance policies issued at a real estate closing. The seller must buy a policy for the buyer. This is called an owner’s policy. It protects the owner’s interest until s/he dies, and extends this protection to their heir(s). This policy is required by Illinois Law, and the seller pays for it. The second policy, the lender’s policy, protects the lender when the seller has to borrow money. The buyer (borrower) is responsible for paying for this. However, as the owner’s policy is required, and as the lender’s policy is related to the same transaction (only one title search is needed) it is given at a discount. The seller, because they pay for the larger policy, has the right to use the title company of their choice.

Title agents also act as escrow agents. They are responsible to see that all the bills related to the closing are paid. All the money related to the transaction is deposited with them, and then disbursed from their account. Attorneys, who are not title agents, can not act as escrow agents for the closing, though they can hold the deposit (called earnest money) which is usually held by a realtor®.

Mortgage Broker
You've seen the commercials and gotten the Emails where multiple banks are begging for your business, haven't you? That's what a mortgage broker or mortgage banker does. They work with a group of lenders to find the best loan program for each client.

Some cater to sellers. Many have yard signs saying, ‘FINANCING AVAILABLE!’ with their phone number. When people call the number on the sign, the mortgage broker will screen potential buyers. There are two steps to the process:

• • Pre-qualify means a buyer fills out an application and answers question about income, credit history and the like.
• • Pre-approve means the buyer’s identity, credit-worthiness, income and employment are verified. They actually have a loan waiting in the wings for the borrower. It is helpful to know before you show your home to a complete stranger if they can afford to buy it, or are just killing time.

Mortgage brokers also can help you when you purchase that new house. When you use them to screen potential buyers, they will discount the fees for your purchase loan. Their fees are usually paid as part of the closing transaction. Before you sign a loan commitment, you are to get a complete package of information including estimating all the fees you will have to pay at closing.

WARNING Never hold an open house when there is only one person in the house. Leave your door locked and make people use the door bell. Get their name, car description and license plate number. Some criminals see this as a great time to ‘case the joint.’

In Illinois, Mortgage Brokers and Mortgage Bankers (the companies) are licensed and Loan Originators (Loan Officers) are registered by the Division of Banks and Real Estate of the Illinois Department of Financial and Professional Regulation. To get a license or registration, brokers, bankers, and originators must undergo a criminal background check, pass a test, be bonded and take continuing education classes every year.

I highly recommend that you use a member of the Illinois Association of Mortgage Brokers. Also, your mortgage broker should have a Certified Residential Mortgage Specialist (CRMS) or Certified Mortgage Consultant (CMC) on staff.

Appraiser
As a FSBO seller, you may want an appraisal before pricing your home to sell. They will measure your home to determine square footage, count bathrooms and bedrooms, etc. Next, they will look for leaks, determine the condition of the furnace, foundation, water heater, flooring and the like.

Then, they will research recent sales in your neighborhood for similar houses to see their selling price (not asking price). These other recent sales are called comparable transactions, or comps for short. Based on the condition of your home and the sale prices of similar homes nearby, the appraiser will give your home a value.

If you and your buyer are working with the same mortgage broker, they can recommend appraisers who are approved by the lenders they work with. It is normally the buyer who pays the cost of the appraiser, but they won’t pay for two. Keep this in mind when negotiating the sale.

Inspector
(Private) Home Inspector
One of the things a seller must do is to disclose any defects or potential defects about the physical condition of the house. If you are not particularly handy, a home inspector can help you prepare this list. Today, many buyers insist on a professional home inspection before purchasing. If you have one in hand, that helps move the process along.

According to Home Inspections USA:

The inspector should not recommend contractors, estimate repair costs (unless the inspector is an active contractor in the particular field), recommend whether or not the client should purchase the home, comment on its market value, or benefit in any way from the repair or sale of the home.

If an appraiser recommends any repair work, get at least two quotes from local contractors. If they seem radically different, get a third opinion.

Somewhat related, are home warranties. These are insurance policies you can buy where the insurer guarantees to make any repairs for a certain period of time after you sell the house. They are related because you must pay for an inspection to determine the premium for the warranty insurance.

Municipal (Building) Inspector
In addition to a home inspection, many municipalities require an inspection of their own. Although the intent differs from town to town, most are looking for proper smoke detectors, safe electrical wiring, a functioning furnace, and adequate water service. They are also looking for repairs or remodeling that was not done in accordance with local building and life-safety codes that might pose a health or safety hazard. Some also look at the exterior condition of the home, condition of garages, sheds, etc.

Check with your community before you put your home on the market. Some repairs require permits and inspections. Most require a stamp (tax) for your deed and payment of your water bill and other unpaid fees, like parking tickets. If they do, you can not sell your home without meeting their requirements. At a minimum, you will need to arrange for a water meter reading. Don’t forget to get final readings for gas and electric, so you won’t have to be responsible for the buyer’s bills.

(Private) Home Inspectors are regulated in Illinois by the Department of Financial and Professional Regulation.

Stylists
Appraisers and inspectors look at the practical, measurable side of the transaction. Styliststs use design and decorating skills to help your home make a good impression on buyers.

First, they look at the outside of the home and make suggestions that will improve ‘curb appeal.’ They also go through the inside of the home with you showing you what can be done so potential buyers can more-easily envision their furnishings in your home. They may show you what to pack early (to avoid a cluttered look), where to apply a coat of paint, how to move some furniture, etc. No state registration or licensing is required for home stylists.

Beautiful Home Makers, is a local home stylist company affiliated with Title Company of America, Inc.

Realtor®
Even if you really want to go FSBO, interview a few realtors®. Be upfront with them and tell them your plans. Let them defend their profession and commission. Most importantly, they have the best marketing structures to sell your house.

The good ones can recommend attorneys, title companies, appraisers, inspectors, mortgage brokers, and stagers they have worked with. And, having worked with these other professionals, they can give you good advice about how useful they would be in selling your home.

As with most of the world, this profession has good, average, and bad practitioners. Some work hard; others hardly work. Get copies of their credentials and check their references. Individual real estate agents must be affiliated with a licensed Real Estate Broker in the state of Illinois. If you have a problem with a realtor, call their boss (local office manager or broker) first as that person gets part of the commission, too.

Epilog
Remember, these people are going to work for you and are helping you sell your home. Interview them for the job. Have a list of questions. Watch their body language. Listen to their words. Pay attention to the way they treat you. OK, you don’t need to go as far as being friends, but is there mutual respect?

Ask for, and then check their references.

Most of these professionals are entrepreneurs, paid by commissions or fees. That works to your advantage, because if they don’t work for you, they don’t get paid. Some will require a deposit and have you sign a service contract. Some will collect the balance at the time of sale or at some pre-determined date specified in the contract. Read everything thoroughly before you sign anything or pay anyone.

Ask for, and then check their references.

Make sure you make (and keep) copies of their credentials, in the event you may need to make a complaint. A trade association is not the place to complain, a state agency is. If you have any problems, start with the State’s Attorney for your County who will either handle the complaint or direct you to the right place.

Happy house selling! Happy house hunting!

Scott Wm. Cheffer, Ombudsman
Title Company of America, Inc.

No part of this article is to be construed as legal or financial advice. I am not an attorney, have never played an attorney and am allergic to thick law books. Nor am I a CPA, CFA, CFP, CRMS, CMC, Real Estate Appraiser, Home Inspector, Building Inspector or Realtor®, though I have been told I’m and an SOB and a PITA in the past.