Wednesday, January 31, 2007

Chicago Condo Contracts

Everyone knows that they want a condo... and mostly what kind of place they want. They don't always know what kind of money gets what and how to get into the condo once they find it. That's my career description (that part about knowing... not the part about not knowing).

Once we have the where, what and how much pinned down, I whip out a contract (look out!). Actually, theri are two kinds of contracts in general when buying a condo.

1. The Chicago Association of Realtors/MLS Condominium Real Estate Sale Contract

2 The builder’s contract

The first contract is used in most re-sale condos and town homes. It is a template contract developed so Realtor’s can “fill-in-the-blank” without practicing law. I won’t get into the history, but the State Bar Associations had much to do with the formulation of this standard. There is also a “multi-board contract” that suburbanite Realtors and agents will use when trespassing on my turf. Both are just fine.

The contracts include these customary and important terms in a Chicago real estate transaction. In a nutshell:

Address and parking space
Date of offer
Personal property
Financing terms and contingency
Earnest money
Attorney modification and physical inspection
Addendums and riders
Client information

Now, that was just a quick run down. Some deals may require extra, special forms and a whole list of addendums I’ll attach to the contract. The way this puzzle is put together is what keeps me in this career. This, and the working all the time part, if you like that sort of thing.

The “Chicago” contract also is written in a way that protects both sides in the transaction. Each clause is plain as day (after we explain, but not advise, each clause). Each clause lays out the responsibility of the purchasing party and the selling party. Sounds like a great party to me! Although a template… not all deals are the same. So make sure you have someone experienced filling this out. If it’s a new agent, they should bring in a heavyweight. No harm or embarrassment in this… you want a smooth process and the brokerage should help the new guy.

A builder's contract will typically be used in a new construction or new converion development.
The builder’s contract may contain all of the above or very little of the above. It is prepared in the developer’s favor in general. This is not sneaky… it’s just on their terms for their risking the housing development. Most builders’ contracts are well laid out and include many buyer protections and warranties. Some do not, and, can be a bit ridiculous in their obligations.

Just tonight a new agent asked me to take a look at a builder’s contract before he sat down with clients. The contract explicitly indicated that the unit was sold “as is” and did not have any warranties. This is an area the client needs to be made aware of by the agent and should take up the issue with a good real estate attorney during the approval period.

Long story short… I like to bring up all the steps of the buying process with my clients and potential clients right off the bat. Have you discussed mortgage financing with a trusted banker, mortgage broker or credit union? Are you familiar with the earnest money procedure? When do you need to be in a place? And, “As long as we are out at showings, let’s talk about the steps in a sales contract… because I think you’re going to flip over this next one”.

Remember… this isn’t meant to be pushy. You’re gonna need to know this stuff and I’d rather you hear it from me early on. All the above questions pertain to the sales contract. After all this teeth pulling, you’ll work closely with a good real estate attorney before everything is signed off. A good reading, writing and explanation of the various contracts will make the process surprise free.

1 comment:

Naheed Amdani said...

Developers contracts are typically one-sided, but since the market has gone down, more and more developers have been willing to budge on contract terms than ever before. It is very important to understand any contract, not just a developer's contract, but it is especially important to understand what you're getting into when signing a developer's contract! I agree, the important thing is that there should be no surprises.