IL Questions
Hi,
I was wondering if any IL investors out there could answer a few questions. I spoke to my lawyer that drafted the docs for me and there were several things he included. Any of you familiar with these extra procedures? It seems to make things a little more complicated for the seller and I want to make things as simple for them as possible.
1. Governmental Compliance. Parties agree to comply with the reporting requirements of the applicable sections of the Internal Revenue Code and the Real Estate Settlement Procedures Act of 1974, as amended.
-He said whoever handles the money is required to fill out a closing settlement statement. This is for capital gains that the seller will incur. He said this may be a 1099 or so, he doesn't know for sure because the title company usually handles all of this. Another point he makes on highly recommending I do a closng like this at a title company rather than over a kitchen table.
2. There is a declaration of transfer for the county and state as well as each city. The ordinance requires the seller to pay for the transfer tax stamps on county/state and water bill needs to be current. The buyer needs to pay city transfer tax typically.
-Can I instead handle all of the taxes or is this illegal? How would you go about ths whole process?
3. Plat of Survey
-Is this necessary or recommended? He recommends this, should I not bother?
Thx
OK, let me take a stab here.
When you are buying subject-to, no equity in the house gets cashed out, so no transfer tax to the state is due(per the quite from Illinois Revenue Service I posted in response to your previous post). Also, when buying subject-to, you don't think it's compliant with RESPA requirements(violating Due-on-Sale clause is certainly not in line with rules and regulations).
The attorney is right that the closing statement won't hurt, but it doesn't affect your bottom line. Having a closing at the title company only makes sense if you're buying a title insurance(highly recommend that).
If you're deciding NOT to purchase title insurance, then no sense in using title company.
As far as city transfer tax goes, it's the same deal as with state - it's only levied on the price of the "consideration" that the transferor receives. If you take the property subject-to and don't pay any cash to the seller, there is no consideration, thus no transfer tax is due.
Plat for Survey is important because it uncovers all the boundaries and encumberances on the property. What you see may not be always what you get. However, if you are not planning on building additions to the property, plat of survey is less important. Regardless, they do cost a pretty penny($450+), and I don't think you can get a distressed seller to pay for it. You'll probably have to obtain it yourself and pay for it. There is a chance you can ask a seller for a copy of most recent play of survey or you can check with the city hall.
Quote:
On 2003-10-28 17:23, snek11 wrote:
Hi,
I was wondering if any IL investors out there could answer a few questions. I spoke to my lawyer that drafted the docs for me and there were several things he included. Any of you familiar with these extra procedures? It seems to make things a little more complicated for the seller and I want to make things as simple for them as possible.
1. Governmental Compliance. Parties agree to comply with the reporting requirements of the applicable sections of the Internal Revenue Code and the Real Estate Settlement Procedures Act of 1974, as amended.
-He said whoever handles the money is required to fill out a closing settlement statement. This is for capital gains that the seller will incur. He said this may be a 1099 or so, he doesn't know for sure because the title company usually handles all of this. Another point he makes on highly recommending I do a closng like this at a title company rather than over a kitchen table.
2. There is a declaration of transfer for the county and state as well as each city. The ordinance requires the seller to pay for the transfer tax stamps on county/state and water bill needs to be current. The buyer needs to pay city transfer tax typically.
-Can I instead handle all of the taxes or is this illegal? How would you go about ths whole process?
3. Plat of Survey
-Is this necessary or recommended? He recommends this, should I not bother?
Thx
Hi,
Thanks for your replies. In buying subject to I was told by the attorney you'd pay the tax on whatever you pay for in terms of equity to the owner. So I understand that point. However, he told me to record a deed you need the transfer tax declaration and water bill forms filled out either way.
It looks like the seller is required to pay for the transfer tax on either the county or state...I want to keep it simple for the seller, how do I pay for it instead?
It all depends - if you do a quitclaim deed, you don't need to pay any stamps, and the water bill is certainly a city/village only issue. I've closed on plenty of properties. and the county never required a water bill to record a deed. In a normal real estate transaction, you(buyer) want a proof that water bill has been paid, because of all utilities, the water bill stays with the property, not the owner/tenant. However, if you know they have no money to pay water bill, it won't help you to require them to pay it.
As far as paying transfer tax, if you are giving someone equity, you can certainly pay it for them - they just have to sign the transfer tax form, but you can make out the check.
Quote:
On 2003-10-28 18:17, snek11 wrote:
Hi,
Thanks for your replies. In buying subject to I was told by the attorney you'd pay the tax on whatever you pay for in terms of equity to the owner. So I understand that point. However, he told me to record a deed you need the transfer tax declaration and water bill forms filled out either way.
It looks like the seller is required to pay for the transfer tax on either the county or state...I want to keep it simple for the seller, how do I pay for it instead?