Property Inspections and Disclosures - Sellers Obligations

Let's Talk About.....Property Inspections and Disclosures - Seller's Obligation
By: Alan Orlowsky

To view my Part 1 Property Inspections and Disclosures follow link: previous article.

 When it comes to Property Inspections it is important to realize the Seller's Obligation and what they need to disclose regarding the property. Let's talk about what their rights are and discuss good guidelines when purchasing Real Estate.


Seller´s obligations 

The sellers are not required to actively look for defects, only to state what defects they are aware of, if any. For example, they do not need to hire an engineer to assess the property's structural integrity or review floodplain maps.

Sellers also do not have to disclose previous defects that have since been corrected. If a flood control system has been installed in the basement, for instance, the sellers would not have to disclose previous flooding problems - assuming the problems have not recurred since the system was installed.

Inspect, no matter what

Even if you receive the seller´s disclosure report and are satisfied with it, you should conduct a thorough inspection of the property. Take the time to find a qualified inspector: Get recommendations from friends, your lender, or real estate professionals who aren't involved in your deal. (Realtors involved in the deal are likely to favor lenient inspectors who will understate defects, because they want the deal to settle quickly.)

Generally, a sales contract will include an inspection contingency clause, which makes the contract contingent on a satisfactory inspection by the buyers within a limited period, typically five to ten days.

 

Post-inspection options

If your inspector finds defects that weren't in the disclosure report, that doesn't necessarily mean the seller concealed or intentionally omitted them. They simply may not have been aware of them. At this point, your main concern is not whether the inspection report was fraudulent, but how serious the defect is and what you want to do about it. You have several options:

• Terminate the agreement
• Ask the seller to repair the defect
• Revise your offer (lower the price)
• Don't change the deal (repair the defect at your own expense)

You should also conduct a final walk-through inspection immediately before closing, especially if the seller has removed furniture and furnishings since your inspection.

At this point, the sellers have a legal obligation to report any new defects, or defects that they become newly aware of. But you do not now have a right to rescind the contract unless the seller knew of the defect prior to completing the disclosure form.

Fraud 

If you discover, after you close the deal and take possession of the property, a significant defect that was not disclosed by the seller, you can certainly contact the seller and ask them to pay the expense of repairs. In some cases, they might comply with your request in order to avoid legal action.

On the other hand, they might respond: We didn't disclose that problem because we didn't know about it, so we're not obligated to pay? Maybe they're telling the truth, maybe not. If you think they're lying, and they falsified the disclosure report, you can bring an action under the RRPDA (within one year of closing) or sue for fraud in state court. If you win the lawsuit, the sellers must pay the cost of repairing the defect, plus court costs and possibly attorneys fees.

To prevail in court, of course, you would have to prove that the seller was actually aware of the defect and failed to disclose it. Your attorney can do this by introducing repair estimates, inspection reports, appraisals, or statements from contractors or neighbors who were aware of the problem before the property went up for sale.

Anxiety and excitement 

Often the sellers are anxious to sell their property, and fail to adequately reveal defects hoping that they'll be overlooked. At the same time, many buyers are excited about the property and tend to rush through the inspection phase of the negotiations. Protect yourself by taking advantage of every opportunity that the law allows to uncover possible problems before you make what might be the biggest investment of your life.


If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

Property Inspections and Disclosures

Let's Talk About......Property Inspections and Disclosures
By: Alan Orlowsky
A version of this article was published in the Pioneer Press, January 3, 2002. Debra Fox, Attorney at Law, helped prepare this article.

Before you buy a home, understand the seller's obligation to disclose defects, and your right to inspect. 

In many cases, people are so in love with a house or condo, and they're so eager to sign a contract and close the sale, that they gloss over the inspection process. Often, when they are advised by an inspector that there might be a significant defect such as a leak or a boundary dispute that's worth investigating further, they tend to downplay it or even ignore it rather than risk delaying -- or worse, scotching -- the deal.

That kind of wishful thinking and denial sometimes lands buyers in a heap of trouble. Once you close the deal and move into the place, if you find a defect and suspect the sellers of fraudulently concealing it, your remedies are much more limited than if you had discovered it (or addressed the issue) well before closing. Fixing a serious defect such as asbestos or water contamination could cost you tens of thousands of dollars. In the worst cases, families have had to move out shortly after moving in, due to such a catastrophe.

The bottom line is, don't rush through the inspection process. Read the seller's disclosure statement carefully and critically, ideally before you make an offer. Never sign a contract that doesn't contain an inspection contingency. Hire a competent home inspector -- and if necessary a specialized engineer -- and thoroughly investigate all indications of a possible defect. If you discover a defect that wasn't disclosed, pursue remedies immediately. Here is an explanation of the law and available remedies:

Disclosure rule

The Illinois Residential Real Property Disclosure Act (RRPDA) requires sellers to complete a disclosure report indicating whether they are aware of any "material" defects in the home or on the property.

The term "material" isn't defined by the Act, but such defects may include:

• Flooding or recurring leaks in the basement; property located in floodplain
• Cracks or other defects in basement walls or foundation
• Roof or ceiling leaks
• Defects in plumbing, electrical, heating, ventilation, air conditioning, or sewer systems
• Lot line or boundary disputes
• Presence of asbestos, lead-based paint, water contamination, high levels or radon
• Underground storage tanks that may leak

Many sellers complete the disclosure form and give it to their Realtor as soon as they put their house or condo on the market. They should make the report available to prospective buyers at the outset. According to the RRPDA, they must provide this information to prospective buyers before entering into a contract with the buyer. But as a matter of common law, the buyer may decide to waive this requirement, although it's usually not a good idea. If they provide the disclosure report after you sign a contract but before closing, you have three business days in which to rescind the contract if you're not satisfied with the report.

Law or no law, you should ask to see the disclosure form before you make an offer. If the seller´s Realtor refuses to show it to you at this point, ask why. If the reason doesn't seem to make sense, you may still decide to go forward with an offer, but be wary and give yourself plenty of time for an inspection and, if necessary, rescission.

If you see the disclosure report and it contains a defect that you're not willing to live with (literally), you have three options: ask the seller to fix the defect at their expense, decide that you will bear the expense of fixing it, or withdraw your offer.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website http://www.orlowskywilson.com

Happy New Year From Orlowsky & Wilson

From All of us at Orlowsky & Wilson we wish you a Happy and Healthy New Year. Should you need any legal services for Estate Planning, Wills & Trusts or Taxation please contact Alan Orlowsky by calling 847-325-5559. Have a safe and healthy New Year.

Can you pass the "Asset Protection Planning Stress Test?"

Let's Talk About...... Passing the Asset Protection Planning Stress Test
By: Alan Orlowksy

Can you pass the Asset Protection Planning Stress Test? 

As an Attorney with over 30 years experience practicing law, on a regular basis I am still challenged by the same common legal mistakes and omissions well educated, fore-warned and intelligent individuals just like you make because they fail to plan for business failures, law suits, illness and, inevitably, death! Of course, there are always new wrinkles to the challenges I face, but the theme never really changes ~ people just fail to plan and often with devastating financial and personal consequences. I advise my clients that it is better to pay a little now than to wait and pay and, perhaps, a successful adversarial party, a whole heck of a lot more when things head south and explode in their faces!

Fortunately for my clients, whether that client is a business or an individual, I am on a mission to protect them (as well as the general public) from the consequences of failing to engage an attorney in order to plan for the future. Consequently, I have created a short, one minute "Asset Protection Planning Stress Test" to help save and protect them from the vagaries of an uncertain world. Accordingly, following below are 10 questions that if read and answered properly will help you to determine if you have the legal firewalls, belts and suspenders needed to protect your business, your personal wealth and family from the unintended consequences of poor or no planning. 


If you can to score 100% on the questions below that pertain to your situation to YOU PASS THE TEST! This may seem unfair, but frankly, it is the standard I am judged upon and the only standard that insures that my clients will be protected if and when things head south. After all, you hire a consultant to give you the correct answer 100% of the time ~ 90% just doesn´t cut it in the real world! To take the test, please continue reading the questions below and remember to answer honestly. This is your future.

Asset Protection Planning Stress Test

1. If you own a corporation, does your corporate record book include by-laws, shareholder and board of director minutes, stock certificates, ownership ledgers, recorded articles of incorporation and annual minutes?

2. If you have an LLC do you have an LLC minute book which includes an operating agreement, up to date member resolutions, articles of formation and membership certificates?

3. If you have employees does your business have an employee handbook?

4. If you have a business partner or partners, do you have a buy/sell agreement funded by life insurance?

5. Do you have a business succession plan or exit strategy if something should happen to you or if you want to retire?

6. Have you had a recent audit of your business and/or personal insurance needs and requirements completed by an outside expert to insure that all your insurance needs are taken care of and that you are paying the lowest prices offered in the marketplace?

7. If you are married, does your spouse own at least one-half of your personal assets?

8. Do you have a personal umbrella policy?

9. If you have a business failure do you have a plan to save your residence and other personal assets?

10. Do you have an up to date estate plan with a current will, revocable trust, health care power of attorney, durable power of attorney and life insurance trust?

What was your score?

If you did not pass the test, contact Orlowsky & Wilson so we can assist you in setting up your future the way it should be.
www.orlowskywilson.com 


If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

Avoid Probate with a Good Estate Plan

Let's Talk about Avoiding Probate with a Good Estate Plan
By Alan Orlowsky

It is important to go about proper estate planning in order to avoid potential probate issues. Probate is a legal document. Receipt of probate is the first step in the legal process of administering the estate of a deceased person, resolving all claims and distributing the deceased person's property under a will. Probate is required to make sure that descendant estates are in accordance with inheritance laws. The simplest way to avoid probate it to consult with an experienced estate planning attorney.

Avoiding probate can save money, time and can help avoid family disputes caused by a will. The essential things that everyone should do regarding establishing a proper estate plan are:

• Creation of a Last Will and Testament
• Creation of a Living Will
• Appointing a Power of Attorney to a reliable individual
• Consult a experienced Estate Planning Attorney

Power of Attorney allows another person to act on your behalf if you are unable to make decisions regarding your health care. The person you designate with Power of Attorney can make decisions in your best interests for such things as life support, organ donation, and resuscitation orders. This person can also pay your bills, transfer titles property and other legal issues regarding your estate. Choosing the right person is key factor in avoiding probate.

Creating a Last Will & Testament and a living will allows you to designate a estate administrator. The duties of this individual depend on the state of matters including estate value, inheritance, property and family disputes. If a will is contested and estate settlement can be drastically prolonged and may substantial legal fees and can eventually bankrupt the estate, leaving nothing for the heirs to inherit. Having these in place and current is an easy way to avoid probate.

Finally, choosing an experienced attorney can assist you in the entire estate planning process. The right attorney makes all the difference and setting up your estate before its too late is the best way to avoid any additional hassles and costs. Should you have any questions regarding setting up an estate plan or re-examining your current estate feel free to contact Orlowsky & Wilson.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

Avoiding Family Disputes Over Personal Property

Let's talk about.....Avoiding Family Disputes over Personal Property

By Alan Orlowsky

It is quite often the personal property that causes the most heartache and disruption in families after a death. Money doesn't usually have any sentimental attachment, but personal property can have a perceived value far beyond its actual monetary worth. For example, there may be souvenirs from family vacations, various collectibles, or other items of sentimental value that are impossible to divide or duplicate, and can be left out of a will entirely. It’s helpful to discuss these things ahead of time, so you have a clear understanding of who wants what, and can anticipate and avoid problems after you’re gone.

Generally speaking, personal property is distributed under the laws of the state in which the decedent was a resident on their date of death. Real property (real estate), on the other hand, is subject to the laws of the state in which it is located. If you have significant personal property located outside of your official state of residence, distribution can be confusing. For example, if you own a Steinway piano that is located in your vacation home, the vacation home and the Steinway piano will be treated differently.

Personal property such as jewelry, antiques, artwork, family heirlooms, and household effects can be passed on to your beneficiaries through a specific bequest: “I leave my Ming Vase to my sister Betty.” But for most people, it would be overwhelming to try to inventory and choose a beneficiary for every last item you own. Instead, it is common to use a separate “Personal Property Memorandum” that is attached to, and incorporated by reference into your trust.

The memo is generally a handwritten or typed list of your bequests to family or charities, which is signed and dated by you. They could cover each personal item that you own, but typically include only those items of financial value or of strong sentimental value – the types of things that could lead to disagreements among the heirs.

The benefit of a memo is that it can be easily changed if you sell something, give it away during life, or change your mind about who should receive it after you’re gone. You simply throw the old memo away and replace it with a new one. Each personal property memorandum should be dated, and the trust should contain instructions that if more than one memo is discovered after your death, the one with the most recent date is binding.

Of course, you should also provide for personal property that is not specifically listed on the personal property memorandum. Over the years, parents have come up with interesting ways to distribute personal property items that aren't the subject of specific bequests. They might instruct the executor or trustee to divide Monopoly money among the children, and let them “bid” on the remaining items. Or they might say that each child can choose one object, starting with the oldest and moving to the youngest (or vice versa), until all items are accounted for. Anything that is not selected can be given to Goodwill or the Salvation Army, or be included in an estate sale.

Most trusts will state that the trustee can dispose of personal property equitably to the beneficiaries, and if they can’t agree on the disposition, the trustee can sell the items and split the proceeds of the sale according to the trust distribution plan.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

Are Attorney Fee's Tax Deductible?

Let's Talk About.....Are Attorney Fee's Tax Deductible?
By Alan Orlowsky

If you haven't been there yet, and without jinxing your luck, the odds are good you're going to need legal advice some day. Maybe you're thinking about a divorce, or you need help writing a will or setting up an estate trust. Regardless of why you need an attorney, you're going to have to pay for the lawyer's legal services. Can you take a tax deduction for those attorney's fees? Usually not, but there are some exceptions.

General Rules

The general rule is simple enough: You can deduct attorney's fees you pay for:

• ·     Trying to produce or collect taxable income
• ·     To help in determining, collecting or getting a refund of any tax

In simple terms, you can take a deduction if you need an attorney's help to make money you have to pay taxes on, or if an attorney helped you with a tax matter, like representing you in an IRS audit. If the legal fees are somehow connected to taxes or taxable income, you can take a deduction.

Is There a Deduction?

There are all kinds of situations that qualify for the tax deduction, such as fees you may pay for:

1. ·     Tax advice you may get during a divorce case, such as how you and your ex-spouse will take deductions for home mortgage interest or child care, or whether alimony is tax deductible by the payor spouse or taxable income to the recipient spouse
2. ·    Trying to get your ex-spouse to pay past-due alimony
3. ·    Defending a lawsuit filed against you on work-related matter, such as an unlawful discrimination claim filed by a former employee that you fired
4. ·     Receiving your share of a class action settlement in a lawsuit against your employer or former employer. For example, your former employer settles a class action claiming that it didn't pay overtime wages. You get a $1,500 check for your share of the settlement, but $2,000 is reported to the IRS as income because you're charged $500 as your share of attorney's fees. Because the income is work-related, you can take a tax deduction for the $500 in fees

Generally, you can't deduct fees paid for advice or help on personal matters or for things that don't produce taxable income. For example, you can't deduct fees for:

• ·    Filing and winning a personal injury lawsuit or wrongful death action - the money you win isn't included in your gross income and so it's not taxable
• ·     Settling a will or probate matter between your family members
• ·     Help in closing the purchase of your home
• ·     Defending you in a civil lawsuit or criminal case that's not work-related, such as defending you on a drunk driving charge or against a neighbor's claim that your dog bit and injured her child

How and How Much?

Generally, you deduct attorney's fees as an itemized miscellaneous deduction on Schedule A of your Form 1040 tax return. You may not be able to deduct all of your fees, though. Miscellaneous deductions are limited by the two percent rule: You can deduct only the amount of your miscellaneous deductions that's more than two percent of your adjusted gross income (AGI) - the amount you entered on line 38 of your 1040.

Have a Business?

As a business owner, you can take a deduction for the same things discussed above. If you pay an attorney to prepare your taxes or to help the business make money, you can deduct the fees. For example, you can deduct fees paid for:

• ·    Collecting money that's owed to you by a customer
• ·     Defending you or an employee in a lawsuit over a work-related claim, such as a discrimination lawsuit filed by a former employee
• ·     Negotiating or drafting contracts for the sale of your goods or services to customers

Also, you can usually deduct attorney fees you paid in connection with starting up your business or buying an existing business. Generally, you deduct these business-related expenses the same way you deduct other ordinary and necessary business expenses. You need to file Schedule C with your 1040 tax return.

Check with Your Lawyer

If you're concerned about whether you'll be able to deduct attorney's fees, you can always ask your attorney - before they do any work for you - and if any of the fees they charge are tax deductible.

Also, ask your attorney to prepare a billing a statement that shows clearly what part of her fees is deductible. So, for example, if you're involved in a divorce, your lawyer's billing statement should show how much time she spent working on how the divorce will impact your taxes. It should be separate from the other non tax divorce issues, like the time spent drafting the divorce papers.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website at http://www.orlowskywilson.com