Top 5 Seller Debts that YOU could be responsible for After Closing - And how to Avoid them
Did you know there are fees, fines, and expenses that you could be responsible for when you buy a property that belong to the Seller that don’t show up on title? That’s right, a title report only shows items that show up in public record. It doesn’t show everything owed to a municipality. That being your city, village or town. Without a proper understanding of what does and doesn’t show up on title, you could be stuck paying for debts that attach to the property that were incurred by the Seller.
Today, I’m walking you through fees, fines, and expenses you could be responsible for when buying a property if the proper due diligence isn’t done prior to closing.
These fines typically don’t appear on the title when you buy a property. So, you could unwittingly be responsible for the seller’s debts after closing.
I’m a Chicago-based business and real estate lawyer, so these apply mainly to Chicago residential real estate properties. Your state could have different issues and laws.
Let’s look at the debts you could incur as a buyer:
The seller’s property fines
Many things could attach to a property. If a seller has incurred some violations or administrative fines, those could be transferred to you as a new owner of the property. Now, these could be as miniscule as weeds that grew too high or garbage dumping. But they typically won’t show up on the title.
The City keeps a record of what a property owes to the municipality. So, you must request a payoff letter from the city of Chicago. The letter will show any fines owed in that property, and it’s going to provide a link for the seller to pay them. Once the seller pays them, this will prevent any debt from transferring to you post closing.
Unclosed building violations
A lot of properties can have various types of building violations on them. While the work may have been done, they may not have been closed by the Building Department.
If you corrected a violation, you need to ensure that your case is closed on the website. As a buyer, you need to get the proper documentation to avoid paying someone else’s debt.
Building permits if rehabbed
Buying a rehabbed property can be amazing. But you also need to ensure that the seller secured the proper permits. Check with the city of Chicago Buildings Dept to see what building permits were pulled. Make sure that any work that the sellers said they did is according to the permit. Remember to request a copy of that approved stamped permit for your records.
The water bill
To sell any property in the city of Chicago, you need a water cert. This is issued by the Water Department to confirm that the water bill has been paid in full. You cannot record a deed without a water cert. But many people don’t know to request the water ledger.
Sellers could get their water cert months before the deal, meaning they’d be using water during that period. That won’t show in the water cert they provide. You’ll need a water ledger to determine the final bill and then request a credit for any outstanding water balance. A water ledger will also help you determine the type of credit for which to ask.
Zoning
Zoning doesn’t count as debt, but you need to make sure that you get the property for which you are under contract for and are paying for. If your purchase price is for a three-unit building, make sure that the zoning cert is for a three unit building and not two. You don’t want to be surprised that you just purchased a non-legal or non-conforming three-unit building. That can cost you dearly to de-convert the building or bring it up to code. You could also loose on your resale value if you find out when you sell that it a legal two-unit and not a three-unit. So, make sure you always get a recent zoning certificate.
I hope these tips help you on your journey to homeownership or property investment. I want my real estate experience to benefit you. So, if you have any questions, you can contact me at: www.enterpriseesquire.com/calendar and schedule a consultation.
