Disguising sales price is akin to mortgage fraud
Q. We have been attempting to sell our house for more than a year. We were with a real estate broker but now we are running ads ourselves and have a sign out front.
Last weekend, a guy approached us and told us he would pay us about 95 percent of our asking price, which, of course, we would happily accept. He said, however, he needed to write the contract for $30,000 less than the price we agreed on. He promised to pay us the additional $30,000 in a separate check at the closing. He said he wanted to do it this way to disguise the actual sales price and keep the real estate taxes down. He told us he would also be getting a loan for about half the “real” sales price.
As desperate as we are to sell, this arrangement makes us nervous. Would we be breaking any laws by doing this? And how could we ensure that he would follow through with the additional $30,000 payment?
A. Space does not permit me to list the number of laws this would violate. Mortgage fraud is a hot topic these days. Don’t do it. In the event he decides to submit an offer, make sure you retain a real estate attorney to review it. This guy sounds just a little shady.
Q. My longtime tenant is now asking me if I will sell him the house he is living in under Articles of Agreement. He is suggesting he put down 20 percent of the purchase price and pay me the balance over 10 years. He says if he misses any payments, I can just file an eviction, kick him out and keep whatever he had paid up to that time.
I would love to sell the house but am not totally comfortable with this arrangement. It seems like it would be OK so long as I can get him out if he stops paying. Obviously I would hire an attorney if this goes any further, but I am curious as to your thoughts about his proposal.
A. Articles of Agreement are a valid and useful method for selling property. However, your tenant’s representations to you regarding terminating the agreement are not accurate.
As a general rule, if the purchaser under Articles of Agreement fails to comply with the terms of the agreement, the seller serves notice on the purchaser that in the event purchaser fails to cure the default within (usually) 30 days, seller will terminate the Articles of Agreement and retain all monies paid to that date. Once the 30 days runs and purchaser has not cured the default, seller files a simple forcible entry and detainer (eviction) action in the county where the property is located. So far, so good.
However, on transactions that exceed 5 years, once the purchaser has paid more than 20 percent toward the purchase price, this remedy is no longer available to the seller. The agreement now falls under the Illinois Mortgage Foreclosure Law, which is far more complicated and offers the purchaser far more remedies and options than would be otherwise available. Not only will the tenant have a right of redemption, which will last at least 7 months from the date you serve him with the foreclosure lawsuit, but he will have available numerous other options that have been created since the onset of the foreclosure crisis. On top of this, the attorneys fees will be far greater when you are required to foreclose a mortgage, rather than just evict a tenant.
Speak to a real estate attorney about your options. The last thing you want is a tenant/purchaser spending month after month in your property without paying anything and you being limited in the action you can take.
Ÿ Send your questions to attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to tdr100@hotmail.com or call (847) 359-8983.