Buying a foreclosure from the bank requires caution

Q. We have been looking at bank-owned properties to purchase our first home. We have had some people tell us not to buy these types of properties because the banks are not fair when dealing with buyers and take advantage of buyers. Is this true? Are there things we should look out for if we decide to purchase a bank-owned property? Or, would you advise us to stay away and just buy from a regular seller?

A. In many cases, banks sell properties they have acquired through foreclosure, deeds in lieu of foreclosure or other means at discounted prices. There are, however, elements of a bank sale that are different from a typical buyer/seller transaction. Some of these differences are:

1. The bank will seldom provide a survey. You must check with your lender to see if they require a survey (most don't). If you want a survey, you will have to order one and your cost will generally be between $300 and $400. Without a survey, the title company will not offer "extended coverage" over issues that a survey would disclose, such as encroachments or easement and building-line violations.

2. Real estate taxes are prorated at 100 percent, rather than the more customary 105 percent. This means if taxes go up during the year you purchase compared to the prior year, you would end up eating some of the seller's tax obligation.

3. The bank makes absolutely no representations regarding the condition of the property. If the roof leaks two days after you buy or the furnace doesn't work, you cannot go back to the seller to seek relief. If there are building code violations affecting the property, too bad. Make sure you perform a thorough home inspection. Also, any personal property located at the house when you made your offer is usually not part of the contract. Most likely the personal property (appliances, window treatments, other unattached items) will be there when you take possession, but the seller is not legally required to convey these items to you.

4. The seller will not, in some cases, pay the state and county transfer taxes, normally a seller expense. In the event this expense is passed on to you, you will pay $1.50 per $1,000 of sales price. For example, the state and county transfer tax on a $200,000 property is $300.

5. If the property is a townhouse or condominium, you may be required to pay up to six months of association dues.

6. The seller makes no representation regarding tenants. Make sure no one is living there.

There are additional issues to consider. Contact a real estate attorney for further details.

Q. My lease was up last February. I have continued to live at the apartment and have paid the same rent. Within the last few days, I told the owner I was going to leave Sept. 30. He told me because I stayed past the written lease "end" date, I was committed for another year. Is this true?

A. Generally, no. Unless there is specific language in the lease addressing this issue, you became a month-to-month tenant starting March 1. Either party may terminate a month-to-month tenancy with at least 30 days notice. To terminate your tenancy Sept. 30, give written notice of your intentions to the owner on or before Aug. 29. I might also suggest having someone witness your tendering of the notice.

• 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.