What is a Good-Faith Estimate?

When it comes to securing a loan, the good-faith estimate is a three-page form. The good-faith estimate is primarily used to encourage price shopping when it comes to mortgage loans and settlement services, enabling you to determine the best mortgage deal for you.

In terms of content, the form displays the loan terms and settlement charges you will pay if you decide to proceed with a given loan. Furthermore, some charges can be changed prior to the loan's beginning, whereas others must remain the same. The most helpful feature is the "shopping cart" on the form, allowing you to instantly compare multiple loans and settlement costs.

Ultimately, the good-faith estimate may be provided by either a mortgage broker or a mortgage lender. Prior to receiving the report, the loan originators can only charge you for a credit report.
That said, they are unable to charge you additional fees, such as appraisals and inspections prior to the estimate.

For the loan originator to provide a good-faith estimate, he/she will need the following:

• Name
• Social Security Number
• Gross Monthly Income
• Property Address
• Estimated Property Value
• Prospective Amount of Mortgage Loan

For more information on good-faith estimates, contact Michna Law Group by phone at 847.446.4600 or by email at BJM@MichnaLaw.com.

Illinois Real Estate Market - June 2017

Spring and summer are generally Illinois' meat and potatoes when it comes to performing real estate transactions. While this past winter was slow, the market saw a great uptick once springtime arrived.

As a whole, June 2017 home sales saw an increase from June 2016. According to the Illinois Association of Realtors, sales are up 0.3% year-over-year, going from 19,001 to 19,066.

The story is even better for Chicago. The Windy City jumped a full percentage point from 2016 to 2017. One year ago, 13,916 homes were sold, whereas 14,052 were sold this year.

But there is a downside. Illinois home inventory saw a 14% decline from June 2016 to June 2017 as there are now only 59,088 homes for sale (from 68,720).

In response to this, Geoffrey J.D. Hewings, Director of the Regional Economics Applications Laboratory at the University of Illinois said,

"While the housing market continues to record gains in prices and sales, the inventory problem remains an important issue. Hopefully, now that the state has a budget, a recovering state economy will encourage more investment in housing – both new construction and investment by first-time buyers."

In addition,  Matt Silver, President of the Chicago Association of REALTORS® and Partner at Urban Real Estate.

"In June, the market exhibited a bit of a holding pattern. Inventory was a
contributing factor, as once you sell your home, you’ll need to then buy another – so, sellers are being firm on their pricing, and while some buyers are willing to wait for their perfect home, other motivated buyers are driving down the time on market. As the weather continues to heat up, people will get down to business, provided the price is right."

For more information on Illinois real estate, contact Michna Law Group by phone at 847.446.4600 or by email at BJM@MichnaLaw.com.

Protection for Home Buyers

Due to federal law, home buyers are protected by certain provisions during the loan process and the loan servicing process following a settlement. The circumstances in which your protected are widespread.

Some of them include:

• Your lender overcharged you during settlement without reimbursement.

• A settlement service paid or received a kickback for a business referral.

• You were mandated to use a company affiliated with your real estate agent, builder, or originator.

• Your loan servicer failed to pay your taxes or insurance premiums in a timely manner.

• You don't receive a response from your loan servicer regarding a request for information or a reported error.

• You were charged for insurance you don't need or overcharged for force-placed insurance.

For more information on real estate law, contact Michna Law Group by email at BJM@MichnaLaw.com or by phone at 847.446.4600.

2017 Real Estate Trends

Fortune Finance recently published an article detailing real estate trends that will be on the rise throughout the next year. They entail the following:

1. Rising Rates


2. More Credit


3. More New Homes


4. The Continued Rise of Medium-sized Cities


5. Foreign Buyers Aren't Going Away

But how do these coming trends affect you? Let's go down the list.

1. With rising interest rates, there seem to be two separate mentalities: A) When rates rise, income rises so the housing marketing will be just fine, and B) Rising rates don't equate rising income levels, harming home-buying ability. In an article by CNBC, Doug Duncan, Fannie Mae's chief economist said, "If interest rates are rising because the economy is growing more rapidly, then, typically, incomes also rise, and the rise in incomes offset the increase in the size of the mortgage payment, and housing goes just fine." But what if income levels don't increase? After Donald Trump's presidential victory, Fortune also reported that "The increase in purchase activity was driven by borrowers seeking larger loans and that drove up the average loan amount on home purchase applications to $310 thousand, the highest in the survey, which dates back to 1990."


2. In the face of rising interest rates, loan borrowers are seeing additional credit granted. In 2015, Barack Obama's administration lowered its fees for first-time homebuyers and "the Federal Housing Administration will likely lower fees it charges first-time homebuyers" moving forward. As an added bonus, Yahoo! Finance reports that Federal Housing Administration loans come with three key benefits, including easy qualification, competitive rates, and low fees.


3. Because of the rising finances, the creation of homes is following suite, allowing for an economically feasible real estate market. Fortune reports that "average annual rate of new groundbreakings reaching a 1.163 million rate so far in 2016, up about 5% from 1.108 million in 2015". This allows for a greater selection of properties when considering purchasing that first home.


4. While large-scale metropolitan cities may contain the highest-paying jobs in the country, it's actually the medium-sized cities that provide affordable housing. This stems from a basic supply-and-demand model with the larger cities unable to keep up with new homes to meet those flocking from around the world.


5. Foreign buyers, particularly those from China, are seeking high-priced homes in large, metropolitan cities. While this trend will be least likely to directly affect you, "U.S. and Europe continue to attract growing amounts of foreign capital", which will in turn, further develop the housing market and U.S. economy as a whole.

While these trends are said to characterize the pending real estate market, Michna Law Group can help you protect your interests with its title insurance and escrow services. For more information on how we do just that, please contact us via phone at 847.446.4600 or via email at BJM@MichnaLaw.com.

Zillow "Zestimate" in Trouble?

Although they say, "Any press is good press," Zillow hasn't received "good press" as of late. Back in May, a class action lawsuit was filed against Zillow.

The claim alleges that Zillow's Zestimate system, their platform for providing home valuation estimates, is inaccurate. If the inaccuracy is proven in court, damages can be award to the plaintiffs on the grounds that this inaccuracy hurt their bargaining position, and in some cases, sales price, during home closings.

In response to these claims, the Chicago Tribune writes, "Zillow has stressed that its Zestimates should be used as a starting point for what a property is worth." So instead of home sellers and home buyers basing their actual pricing on a Zestimate, they should merely factor it into play, along with other variables affecting a home's valuation, such as recent improvements.

But a more long-term solution may be available.

The Motley Fool writes, "The company is looking to crowdsource an improvement to the accuracy of its "Zestimates" just weeks after a class action lawsuit was filed over the flaws in its proprietary algorithms."

By doing so, this would be the first time Zillow is releasing a portion of its proprietary data available to non-Zillow employees. While this obviously can be risky, the one million dollar payout would be rather difficult to turn down.

For more information on Chicagoland real estate closings, contact Michna Law Group by phone at 847.446.4600 or by email at BJM@MichnaLaw.com.

The Illinois Budget Crisis Continues...

Throughout his term, Illinois Governor Bruce Rauner has continually emphasized the high property taxes assessed to Illinois residents. Yesterday (May 31st, 2017), the Illinois State Senate passed a measure to enact a two-year cap on property taxes.

While initially, this sounds like a pro, the Illinois House of Representatives still needs to vote on the issue at hand. Currently, it's unlikely that the House passes the budget with the property tax freeze intact. But Crain's Chicago Business states that "The freeze is like that old Mary Poppins song, "A Spoonful of Sugar." It helps the medicine go down, although definitely not in a "most delightful way." There are undoubtedly other issues which could help make a tax hike more palatable, but we're stuck with this one because the governor is so adamant about a win on this topic."

The eponymous "sugar" is to counteract an increase on Illinois income taxes. To elaborate, the Chicago Tribune illustrates that "House Democrats are united in their opposition to making the income tax hike retroactive to Jan. 1 of this year as the Senate called for. If lawmakers approved a higher rate starting at the first of the year, Illinoisans would have more money withheld from their paychecks to cover income from the first several months of 2017. The biggest question that remains, however, is what kind of tax proposal House Democrats could get behind, and whether they would be willing to pass it without Republican support."

However, Illinois is in a Catch-22. Illinois heavily relies on taxes for funding and education funding has been cut through budget mismanagement. Critics have claimed that the Illinois property tax freeze is an answer to the increase in income taxes, which itself is an answer to underfunding for education.

The Chicago Sun-Times writes, "Yet of all the money actually spent on public education in Illinois, this state contributes only 26 percent. Since state lawmakers have deliberately failed to adequately fund education, as directed by the Constitution, property taxpayers must pick up 67 percent of the cost."

Will Illinois resolve the two-plus-year-long budget crisis? Time will tell.

For additional information on real estate law, please contact Michna Law Group by phone at 847.446.4600 or by email at BJM@MichnaLaw.com.

Which Trust Fund is Right for Me?

Last week, Michna Law Group discussed the "Basics of a Trust Fund". In that article, we covered the two primary types of trust funds: a living trust and an after-death trust. As a quick recap, here are the differences between the two:

Living (Inter-Vivos) Trust

• Activated during grantor's lifetime
• Assets distributed to beneficiaries upon grantor's death
• Revocable or irrevocable
• Avoids probate

After-Death (Testamentary) Trust

• Activated after grantor's death
• Considered part of a will
• Reviewed in probate court prior to asset distribution
• Revocable during grantor's lifetime

In addition to inter-vivos and testamentary trusts, there are numerous other types. Today, we will examine the following trusts:

• Asset Protection
• Charitable
• Constructive
• Special Needs
• Spendthrift
• Tax By-Pass
• Totten

Asset Protection Trusts

Often (but not always) set up in a foreign market, asset protection trusts are created for the purpose of protecting assets against the threat of creditors. To ensure that the grantor is not a current benefit, these trusts are typically set for a number of years. After the trust's term is up, the assets can be returned to the grantor, assuming that the grantor isn't under attack by creditors.

Charitable Trusts

Set up to benefit the general public or a specific charity, charitable trusts can also be used as a strategic tool for financial planning. This trust is typically set up as part of an estate plan, permitting the avoidance of estate or gift taxes. Not only does this offer tax benefits for the grantor and his/her heirs, the grantor's altruistic gesture is typically recognized by the charity of choice. While these trusts are primarily irrevocable, grantors can establish a revocable version until his/her death. 

Constructive Trust

The only "implied trust" on this list, constructive trusts don't require a formal establishment. Instead, if a person's intention is to distribute assets to another, a court may recognize that a trust was, in fact, created.

Special Needs Trust

A special needs trust is created mainly to provide the beneficiary with additional assets, such as an inheritance, while simultaneously maintaining said beneficiary's eligibility for government benefits. In many instances, this is a necessity because receiving a large sum of money can disqualify the beneficiary from government benefits. Because the beneficiary receives government benefits, he/she can not act as trustee. However, the beneficiary can be the grantor of the trust.

Spendthrift Trust

Similar to an asset protection trust, a spendthrift trust is set up to protect the beneficiary from having to give assets in the trust away to creditors. Once the trust's assets are distributed to the beneficiary, they are no longer protected against creditors.

Tax By-Pass Trust

A tax-by-pass trust is a legal way to avoid federal taxes. The purpose of this trust is for a spouse to leave the other spouse and their children with tax-free assets, Without this type of trust, assets are tax-free for the children up to a certain legal limit. Any money over that limit can be heavily taxed by the federal government, leaving children to pay thousands of dollars in taxes.

Totten Trust

The final type of trust that we're going cover is a totten trust. This trust provides many of the same benefits as an inter-vivos trust, including its revocable nature and the allowance of assets to avoid probate upon distribution. That said, totten trusts can't be used with a property. Alternatively, totten trusts are primarily used for financial accounts and securities.

Summary

As you can see, there is a type of trust for virtually any circumstance. The wide variety allows people to structure their assets in a way that's most beneficial for them. To have a conversation with a trust lawyer, please contact Michna Law Group by phone at 847.446.4600 or by email at BJM@MichnaLaw.com.