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Is it Legal in Illinois when Doing a Contract for Deed to Have the Buyer Pre Sign a Quit Claim Deed?

Discussion in 'Quitclaim Deeds' started by John Carson, Jul 12, 2018.

  1. John Carson

    John Carson Law Topic Starter New Member

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    Jurisdiction:
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    My wife and I found a very nice property that an owner was willing to sell to us with a contract for deed. All the terms of the contract looked reasonable except the fact that we had to sign this quit claim deed on the property at the same time we signed the contract for deed essentially signing away the property back to the seller before we even made our first payment on the house. We are wondering if we should do that or not. Conceivably, we could make five years of on time payments and then be late with one payment and the seller could sign his half of the quit claim deed and take back our property without having to go through a foreclosure process. That does not sound fair to me and my wife but he is trying to do that to us and insists he does it with all the people that buy houses from him on contract for deed. Something does not sound right about this and we are just trying too find out if he is allowed to do that in Illinois. It is really a nice house that we are trying to buy but this quit claim deed on the property he is trying to makes us sign right now does not make sense to us, sounds very tricky. We do not know what to do and our attorney is trying to find out if this is legal or not but so far he has not come up with anything definite.

    In this contract for deed we are about to sign, if we default on the contract for any reason during the term of the contract the seller would then have the right to take back the property from us by signing his name to the quit claim deed already signed by us. This would bypass any costly and time consuming foreclosure proceeding that would ordinarily have to occur if there was no pre signed quit claim deed in place. Is this legal in Illinois? The attorney for the seller would supposedly hold the pre signed quit claim deed in escrow to be executed by the seller at the appropriate time under the proper circumstances, whatever those might be. In many states this practice of having pre signed quit claim deeds in contracts for deeds is not allowed. We are wondering if this is allowed in Illinois. Thank you.
     
  2. army judge

    army judge Super Moderator

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    Do you know what a contract for deed is?

    What is a Contract for Deed?

    A Contract for Deed is a way to buy a house that doesn't involve a bank.

    The seller finances the property for the buyer.

    The buyer moves in when the contract is signed.

    The buyer pays the seller monthly payments that go towards payment for the home.

    Once the house is paid off, the buyer gets the deed recorded in the buyer's name.

    A contract for deed is commonly used by people who cannot get a traditional mortgage.

    However, a contract for deed gives the purchaser far fewer rights and protections than a mortgage.

    It would be in your best interests to talk to a lawyer if you are considering a contract for deed.

    There are far fewer protections if the person carrying your note dies, goes bankrupt, gets very ill, gets arrested and imprisoned, or anyone of a thousand other negative things intervene.
     
  3. army judge

    army judge Super Moderator

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    As I replied above, this is another of the thousands of things I didn't mention.

    In fairness, an arrangement such as the one you're considering is just a lease purchase option.

    These arrangements are far too speculative for me to ever endorse.
     
  4. army judge

    army judge Super Moderator

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    What is needed for a Contract for Deed?
    You must get a written contract that is signed and notarized by both parties. The contract must clearly state the following information:

    Buyer's name
    Seller's name
    Legal description of the property or address of the property
    Permanent index number (PIN)
    Price
    Amount of the down payment to be applied to the price, and the resulting principal to be paid on the loan
    Interest rate (expressed as an annual percentage rate)
    Monthly payment amount
    Late payment fees and grace periods
    Length of the loan in years and months
    Number of payments required
    Whether a lump sum ("balloon") payment is due at the end
    Who will pay real estate taxes and insurance, and whether or not they are included in the monthly payment
    Amount of insurance and property taxes for the first year
    Statement that the amount of taxes and insurance may change each year
    Fair cash value according to the property tax bill for the prior year
    Assessed value according to the property tax bill for the prior year
    Amount of real estate taxes for the prior year
    Amount of unpaid property taxes
    Annual insurance payment amount for prior year
    Type of insurance coverage to be required or provided
    Seller's interest in property being sold
    Any known limitations on the property (such as liens or mortgages)
    Statement about when the buyer will obtain the title
    Statement about who is responsible for making and paying for repairs
    Statement about what changes to the property must be approved by both buyer and seller, including requirements to provide permits, insurance and lien waiver agreements
    Due dates of additional charges or fees due at the date of sale or at a later date
    An amortization schedule
    Certificate of compliance with the building code
    Statement about the buyer's right to an inspection, which shall state in substantially similar form, in large bold font: "NOTE TO BUYER: BEFORE SIGNING THE CONTRACT THE BUYER HAS THE OPTION OF OBTAINING AN INDEPENDENT THIRD PARTY INSPECTION AND/OR APPRAISAL SO THAT THE BUYER CAN DETERMINE THE CONDITION AND ESTIMATED MARKET VALUE OF THE RESIDENTIAL REAL ESTATE AND DECIDE WHETHER TO SIGN THE CONTRACT."
    Statement that property was condemned if it applies, following the language in 765 ILCS 67/26.
    Statement about what happens if buyer defaults in payment, outlined in 765 ILCS 67/28.
    The requirements listed above cannot be waived by the buyer or the seller.

    Note: The seller must provide the buyer a copy of the Illinois Attorney General's disclosure (
    http://www.illinoisattorneygeneral....e_to_Buyers_Installment_SalesContract Act.pdf ).

    They must do this at least 3 business days before the contract is signed.

    There is a cooling-off period for these types of contracts of three (3) business days, meaning the potential buyer is not required to close or proceed with the contract until that time has expired.

    Buyer may cancel the contract after signing within these three (3) business days.


    The seller must record the contract or a memorandum of the contract within 10 days of the date of sale. They must do this at the county recorder of deeds where the property is located.

    If recording a memorandum of the contract, the memorandum must have the title "Memorandum of an Installment Sales Contract" in capital letters. The memorandum must include the following information:

    Address of the property
    Permanent index number
    Legal description of the property
    Buyer and seller names
    Date the contract was executed
    Notarized signatures of buyer and seller
    Recording the contract helps protect you. It preserves your rights in public record as to what you have agreed per your contract and prohibits sale to another purchaser. You have the right to cancel the contract if the seller does not record the contract or a memorandum of the contract.

    You should still record the contract even if it states it "cannot" be recorded. Any provision in the contract that "forbids" you to record the contract is void. The Contract for Deed cannot prohibit you from recording it.


    Changes in Illinois Law Regarding Installment Contract Purchases of Real Estate



    Illinois Laws on a Contract for a Deed



    Risks and realities of the contract for deed | Federal Reserve Bank of Minneapolis




    http://housingactionil.org/2017/06/...-homebuyers-passes-illinois-general-assembly/




    .........................
     
  5. John Carson

    John Carson Law Topic Starter New Member

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    Yes, we are aware of all that, but can someone makes us sign over the house to them before we even make the first payment on it. A typical contract for deed has no pre signed quit claim deed attached to it. I read somewhere it is illegal in some states to do this but it did not mention Illinois. The seller is using a pretty sophisticated way of making it very easy, quick and inexpensive for him to take back the house from us at practically any time he wants if we mess up in any way. Foreclosure laws and proceedings are set up to give a buyer a chance at saving his house, what this seller is doing to us is taking away all those protections inherent in the foreclosure laws of Illinois.
     
  6. John Carson

    John Carson Law Topic Starter New Member

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    Interesting statement you made about lease option purchase being the same as contract for deed with attached pre signed quit claim deed, but it really is not. It made me think twice though.
     
  7. army judge

    army judge Super Moderator

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    If you agree to the scammer's demands, you'll assist the scammer in doing to YOU that which you surmise.

    No one is FORCING you to do anything.

    You are being given a choice to sign, which in my view would be very unsound financially.

    There are far too many risks for me in a deal such as you describe.

    If I were you, I'd simply say, "No thanks, signing a quit claim deed over to you wouldn't be a financially sound thing for our family. We must respectfully walk away, thank you."
     
  8. army judge

    army judge Super Moderator

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    I am NOT here to instruct anyone or debate the law.

    When I do debate legal issues, I do it in a courtroom or on retainer for a very handsome fee.

    You are fee to think whatever you conceive in your mind's eye, mate.
     
  9. John Carson

    John Carson Law Topic Starter New Member

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    I like the way you call it scamming, but is it illegal in Illinois? That is my question that remains unanswered, i would probably report him to someone if it was. By the way, we took your advice today and turned down the deal, my wife was disappointed but i explained to her the best i could what this guy was trying to do. I also went and did a title search on his name and company name and found that he and his company had recorded more than fifteen quit claim deeds from contract for deeds gone bad over the past ten years so that was enough for me to back out of it. Thank you.
     
  10. Highwayman

    Highwayman Well-Known Member

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    If you're attempting to buy a piece of real estate in an unconventional manner without the assistance of an attorney then you are a fool.

    You need to consult with a local real estate attorney.

    ETA: I see you have an attorney. You have no need for an internet forum. USE YOUR ATTORNEY.

    If you think it's wise to buy a house which the seller can take back at any time you're crazy.
     
  11. John Carson

    John Carson Law Topic Starter New Member

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    ev
    everything you say is true except for me not needing a internet forum if I already have an attorney
     
  12. army judge

    army judge Super Moderator

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    Only a court can adjudicate the legality of an issue in dispute.

    As far as purchasing a home other than by a conventional mortgage, it's a lease, no matter what the state or others call it.

    Yes, your state says it's legal, but your state says it's legal for them to TAX your wages.

    My state doesn't tax my wages or my income.

    As far as this dummy is concerned, taxing my income is stealing my income.

    To me, that's illegal, even if the government does it, too.

    Jesse James was a Saint, insofar as Uncle Sammy is concerned.

    If I have any doubts regarding anything, I refer to the thing as a scam.

    Yes, I may be paranoid, but I don't get scammed out of my money.

    Dad once told me, "If you have any doubts about buying a thing, don't buy the thing and keep your money!"
     
  13. John Carson

    John Carson Law Topic Starter New Member

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  14. army judge

    army judge Super Moderator

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    I can't read minds.
    If his track record shows that 10 people lost what money they paid, that would permanently make me BAN myself from being within 10 miles of that THIEF.

    Your state legalized or tried to clean this up.
    The info is in the links I posted.

    My guess is that people trying to own homes by the method you describe don't have the resources to sue even if they've been scammed.

    I doubt that any recent case law exists as the law was changed recently to prevent what the scammer was setting you up to be victim 11!!!
     
  15. John Carson

    John Carson Law Topic Starter New Member

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    on second thought, maybe a pre signed quit claim deed might be good for the buyer, at least in one way

    if the buyer defaults on the contract for deed by missing payments and all the seller has to do is sign his name to an already signed quit claim deed to get full title back, then there is no foreclosure process to go through and the credit rating of the buyer would be preserved, when a foreclosure is reported to the credit agencies, it can really end up hurting the credit score of the buyer

    so maybe pre signed quit claim deed is not so bad after all since the credit agencies may never hear about that defaulted on contract, the seller just moves on to his next victim without reporting anything to the credit agencies, why draw unnecessary attention to what he is doing
     
  16. John Carson

    John Carson Law Topic Starter New Member

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    Thanks, I just read for the first time that link you had sent in a previous message, for some reason i had missed that one, i just read it quick, will read it several more times, but that is exactly the type legislation we need to stop all these scams from happening

    Legislation to Protect Rent-to-Own Homebuyers Passes Illinois General Assembly | Housing Action Illinois

    and you are right i did not see anything about law being made to stop the specific scam we are talking about here, that is probably why my attorney had such a tough time with it, nothing out there exists on this type of scam, no law, no pending law, no court precedent, nothing and this guy just signed another one up a few weeks ago he said, he was not able to sell his house after listing it on the market with a real estate agent for a year so he told me he had no choice but to do this contract for deed with pre signed quit claim deed thing.

    I was just in one of his houses where he just had signed the quit claim deed taking back full title and kicking the buyer out, the house was totally trashed inside and out, the house was worth nothing so his scam backfired on him that time, he keeps doing it though, he said he would fix up that house like brand new again in three months, he will spend a lot of money doing it.

    You are so right about these victims not having the money to sue the seller and they also do not have the knowledge about what their rights are, totally vulnerable, classic example of predatory lending.
     
  17. army judge

    army judge Super Moderator

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    The bigger problem for any purchaser who gets duped into signing a quit claim deed occurs when the unscrupulous seller decides to execute the signed quit claim six months before the debt is paid in full, or after one year of payments, effectively skirting the law, quickly booting the duped buyer, and making a tidy profit for nothing.

    Don't allow anyone to scam you.

    If you have doubts, do NOTHING, walk away.
     
  18. John Carson

    John Carson Law Topic Starter New Member

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    I was still wondering about the legality of the seller making the buyer sign a quit claim deed. I found these three provisions in the new contracts for deed law passed in Illinois on January 1, 2018. I think all three provisions are violated to some extent when a seller makes the buyer sign that quit claim deed before the buyer makes his first monthly payment on the house.

    Section 45. Unlawful acts. It is a violation of this Act
    for either party to make an oral or written misrepresentation
    to the other party concerning a contract or regarding the
    rights or duties of either party under this Act or to induce
    either party to sign incomplete forms, contracts, notices, or
    written statements relating to the sale of residential real
    estate.

    Section 50. No waiver. The buyer or the seller may not
    waive any provisions of this Act by written contract or
    otherwise. Any contractual provisions or other agreements
    contrary to this Act are void and unenforceable.

    Section 55. Circumstances voiding mandatory arbitration
    provisions. A mandatory arbitration provision of an
    installment sales contract that is oppressive, unfair,
    unconscionable, or substantially in derogation of the rights of
    either party is void.

    I think the second sentence in Section 50 is especially applicable as "other agreements contrary to this Act are void" could be the quit claim deed the seller makes the buyer sign.

    Even the part in Section 45 is applicable where they say it is a violation "to induce either party to sign incomplete forms, contracts, notices, or written statements", the incomplete form or contract being the quit claim deed that only the buyer signs.

    So if the seller violates one or more of these sections with his contract for deed and quit claim deed arrangement, is he breaking the law or is it just that his contract for deed and quit claim deed are both invalid. Are there any legal consequences for doing invalid contracts for deeds? What is going to stop someone from continuing to do this type of contract for deed with a pre signed quit claim deed.
     
  19. army judge

    army judge Super Moderator

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    A contract isn't on its face violative of law.

    If one party violates the contract, it's a breach.

    My guess would be that the requirement to sign a quit claim violates the spirit, if not the letter of the new law.

    As a practical matter, signing such a document would be foolish.

    Even if it violates the law, litigating it civilly would be expensive, other than the IL AG, I doubt the issue would attract anyone to help you.

    Not signing it was wise, especially with the seller's history.
     
  20. John Carson

    John Carson Law Topic Starter New Member

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    "A contract isn't on its face violative of law."

    I guess it would depend on what the contract says. Would a signed contract to kill someone be violative of law on its face. Would a signed contract to take property away from someone in an unfair manner be violative of law on it face? I would think the answer to both questions is yes.

    "If one party violates the contract, it's a breach."

    Yes, this is well known fact.

    "My guess would be that the requirement to sign a quit claim violates the spirit, if not the letter of the new law."

    Big difference between violating spirit and letter of the law, violating spirit of the law gets you nowhere in the courtroom when it comes to prosecuting someone. You have to admit this is a pretty tough legal question. There is nothing in the literature on this specific issue.

    "As a practical matter, signing such a document would be foolish."

    I totally agree, but a lot of people out there are doing it and getting hurt by it. I was not sure myself whether I should sign it before I came to this discussion group.

    "Even if it violates the law, litigating it civilly would be expensive, other than the IL AG, I doubt the issue would attract anyone to help you."

    Some people out there are working on it, that is all I can say right now.

    "Not signing it was wise, especially with the seller's history."

    It may have been wise but not so easy to do when your wife really wants the house.
     

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