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

[John Carson]

Jurisdiction

Illinois

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.

 

[army judge]

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.

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.

 

[army judge]

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.

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.

 

[army judge]

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/




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[John Carson]

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.

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.

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.

 

[John Carson]

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.

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.

 

[army judge]

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.

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."

 

[army judge]

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.

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.

 

[John Carson]

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."

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.

 

[Highwayman]

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.

 

[John Carson]

ev

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.

everything you say is true except for me not needing a internet forum if I already have an attorney

 

[army judge]

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.

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!"

 

[John Carson]

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

Yes, i was hoping someone here knew of a court decision where they already ruled on this, my attorney had a tough time coming up with a definite answer to whether it is legal or not in my state.

"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."

Even a conventional mortgage is only a lease when you start to miss payments and the mortgage goes bad.

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

I do not know what my state says about the legality of my situation, could go either way, i need to find out more, there has to be a previous court decision somewhere on it.

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

You must live in Florida.

"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."

Not sure what you mean here and how it relates to my situation.

"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."

not all scams are illegal, my question is about the legality of it, is what this guy was trying to do to me and my wife illegal, i want to try and prevent this from happening again to someone else in my town, those fifteen quit claim deeds i saw during a title search on him show i was not his only victim

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

Good advice.

 

[army judge]

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!!!

 

[John Carson]

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

 

[John Carson]

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!!!

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.

 

[army judge]

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.

 

[John Carson]

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.

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.

 

[army judge]

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.

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.

 

[John Carson]

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.

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.

"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.