Whenever you enter into a purchase and sale agreement in Illinois, whether you are a buyer or a seller, you will agree to an Attorney Review provision. To be sure, Illinois is somewhat unique in this way, and not many states require a lawyer for Real Estate contracts. To clarify, this article will inform you when attorney review/due diligence happens, what the attorney does and how to get the most for your money in your due diligence period.
First, attorney review is extremely important for your contract. As a buyer or seller, you will likely be handing over hundreds of thousands (if not millions) to the other side. If they are going to take that much from you; make sure there isn’t anything missing in your agreement! Your attorney will be reviewing the contract for any errors, omissions, or other mistakes in drafting. You can expect your attorney to make sure you are not being taken advantage of, and that everything is clearly defined. It is important to remember due diligence does not include a legal opinion on whether something should be included in the agreement itself.
I have included a copy of the standard contract here for you to follow along. Here, we will be looking at Article 10 (Line 135).7.0_MASTER__fillable_-3
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Why is there an Attorney Review Clause?
Illinois real estate contracts typically include an attorney review provision to provide an additional layer of protection for both buyers and sellers. This clause allows a specified period (usually five business days) during which the buyer’s and seller’s attorneys can review the contract and suggest modifications or even terminate the agreement without penalty.
The rationale behind this provision is rooted in the complexity of real estate transactions. The contract often involves significant sums of money and intricate legal terms. Hence, it’s crucial that both parties fully understand their rights and obligations under the agreement and any potential legal implications that could arise.
Furthermore, real estate agents, while experts in their field, are not licensed to practice law and may not be fully equipped to navigate the legal intricacies of the contract. The attorney review period allows for legal professionals to examine the contract in detail, ensuring that their clients’ interests are adequately protected and that the contract is compliant with all relevant laws and regulations.
How Long is my Due Diligence Period?
Nearly every contract for Residential Real Estate in Illinois includes a standard attorney modification clause. In the Multiboard 7.0 contract, it’s in Paragraph 10 for attorney review and Paragraph 12 for inspections. Specifically, this clause states that both parties have five business days from the signing to submit their attorney letters. For those five days, the attorneys can accept the sale contract, decline it, or propose modifications. Typically, the attorney proposes modifications, but we will get into that later.
Now, I have never accepted a contract without a change to benefit my client. Typically, I ask for small things, like more specific financing dates, FHA compatibility, or addenda about fixtures. We always add in some language about homeowner’s associations, flood damage, wholesaling, short sales and other risks that aren’t always disclosed by law. Also, we frequently specify the home warranty provider during this time. These small items are usually worked out in a few days.
Once we propose modifications to the contract, the other side has 5 more business days to agree or counter-offer. Exactly, this means that by the 14th calendar day from the day you sign, the contract is usually either in its final form or the sale fell through.
What does the Attorney Review in Real Estate?
Honestly, we do most of the work on the entire transaction during this period! In particular, we fix the contract to say what your lender or title company will need it to say. Moreover, we make sure that anything specific that you decided you wanted is now in the contract. Further, we can add clauses for more specific inspections, or pick a service provider, or even set the closing date!
Equally important, the attorney modification letter often includes the inspection letter. While I’ll get back to this in another post, the inspection letter is a list a professional helps your team prepare to fix everything that needs fixing. In attorney review, we are often making the property safe for you to purchase and move into!
How do I get the most out of my Due Diligence?
The most important thing to do is to talk to your attorney. Tell the attorney what you paid for the property! Also, tell us how much earnest money you put down. It is so important for us to confirm the dollars and cents before we do anything else.
Moreover, tell us anything that’s on your mind! If you need time to sell one home to afford another, let us know so we can make sure. Similarly, if you need two weeks to get good financing, let us know! Also, if you’re considering an as-is sale, or the property is subject to a homeowner’s association you should tell us that now.
In conclusion, while no contract is ever perfect, this is the process where we make it perfect for your needs. Attorney review is a must for any purchase and sale agreement. You should never enter into an agreement without attorney review! It’s the only way to ensure that you are getting what you paid for. As such, we always need to hear from our clients to learn what they need to make it work so we can help them get the best deal possible. Be sure to reach out early and often during your due diligence period.