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Since the housing market crash in 2008, more and more people are choosing to buy on contract instead of seeking a traditional mortgage. What this means is buyers are choosing to live in a house while directly paying the seller a contract payment over time instead of paying the bank mortgage payments. As a result this also means that under some circumstances Illinois foreclosure laws do not apply and cannot protect the buyer in the event of default. If the contract buyer were to default the seller could evict the buyer without any compensation to the buyer even if significant repairs and improvements have been made to the property by the buyer. In this situation the buyer stands to lose out on a significant investment.

Public Act 100-0416, the Installment Sales Contract Act, which was recently signed into law, now attempts to protect these buyers. Now, if the buyer were to default, there is a requirement of a 90 day cure period in which the buyer has a chance to make any payments to that are due to the owner. Further, if there is ever a deficiency judgment against the buyer, the buyer may have the opportunity to claim credit for any maintenance and repair costs that the buyer incurred. In the event that 80% or more of the contract was already paid off the contract at time of default then the seller would be required to go through judicial foreclosure, as this bill also amends the Illinois Mortgage Foreclosure Law to cover any contract sale with 20% or less of the purchase price remaining. This act also requires the seller to record the contract with the state ensuring that the buyer will be protected under this act. If the seller does not register the contract within ten days of the sale, the owner has 90 days after discovering the failure to record to pull out of the agreement even if the contract has since been recorded.

Some people do not involve lawyers when they buy houses on contract, but Joseph Fortunato Jr., a lawyer quoted in the Illinois Bar journal, disagrees saying that “representation by lawyer in a residential real estate transaction is one of the few remaining bargains in our lifetime.” If you are buying a house on contract and need legal representation the law offices of McCarthy, Callas, & Feeney can help you at a very reasonable rate. Please call 309-788-2800 to connect with a real estate lawyer. The firm practices extensively in Rock Island, Moline, East Moline, and Davenport, Iowa.


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