ChicagoHomeBuyerCoalition.org

HOW TO AVOID A LAWSUIT AGAINST A DEVELOPER

After 10 years of a lawsuit against Bahary Development for fraud and defective construction, we finally settled. $200,000 later we end up with really nothing since now we have to rebuild the porch (condemned 4 years ago by the city) and build the parking. Right now condo owners have to park on the street.

 

In addition to that the value of the 12 condos  have gone down by at least 5% on the top of the general  price reduction due to a down market. 

 

So the question is: could I have avoided this nightmare?

 

At the time I was not a REALTOR so I did not know better. There are things I could have done if I had been guided correctly. I could have gotten a copy of the plans from the city and have an architect evaluate them.  In any case make sure that

 

1)   there won't be water intrusion.  For almost 2 years I had leaks in my bedroom to a point where I had to sleep in my living room  And I was not the only one with that problem.

 

2) the condo had reduced sound transmission.  Since most units were empty, there was no way to find out about sound problems.  But we discovered too late that there was no insulation between floors although we were told

there was..  Bring a friend and have him/her walk/talk in the unit above the one you want to buy and see if the sound is a problem.

 

3) to hire a structural engineer to check the building including the common elements and basement.  Such inspection is expensive but worth it if it will save you thousands of dollars later on.

 

4) to compare the original developer's plans with the one provided by the city: they should be the same. Many times a developer will cut corners during construction.  The plan should also be signed by a city inspector. 

 

5) to verify that all city inspections were done before, during and after construction. You can contact the city to find out.

 

6) to check the developer's history.  If units have been sold, talk to the new owners.

 

Remember until all units are sold the developer is acting as the Board of Directors for the association; a potential for conflict of interest.

Forrest David Laidley Charged with Allegedly Swindling Investors and Financial Institutions in a Multi-Million Dollar Fraudulent Financing Scheme

 

CHICAGO—A Libertyville, Illinois real estate developer, who offered and sold limited partnership interests and short term, high interest, guaranteed promissory notes to the public, was indicted by a federal grand jury yesterday and charged with mail fraud, wire fraud and bank fraud in connection with a scheme to fraudulently obtain, retain and use more than $10,000,000 from investors and financial institutions.

Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, announced the return of the fourteen-court indictment against Forrest David Laidley today. In doing so, they also thanked Lake County State’s Attorney Michael Waller and his office for their assistance in the investigation.

Laidley, 65, of Libertyville, Illinois owned and operated Forrest Properties Inc., which was engaged in the real estate development business in the northern suburbs.

According to the indictment, Laidley through Forrest Properties fraudulently obtained funds from investors, financial institutions and others by misrepresenting the expected return on investments, the risks associated with investments, his ownership of property, his ownership of loan collateral, his financial condition, the status of investments and the use of proceeds obtained. The indictment further alleges that Laidley commingled the fraudulently obtained funds and at times misappropriated them to make ponzi-type payments to investors, to repay delinquent loans including bank loans, to benefit unrelated real estate development projects and to benefit himself.

According to the indictment, as a result of the defendant’s scheme, limited partnership interest investors and promissory note purchasers lost over $8,000,000.

If convicted, each mail fraud, wire fraud and bank fraud count carries a maximum penalty of 30 years in prison and a $1,000,000 fine, or the Court may impose an alternative maximum fine totaling twice the loss or twice the gain, whichever is greater. The Court, however, would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.

The government is being represented by Assistant United States Attorney Edward G. Kohler.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the
burden of proving guilt beyond a reasonable doubt.

Department of Justice Press Release

July 23, 2009

Are Inspectons Necessary for New Constructions

There are different types of inspections for new constructions:

1) An inspection from start to finish, which can run in the thousands of dollars:

This inspection starts at the very beginning, even prior to breaking ground all the way to completion.

2) Mid-process inspections costing a few hundreds dollars:

This inspection, done at any time during the construction, covers all visible non-cosmetic items and systems, and applicable codes.

3) The final inspection for a few hundreds of dollars, takes place at the end of the construction.  Same as mid-process inspection.

4) One-year warranty inspections which takes place before the builder one year warranty expires. This inspection can help determine who is responsibie for any repairs that may not have been found during the previous inspections. It covers all visible non-cosmetic items and systems, and applicable codes.

HOMEOWNER'S INSURANCE FROM A LAWYER PERSPECTIVE

HOMEOWNER'S INSURANCE? GET A CLUE!

THE PROBLEM:

Your client's closing is scheduled for next week. You've reconfirmed the appointment with her and reminded her to buy homeowner's insurance and to bring the receipt to the closing. Panicked, she calls you back and reports that none of the half dozen agents she spoke with will sell her a policy. Now what?

The need for homeowner's insurance is a "no brainer". Even if your buyer doesn't want it, the mortgage lender is going to insist on it. But what happens if the house under contract is uninsurable? Insurance underwriters across the country are reevaluating the risks they are willing to insure against. As a result, many home buyers are finding that needing insurance isn't the same as actually getting insurance. This problem is very real and is is fast becoming one of the biggest traps for unwary buyers - and hapless sellers.

HOW BAD IS IT?

It's hard to feel sorry for 'em, but insurance companies claim they are in deep trouble: too many natural disasters; too many claims; too much money paid on those claims; poor returns on investments; 9/11.

The insurance industry tells us that it suffered nearly 9 billion dollars on home-related underwriting losses last year and that even premium increases of 40-200% cannot cover those losses. State Farm reported that it paid $95 million last year in Illinois alone for claims relating to ice damage in gutters and roofs. State Farm also claims that it paid $1.55 in claims for every $1.00 of homeowner's premium last year. For a time this year, it stopped writing new homeowners insurance in Illinois altogether (State Farm announced earlier this week that it would begin selling new policies again).

THE INSURANCE INDUSTRY'S RESPONSE:

Insurers are placing increased reliance on a national database that effectively blacklists homes and homeowners who have the nerve to actually ask them to pay out on a contract they sold! The Comprehensive Loss Underwriting Exchange (C.L.U.E.) run by ChoicePoint, Inc. has been tracking homeowner policy claims for about 10 years now. More than 90% of all insurance companies use it to share information.

Too many claims? Too much risk? Too bad - no more insurance. Homes that have been hit by water damage, storm damage, mold claims or burglaries are particularly vulnerable to rejection.

WHAT THIS MEANS FOR HOMEOWNERS/BUYERS

Homeowners with an unfavorable claims history may find it impossible to renew or replace an insurance policy. If insurance is offered, it will come at a price - steep premium increases.

Buyers who learn of insurance problems too late may wind up committed to a contract they cannot complete (how do you close on that mortgage loan without proof of insurance?).

Sellers whose homes are uninsurable may find that their homes have also become unsalable.

Without advance knowledge AND an insurability contingency, buyers face the risk of being unable to close the deal. Buyers and Buyers agents are urged to investigate this issue early on in the contract process.

FOUR WAYS TO HELP PROTECT YOUR CLIENTS:

• Ask the Seller for a C.L.U.E. report at the outset of the contract. Reports only cost $20 and can be ordered on-line.
• Promptly review the C.L.U.E. report with an attorney and insurance agent
• Make sure that the contract provides a C.L.U.E. contingency - so that the contract can be cancelled if a problem is discovered.
• Urge clients to shop for insurance among several companies to find the best premium and coverage available. (Don't assume all policies afford the same coverage; don't assume all companies charge the same rates)

YOUR NEXT STEP

Call 312-726-1512 or e-mail Mike Wasserman at info@wasserlaw.net if you would like a sample CLUE contingency form, or if you would like contact information to reach ChoicePoint

ABOUT CONCRETE

Concrete is a mixture of cement, sand, gravel, water...

Reinforced concrete includes wired mesh to avoid some cracking.

The concrete quality is relative to workmanship, stable base (consistency of concrete/good gravel material/good bearing soil),  drainage above and under, the final mixture of all the elements.

PRESSURE TREATED LUMBER

For rot to occur in wood, 4 elements must be present: temperature, oxygen, moisture, food source for living organisms. Pressure-treated lumber eliminates rotting and food source. The chemical most commonly used is chromated copper arsenate. For more information go to the American Wood-Preserver's Association.

TYPES OF RESIDENTIAL FOUNDATIONS

~Poured concrete (common);  

 ~Block for basement ;

 ~Pier for unstable soil / concrete with steel beam for soft underground; 

 ~Permanent wood foundation.

 The Primary foundation considerations are structural strength, dryness or water proof, energy efficiency. 

Typical Cost of a New Home

To understand how a new construction is priced, you need to know what are the costs involved. The percentages below are just approximate numbers and may vary over the years.

~ 28% for the materials  

~ 24% for the land  

~ 20% for labor  <li> 9% overhead  

~ 8% profit 

~ 6% Sales & Marketing  

~ 5% Financing

(Excerpt from Certified New Home Specialist training class)

Developer/Builder's Risks

Life is not all rosy for developers/builders. Here are some of the risks they are facing as they try to service their customers, meet their contractual obligations, and earn a reasonable profit.

• Too much overhead
• Availability and cost of the land
• Economic conditions
• Sales/marketing expenses
• Minimum sales volume to break even
• Competition - anyone can call himself/herself a building/developer
• Weather condition
• Unreasonable customers'requests
• Customers'personal problems
• Labor conflict/shortage, unpredictible delays mainly on custom product
• Cashflow problems
• Quality issues
• Vandalism/theft
• Mistakes due to too many people involved

(Excerpt from Certified New HOme Specialist training class)

The Reality of Residential Rehabs by Otto Ruebsamen

...Residential rehabs can be residential properties that are bought and renovated to function as a commercial or office space or vice versa. Sometimes, commercial spaces are bought to be renovated into a residential space. The biggest problems in buying spaces and investing in residential rehabs arise with people suffering from poor planning, over confidence and limited knowledge. Rehabbing is a complex, professional project and having some home-improvement experience alone will not help. There are many who consider residential rehabs to be risky simple because they once wanted to invest in real estate and ended up buying property for rehab without knowing what exactly they should do. This results in mismanaged money, loss and waste of time and energy due to deadline lapses. Projects regarding residential rehabs should be given the same importance and professional care that you would give a large scale commercial project.

There are a few things to pay attention to when you plan to invest in residential rehabs.

1. Personal vs. professional - Residential rehabs, unlike commercial projects offer you a choice. They can either be done by you or you can hire a professional to do it for you. By doing it yourself you can save on money. Whereas, if you hire someone to do it for you they will take much less time, but you will have to pay them and constantly supervise them. Weigh the pros and cons of both along with your professional experience in the area before you make the call; as residential rehabbing demands professional expertise.

2. Estimating costs - First, before making any form of investment, it is absolutely vital to research and find out exactly how much it would cost you. Unless you are sure about this, whether your rehab project will be profitable to you or not cannot be estimated. The biggest expenses to be considered are roofing, plumbing, structure and electrical repairs. Also, evaluate the location of the property, neighborhood and the facilities available. This will allow you to understand whether investing in that property is advisable or not.

3. Legal issues - All the four important areas that when it comes to residential rehabs, which need primary attention, also require a legal permit. Windows also need permission, but since the important areas are most expensive, the law is much stricter about permits for them. You can do some of the rehabbing on your own on the weekends to avoid obtaining permits, but it is at high risk. If city officials spot you rehabbing without permits, they will cite you for an offense. I strictly recommend sticking by the law.