Chapter 10 Real Estate Taxes and Other Liens

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9th. Edition

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Chapter Ten Real Estate Taxes and Other Liens:

Chapter Ten Real Estate Taxes and Other Liens ON LINE Program 75 Hr. Real Estate Broker Principles Course Copyright Sarrett 2018

Liens:

Liens A charge, debt or claim against property that is made to enforce the payment of money. It provides “collateral” which will go to the lender if the debt is not payed Typically they are filed with the county recorders office. (exceptions are Property Tax Liens and Mechanic Liens). Page 172 Chapter 10 Real Estate Taxes and Other Liens

Types of Liens:

Types of Liens Voluntary Lien - created intentionally by the property owner’s action (i.e. Mortgage Lien) Involuntary - created by enforcement or operation of law ( i.e. a property tax lien) Statutory lien - created by statute passed by legislatures. (i.e. Mechancis Liens) Equitable lien - created when parties agree in writing that a property will be held as security for a debt or other obligation or court places for “fairness” (i.e. wife helps husband purchase and improve property, husband puts property in his name attempts to sell, it court gives her lien on that property) Page 172 Chapter 10 Real Estate Taxes and Other Liens

Type of Liens:

Type of Liens General Liens - affects all the property, both real and personal , of a debtor. Income Tax ( IRS ) Liens Court Money Judgment from a Law Suit Corporation Franchise ( Business Income) Tax Specific Liens - secured by and affects only one specific parcel of real property . Mortgage Liens Mechanics Liens Property Tax Liens Utility Liens HOA Assessment Fees Page 172 Chapter 10 Real Estate Taxes and Other Liens

Priority of Liens:

Priority of Liens “First come, first served” Date of recording (usually) determines priority Subordination agreements Exceptions Race to the Recorders Office Real Estate Taxes Jan 1 and Special Assessments Jan 2 Lets a “Junior” Lien Holder Jump Ahead of “Superior” Lien holder Page 173 Chapter 10 Real Estate Taxes and Other Liens

Real Estate Tax Liens:

Real Estate Tax Liens Ad Valorem – Taxes based upon the property value not ones personal income Specific, Involuntary and Statutory Lien Exceptions - Schools , Government, Religious, Charitable, Hospitals, Non-Profits Latin for “At Value” Page 175 The General Real Estate Property Tax

Real Estate Tax Liens:

Real Estate Tax Liens Homeowner’s Exemption - $6000 (up to $7000 in Cook County) Senior Citizen’s Exemption - $5,000 (65 and over) Senior Citizen’s Assessment Freeze - $55,000 Income or less/ and over 65 Disabled Person - $2,000 Returning Veteran (Year of return only) - $5,000 Disabled Veteran - $2,500 to $5,000 Home Owner Improvement ( Max improvement is $75,000 = $25,000 off assessed value) Property Tax Exemptions Page 175 Chapter 10 Real Estate Taxes and Other Liens

Slide8:

Taxes Bodies Create a Budget ( i.e. schools, city gov, park districts ,Libraries) etc County Collector Makes County Budget Sends to Collector ( Collector takes budget and divide by total value of county assessment values= tax rate Appropriate ( formal authorization) County Clerk Levies the tax Collector than Sends Tax Bills Enforcement Property Tax Process Annual Tax Sale Forfeiture Sale Scavenger Sale Page 176- 178 Chapter 10 Real Estate Taxes and Other Liens

Slide9:

Illinois Laws Liens (other than Real Estate Tax Liens) are typically recorded. Lien takes effect on by January 1 of tax year Billed in 2 installments Due (Penalty) Dates June 1 & September 1 (all counties) March 1 & August ? (Cook County) Page 177 Chapter 10 Real Estate Taxes and Other Liens

Property Tax Calculation:

Property Tax Calculation Market value Assessed 33%) Assessed Value X Equalization Factor Adjusted Assessed Value Tax Rate $6.00/100 (Property Taxes Due) x $250,000 .33 $82,500 1.02 $84,150 $5049 Page 177 x $84,150 X .06 Chapter 10 Real Estate Taxes and Other Liens

Slide11:

Special Assessments Taxes levied on real estate to fund public improvements. ( only to those that benefit) i.e. sewers, curbs sidewalks) Due in equal annual installments Payment due January 2 nd Allocated over a 5 – 10 year period Page 179 Prospective Buyers and their agents need to make sure they ask Sellers if any Special Assessments are on the property Chapter 10 Real Estate Taxes and Other Liens

Mechanics Liens:

Mechanics Liens Page 180 Illinois statue which gives a lien right to contractors , laborers, artisans, subcontractors, provide material or tools etc., who enhance someone's property . Chapter 10 Real Estate Taxes and Other Liens

Mechanic Liens (Secret Liens):

Mechanic Liens (Secret Liens) Rules to qualify: Take affect from date of contract 4 months from date of completion to file 2 years from date of completion to take legal action Page 181 Chapter 10 Real Estate Taxes and Other Liens

Mechanics Liens:

Mechanics Liens Installation of a new kitchen: 3/7/17- Contract Date 3/25/17 -Construction begins 4/15/17 – Date of completion 8/15/17 - Last date to file/record the lien 4/15/19 - 2 years from date of completion Last date for legal action Lien Begins Lien Ends Formally Recorded Extra Chapter 10 Real Estate Taxes and Other Liens

Mechanics Liens:

Mechanics Liens $13,000 - Current years property taxes $375,000 -Primary mortgage filed 7 years ago $105,000 - Second mortgage filed 4 years ago $38,000 - Judgment lien filed 6 years ago $25,000 - Judgment lien filed 2 years ago $2,500 - Mechanics lien filed this year 1 6 5 4 3 2 Extra Chapter 10 Real Estate Taxes and Other Liens

Slide16:

Judgments Estate and Inheritance Taxes Municipal Utilities Bail Bond Liens Corporate Franchise Taxes IRS Tax Liens ) General Liens (Real and Personal Property) Page 181-183 Chapter 10 Real Estate Taxes and Other Liens

Also:

Also Lis Pendens Page 182 (Red Flag to subsequent Purchasers of an impending lawsuit) Commercial Broker Lien Act) Page 183 (Commercial Real Estate Brokers ( Not Residential Brokers) may place a lien on sellers property for unpaid commission) Lien Pending Page 182-183 Chapter 10 Real Estate Taxes and Other Liens

Chapter Ten Chapter 10 Quizzes:

Chapter Ten Chapter 10 Quizzes ON LINE Program 75 Hr. Real Estate Broker Principles Course Copyright Sarrett 2018

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