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New Law Protects Real Estate Purchasers Who Buy on Contract

Most home purchases, unless they are cash deals, involve a mortgage loan. Since the real estate market crashed in 2008, a lesser-used path towards home ownership has been on the rise - owner financing. Also known as an installment contract, owner financing allows a buyer to live in a home while paying the seller the purchase price over time.

However, the practice is ripe for abuse because the purchaser doesn't actually own the home until the balance is paid in full. That means the Illinois Mortgage Foreclosure Law - and its protections for homeowners - doesn't apply in the event of a default. A simple eviction action is all it takes to divest the would-be purchaser of what may be a significant financial investment. On August 25, 2017, Governor Rauner approved Public Act 100-0416, also known as the Installment Sales Contract Act, which is designed to provide protection for purchasers.

According to a March 2017 report by The Chicago Reader (, installment sales contracts are seeing a resurgence in Cook County, particularly in poorer communities that were hit hard by the foreclosure crisis. According to the Reader, Illinois law doesn't require that these contracts be recorded or otherwise registered with the state, which makes it difficult to know just how many exist.

That ends on January 1, 2018, when the new Act takes effect. Section 20 requires sellers to record their contracts within 10 days of the sale. If the contract is not recorded, the buyer has the right to rescind it until it is recorded. If the contract is unrecorded and title to the property becomes clouded, then the buyer has the option of rescinding up to 90 days after discovering the title defect even if the contract has been subsequently recorded. Find out more in the October Illinois Bar Journal.

Posted on October 4, 2017 by Mark S. Mathewson
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Member Comments (1)

Contract purchasers deserve transparency in contracts for deed.
Aspiring homeowners who makes multiple payments, in effect equity, should have reasonable due process protections.