An Illinois residential closing has four different jobs in it, and the law gives each job to a different kind of professional. The Real Estate License Act of 2000 governs the broker, the Attorney Act governs legal services, the Illinois Title Insurance Act governs escrow and closing money, and the federal rules in 12 CFR 1026.19 require the lender to see that the Closing Disclosure reaches the buyer three business days before closing.

This guide lays those four jobs side by side so you know who to call when a question comes up at the closing table. It sticks to what the statutes, the state rules and the federal consumer pages actually say, and it points out where those sources are silent. If you are also weighing where to build a career in this business, our piece on how to choose your first brokerage covers the other side of the desk. Gambino Realtors has been in business in Rockford since 1923, and none of this is legal, tax or financial advice. An attorney licensed in Illinois is the person who answers legal questions about your own contract.

What The Broker Does, And Where The Act Stops The Broker

The Act defines a broker by what the person does. A broker, for another and for compensation or with the intention of receiving it, sells, exchanges, purchases, rents or leases real estate, offers to do so, lists real estate, or negotiates or assists in the negotiation of a transaction. The Act calls those activities "licensed activities". Preparing a title search, issuing a title policy and drafting a deed do not appear on that list. That is the first clue that the broker's lane is the sale itself and not the paperwork that transfers title.

The written agreement comes first

The relationship begins with a brokerage agreement. The Act says all brokerage agreements shall be in writing and may be exclusive or non-exclusive. It also splits the people a broker deals with into two groups. A client is a person the licensee represents. A customer is a consumer the licensee does not represent. Our article on agency law and dual agency in Illinois goes through the duties that attach to each group. The short version is that the duties owed to a client are longer than the duties owed to a customer.

What the broker owes a client

A licensee representing a client must perform the terms of the brokerage agreement and promote the client's best interest. The Act spells that out. The licensee presents all offers in a timely way, discloses material facts that the licensee actually knows about, accounts for money and property received, and obeys specific directions from the client that are not contrary to law. The licensee must use reasonable skill and care, keep confidential information confidential, and follow the Act and other laws, including fair housing and civil rights statutes.

A customer gets a shorter list, but it is not empty. The Act says licensees shall treat all customers honestly and shall not negligently or knowingly give them false information. A licensee engaged by a seller client must also disclose to prospective buyers the latent material adverse facts about the physical condition of the property that the licensee actually knows and that a reasonably diligent inspection could not find.

Money the broker may hold

One closing-day item sits squarely with the broker, and that is earnest money held in the broker's special account. The Act makes it grounds for discipline to fail to keep escrow moneys in a special account, apart from personal and other business accounts, until the transaction is consummated or terminated. There are three exceptions. The money may be released on the written direction of the principals, under release directions in a signed written contract, or under a court order. The state rules add that the broker may transfer escrow moneys to the closing agent up to two business days before the scheduled closing. They also say a broker shall not withhold an authorized disbursement because a licensee has a claim for commission. Our guide to escrow and trust account rules for brokers has the full rule.

The Act also protects the party who is not the broker's client. It is grounds for discipline to require a person who is not a client to let the licensee keep a portion of the escrow moneys for commission or expenses as a condition of releasing the money to that person.

Where the broker stops

The edge of the broker's role is written into two places. The first is the Attorney Act. It says no person shall receive any compensation, directly or indirectly, for legal services other than a regularly licensed attorney, and no unlicensed person may advertise or hold himself or herself out to provide legal services. Practicing without a license is contempt of court, and the remedies include equitable relief, a civil penalty paid to the Illinois Equal Justice Foundation, and actual damages.

The second place is the state rule on unlicensed assistants, which draws the same line from the other direction. An unlicensed assistant may not interpret information about listings, titles, financing, contracts, closings or other information relating to a transaction. An assistant also may not explain or interpret a contract, a listing, a lease or another real estate document for or with anyone. The same rule lets a supervised assistant assemble documents for a closing and follow up on a transaction after the contract is signed. Assembling the paper is a clerical job. Explaining what the paper means is a licensed activity, and the rule says so in plain words.

Read together, those provisions tell you what to ask a broker and what not to. Ask about the price, the terms in the brokerage agreement, the offers, the disclosures and the schedule. Take the question of what a clause in your own contract does to you, legally, to an attorney. The sources draw the line this way. Licensed activity is one thing, legal services are another, and a person who sells legal services without a license answers to the court.

The Attorney, The Title Company And The Escrow Agent

The attorney

The Real Estate License Act carves out lawyers directly. The license requirement does not apply to the services an attorney at law renders in the performance of the attorney's duty as an attorney. So a lawyer who reviews a contract or a deed is not required to hold a broker license to do that work.

The Act also keeps one person from wearing both hats. It is grounds for discipline when a licensee who is also an attorney acts as the attorney for either the buyer or the seller in the same transaction in which the licensee is acting or has acted as a managing broker or broker. A person can hold both credentials. The person cannot be the lawyer and the broker in the same deal.

The federal Consumer Financial Protection Bureau says in its pre-closing guidance that a buyer "may want to hire a real estate attorney to review the documents." Its example is a purchase with another person, where you want the deed set up to give you the type of ownership you want.

What the sources do not say matters here. Nothing in the Real Estate License Act, the state rules, the Title Insurance Act or the Attorney Act requires an attorney to be present at a residential closing in Illinois. The Bureau's own page tells the buyer to ask a lender or real estate agent what the situation is in the buyer's state. It notes that some states require a closing attorney for each side and that closing agents go by different names depending on location. Those pages do not tell us who conducts closings in a given Illinois deal, so this article does not guess.

The title company and the title agent

The Title Insurance Act defines the business of title insurance broadly. Besides issuing title insurance, it includes handling escrows, settlements and closings, abstracting, searching or examining titles, and issuing closing protection letters. Title insurance itself means insuring owners of real property, or holders of liens, against loss from liens, encumbrances, defects in the title or unmarketability of the title. One carve-out is worth knowing. Preparing an attorney's opinion of title is not within the definition of title insurance, so a lawyer's opinion and a title policy are two different products under Illinois law.

The CFPB's closing guidance adds the lender's side. Most lenders require a lender's title policy, which protects the amount they lend. A buyer may want an owner's policy, which protects the buyer's own investment in the home. Title services are the largest costs in the category of closing services a buyer can shop for, and the Bureau's page says that in most parts of the country the fee for the closing agent who conducts your closing is part of those title services. Your lender must give you a list of companies in your area that provide the services you can shop for. You may use one of those companies or choose another if the lender agrees to work with your choice. The Illinois Act adds that the Secretary has no authority under it to set or adjust the fees for title policies, title searches, commitments, or closing, escrow and settlement fees. Our guide to transfer taxes and closing costs in Rockford shows where those fees land on the settlement statement.

Who may hold the closing money

The Act gives names to two kinds of closing-money holders. An escrow agent is a title insurance company or title insurance agent that receives deposits in trust of funds or documents to effect the sale, transfer, encumbrance or lease of real property, held until title is in a prescribed condition. An independent escrowee is any other person or entity that does the same thing. Banks, savings and loan associations, credit unions, mortgage bankers, licensed real estate brokers, and licensed attorneys engaged in the attorney-client relationship are exempt from the Act's escrow provisions.

A title insurance agent has to be registered by a title insurance company with the state before the agent may act as, or hold itself out to be, a title insurance agent. An agent may serve as escrow agent only when a registered title company has authorized it in writing. In a residential deal there is a further condition. The agent may not act as escrow agent unless title insurance has been committed for in that transaction and the agent has authority through an agency contract or through a closing protection letter. A closing protection letter is issued by the title company to the seller, buyer, borrower and lender. The statute says an agent shall not issue one.

The money rules are specific. Funds deposited for an escrow, settlement or closing go into a separate fiduciary trust account at a federally insured institution. The funds belong to the people entitled to them, are tracked deal by deal in the escrowee's records, are not subject to the escrowee's own debts, and may be used only under the terms of that closing. Interest goes to the depositing party unless the instructions say otherwise. A title company, title agent or independent escrowee may not disburse from that account unless the funds received are good funds or collected funds as the statute defines those terms.

Referral payments

Two anti-kickback rules sit around the closing table. The Illinois Act says no person shall pay or accept any commission, discount, referral fee or other consideration as inducement or compensation for referring title business or escrow service to a title company, independent escrowee or title agent, and a violation is a Class A misdemeanor. A separate section covers residential properties of four or fewer units where at least one unit is owner-occupied. A title business may not serve an applicant referred by a producer of title business that has a financial interest in it, unless the producer gave the paying party a written disclosure of that interest before the title commitment was issued. The Act counts as a producer of title business a person acting as broker, agent, attorney or representative of buyers and sellers or lenders. The federal rule in 12 CFR 1024.14 says the same thing in its own terms. No person shall give or accept a fee, kickback or thing of value for the referral of settlement service business, and no one may take a split of a settlement charge other than for services actually performed.

The Lender, The Closing Disclosure And Your Own Review

What the lender owes

The lender, which the federal rule calls the creditor, is responsible for the Closing Disclosure. The rule says the creditor shall provide the consumer with the disclosure reflecting the actual terms of the transaction. The creditor must ensure the consumer receives it no later than three business days before consummation. A settlement agent may deliver it, provided the agent follows the rule, and a compliant disclosure from the settlement agent satisfies the creditor's obligation. The creditor remains the party who must ensure it is done.

The CFPB tells buyers to contact the lender or closing agent at least a week before closing to find out how the Closing Disclosure will arrive. Some fees cannot increase at all unless the buyer asked for a loan change or financial information changed. Other fees are limited to a 10 percent increase, and a third group is not limited. The Bureau also says that if something important changes about the loan, the buyer gets a new Closing Disclosure, and in limited circumstances the law requires a full three business days to review the new one.

Who answers which question

The CFPB puts the division of labor in two sentences. If you have a problem or are confused about the terms and conditions of the sale, ask your real estate agent or your settlement agent, meaning the title company, escrow officer or attorney. If you have a problem or are confused about your loan, you need to talk to your lender. The side-by-side list below uses only facts from the sources above.

• Broker: negotiates the sale, presents offers, discloses known material facts, holds earnest money in a special account if the contract puts it there, and keeps the transaction records.
• Attorney: gives legal services, which only a licensed attorney may charge for in Illinois. May also act as escrow holder when engaged in the attorney-client relationship. Cannot act as attorney for the buyer or seller in a deal in which the same person is the broker.
• Title company or title agent: insures title, searches title and may handle escrows, settlements and closings, subject to registration and authorization rules and trust-account requirements.
• Lender: provides the loan, requires the lender's title policy, and must ensure the buyer receives the Closing Disclosure three business days before closing.

Your own review

The Bureau's last steps are about what you do as the buyer. Do a final walk-through before you sign, and confirm that the repairs the seller agreed to are done and that anything the seller agreed to leave is in the house. Do not sign blank documents, or documents that say something different from the transaction you agreed to. You are not committed until you sign, and you can walk away at closing. The Bureau is plain that walking away might cost you a deposit you gave the seller and any application or appraisal fees paid to the lender, and there could be other consequences from breaking the contract. Know what your contract says before you walk in.

Wiring instructions deserve their own line. The CFPB's archived scam warning says scammers send spoofed emails posing as the real estate agent, settlement agent, legal representative or another trusted person, with false wiring instructions. Its advice is to name two trusted people ahead of time, confirm wiring instructions by phone using a number you agreed on beforehand, and never follow instructions that arrive by email. The scam can borrow the name of the agent, the settlement agent or a legal representative, so the confirming call goes to the number you agreed on.

After closing, the Bureau lists four documents to keep. They are the Closing Disclosure, the promissory note, the mortgage (security instrument or deed of trust) and the deed. The broker keeps its own copy of the closing statement under the state recordkeeping rule, along with the signed contract, the written release of escrow funds, the brokerage agreement and the disclosures.

The Bottom Line

It has a broker who handles the sale and the earnest money, an attorney who handles legal advice and legal documents, a title company or agent who insures title and holds closing funds under a trust-account law, and a lender who must ensure the Closing Disclosure arrives three business days ahead. Pick the right person for the question. Ask the broker about the sale, the attorney about what your documents do to you legally, the title company about title and closing funds, and the lender about the loan.

The two things to carry out of this guide are short. A broker is not licensed to give legal advice and an unlicensed person may not charge for it, so take contract-meaning questions to an Illinois attorney. And do not wire money on the strength of an email, no matter whose name is on it. If you are deciding between brokerages and want to know how a firm handles these roles in practice, how to choose your first brokerage is the place to start, and the full list of our Illinois guides is in the Illinois Real Estate Guide.

Still sorting out who does what? These questions cover the points the sources answer.

Frequently Asked Questions