Sharing our real estate tools, tips and links to get you a "clear to close."
OUR TOP TEN BUYER'S TIPS
1. Use a real estate agent. Buying or selling a home is a major financial (and emotional) undertaking and you should not go it alone. A good real estate agent possesses intimate knowledge about your neighborhood that can be vital in making an educated home buying decision. Your agent should have valuable partner referrals within the profession that will provide you with reliable answers to key questions regarding a property and/or neighborhood. In almost every instance the buyer agent is compensated by the seller.
Your agent will provide valuable price guidance based on market conditions that can change daily and vary from block to block. A full time professional agent will pay dividends for you by spotting overpriced listings and advising you accordingly.
Your agent will send you listings directly from the Multiple Listing Service that fit your parameters so you won't need to waste time surfing real estate sites looking at listings or waste time on offerings that are already under contract. Experienced agents are skilled in negotiations and will remove themselves from emotional aspects of the transaction in order to present your offer in its best light.
2. Figure out how much house you can afford. Prior to making your offer you need to get a better handle on ALL costs associated with buying your dream home. The purchase price is just the starting point. Depending on the terms of the Contract and the location of the property, you may also be responsible for title charges, municipal transfer taxes, and lender fees. Some of those charges may be offset by tax credits and negotiated seller concessions. Our interactive closing statements and your lender’s loan estimate of closing costs can help give you a good idea of what it may actually cost you to close the deal.
The condition of the house you choose will also be an important financial consideration. Be certain to budget enough reserves to make the necessary repairs and upgrades which will vary significantly from house to house. This is one of many reasons why you should get your home inspection as soon as you have negotiated the terms of your contract, or in some rare cases even before securing a contract.
It is critical that you surround yourself with experienced real estate professionals you trust to ensure that you close your deal at the right price.
3. Negotiate the offer. The old axiom that everything is negotiable generally applies to buying a home. The key is to be an educated buyer and understand some key concepts used in real estate. Buyers sometimes make the mistake of comparing the list price of a home to other homes they have seen. Asking prices are just that - the price the seller is asking. Sellers can ask any price they want. It doesn't mean the home will sell at that price. Your real estate agent will provide you with comparable home sales and also examine pending contract sale prices and other asking prices of similar homes. Comparable sales are sales of similar type homes, in the same condition and location, that have actually sold within the past 3-6 months. Pending sales may become the comparable sales by the time your home closes. Similar homes that are still active are the competition for the seller of the property you are interested in, and might be overpriced since they are still available. All of these factors are barometers of real estate market pricing.
You may be able to bid below list price if the property is in a buyer’s market, with little to no offers on the property. On the other hand, you may need to pay over list price in a seller's market, especially if many buyers are vying for the same inventory. Your real estate agent can give you a reasonable price range and help to manage your expectations. A good buyer's agent knows that there is always more to an offer than its price, but price is paramount.
Sellers usually prefer an offer accompanied with a detailed pre-approval letter from a reputable lender. To strengthen your negotiating position, the pre-approval letter should state that your credit report has been pulled and supporting documentation has been inputted into their automated underwriting system. The stronger the letter, the higher comfort level your seller will have in considering your offer.
4. Hire an attorney that regularly handles real estate matters. Your cousin’s friend that just passed the bar or your brother-in-law that handles closings on the side won’t cut it. Your real estate transaction is an important and costly business deal with high financial stakes attached to it. You can’t afford to settle for part-time legal assistance. You need an attorney with a fully staffed law firm that regularly handles real estate closings to properly address the many obstacles that can and do arise.
Your attorney is a key part of your professional team that manages the entire process. Your attorney will review the contract with you and make necessary changes, keep track of all critical contract deadlines, oversee the home inspection including negotiating any seller concessions, monitor financing contingencies, and assist you in getting that sometimes elusive “clear to close” from your lender.
Your attorney will accompany you at the closing and explain the many documents that you will be signing to ensure the closing complies with all the terms of the Contract. After closing, your attorney will be there to guide you through any legal issue that may come up.
5. Hire a good home inspector. Hiring a licensed and experienced home inspector should be a top priority for a home buyer. We love your dad and your uncle, but they are simply not objective, or in most cases not adequately trained, to spot problems in a home. We have a whole page devoted to this topic which can help you get started with your due diligence. We suggest that you get referrals from friends and family who were happy with the professional inspector they used when they purchased their home. Your lawyer and real estate agent can also give you the names of reputable home inspectors in your area to use.
Be present for the inspection and ask your inspector many questions. The home inspector is your paid consultant, so take advantage of the time you have with the inspector. Don’t just find out what is wrong with the property now. Ask your inspector what items will need to be addressed in the future and the time frame for repairing and replacing items. Don't be afraid to ask how a component works or how you should maintain it once you move in or even what it is. Good inspectors will spend several hours with you at your inspection and will welcome questions from you.
6. Understand the home inspection contingency. The home inspection contingency is governed by the form of contract used. Read the inspection provision and review it with your lawyer before the inspection to make sure you fully understand it. Most form contracts limit the seller’s potential responsibility to material items that don’t work, regardless of age. Having said that, your inspector should still inspect ALL items so that you can be aware of and budget for these items once you move in.
Your lawyer should review the inspection report with you and discuss your options. Depending on the issues raised in the home inspection report, your options range from terminating the Contract for material defects, to accepting the property in its “As Is” condition. There are many options in between, including the seller making requested repairs and/or providing a closing cost credit or price reduction. Your real estate agent’s input should be sought on inspection requests to include his/her important insight on prior negotiations and market considerations.
7. Carefully choose your lender. Your lender is also an important real estate professional that must be carefully chosen. As with the other real estate professionals on your team, you need to find a lender that has successfully closed deals for friends and family in Cook County. Your realtor and lawyer can also help you find reputable lenders in the area. Interview more than one to find the lender that you are most comfortable with.
Definitely look around for the best deal, but look beyond the interest rate on the loan. Each lender is required to give you a Loan Estimate of Closing Costs which you should review with your lawyer before you make your final decision.
Often overlooked is the lender’s underwriting department which can be more important than your loan officer. The underwriter will determine what additional documents you or your lawyer will need to provide and will ultimately make the “clear to close” decision. We have handled a number of deals with terrific loan officers whose good work was undercut by unreasonable requests made by underwriters. Talking to your loan officer, attorney, and real estate agent about this issue upfront will save you headaches down the road.
8. Promptly get all information and documents to your lender. Before you even make that offer, it’s a good idea to gather and keep every piece of financial paper in the two months leading up to buying your home, including pay stubs, bank statements for savings, checking, and investment accounts, W-2s, tax returns for the previous two years, canceled rent checks, and any mortgage or property tax statements for any other property you own. If you are able, put these documents in PDF format to make it easier to send to your lender.
The one potential closing delay issue that you have control over is getting any requested information to your lender in a timely manner. You may get frustrated by the amount of documents requested, but if you don’t comply right away with your lender's requests, your closing could be delayed or worse you may find yourself in default under the terms of the Contract. Keep your lawyer apprised of any financing problems so that he or she can request an extension and help you through this sometimes difficult process.
9.Maintain your credit profile. In the months leading up to your home purchase, avoid adding to your credit obligations, especially during the period between your pre-approval and the closing of your loan. Don't close or apply for any new credit cards, keep the balances on your credit cards within normal range, and don't make any major purchases on credit. Any of these actions could upset your debt-to-income ratio, which is a key factor in determining your eligibility for a loan.
Be aware that a new credit report is always obtained by the lender just prior to funding your loan. If a new inquiry of credit is found on the updated credit report, it could raise your interest rate and fees related to your loan or even keep you from qualifying for any loan.
10. Take advantage of the final walk through. Most contracts give you the right to inspect the property shortly before closing. Take advantage of this final inspection. Generally, you are ensuring that the property is in the same condition as it was when you signed the contract. This is NOT an opportunity to re-inspect the property to find old defects that were missed at the inspection. You should be looking for any problems that occurred after signing the contract such as damage caused by seller during the move out or removal of personal property that was to remain with the home. You also want to be certain that the property has been left in the condition required by the contract, which is typically “broom clean."
A walk through may also be needed to ensure that all agreed upon seller repairs were properly completed. In that instance, an inspection should be done well in advance of closing to give the parties time to address any problems that might come up.
These tips are intended solely to be helpful in understanding the possible issues involved generally in a residential real estate transaction in Cook County Illinois. There are, however, many factors that may affect these tips. Before signing any documents or depositing or receiving any money preparatory to entering into a real estate contract, you should consult with an attorney of your choice to ensure that your rights are properly protected.