Essential Facts for Buying Real Estate in Chicago
What does the buying process entail?
Below are the steps from start to finish for buying real estate.
- Select a Realtor® – buyers' representatives work for you, putting your best interests first.
- Set Your Price Range – determining affordable monthly payments based on your net worth and down payment.
- Secure a Lender – free prequalification followed by pre-approval then, choosing the suitable mortgage for you and applying for your loan.
- Negotiate Your Purchase – your Realtor® will help with creating, presenting and negotiating your purchase offer. They make sure everything is in order including legal review of contract, home inspection, and property appraisal.
- Close the Deal – title, walk-through, closing fees, homeowner's insurance.
- Move in Process – select a moving company, complete change-of-address forms, contact new service providers, etc.
What is the Chicago MLS?
It is a database of real estate for sale used by Realtors®. Listings are held individually by members of a group of real estate brokers, with the agreement that any member may sell the property and the commission will be divided between the listing and selling broker. The Chicago Multiple Listing Service (MLS) has great search functionality that allows for you to find listings according to specific parameters.
What is Comparative Market Analysis (CMA)?
Is a method of appraisal in which selling prices of similar properties are used as the basis for arriving at the home value estimate (a.k.a. the Market Data Approach). It is also referred to as a Home Value Analysis.
Why do I need a Buyer's Realtor®?
When you enter the market looking for a home, it is essential that you have a professional and experienced Buyer's Realtor® as a sounding board and ally. Home Sellers' Realtors® represent the seller's interests; they are contractually obligated to work toward an optimal price for the seller. In contrast, a Buyer's Realtor®, as your committed advocate, is dedicated solely to your best interests and to finding your dream home. Our services are free to you, as the seller pays all commission costs.
How does the Realtor® get paid?
Real estate agents are self-employed. They make a commission off the selling price of the home only if the transaction is completed. The seller pays the commission, it is not a buyer's expense. Historically, the commission is between 4-7%, which is split with the broker. Overhead costs are also taken out of the commission before the Realtor® is paid. In addition, any other expenses such as MLS membership fees, insurance costs, gasoline/car, etc. must be paid out of the remaining money.
How does a disclosed dual agent work?
When an agent shows properties that are listed with Thornton Properties, or if Thornton Properties is representing more than one buyer on a particular property, the Thornton Properties agent then becomes a disclosed dual. The agent will not be able to disclose confidential information to either party, such as price, terms or motivation to sell or buy. The dual agent must treat all parties fairly, act in good faith and disclose all appropriate property facts.
What are assessments?
Fees paid by a condominium owner to the condominium association to cover protection and maintenance of common areas, or by a homeowner in a townhome or gated community to the homeowner's association. Also the statistic used by local governing agencies to determine your property tax.
Are condominium or homeowner association assessments tax deductible?
No. Your interest and taxes are deductible just as in a freestanding single-family residence, but not your monthly assessments.
What is a good offer?
Offer an amount you feel comfortable with – that also leaves room for negotiation. Start low to give yourself leeway for the seller's counter offer. If you start too high, the counter offer may be out of your range.
What is earnest money?
The deposit the buyer makes along with an offer to the seller, held by the seller's Realtor® in escrow until closing and applied to the down payment at closing. The buyer usually pays $1,000 with the offer and the balance within expiration of attorney review and home inspection.
Do I need a home inspection on new construction?
Even though the city has seen to it that everything's up to code, and the builder or developer may give you a warranty, have a home inspection anyway. Your inspector can help you develop a list of minor repairs or corrections that need to be completed by the builder/developer either before you take possession, or within a specified time after.
Is there any way to avoid paying mortgage insurance with a down payment of less than 20%?
There may be, if you take two mortgages: one for 80% of the purchase price, another for the difference between what you want to pay down and 20%. For instance, if you want to pay 10%, you'd try to get a second mortgage of 10%. Since your first mortgage is for only 80%, the lender won't require mortgage insurance.
Should I have my mortgage company set up an escrow account so I pay them taxes and insurance monthly, and they pay the tax bills and insurance payments when due?
Some lenders will insist on it and others will refuse. They are holding your money in an escrow account without paying interest, so it costs you a little. It also saves you a lot of trouble – if they are late paying property taxes, which can be confusing, they pay the penalties.
How do I avoid paying upfront closing costs?
Your Realtor® will refer you to a mortgage broker who will be happy to pay your closing costs. However, this may affect your interest rate. Another way is to have your Realtor® negotiate that the seller pays your closing costs. This will ultimately be reflected in your purchase price. Either way, you are rolling your closing costs into your mortgage... saving about $4,500 in up-front costs on a $300,000 purchase.
Can I get out of a contract?
Yes, depending on what contingencies are written into your contract. Talk to your Realtor® about what contingencies should be included in your contract. You also have a window of five business days for attorney review where you will not suffer any cancellation fees.
If my contract is not accepted, do I get my earnest money back?
This depends on the details of your contract. The contract must state under which contingencies or circumstances the buyer will be refunded the earnest money. Even then, there may be third party fees for things such as appraisals or legal costs that will diminish the amount returned.
What is a contingency?
Conditions or "safety valves" written into real estate offers and contracts to protect the buyer.