Home Buying Process In Chicago For First Time Home Buyers
This BLOG On The Home Buying Process Chicago Was UPDATED And PUBLISHED On February 4th, 2020
Home Buying Process Chicago:
The Home Buying Process Chicago: Q&A With Julie About Home Buying Process Chicago
In this section, I provide guidance through some of the common concerns and steps in the Home Buying Process Chicago, as well as other considerations you should know about when actively in the process of the Home Buying Process Chicago.
What Are The Steps In The Home Buying Process Chicago
Here is the first step Home Buying Process In Chicago:
- The first step is to get pre-approved
- A pre-approval, unlike a pre-qualification, will allow buyers to put an offer on a home right away
- Most sellers want the pre-approval letter or proof of funds (if paying cash) submitted along with offer
- Sellers want to know buyers can get funding from the lender
- A pre-qualification is more like an algorithm that uses the yearly income verbally to determine how much buyers can afford to pay
- This calculation isn’t verified by paystubs, W2’s or other official means
- A pre-approval is generated based on verifiable financial data, is more accurate, and sellers take it more seriously when accepting an offer
- A pre-qualification is usually just a ballpark and not an absolute:
- It doesn’t take into account other factors such as debt and child support and there is no verification
- The pre-approval is more in-depth and verifies income:
- Debt, and other factors that affect the ability to obtain a loan
I strongly advise buyers to get pre-approved before shopping. If you find a home you absolutely fall in love with and later discover you can’t get the loan for it, you will have wasted your time and will be very disappointed.
After I Get Pre-Approved And I Find A House I Like, What Happens Next?
After home buyers find a home they like, they can put an offer on it.
- There are strong offers and not-so-strong offers
- In order to have a strong offer, you want to put earnest money down
- Earnest money is like a security deposit
- Essentially holds the property for buyers
- It also lets the seller know buyers are serious about purchasing and have skin in the game
Earnest money also holds the seller accountable to complete the transaction.
Other factors that can strengthen an offer are:
- limited concession requests
- no sale contingencies (the offer is contingent upon the sale of the current property)
- type of financing
- quick closing date, to name a few
What Price Do I Offer Or What Price Do I List At?
The agent should show the clients a CMA (Comparative Market Analysis) for the property.
- This analysis gives you an estimated value based on similar homes that have sold in the area
- If you are a buyer, you’ll want to make a fair offer and not a low-ball offer
- Buyers could offend the seller with a low offer
- They may not think they are a serious buyer
- Make an offer you are comfortable with based on estimated monthly mortgage payments, similar recent home sales and asking prices, and work that may need to be completed
- The agent can and should guide you in the amount you offer
Tips For Sellers
If you are a seller, you will base your asking price on several factors:
- Recent home sales for similar properties in the area
- Current asking prices for similar homes in the area
- How quickly you’d like to sell and any concessions you may be willing to give in order to attract a buyer to make your home stand out from the crowd
- I use a three-pronged strategy in helping sellers appropriately price their properties
- Sellers choose which one is best for them based on their goals, motivations, timing, and comfort level
- Should I remodel before I put my house on the market and if I do will I recoup my investment?
- The Remodeling Cost vs. Value Report, produced by Remodeling magazine in cooperation with the National Association of REALTORS® and REALTOR® Magazine:
- Provides estimated costs for 36 mid-range or upscale home-improvement projects:
- Along with the percentage of cost that owners can expect to recoup when they sell
- The report says large-scale jobs aren’t likely to return sellers their full cost
- But there are improvements worth doing since some will return almost 100%
- Others may not have 100% payback
- But they improve the market position of the property in relation to the competition
Fixing Property Before Listing It
As a general rule, simple low-cost projects tend to return greater value. Projects expected to top or come close to the 100% payback in multiple markets are:
- Entry door replacement, stone veneer, mid-range, and high-end garage door replacement, mid-range window replacement, and minor kitchen remodels
- With the exception of the kitchen job, they’re all replacement projects
- Upgrading or replacements usually cost less and provide larger returns than remodels or additions
- First impressions are important
- So replacements that offer the largest return are the ones that are most obvious to buyers when they first view a house, either in person or online
- Examples include the new front door, garage doors, new windows, and stone veneers
- Siding replacement also provides great value when selling
- Manufactured stone veneer is also very popular right now
- Expected to recoup 92.2% of its cost, on average nationally
- Kitchens yield the highest return when remodeling
- It is the only remodeling job that breaks into the top 10 in terms of payback
The minor kitchen remodels with a national average cost of $19,226 returns a national average payback of 79.3%.
Top 5 Projects Nationally
Top 5 projects nationally in percentage of cost recouped are:
- Entry door replacement (101.8%)
- Manufactured stone veneer (92.2%)
- Garage door replacement—mid-range (88.5%)
- Siding replacement, fiber cement (84.3%)
- Garage door replacement—upscale (82.5%)
Recouping On Home Improvements
How much sellers can expect to recoup from home improvements depends on the size and type of job, and the market they live in.
- Other factors also come into play, such as what updates are typical for the neighborhood and how important the improvement is to the buyer
- Those aren’t things you can control
While the data can’t be extrapolated directly to a specific home or neighborhood, you can use the Cost vs. Value Report:
- Use it as a guideline on whether or not improvements make sense for you before putting house on the market
Home Buying Process Chicago With Submitting 2 Offers At Same Time
Do not submit two simultaneous offers unless you are prepared to buy two properties.
- Once a seller accepts the offer, the offer becomes a legally binding contract
- If both offers are accepted, you will ultimately end up breaching a contract
- Potentially paying thousands of dollars in legal fees, damages, and penalties
- So, choose the property you like best and that most closely fits your requirements
- If for some reason it doesn’t work out, maybe it wasn’t meant to be
- I promise you there will be another one right around the corner that will work for you
I’ve had this happen to several buyers and the second property ends up ultimately being their favorite! Sometimes life works in mysterious ways.
Location And Neighborhood Of Property
Here is a personal example.
- Years ago, my husband and I put an offer in on a property we loved
- But weren’t too sure about the area
- When things didn’t work out with the property, we were initially upset
- Then we found one we liked that was just as nice, yet not as big
- The area was closer to work, was in a better community, and development in the area really took off
- So we built a lot of equity in a short amount of time
- Although the first property was bigger, it was in an up-and-coming area that never took off after the market crash of 2008
In the end, things worked out for the best—and we were thankful. We said to ourselves:
- “Thank God we didn’t end up getting that other house. After the market crashed and no one wanted or could afford to develop around there we wouldn’t have been able to sell it
- Can you imagine?!
- As an agent, I see this sort of result all the time
Home Buying Process Chicago With Selling Exiting Property
Do I sell first or find a property I want to buy first?
My answer depends on your comfort level.
- Depending on what the real estate purchase contract with the real estate agent says, the home may need to be listed within 5 days of contract acceptance
- Personally, I recommend listing the current property and searching for the new property simultaneously
- Sellers that are also buyers need to familiarize themselves with the current market
Should they find a home they like, they should put an offer on it before it goes under contract with someone else —and
- therefore, they should be prepared to list their home as soon as possible upon acceptance
Stress With Selling And Buying Home At Same Time
There are risks to and some stress in both approaches.
- Listing current home first and quickly receive an offer but have no place to go, or don’t find something you like, you could end up living in something you may not like or in temporary housing
- If you decide to buy first and then cannot sell a current home, you may lose your first choice and find yourself house-hunting again
- Whatever you decide, be sure to take a look at the market first and know the range that homes are selling for in the areas you like as well as the value of your current home
- You want to base your decisions on facts and realistic expectations in such an emotional decision
- Doing so will make everything go a lot more smoothly
You can do everything right and there still may be an issue or two, but planning in advance will help you prepare.
Home Buying Process Chicago After Submitting Offer
The seller will accept, reject, or counter the offer.
- Sometimes this process will go back and forth several times until both parties come to terms
- Once both parties accept and the contract is signed, depending on what the contract says, there is usually an attorney review period
- In my particular market, this period is five business days
- During this time, buyers have five days to conduct a home inspection
- After the inspection report comes back, the buyer, agent, and attorney work together to arrange for repairs or credits to be made
- If the buyer and seller cannot come to terms with this, the contract may become null and void.
Can I Change My Mind On The Contract And Decide Not To Purchase The Property?
You can but there may be penalties depending on the terms of the contract.
- The contract is usually contingent on certain parameters being met, such as financing
- If these parameters are not met, the contract can be canceled without penalty
- If a buyer or seller meets all the contingencies but decides not to proceed with the sale, they will be in breach of contract
In this case, the breaching party may be liable for damages, costing them their earnest money as well as additional penalties or damages.
Home Buying Process Chicago After Home Inspection
After the inspection is complete, if you are financing, the bank will order an appraisal.
- Once the appraisal is done on the property and the value comes back, the loan will go to processing and then underwriting
- If the value of the appraisal comes back higher than the loan amount, the bank can decide to issue the loan for up to the value
- The buyer may have to cover the difference out of pocket
Proceeding With Mortgage Process Towards Closing
This reason is why you need to be careful and not overbid for a property.
- If you decide to offer more than it’s worth, you may be stuck with the difference and if you’re unable to pay, you will lose the house
- Once the loan process has been completed, a HUD will be issued prior to closing
- This document will be supplied by the lender and will show all costs for closing
The attorney will then schedule the closing date and time within several days after the lender has clear to close.
Appraisal Versus CMA Values On Homes
I just bought new construction and I was hoping the appraisal value would come back higher.
- The developer told me that, with the upgrades, the house is worth $350,00,0 but the appraisal came back at $299,000
- Should I be worried?
- No, an appraisal and Comparative Market Analysis are ways to determine the value
- They are similar but differ in the aspect of what the market will bear
- Appraisals use formulas that include algorithms for replacement cost, whereas CMAs look at similar homes and asking and selling prices
An appraisal isn’t always indicative of what a home can and does sell for, those these two amounts are generally within 25% of each other.
Appreciating Of Home Values Over Time
Historically real estate values maintain a steady increase over time.
- The housing crisis created concern regarding the long-term value of real estate
- But even in the last decade, overall values still increased by 7.0%
So, depending on how long you want to live in the home, the chances are good that when you do the next appraisal, you’ll get the numbers you were hoping for whether you stay or move.
Where Do I Go For The Closing?
The closing will usually take place at the title company’s office.
- Before closing, you should transfer utilities, forward mail, and arrange movers
- A day prior to closing or the day of closing, you should conduct a final walk through with your agent
- The purpose is to make sure the property is in the same condition it was when you first made the offer
- Closing usually only takes a few hours
- You will sign several documents to consummate the deal
- Then you get the keys!
What To Look For In The Final Walk Through Home Buying Process Chicago
Here is a brief checklist of things you should look for and do:
- Make sure all windows and doors (including garage) open and close
- Look up (ceiling) and down (flooring)
- Look for any cracks, scratches, and other potential issues
- Turn on all faucets and flush toilets
- Turn on appliances if possible (electricity may not be turned on yet)
- Take any measurements for refrigerator, furniture, window treatments, TV, etc.
- Schedule utilities to be turned on for day of closing or move-in
About The Author
Julie Hayward is the author of this article, Home Buying Process Chicago. Julie is a veteran prominent Real Estate Agent in Chicago. She is the owner, President, CEO, and managing broker for EDGE REALTY LLC and one of the most knowledgeable realtors in Illinois. Julie Hayward has published her first book, OPPORTUNITY KNOCKS, which will be released within the next few week. Gustan Cho Associates is one of Julie’s greatest fans and we are lucky and blessed to have Julie Hayward as a contributing associate editor and writer.