Robert Darrow, @properties

Archive for the ‘Buyers’ Category

Your Guide has the most wonderful clients.  Adam and Nikko love their Chicago home so much they write about it regularly.  Expecting in Spring, new posts are all about preparing the Little Bungalow for the arrival of Junior.

Check out the latest post.

Congratulations Adam and Nikko!

Last week Congress approved an extension of the popular First Time Homebuyer tax credit which was set to expire at the end of November.

To recap – under the current program, first time home buyers could apply for $8,000 cash back on their next tax return.  Or could amend their 2008 tax returns to request the refund.  The $8,000 is not a “deduction", rather, it is a direct payment back to the taxpayer.  In other words, if the government owed you $500 on your tax return, you would get a check back for BOTH the $500 PLUS the $8,000 – or a total of $8,500.

If you owed money on your taxes, the rebate would offset your taxes.  If you owed $1,000, the $8,000 would offset the $1,000, and you would get a check back for $7,000.

The new First Time Homebuyer Credit is available for purchases between December 1, 2009 and contracts signed through April 30, 2010.  You must close on your new property by June 30, 2010. 

Income limits have ALSO been expanded.  Buyers now qualify for the First Time Homebuyer Credit if they earn UP TO $125,000 for each borrower.  The Homebuyer Credit phases out with higher incomes.  Since there’s math involved, I’m skipping the formulas for the purposes of this post.  (It’s a great opportunity to call your REAL ESATE PRO for further info. Hint?)

Repeat Buyers Not Left Out

Congress also added a shopping opportunity for existing home owners who buy a new (different, not necessarily brand new) home.  Repeat buyers qualify for $6,500 credit towards their next home purchase if they have lived in their current home for at least five years. 

First Time Buyer Down-payment Assistance from State of Illinois

Additional resources for buyers in Illinois can assist first time buyers with a gift towards down-payment.  On October 30, Governor Quinn launched an affordable home ownership program designed to help qualified buyers by providing a second, forgivable loan for 3% of the purchase price.  The max gift is $6,000 which is applied towards the down-payment on the property.  Buyers are required to put down at least 1% (or a minimum of $1,000) of their own money towards the purchase price. 

Counseling through a HUD-certified counselor is a requirement of this assistance program.  IHDA expects to help approximately 2,000 home buyers in Illinois with their home purchases in the coming year.  Home buyers that want to participate, visit Illinois Housing & Development Authority on the web to find a participating lender.  www.ihda.org.

Your Guide went on a walking tour of the Boystown Neighborhood with YoChicago’s Joe Askins last week.  We started out at Halsted and Roscoe (no, we did NOT stop in for a slushie at Roscoe’s.)  Learn a little bit of Boystown history, and check out some retail along Halsted.

Your guide received condominium documents over the weekend for a buyer who just went under contract for a very cool loft in Chicago’s South Loop neighborhood. 

When you buy a condo, you are entitled to a giant stack of documents that you get to look through as part of the discovery process – learning everything there is to know about the association, the building, the finances – pretty much everything about the building.

In this building, the financial disclosure revealed a 13th month assessment that the association uses to build up its reserves. 

13th month assessments were devised as a rather clever way to build up a bunch of money in savings rather quickly and without too much pain on the part of the members.  Often times, 13th month assessments are enacted for only one year, or perhaps two.  Usually just for a few years at most.

The way they work is the association bills the home owners for one extra month worth of assessments at some point during the year.  Many times right at the beginning of the year.  Equally as often at the end of the year.  Since the first or the last month of the year usually coincide with the Holiday Shopping Season, I’ve seen a few associations bill the extra month in June.

In my example, we discovered that the 13th month assessment is due on November 1.  This cleverly is one day after we are scheduled to close.

Two problems:

Our contract has a paragraph where the seller of the condo swears that there are no special assessments.  And that if there ARE any special assessments, details who is supposed to pay for it.  In our contract, the seller indicated that there is NOT a special assessment, and the rest of the paragraph is scratched out.

So on the very first month of his ownership, my buyer (theoretically) gets whacked with a special assessment.  Of course, as a practical matter, we’re going to require the seller to pay the assessment since it has been planned for all year long, and the seller failed to disclose it.

My second problem is that this budget trick makes the assessments look better than they are.  In our example, the advertising and the MLS say our assessments are $270 per month.  But if the association uses a 13th month assessment year after year, the TRUE assessments are 10% higher – or a little more than $300.  When comparing this unit to others in the neighborhood, typically, the one bedrooms have assessments in the $250 per month range.

In fact, in THIS buyer’s instance, I searched out condos with assessments LOWER than $300 per month.  And the budget trick allowed the marketing to reflect the false (lower) figure.

It’s the duty of the manager as well as the board of an association to accurately show the true condition of the association, both physically and financially.  The 13th month assessment scheme does mask the true financial picture for the association, and in that regard, Your Guide is not a fan.

Labor Day Weekend is officially upon us.  Invariably there will be buyers that get a last minute  bug to do some Real Estate Shopping.  These tips hold true for all Holiday Weekends throughout the year.

Labor Day weekend is an un-official Realtor Holiday as well as the last hurrah for summer in Chicago (and all over the Mid-West.)  Knowing these key facts will help you develop a strategy to see what you need to see this weekend.

• I, and most of the other Top Producing agents in Chicago have already booked their weekend schedules.
• This might include a few showings.  Or might not.  And the rest of their social obligations for the weekend.
• The agents that are working “Floor Duty” this weekend are the rookies hungry to pick up clients.

The first thing to know about the weekend:  If you’re reading this now – it might be too late.

It’s not that I won’t meet a buyer, or accommodate a showing on the weekend.  But I firmed up plans with my buyers much earlier in the week.  It’s the same for showing my listings to other agents.  But last minute requests often indicate that the client you’re working with is more of a “tourist” than a “buyer.”

I love showing homes to buyers.  Not so much to the tourists.

A few clues to identifying the tourists:

• The phone call comes in after 3pm on the Friday of the Holiday Weekend.  Whether from the actual buyer or the agent.
• There are certain real estate companies out there that specialize in capturing leads from the internet.  I know which companies those are.  A phone call from one of those agents late on Friday, or over the weekend, usually indicates we have a “tourist.”
• An out-of-area area code on a return telephone number.  From either a potential buyer or a Realtor.

I love out-of-area buyers.  But I like the opportunity to meet them in a relaxed meeting in an office setting rather than a hastily arrange last minute showing.

So this weekend you won’t catch me in the office.  And if I’m already out with friends at Labor Day festivities, I probably won’t grab my cell phone.  It’s the same with the other seasoned pros, too.

So if you call the number on the sign, or the office from an ad somewhere, you’re going to reach the Low Man on the Totem Pole.  And there may not be much he can do for you.

Plan ahead for  the next Holiday with these tips:  line up your Real Estate tours by Monday or Tuesday before next holiday rolls around!

Your guide is lucky enough to work with the most delightful clients in the known universe.  And a wonderful couple who I enjoyed working with purchased this listing in Logan Square.

Adam was kind enough to send along this testimonial:

Hi Bob,

I just realized I never sent you a testimonial, something you certainly earned after the five month buying/selling process.

Here goes:

Bob’s professionalism made what could have been a frustrating short-sale into a journey that concluded with my wife and I purchasing the home of our dreams.  What truly set Bob apart from other agents we have interacted with in the past was the depth of knowledge as well as the compassion he answered the countless questions and requests we asked of him during the buying process.  If a friend or family member asked me for recommendations on a real estate agent I wouldn’t just suggest that they speak to Bob, I’d insist on it.

I hope you have a great selling season this year!

Best,

Adam

PS: Not sure if I sent you a link to Nikko’s home-blog before, but check it out! http://www.littlechicagobungalow.com.  One note we didn’t mention on the blog was the total rat kill number in garage was 18!  I can’t believe I even stepped in there before we got rid of them!

I have quoted the entire note to draw your attention to my two favorite points…

1.  I hadn’t realized that they had been searching for a house for four-and-a-half years!  That’s an even better testimonial than the one above!  Thank you!

2.  I told them about the rats!  After being un-inhabited for about a year, I’m afraid the garage reverted back to the natives.

Part 1 on Corporate Relocations here

Part 2:  The Internet Empowered Consumer

More and more home buyers are starting their home searches on the Internet.  The convenience of looking at homes 24 hours a day, even in your underwear (see this article) is a powerful convenience.

Some statistics from N.A.R.

Homebuyers’ Use of the Internet

80% of home buyers used the Internet as a source.
81% of Internet home buyers also used a real estate agent.
63% of non-Internet buyers used a real estate agent.
74% of buyers who searched online drove by or looked at a home they first saw online.

To reach the Internet Empowered Consumer, you must answer the fundamental question that forms the basis for all decisions undertaken by this consumer:  What’s in it for me?

Since it stands to reason that these buyers are looking online because it is convenient, they are also going to look for the source of homes that offers the greatest convenience. 

These convenience seekers are unwilling to scour the Internet for multiple sources for homes.  They are going to Google search for “Real Estate ______” – and where the blank is located, they are going to plug in the name of the city they are interested in.

Here in Chicago, that means they are going to land on the web pages for the major brokerages, and the major real estate portals. 

Neither source caters to listings offered “By Owner.”

The number 1 source for homes on the Internet is www.realtor.com – the website that Realtors put all their listings on.  Every single Realtor who belongs to a local MLS or Realty Board sends their listings to www.realtor.com.

And by definition, none of those properties will be “By Owner.”

The source for all the real estate information on AOL’s real estate search portal is www.realtor.com.  Several others, too.

As a FSBO, you have access to several classified advertising web sites, and a handful of “By Owner” web sites.  But remember the credo of the Internet Empowered Consumer?  What’s in it for me?

The buyers that search for listings on the classified ad web sites are likely looking for something in particular:  to save a commission, too.

Buyers who search out FSBO properties often do so in order to do the same thing that the seller is trying to do.  So even if you have taken the commission savings into consideration with your list price, seekers of FSBO properties are going to try to negotiate even more off the list price of your property.  Perhaps another 2%, 3%, 5% or even 6% off since he thinks you’re trying to keep all that money for yourself!

In the immortal words of one of my esteemed competitors at another company “It ain’t all big hair and Cadillacs.”

A regular reader posted a question recently:

I am currently an attorney and confident that I can handle representing my own interests regarding the purchase of my home. I have disclosed in the offer that I will be representing myself and so they can save on commission, but they haven’t discounted very much for that fact. I can pretty easily take the sales agent exam in IL before closing. Can I then put my name as the broker on the contract and take the commission check at closing?

You may very well be excellently suited to represent yourself in your transaction.

And, in fact, here in Illinois, attorneys are allowed to act as Real Estate Brokers on behalf of themselves and their clients.  For example, if you were handling the estate and disposition of property on behalf of someone that inherited some property.

You would be permitted to act as a Real Estate Broker as their attorney and place advertising, negotiate a contract, and handle the closing.

Here’s where there seems to be a bit of confusion:  A seller’s Realtor (note that I am using the Trademarked term Realtor in this example) – for example: from Big Blue Brokerage – has negotiated a commission from his client, the seller.

And that Realtor has offered compensation to other Realtors through the use of the Multiple Listing Service of his/her service area.  Here in Illinois, it’s MRED.

And contractually – by joining this association, and by adding a listing to the computer database, and offering a commission in that database, a contract is created between the Listing Realtor and all the other Realtors in the service area who are working with buyers.

However there is no obligation whatsoever on the part of the Listing Realtor to offer any sort of commission reduction or rebate to a buyer who is not represented by another Realtor.  (again using the trademark Realtor here on purpose.)

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And even though you, as an attorney, may act as though you have a Real Estate License, your real estate license does not entitle you to COMPENSATION.  It only entitles you to REPRESENTATION (capitols only used for emphasis.)

The only way you would be entitled to compensation would be if you were a member of the Multiple Listing Service through which the offer of compensation has been made.

Notwithstanding my technical explanation above, many buyers certainly DO go out, and purposefully shop for property without the use of a Buyer’s Realtor in order to do just what you are seeking – namely the Buyer’s Realtor Co-op Commission.  But without the benefit of the contractual obligation of belonging to the local MLS, you are simply negotiating.

And in the case of negotiations, of course, everything is negotiable.  Obviously, as the practice is common enough that you are aware that the practice exists, it must happen on occasion.  But not always.  A Real Estate Agent with a desirable property that might sell without difficulty may be much less amenable to such tactics.  A motivated (i.e. hungry) Real Estate Agent may be totally willing to entertain your proposition.

But just because you ask, doesn’t mean you’re entitled.

In my course of business, I normally am hesitant to give away part of my commission.  The reasons are many:

* My offer of compensation to other Realtors is designed for us to cooperate together in making the process of helping our seller clients, and our buyer clients as hassle free and smooth as possible.  It aids us greatly to be able to take our buyers to properties that are listed with competing real estate agencies.  And vice-versa.  And I know that when a colleague from another company sells one of my listings, there is a chance that I will return the favor someday.  In your situation, it is likely that you will not be bringing other buyers to my listings nor will you be promoting listings that I would like to bring my buyers to someday.  Since it is unlikely that we are going to cooperate again someday, there is no incentive for me to give my commission to you.

* I might be willing to negotiate with a customer who could become a repeat customer someday.  But in your situation, as you have already indicated that it is your desire to represent your own interests in the purchase of your home, it is very likely you will wish to do the same when it comes time to sell your own home.  So I probably am not going to get repeat business from you.

* Most likely of all – you located my property for sale through one of the avenues that I spent money on.  Whether you find a property in the newspaper ads, or on the company website, or on a big National Website such as Realtor.com – that is an advertising outlet that I have spent a considerable amount of money on.  And if you located one of my listings through one of those advertising avenues, then it’s my desire to be compensated for procuring your interest through that avenue.

Certainly, I should recommend that you may very well benefit from a local expert on your marketplace and save even more money by using a Realtor that knows your neighborhood and the marketplace well.  Perhaps you should talk to one rather than focusing on that little percentage?

A reader wrote in about a week ago and asked a question:

Can a buyer have two real estate agents?

I wish I had more details to go on, but without more details, I’ll do my best.

The shortest answer:  With me, no.

Here are a few more verbose explanations.

There is no legal prohibition against having two real estate agents.  You could go out on Monday with one, and on Tuesday with another.

It is becoming increasingly common, however, for real estate agents to ask their buyers to sign an exclusive buyer representation agreement.  And if you have signed one, then no.  You shouldn’t have two real estate agents.

However, if you DO have two real estate agents, and you haven’t signed an exclusive buyer representation agreement, there is a chance that when one or the other finds out you have been two-timing him, he might drop you like a hot potato.

I know I would.

There is one scenario when I have worked with a buyer that has another real estate agent:  when a buyer is still deciding whether they would like to live in the City of Chicago – my area – or living in a Suburb of Chicago – out of my area of expertise.

In this instance, I will take out a buyer on an orientation tour, and show a few selected listings so the buyer can make an informed decision about where he or she might like to live.  And knowing that the buyer is doing the same thing with an agent in the Suburbs.

But I won’t keep going out on repeated tours.  After the orientation tour, the buyer has to make up his or her mind about where he wants to live.  I don’t want to be in a position where a buyer spends a season full of Saturdays with me, and a season full of Sundays with another agent.  In that instance, we have invested too much time and resources to only have a 50/50 shot at the customer’s business.

Last week we started a discussion on estimating property taxes on your new construction condo in Chicago.  Last week’s discussion focused on how much they might be.  This week, let’s dive into how to pay, and some pitfalls you can come across during the period of time after you move in, but before the Cook County Assessor gives your property its own PIN number.

The photo above depicts one of the most challenging properties I’ve come across in my career.  I think if I simply quote all the challenges we came across here, we should cover all the bases.

I write about these townhomes often.  It’s a community of 94 townhomes with 16 more single family home lots.  The community was built on an industrial parcel that had two PIN (or Tax Identification) numbers to begin with.

The row in the photo contains 8 townhomes.  The community has 14 rows of townhomes with between 8 and 14 townhomes each.  These townhomes are “Fee-Simple” which means that the owner, you, own the land underneath the homes.  This is different than condominiums, where you and all the neighbors share an undivided interest in the land and the parking lot, and other common parts of the building.

The first year that residents lived in the community, the developer paid the common tax bill.  It was a small bill on the two PIN numbers for what was the old factory.  All the owners put a little money in escrow at closing to cover what might be their share, and then the developer paid the bill when it came due.

Then the Cook County Tax Assessor did something weird.

Rather than splitting the properties into individual parcels, the office divided the property into rows.  Each row got a temporary PIN for a year.  To this day, the reason is a complete mystery.

In the photo above, two townhomes on the end are bigger than the other six. 

In the second year the residents lived here, a tax bill was sent to one owner, randomly, for the entire row.

Challenge 1

Disagreements arose between residents as to how to pay the tax bill.  The declarations for the community said that common expenses should be divided evenly among the owners.  But that didn’t make sense since some homes were bigger than others.  Some owners wanted to divide the bill by square footage.  And just for giggles, the one owner that received the bill in her name decided that she would divide the tax bill by sales price.

Challenge 2

Mortgage companies received copies of the owners’ tax bills.  And promptly paid them.

This sounds exactly like what is supposed to happen – right?  Not so much.

Several mortgage companies paid the tax bill for the whole row.  Sometimes, several companies paid in the same row paid the whole bill resulting in overpayments.

Challenge 3

Some residents didn’t have the money, or didn’t understand, that they had to pay their property taxes.  In rows where everyone was ready and able to pay their taxes, a resident who wouldn’t, or couldn’t, pay would cause the Cook County Treasurer to show a tax delinquency.  And delinquent taxes can go into collections, and even to a tax sale.

A common solution: Pay by Legal Description

Here in Cook County, we have a solution called “paying by legal description.”

To pay by Legal Description, you take the deed to your condo or townhouse, and the Settlement Statement (also known as your HUD1) down to the Cook County Treasurer’s Office.  That’s in City Hall on the First Floor – 121 N. LaSalle.

Unfortunately, you have to go in person.  But it’s a guaranteed fool-proof way to ensure that the tax bill on your property gets paid properly.  And it doesn’t matter what your neighbors do.  They can pay, or not pay, or pay the wrong amount, and you are protected.

Watch your escrow accounts

It’s really up to you to make sure that your bank doesn’t overpay your tax bill if you still live with a common PIN number.  Technically, the bank is supposed to know the difference, but I wouldn’t plan on it.

So keep your eye on when tax bills are printed and mailed.  They come out every February with a due date of March 1.  And then come out in August with a due date of October 1.  Sometimes a bit later.

Since this might be the first time you are expecting a tax bill, there is a very good chance that the bill is going to be sent to the wrong place.  Maybe to the developer’s office.  Maybe to a neighbor.  Maybe it won’t get sent at all.

Do you know the PIN number for the property?  If you do, skip ahead.  If you don’t, here’s how to find it:

Start at the Cook County Assessor’s website:  www.cookcountyassessor.com and search for your property by address.  Once you have your PIN number, then you switch to the Cook County Treasurer’s website to search for your bill.

Log onto the Cook County Treasurer’s office (www.cookcountytreasurer.com) to view your bill, and see what payments have been applied.

If there is a credit balance, then odds are a lender paid the whole bill.

A clue to whether it was YOUR lender:  your lender writes you a letter telling you that they want to increase the amount of money you pay each month because your escrow estimate is wrong. 

The process of getting refunded money from the Cook County Treasurer is cumbersome, and may involve personally visiting the Treasurer’s office.  But there’s no reason you can’t turn this back on your lender and insist that since the mistake was theirs, that they must correct it.  Be persistent as no one is going to want to tackle this job.  You are protected by law, however, against mistakes made with escrow account payments.  So if you cajole with a hint of lawsuit, you may be able to prevail against the bureaucracy in getting them to resolve this for you so you don’t have to tackle it yourself.